Consumer Contracts: Time to rethink your contracts with students

Published: 21st August 2008

Is a student a consumer for the purposes of the new consumer contracts regulations? Absolutely. So what does that mean for you?

On 25 July 2008, the FSA provided an update (http://www.fsa.gov.uk/pubs/other/consequential_loss.pdf) on its work on the fairness of terms in standard form contracts under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR). The FSA's statement covers terms in general insurance contracts, but will be of interest to everybody using standard terms or consumer contracts, including those involving students.

The FSA has looked at terms that use the phrase "consequential loss". This phrase is generally used to exclude liability for loss that is remote or indirectly caused by a party's default. The FSA's view is that a term using the expression "consequential loss" is not written in plain, intelligible language, as it refers to a legal term of art. As a result, such a term may be unfair under regulation 5 of the UTCCR and, therefore, unenforceable. The FSA considers that the average consumer would not understand what this phrase means.

The FSA's statement makes reference to the Office of Fair Trading (OFT) (the main enforcer of the UTCCR), having expressed similar concerns about the use of this phrase. It suggests that using a drafting style which might be normal in a commercial contract is inappropriate and using phrases like "consequential loss" or "time of the essence" should be avoided.

Although the FSA's statement refers to general insurance contracts, the OFT or the courts could take a similar view wherever the phrase "consequential loss" is included in any consumer contract. As a result, all organisations dealing with students may wish to review the lawfulness of their contract terms (including those for student accommodation) in light of the new regulations. Mace & Jones would be pleased to assist.