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Unfair terms in contracts and EU law: Unfair Terms Directive and Common European Sales Law

Unfair contract terms in EU law Unfair Terms Directive and Common European Sales Law
© Eisenhans / Fotolia

‘Standard terms contracts’ are an inevitable part of everyday transactions for both businesses and consumers. Parties using such contracts may, however, rely on their advantageous position in order to impose unfair terms on the other contracting party. This has prompted national courts and legislatures to implement measures aimed at combating such terms. In order to bring about harmonisation of such measures in consumer contracts, the EU enacted the Unfair Terms Directive in 1993. The Commission’s proposal for a Common European Sales Law (CESL) also addresses the issue of unfair terms, not only in consumer contracts, but also in transactions between businesses.

The Directive defines unfairness using broad notions, such as ’good faith’ and ’significant imbalance’. The Court of Justice of the EU (CJEU) has given indications as to the concrete factors which should be taken into account when applying those criteria. The CESL also relies on broad concepts, but it takes into account the Court’s case law fleshing them out.

As to the effects of unfairness and the ensuing duties of the judge, in its case law, the CJEU has repeatedly put emphasis on the effectiveness of enforcement of consumer rights.

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