Abstract
This paper considers how UK law regulates the price and other charges in contracts. It asks how dominant the information paradigm is as a regulatory approach, and also considers the limits of this paradigm in providing consumer protection. Assuming a more substantive paradigm of regulation is desirable, the paper considers how to achieve this. It considers the respective roles that should be played by a legislative general clause; and on the other hand by more concrete rules developed by regulatory bodies, each rule designed for specific charges in particular types of contracts in different trade sectors.
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Notes
- 1.
Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent); ParkingEye Limited (Respondent) v Beavis (Appellant) [2015] UKSC 67.
- 2.
Part 2 Consumer Rights Act 2015.
- 3.
- 4.
- 5.
Section 3 below.
- 6.
- 7.
‘Routine non-contingent subsidiary charges’, ‘routine contingent charges’ and those ‘non-routine contingent charges’ where there is genuine service: on all of which see further below at Sect. 3.
- 8.
- 9.
Willett (2012).
- 10.
Citizens Advice/Oxford Economics (2016).
- 11.
Willett (2018).
- 12.
Willett (2018).
- 13.
Often supported by behavioural science evidence as to the limits of transparency: e.g. see discussion in Atamer (2017).
- 14.
Willett (2007), pp. 37–39.
- 15.
Rott and Willett (2018), Ch. 11.
- 16.
Willett (2018).
- 17.
Kaplow (1994), pp. 307–401.
- 18.
Starks (2018).
- 19.
See also the example of substantive caps on fees payable by the National Health Service to independent contractors: NHS (2018).
- 20.
Chapel v Nestle [1959] UKHL 1.
- 21.
Nat West Bank v Morgan [1985] AC 686; Walford v Miles [1992] 2 AC 128; and McKendrick (2018), Ch. 15.
- 22.
Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79.
- 23.
Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent); ParkingEye Limited (Respondent) v Beavis (Appellant) [2015] UKSC 67 where the fee for overstaying the 2 h free period in a car park was not a penalty because it was considered necessary to deter overstays and to provide Parking Eye (the business managing the car park and determining whether overstays have occurred) with an income stream (para 94–101); Beale (2016).
- 24.
Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent); ParkingEye Limited (Respondent) v Beavis (Appellant) para 152 [2015] UKSC 67.
- 25.
Boustany v Piggot (1995) 69 P & CR 298; Strydom v Vendside Ltd [2009] EWHC 2130 (QB).
- 26.
OFGEM (2018a).
- 27.
Parker v SE Ry [1877] 2 CPD 416.
- 28.
Willett (2007), pp. 400–401.
- 29.
L’Estrange v Graucob [1934] 2KB 394.
- 30.
Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1987] EWCA Civ 6.
- 31.
Peninsula Business Services v Sweeney [2004] IRLR 49; Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1987] EWCA Civ 6.
- 32.
E.g. Consumer Credit (Disclosure of Information) Regulations 2010 SI 2010/1013 (information as to type of credit, interest rate, amount and frequency of instalments etc.): for a full discussion Woodroffe et al. (2016), pp. 367–368.
- 33.
Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013/3134): for a full discussion Woodroffe et al. (2016), pp. 93–103.
- 34.
Further below Sect. 5.
- 35.
The regime applies to all except specifically excluded terms, most significantly here being price terms (s. 64).
- 36.
Enforcement is both ex post (unfair terms are not binding on individual consumers-s.62 (1)) and ex ante (action to prevent continued use of unfair terms may be taken by bodies such as the Competition and Markets Authority and local authority trading standards authorities-s. 70, Schedule 3).
- 37.
Director General of Fair Trading v First National Bank plc [2001] UKHL 52; Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent); ParkingEye Limited (Respondent) v Beavis (Appellant) [2015] UKSC 67; Willett (2012).
- 38.
- 39.
S. 64 (1) (b) & 64 (2): deriving from art. 4 (2) Directive 93/13/EEC. Note that it was a UK choice to follow art. 4 (2), it being a minimum harmonisation provision and it being open to Member States to provide for a higher level of protection (art 8 Directive 93/13/EEC), in this case, e.g. by allowing price terms to be tested under the GC.
