Recommendation 6 To be “transparent” a term must be

(1) in plain, intelligible language; (2) readily available to the consumer;

7 _{The Consumer Protection (Distance Selling) Regulations 2000 (SI 2000 No 2334) might}

also be of relevance here. Regs 11 and 12 give the consumers a period of seven working days to cancel a contract (or three months plus seven working days where the supplier has not complied with the information requirements in Reg 8). This will be extended to 14 days once the Consumer Rights Directive (Directive 2011/83/EU) is transposed into UK law.

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(3) and, if in writing, it must be legible. THE DEFINITION OF “PROMINENT”

The Issues Paper proposal

4.27 In the Issues Paper we argued that a term should only be exempt from review if it is prominent. By this we meant that it is presented during the sales process in such a way that a reasonable consumer would be aware of the term even if they did not read the full contractual document.

4.28 European law relies on the concept of “the average consumer”. This hypothetical person is “reasonably well informed, reasonably observant and circumspect”,8 _but

their “level of attention is likely to vary according to the category of goods and services in question”.9 _{In the Issues Paper, we asked whether it would it be}

helpful to adopt this test. We suggested that a term should be considered prominent if it was presented in a way that the average consumer would be aware of the term.10

4.29 We said that in an individual challenge, the court should consider evidence of how the term was actually presented, including the material the consumer was sent, and what the salesperson said. In a general challenge, the court would need to look at the firm’s general business practices. This might include evidence about the advertising material used, the structure of the firm’s website, any key fact documents or information leaflets provided and the instructions given to sales staff. Often it will involve more than just looking at the structure of the written contract document, though this may also be important.

4.30 In the Issues Paper we commented that the more unusual or onerous the term, the more prominent it needs to be. This is in line with the policy behind the general common law rule that a party should take steps to bring particularly unusual or onerous terms to the other party’s attention. The leading case is Interfoto,11 _{which approved an earlier statement from Lord Denning that some}

clauses “would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient” to bind the other party.12 _{The question before the court in that case was whether a term was}

sufficiently brought to the defendants’ attention to make it part of the contract. The wider principle at stake, however, is the same – whether the term is fairly brought to the other party’s attention.

8 _{Reg 2(2) Consumer Protection from Unfair Trading Regulations 2008 (SI 2008 No 1277),}

mirroring the European Court of Justice’s approach in Case C-210/96 Gut Springenheide

GmbH and Rudolf Tusky v Oberkreisdirektor des Kreises Steinfurt-Amt für Lebensmittelüberwachung [1998] ECR I-4657.

9 _{See Joined Cases T-183/02 and T184/02 El Corte Inglés v Office for Harmonisation in the} Internal Market (Trade Marks and Designs) [2004] ECR II-00965 at [68].

10 _{Issues Paper, para 8.68(1).}

11 _{Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] 1 QB 433, [1988] 2}

WLR 615. It was applied in Scotland in Montgomery Litho Ltd v Maxwell 2000 SC 56.

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Support for our proposed definition of “prominent”

4.31 Almost two-thirds of respondents agreed that a term should be considered prominent if it was presented in a way that the average consumer would be aware of the term. All categories of respondents were well represented.

4.32 Reflecting the majority view, the Judges of the Court of Session considered this to be “a familiar and suitable objective test, and a fairly robust standard”. Similarly, the North East Trading Standards Association noted:

The “average consumer” test is a default in much EU related legislation. If the changes are meant to make the regulations both more transparent and also simpler to enforce central to this should be that they mirror other legislation within the same context.

4.33 Deborah Parry considered that the “‘average consumer test’ may sometimes be slightly more ‘generous’ to businesses than a reasonable person test, but this … is an acceptable price of standardisation”.

4.34 The Association of Her Majesty’s District Judges concurred, concluding “if the consumer then does not consider it further they have no basis for any subsequent challenge”.

Concerns about the proposed definition of “prominent”

4.35 Most of those who opposed the test were worried about the concept rather than the definition we had used. As we have seen, some business groups such as the ABI thought that it was unrealistic to make all price information prominent. By contrast, regulators and consumer groups thought that prominence may not be sufficient to ensure consumers took note of the term.

4.36 That said, some business groups agreed with the principle of prominence, but expressed concern about how it would operate in practice. The BBA agreed that “prominence” is beneficial in exploring fairness, but feared it has “its own complexities due to the subjective nature by which it must be assessed”. They thought that it might lead to:

a paradox whereby the more that one seeks to create prominence by emboldening and highlighting information the less prominent that information becomes in comparison to the highlighted information with which it sits.

4.37 The Nationwide Building Society also agreed with the proposal in principle, but it was concerned about the suggestion that the use of hyperlinks could prevent terms from being considered prominent:

Within our internet bank and website hyperlinks are used primarily to improve the customer experience as we find that click through terms and conditions are less frustrating for the customer than reams of text appearing every time a page is opened.

4.38 The FLA had no objections to the “average consumer” test, but still thought that the proposal failed to define the term “prominent” adequately.

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4.39 Meanwhile the Office of Fair Trading (OFT) welcomed “recognition of the fact that the consumer’s perspective should figure in determining the scope of the exemption”. It thought, however, that the proposed definition “fails to adequately take into account whether consumers do factor the term into their decision to enter the contract”. It objected to the introduction of the “average consumer” concept to the UTCCR, arguing that unfair terms legislation should also protect “vulnerable” consumers. Itcommented:

in the UCT Directive the fairness test requires that “all the circumstances attending the conclusion of the contract” (Article 4(1) of the Directive) are taken into account and, more generally, the requirement of good faith supports our [the OFT’s] objection to the view that vulnerable consumers are not intended to enjoy special protection.

The OFT thought that it would be an “anomaly” for the average consumer standard “to be recognised as being applicable to just one aspect of the legislation”.

4.40 The OFT also expressed concern that, in some cases, consumers may fail to take account of a term even if it is reasonably prominent. As we discuss in Part 5, in discussions it gave an example from OFT v Foxtons,13 in which a consumer who planned to let their property would be required to pay a substantial commission to Foxtons if they later sold the property. The OFT thought that when terms covered remote contingencies such as this, consumers would not engage with them, even where prominent.

Discussion

4.41 There was a good level of support for our test of prominence. It is right that the issue of prominence should be assessed from the point of view of a consumer, but we think that the standard should be objective and reasonably high. The concept of a “reasonably well informed, observant and circumspect” consumer is well-established in European law, and we think that it can be useful in this context.

4.42 The legislation needs to use a general test that can be applied across all sectors. We understand businesses’ desire for more detail, but think that this is best addressed through guidance.

4.43 The OFT feared that the “average consumer” would spread across different tests in unfair terms litigation, so as to prevent the court from looking at all the circumstances of the case. We stress that under our recommendations the fairness test will continue to operate in the same way and “all the circumstances attending to the conclusion of the contract” will still have to be taken into account by the courts. If a consumer’s vulnerability is a relevant circumstance, then the court must take it into account.

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4.44 The average consumer standard we recommend is to be applied to the prominence test for the purposes of establishing whether or not a term can be exempt. We do not believe that this particular test should be subjective, or else it would be too difficult to apply in practice.

4.45 After considering the OFT’s concerns, we think it would be useful to state in the legislation that the more unusual or onerous the term, the more prominent it needs to be. This clarifies that there is an element of relativity to the definition of “prominent”. Some terms may need to be more prominent than others. As we have seen, this is not a novel concept; it reflects Lord Denning’s “red hand rule” as endorsed in Interfoto.14