News

Make contracts clear and understandable

Businesses have been warned to make sure that the contracts they offer consumers are clear, unambiguous and can be acted on at the first time of reading.

The warning has come from the Office of Fair Trading (OFT) following an investigation into the sort of contracts with which consumers are being presented.

According to the OFT survey, some 20 per cent of customers polled encountered some form of problem with contracts last year.

The OFT study examined how well consumers were able to comprehend contracts and the small print contained within them.

The review also took into account differences between traditional retail contracts and those offered when making online or telephone purchases; and it examined when, how and why contracts may cause difficulties for people, identifying the practices and contract terms which have the potential to breach consumer protection laws.

Problems can arise when a small print term alters the deal from what consumers understand it to be, or if the way the contract is presented makes it difficult for consumers to understand the deal properly.

Currently 70 per cent of the OFT’s consumer enforcement cases relate to contract terms and conditions, and the OFT is urging businesses to ensure their customer contracts do not contain terms that may be detrimental to consumers.

Detrimental terms include unexpected restrictions to contract scope (football season tickets not always guaranteeing seats, for example); terms that impose unexpected risks on consumers; complex, deferred or contingent charges that exceed costs; and obstructions to consumer switching (such as service cancellation fees).

Heather Clayton, senior director of the OFT’s consumer group, said: “On the one hand, we all know that people don’t read the small print of contracts. On the other, small print is a necessary fact of life and consumer law isn’t there to protect the careless or the over-hasty.

“This report reconciles the need for small print with the real life behaviour of consumers and sets out the OFT’s expectation that consumers should be free to focus on the main elements of the deal, confident that there will be no unwelcome surprises in the small print.

“It gives clear guidance to businesses and it will helps them to assess whether their contracts need reviewing to make sure that their customers are treated properly. Transparent business practices build trust in markets, allow people to shop around to find the best deal for them, stimulating effective competition and strengthening innovation and growth.”