- 40.
The fairness test is not excluded from testing ‘peripheral’ issues in relation to charges: e.g. when payable, rights to increase or fix the price, equal treatment in relation to deposits: see Law Commission (2013), Ch. 3, and CRA, Schedule 2, Part 1, paras 4–6, 14–15.
- 41.
E.g. Willett (2018).
- 42.
Sch. 1 CRA, for revocation of the UTCCR 1999.
- 43.
OFT v Abbey National and others above, [2009] UKSC 6; and Whittaker (2011).
- 44.
Abbey National term 3.3 (3.3.1–3.3.4) cited in OFT v Abbey National and others [2008] 2 All ER (Comm) 625 (High Court) [135], on which further below (Chancellors 2017 and related text).
- 45.
Abbey National plc and Others v OFT [2009] EWCA Civ 116.
- 46.
OFT v Abbey National, [2009] UKSC 6; Lord Mance [113].
- 47.
OFT v Abbey National, [2009] UKSC 6 [102].
- 48.
OFT v Abbey National, [2009] UKSC 6 [47].
- 49.
S. 64 (2); further below in Sect. 4 on the transparency and prominence conditions.
- 50.
As under the UTCCR (reg. 6 (2)), following 4 (2) Directive 93/13/EEC.
- 51.
Law Commission (2013), pp. 16–36.
- 52.
Competition and Markets Authority (2008), p. 40.
- 53.
Perhaps also a sum to deter breaches-see Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent); ParkingEye Limited (Respondent) v Beavis (Appellant) [2015] UKSC 67.
- 54.
Sch. 2, Part 1, paras 5 & 6, CRA.
- 55.
Law Insider Database (2018).
- 56.
E.g. for numerous examples see the Ryanair (2018).
- 57.
E.g. allowing for the extra baggage to be boarded, paying the money from the bank account, re-fuelling the car.
- 58.
For the approach of the Court of Justice of the EU, see CJEU Judgment of 30 April 2014, Kásler and Káslerné Rábai, C-26/13, EU:2014:282, holding that a charge is not the price unless there is a service in exchange, but not being clear whether contingent charges for contingent services can be the price.
- 59.
Abbey National term 3.3 (3.3.1–3.3.4) cited in OFT v Abbey National and others [2008] 2 All ER (Comm) 625 (High Court) [135].
- 60.
Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent); ParkingEye Limited (Respondent) v Beavis (Appellant) [2015] UKSC 67.
- 61.
E.g. Chancellors (2017), p. 4.
- 62.
OFT v Foxtons [2009] EWCA Civ 288.
- 63.
Another example of a charge for a non-routine contingency not related to consumer inadvertence is a fee imposed by a freeholder for giving permission for a long leaseholder to sub-let: see Forte Freehold Management (2017).
- 64.
For further evidence beyond the CRA GC, note also the approach to the ‘unfair credit relationships’ general clause (Consumer Credit Act 1974 s. 140A) where usually only extreme substantive unfairness is found unfair (e.g. where, through addition of interest a debt of £56,450 eventually rose to £4.5 million [2009] EWHC 3264); the norm being to rely on the information paradigm by only finding unfairness in cases where there has been insufficient information (e.g. failure of those selling payment protection insurance to declare the commission they earn—Plevin v Paragon Personal Finance Limited [2014] UKSC 61).
- 65.
- 66.
- 67.
See Sect. 3.3.4 above.
- 68.
S. 64 (3) CRA.
- 69.
Case C-26/13 Árpád Kásler, Hajnalka Káslerné Rábai v OTP Jelzálogbank Zrt [2014] [75]; for an example of a UK case on the issue Spreadex Ltd v Cochrane [2012] EWHC 1290 (Comm) (a contract with 49 pages of complex paragraphs); and see discussion in Woodroffe et al. (2016), pp. 208–210.
- 70.
Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ 1993, L 95/29.
