Unfair contract terms

What it means

Unfair contract terms are provisions in consumer contracts that, contrary to good faith, create a significant imbalance in the parties' rights and obligations to the consumer's detriment. Typical examples are excessive penalties, unilateral changes to price or terms and exclusion of the trader's liability.

Such terms are void and do not bind the consumer. The rest of the contract remains valid if it can stand without the void term. Courts assess unfairness of their own motion when dealing with a dispute under a consumer contract, which is an important protection especially in consumer credit.

The rules derive from an EU directive and the Civil Code, which also contains an indicative list of unfair terms. They apply mainly to terms drafted in advance by the trader that the consumer could not influence, typically in general terms and conditions.

How it works in practice

A business selling to consumers should regularly review its terms of trade, contracts and complaints policy. Risky provisions include contractual penalties disproportionate to the obligation, automatic renewal without clear notice and the right to change prices without giving the consumer a way out.

In consumer credit, unfair terms are a frequent subject of litigation, for example hidden fees or arbitration clauses. If a court finds an unfair term, the lender may lose its right to interest and fees arising from it.

Supervision is carried out mainly by the Slovak Trade Inspection and, for financial services, the National Bank of Slovakia. They can fine traders for using unfair terms and order their removal. Consumers can also defend themselves in court or through alternative dispute resolution.

What to watch out for

The rules on unfair terms apply to contracts with consumers, not between businesses. In business-to-business relations there is greater freedom of contract, although some terms can still be invalid, for example for breaching good morals or the law, and a liability cap has its limits.

A clearly written term is not necessarily fair; what matters is whether it creates a significant imbalance. At the same time, unclear terms are interpreted in the consumer's favour. When drafting terms of trade, write clearly and in a balanced way so that they withstand both inspection and dispute.