NCJ Number
73576
Journal
JOURNAL OF CONSUMER POLICY Volume: 2 Issue: 1 Dated: (1978) Pages: 67-71
Date Published
1978
Length
5 pages
Annotation
The article explores legal ways that consumers can be protected against unfair terms in contracts, as exemplified in the West German Law on Standard Terms of Contract implemented in 1977.
Abstract
In contracts between consumers and businessmen, the consumers are usually at a disadvantage because either they do not understand the terms, cannot shop around because all competitors use the same clauses, or find such shopping too costly. Although stricter requirements regarding the preconditions for including standard terms in the contract appear to offer a possible solution, they are of little value, because the consumer has no choice but to accept the contract terms. Thus effective consumer protection can be realized only by controlling the content of these terms. Courts and legislatures in several countries have moved toward this approach by not upholding the contract's terms if they give undue advantage to the person imposing them. Legislatures should not limit themselves to a general prohibitory clause, but should designate the specific terms that are regarded as unfair. The 1977 West German law is constructed on these lines, and a Council of Europe committee has published a list of terms which most countries regard as unfair. Substantive protection rules must be supplemented by effective procedural control. Current court regulation is haphazard and places the burden of bringing suit on the consumer. The Council of Europe committee has recommended several solutions, such as penalizing the inclusion of unfair terms or permitting administrative control of standard terms in advance. The latter approach has been used successfully in West Germany in insurance and antitrust cases and could be a practical solution if the number of terms could be drastically reduced by placing only those clauses which have been worked out by trade associations under control. The new German statute did not include administrative regulation but only empowered representative bodies to institute legal actions against unfair contractual terms. Most Nations emphasize consumer protection from unfair terms, although the German law affords general safeguards to businesses in their agreements with other dealers or manufacturers. Some countries, including the United States, have general clauses in their laws that enable the courts to control unfair terms in both standard and individual contracts. A list of four references is provided.