- 71.
Willett (2007), p. 42.
- 72.
So called ‘hyperbolic discounting’, on which see Frederick et al. (2002).
- 73.
Atamer (2017), p. 634.
- 74.
- 75.
Consumer Credit (Total Charge for Credit) Regulations 2010, SI 2010/1011; see discussion in Woodroffe et al. (2016), pp. 354–355.
- 76.
OFGEM (2018b).
- 77.
S. 67 (4).
- 78.
Section 4.1.1 above.
- 79.
E.g. Consumer Protection from Unfair Trading Regulations 2008, Regs. 6 (4) (d)–(e) (from Art. 7(4) (c) Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council, OJ 2005, L 149/22.)
- 80.
Frederick et al. (2002) and related text on over-optimism and discounting future risks.
- 81.
Law Commission (2013), pp. 16–36. One proposal that may provide an effective approach in the banking sector is to introduce an ‘application programming interface’, an independent resource enabling consumers to compare to the offerings of banks (including on charges): Competition and Markets Authority (2016), p. 166; and see discussion by Atamer (2017), p. 651.
- 82.
- 83.
- 84.
See Sect. 3.3.4.4.
- 85.
Atamer (2017), pp. 643, 646 and 654.
- 86.
- 87.
Frederick et al. (2002) on over-optimism and discounting future risks.
- 88.
Competition and Markets Authority (2016), para 5.
- 89.
Travel Supermarket (2018).
- 90.
Section 3.3.4.7 above.
- 91.
Section 3.3.4 above.
- 92.
I.e. all of the categories at Sect. 3.3.4 above.
- 93.
Rodger and McCulloch (2015).
- 94.
Rott and Willett (2018).
- 95.
E.g. low income, long or short term loss of employment, money needed for basic housing and sustenance etc.
- 96.
Further below at Sect. 5.3.3.
- 97.
Willett (2018).
- 98.
Collins (1999), Ch. 11.
- 99.
Willett (2018).
- 100.
Department for Exiting the EU (2017), p. 5.
- 101.
Kaplow (1994).
- 102.
Kaplow (1994).
- 103.
Section 3.3.4.4 above.
- 104.
The notion of ‘reasonable expectation’ used here is empirical i.e. based on what one typically experiences: on which in contract law: Mitchell (2003), p. 656.
- 105.
Friedman (1970), pp. 32–33 and 122–124.
- 106.
See FCA work showing that consumers often view exceeding an authorised overdraft as a ‘mistake’: FCA (2015), p. 4.
- 107.
Section 3.3.4.2 above.
- 108.
Section 3.3.1 above.
- 109.
CJEU Judgment of 14 March 2013, Aziz, C-415/11, EU:C:2013:164, para 68.
- 110.
Willett (2007), pp. 227–240.
- 111.
Friedmann (1995).
- 112.
Section 3.3.4.2 above.
- 113.
ParkingEye Limited (Respondent) v Beavis (Appellant) [2015] UKSC 67, para 102–114.
- 114.
E.g. ParkingEye Limited (Respondent) v Beavis (Appellant) [2015] UKSC 67; Lord Neuberger [102–114]. If inadvertence charges are classed as being for breach by the consumer, then the common law rule on penalties is also engaged, but this may provide slightly less protection. In Parking Eye v Beavis it was held that under the penalty rule, the ‘legitimate interest’ (that makes charging more than one’s losses not a penalty) includes not only deterring the other party’s breach but also making a profit [94–101]. In contrast, the decision did not refer (expressly at least) to profit being legitimate in assessing unfairness under the CRA GC [paras 102–114].
- 115.
Section 3.3.4.7 above.
- 116.
E.g. see Chancellors (2017), p. 4.
- 117.
OFT v Foxtons (2009) and related text.
- 118.
E.g. Forte Freehold Management (2017).
- 119.
Sch. 2, Part 1, 3, CRA.
- 120.
Kaplow (1994).
- 121.
See Sect. 5.1 above.
- 122.
Section 3.3.4.4 above.
- 123.
