Scope and Fairness of the Unfair Terms in Consumer Contracts Regulations: Director General of Fair Trading v First National Bank

Publication Date01 Sep 2002
AuthorElizabeth Macdonald
Scope and Fairness of the Unfair Terms in Consumer
Contracts Regulations: Director General of Fair Trading
vFirst National Bank
Elizabeth Macdonald*
The Unfair Terms in Consumer Contracts Regulations are possibly the single most
significant piece of legislation in the field of contract law.1They impose a fairness
test on non-individually negotiated terms in contracts between consumers and
sellers or suppliers. Certain ‘core’ terms are exempt from being the subject matter
of the fairness test, but nevertheless the Regulations have considerable potential to
change the approach to the drafting of standard form contracts to be used by
businesses contracting with consumers.2All the more so, because the Regulations
do not leave enforcement simply to the individual consumer, but also provide for
action to be taken against unfair terms in general use by the Director General of
Fair Trading (and now also ‘other qualifying bodies’).3The Regulations derive
from a European Directive of the same name.4It was originally brought into
with some changes,6those have now been superseded by the 1999 Regulations of
the same name.7It is these significant Regulations, in their 1994 version which, for
the first time, have been considered by the House of Lords in Director General of
Fair Trading vFirst National Bank8and it is that important case which is the
subject matter of this note.
First National Bank is a major lender in the consumer credit market. Director
General of Fair Trading vFirst National Bank is concerned with one of the terms
in its standard form contract for lending money to borrowers through regulated
agreements under the Consumer Credit Act 1974. The particular term stated9
ßThe Modern Law Review Limited 2002 (MLR 65:5, September). Published by Blackwell Publishers,
108 Cowley Road, Oxford OX4 1JF and 350 Main Street, Malden, MA 02148, USA. 763
* Reader in Law, University of Wales, Aberystwyth.
1 See generally E. Macdonald, Exemption Clauses and Unfair Terms (London: Butterworths, 1999)
chap 4, S. Bright, ‘Winning the Battle against Unfair Contract Terms’ (2000) 20 LS 331.
2 In fact the Bulletins published by the Office of Fair Trading (OFT) outlining contract terms which
have been deleted or changed upon investigation by the Director-General of Fair Trading under the
Regulations indicate that considerable change has already occurred.
3InDirector General of Fair Trading vFirst National Bank [2001] 3 WLR 1297, para 33, Lord Steyn
noted – ‘The system of pre-emptive challenges is a more effective way of preventing the continued
use of unfair terms and changing contracting practices than ex casu actions’.
4 Council Directive (EEC) 93/13 on Unfair Terms in Consumer Contracts (OJ 1993 L95 29).
6 Most significantly the powers given to the Director General of Fair Trading to take action at the
general level against unfair terms was extended by the 1999 Regulations to ‘other qualifying bodies’,
listed in Sched 1, such as Trading Standards departments and the Consumers’ Association.
8 [2001] 3 WLR 1297; [2002] 1 All ER 97; [2001] 2 All ER (Comm) 1000 HL. [2000] QB 672; [2000]
2 WLR 1353; [2000] 2 All ER 759; [2000] 2 All ER (Comm) 371 CA. [2000] 1 WLR 98; [2000] 1 All
ER 240 Evans-Lombe J.
9 ‘The term’ was set out in the contract as part of ‘Condition 8’, but it was treated by the court as a term
in itself.

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