The House of Lords stated that reg 6 Unfair Terms in Consumer Contracts Regulations 1999 should be interpreted restrictively. Their Lordships distinguished terms that were ‘ancillary’ from those that were ‘core’ and held that terms ‘ancillary’ to the ‘core’ of the contract should be subject to an assessment for fairness.

The supplier contracted to supply a Buick car, which had been inspected and found to be in good working order. However, when it was delivered late at night it had been towed to its destination as it was incapable of being driven. The cylinder head had been removed, some of the pistons were broken, and the valves were burned out. The supplier sought to rely on a term of his contract that provided that ‘no condition or warranty that the vehicle is roadworthy, or as to its age, condition or fitness for any purpose is given by the owner or implied herein’.

The Court of Appeal held that as there had been such a fundamental breach of the contract, the supplier was not entitled to rely on the exclusion clause in the agreement. There was a substantial deviation between what had been contracted for and what was eventually delivered.

C purchased a Sunday newspaper containing a scratch-card game relating to a competition being held the following week in the Daily Mirror. The scratch card told readers to refer to the Daily Mirror for the full rules and how to claim. Rule 5 provided that in the event of more prizes being claimed than were available, a simple draw would take place to determine the winner. C had a winning scratch card and called the claims line, where he was told that he had won a £50,000 prize. However, due to an error, 1,472 other people had also claimed this prize. The newspaper then held a draw in accordance with Rule 5 and added a further £50,000 to be shared amongst the other winners. C won only a £34 share. In C’s claim against the newspaper for the full £50,000 prize money, the issue was whether the contract incorporated the rules, and in particular, Rule 5.

The test was whether the newspaper had reasonably brought the rules to the attention of its readers and further whether Rule 5, which in effect turned an apparent winning card into a losing one, was unusual or particularly onerous. The Court of Appeal held that the rules were incorporated into the parties’ contract as they had been referred to on the face of C’s scratch card and could also be ascertained from back issues of the newspaper or by means of an enquiry to the newspaper offices. Hale LJ said that Rule 5 could not by any normal use of language be called ‘onerous’ or ‘outlandish’ since ‘it merely deprives the claimant of a windfall for which he has done very little in return’. She went on to say that the rules were not unusual or uncommon in the field of such games and competitions and ‘indeed it would have been surprising if there had been no protection on the lines of Rule 5’.

The Office of Fair Trading began an investigation, under the Unfair Terms in Consumer Contracts Regulations 1999, into the fairness of certain personal current account charges levied by banks on transactions for which their customers did not have sufficient funds in their accounts to meet the payments. It then issued proceedings against the defendants, seeking a declaration that the standard terms and charges in question were not excluded by reg 6(2)(b) of the 1999 Regulations and could therefore be assessed for fairness.

The Supreme Court focused on reg 6(2)(b). In reaching a contrary view to the decision of the Court of Appeal, the Justices concluded that if a term concerned only a part of the price, it should fall within the ambit of reg 6(2)(b).
Therefore, since the charges in question were a part of the price the bank received in exchange for providing its customers with a current account, the relevant terms fell within reg 6(2)(b) as ‘core terms’ which are excluded from the Regulations and therefore could not be assessed for fairness.