Unfair Contract Terms: What Schools Need To Know

What are the overriding requirements?

When entering into consumer contracts, schools must ensure that the terms are fair. A term is unfair if it “contrary to the requirement of good faith, causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer”. Unfair terms are not enforceable against the parent.

Terms in a consumer contract must also be transparent, meaning that written terms must be expressed in “plain and intelligible language” and be legible. Therefore, parents should be able to understand the practical significance of terms in a contract.

There are exemptions from the ‘fairness test’. The main exemption relates to terms which specify the main subject matter of the contract or set the price. However, such terms should still be transparent.

There is also an exemption from both the fairness and transparency requirements where the terms of the agreement reflect mandatory laws.

How do we ensure ‘transparency’?

The ‘transparency test’ requires that terms of the agreement are written in plain and intelligible language, and in a legible manner. However, legibility and clarity of language alone do not ensure compliance, and schools should ensure that agreements allow parents to make informed choices.

Whilst lacking transparency alone does not automatically make the term unenforceable, where the term is ambiguous and has more than one potential meaning the court will interpret the term in the manner which is most favourable to the parent.

What terms might be considered unfair?

There are specified types of terms which may be regarded as unfair (grey terms) and other terms which are inherently objectionable independently of the fairness assessment, and are therefore ‘blacklisted’. Generally speaking, these are terms which would exclude or restrict the school’s liability and remedies arising from breach of certain consumer rights.

Terms which form the ‘grey list’ include terms which may cause:

• Parents to be tied into the contract beyond normal expectations

• The school not having to perform its obligations

• Parents unfairly losing prepayments if the agreement is ended

• The school arbitrarily varying the terms after they have been agreed, for instance, so as to supply a different product, raise the price or reduce the parent’s rights

• The school determining the price or subject matter of the contract after the parent is bound by it

• Parents being subject to disproportionate financial sanctions

Terms which are included on the list of ‘blacklisted’ terms include:

• Excluding or restricting liability for death or personal injury resulting from negligence

• Seeking to exclude or restrict statutory rights and any remedies

• Excluding the school’s liability for failing to carry out a service with reasonable care and skill

• Excluding or restricting any available remedy for breaches of certain rights, or making a remedy more difficult for the parent to enforce

• Restricting the amount of compensation paid to parents for breach of any statutory rights to less than the price the parent is required to pay under the contract

Practical steps

Getting your schools contracts drafted appropriately is an important step to protect your school. Whether you are entering into consumer contracts with parents and need to ensure to comply with unfair contract terms requirements, or if you are seeking to vary or terminate agreements, the risk to the school can be vast if the terms of the agreement are not properly drafted.

Please get in touch if you would like support with reviewing or preparing your school’s contracts.