Key facts about the contracts

Relevant or Related Legislation:

The relevant legislative regulatory basis framing contracts with consumers is Consumer Rights Protection Law embodying Unfair Contract Terms Directive (1993/13/EEC), Directive on Sale of Consumer Goods and Guarantees etc.

Key Facts about unfair contract terms:

•  A consumer is an individual not acting in the course of his or her business or profession.
•  A consumer is not bound by a standard term in a contract with a seller or supplier if that term is unfair.
•  Standard terms are those devised by a business in advance and not individually negotiated with the consumer.  They do not have to be in writing but typically are found in the ‘small print’ on the back of order forms etc.
• A standard term is unfair if it creates a significant imbalance in the parties’ rights under the contract, to the detriment of the consumer, contrary to the requirement of good faith.
• All terms must be in plain intelligible language otherwise they are open to challenge as unfair.
• Consumer Rights Protection Centre of Latvia (CRPC) have powers to stop businesses using unfair standard terms and anyone from recommending the use of such terms. The CRPC has a duty to consider any complaint sent to it that a contract term drawn up for general use is unfair. 

What exactly does the definition of an unfair term mean?

An unfair term is one that creates a significant imbalance in the parties’ rights under the contract, to the detriment of the consumer, contrary to the requirement of good faith.

A term is most likely to cause an imbalance if it has the effect of reducing the consumer’s rights under the ordinary rules of contract or the general law.  For example they either stop consumers from making certain sorts of legal claim against the business which they could otherwise have made, or give the business rights against the consumer that it would not otherwise have had.

But a term causing an imbalance must be capable of causing detriment to consumers taken together with the other terms in the contract.

The requirement of good faith embodies a general ‘principle of fair and open dealing’. It does not simply mean that a term should not be used in a deceitful way.  Suppliers are expected to respect consumers’ legitimate interests in drafting contracts, as well as negotiating and carrying them out.

What does a consumer do if a firm refuses to accept that a term is unfair?

For the individual consumer, the Regulations mean that if a business refuses to accept that a term is unfair, the consumer can ask the help of the CRPC.  At first consumer can seek for legal advice in CRPC and if CRPC agrees with the consumer, the business will not be allowed to rely on that term.

Standard terms are often in small print that is difficult to read.  Is this covered?

The Regulations require that plain and intelligible language is used in consumer contracts.  The plain language rule is part of a wider requirement that consumers should be able to read and understand terms before becoming bound by them. So, contract terms which are hard to understand because of obscure wording or unreadable small print can be found to be unfair.

If a term of the contract is unfair does this invalidate the rest of the contract?

The fact that an unfair term is unenforceable does not mean that the rest of the contract is void, unless it is unworkable without the unfair term.

How does the CRPC assess whether a standard contract term is unfair?

The CRPC starting point in assessing the fairness of a term is normally to ask what would be the position for the consumer if it did not appear in the contract.  Where a term changes the normal position seen by the law as striking a fair balance it is regarded with suspicion.

What action can CRPC take to prevent the continued use of unfair terms?

The Regulations permit enforcement authorities to consider appropriate undertakings by businesses about the use of contract terms with consumers.  If necessary an application for an injunction can be made through the courts against anyone who is using or recommending the use of an unfair term.

Where can I get advice about unfair contract terms?

If you have an enquiry or complain regarding the unfair contract terms please contact Consumer Rights Protection Centre of Latvia.