Section 3.3.4.5 above.
- 124.
Section 3.3.4.6 above.
- 125.
CJEU Aziz (n 109).
- 126.
On the source of the exemption in art. 4 (2) Directive 93/13/EEC.
- 127.
Law Commission (2012), paras 7.56–6.
- 128.
De Elizalde (2019).
- 129.
Sale of Goods Act 1979 ss. 8 (2) & (3); CRA 2015 s. 51.
- 130.
- 131.
Section 4 above.
- 132.
CJEU Aziz (n 109); ParkingEye Limited (Respondent) v Beavis (Appellant) [2015] UKSC 67.
- 133.
S. 62 (5) (b) of the CRA.
- 134.
Willett (2007), pp. 240–244.
- 135.
Mitchell (2003), pp. 656–657.
- 136.
Mitchell (2003), p. 656.
- 137.
Sch 2, Part 1, 15, CRA: not being an assessment as to the basic level of the charge, this is not covered by the price exemption (n. 40 and related text).
- 138.
Starks (2018).
- 139.
- 140.
Fejős (2015), pp. 181–202.
- 141.
Consumer Credit Sourcebook (CONC) 5A.2.3R.
- 142.
CONC 5A.2.2R.
- 143.
The consumer pays off the interest and charges initially due, but the capital amount, which has not been paid off, ‘rolls-over’ (with new interest and charges) beyond the original repayment period, into a new loan.
- 144.
CONC 6.7.23R.
- 145.
E.g. in 2012 roughly 10% of loans rolled over 4–6 times, around 5% over 7–10 times, and there was one example of a loan rolling over 36 times: Office of Fair Trading (2013) Payday Lending Compliance Review, Final Report, OFT 1481, March 2013.
- 146.
FCA, Proposals for a price cap on high cost short term credit (2014), 1.8, 5.84.
- 147.
Citizens Advice, Payday Loans After the Cap (2016), 23.
- 148.
Occupational Pension Schemes (Charges and Governance) Regulations 2015, regulation 13 SI 879 (as amended by the Occupational Pensions Schemes (Charges and Governance) (amendment) Regulations 2017 SI 774).
- 149.
- 150.
Financial Conduct Authority (2018a), Ch. 5; Financial Conduct Authority (2016); House of Commons Library (2016); Domestic Gas and Electricity (Tariff Cap) Act 2018; Financial Conduct Authority (2018b), pp. 44–48; Financial Conduct Authority (2018c). Of course, it has been argued above here that charges for exceeding overdrafts (being consumer inadvertence charges) can be most efficiently dealt with under the CRA GC; but this does not undermine the value of this example as an illustration of the way in which regulatory bodies can develop highly specific and tailored rules for particular types of charge. See also recently the proposals for caps to fees in rent-to-own transactions, home-collected credit and catalogue credit and store cards (Financial Conduct Authority 2018c).
- 151.
Ss. 134–8.
- 152.
E.g. Competition and Markets Authority (2016).
- 153.
Ss. 134–8: On approaches taken see Competition and Markets Authority (2017).
- 154.
House of Commons Library (2016).
- 155.
Domestic Gas and Electricity (Tariff Cap) Act 2018.
- 156.
- 157.
Understanding Regulation (2018): noting also that the traditional formula for measuring inflation is the retail price index (RPI), so the formula has traditionally been RPI-X but the consumer price index harmonised (CPIH) is beginning to be preferred, so CPIH-X could take over as the formula. For an academic (law and economics) analysis of utility price regulation see Baldwin et al. (2013).
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Willett, C. (2020). Control of Price Related Terms in Standard Form Contracts in the UK: Regulating Prices and Charges in the UK: Information Versus Substance, General Clauses Versus Rules Developed by Regulators. In: Atamer, Y.M., Pichonnaz, P. (eds) Control of Price Related Terms in Standard Form Contracts. Ius Comparatum - Global Studies in Comparative Law, vol 36. Springer, Cham. https://doi.org/10.1007/978-3-030-23057-9_29
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