Videos: Part 3: Regulating contracts: Video 2: Constraining consumers' freedom

Consumers buying services are very often required to assent to standard terms.  Standard terms increasingly include clauses which seek to restrict consumers’ freedom of action.  The videos below relate to two such clauses.  The first video deals with a clause in Paypal’s terms which prohibits consumers from letting other people use devices on which they use Paypal.  Read literally, this would mean that if you use Paypal on a mobile phone or laptop, you cannot let anyone else use that phone or laptop. 

The second video deals with a clause in a hotel’s terms and conditions under which guests are prohibited from leaving negative reviews of the hotel on any review site, with the hotel reserving the right to charge a fee to any person who leaves a negative review.

Watch the videos, and consider the legal issues posed by clauses of this type. 

Commentary

1. Neither clause in question is an exclusion clause, in that neither seeks to diminish or reduce the liability of the service-provider.  The issue, rather, is that they impose obligations on the consumer which appear unfair.  In law, clauses of this type are dealt with under the law relating to unfair terms under the Consumer Rights Act 2015.  Under s. 62(4), clauses are not enforceable if they cause as significant imbalance in the parties’ positions and are contrary to good faith. 

2. The key question in this case will be whether the clause causes a ‘significant imbalance’ in the parties’ relationship.  Under DGFT v First National Bank [2002] 1 AC 481 (HL), the imposition of a ‘disadvantageous burden or risk or duty’ on the consumer is sufficient to make a clause unfair, if it tilts the parties’ rights and obligations in the supplier’s favour.   The question to consider is whether either clause falls into this category.

3. Consider the following variants of the clauses discussed in the video. Do these variations affect the position under the Consumer Rights Act?  Why or why not?

  1. Consider a hypothetical clause under which Paypal does not bar consumers from sharing their devices.  Instead, it provides that if a consumer shares his or her device, they will no longer be covered by Paypal’s anti-fraud guarantee.
  2. Consider a hypothetical variation on the ‘no negative reviews’ clause, in which the hotel, instead of barring negative reviews altogether, instead requires guests to contact the hotel and provide them with an opportunity to resolve the complaint before leaving a negative review.  Guests who fail to provide the hotel with this opportunity will be charged a fee.