Control of Price Related Terms in Standard Form Contracts: Yeşim M. Atamer Pascal Pichonnaz Editors

Ius Comparatum – Global Studies in Comparative Law
Yeşim M. Atamer
Pascal Pichonnaz Editors
Control of Price
Related Terms
in Standard
Form Contracts
Ius Comparatum – Global Studies
in Comparative Law
Volume 36
Series Editors
Katharina Boele-Woelki, Bucerius Law School, Hamburg, Germany
Diego P. Fernández Arroyo, Institut d’Études Politiques de Paris (Sciences Po), Paris,
France
Founding Series Editors
Jürgen Basedow, Max Planck Institute for Comparative and International Private
Law, Hamburg, Germany
George A. Bermann, Columbia University, New York, USA
Editorial Board
Joost Blom, University of British Columbia, Vancouver, Canada
Vivian Curran, University of Pittsburgh, USA
Giuseppe Franco Ferrari, Università Bocconi, Milan, Italy
Makane Moïse Mbengue, Université de Genève, Switzerland
Marilda Rosado de Sá Ribeiro, Universidade do Estado do Rio de Janeiro, Brazil
Ulrich Sieber, Max Planck Institute for Foreign and International Criminal Law,
Freiburg, Germany
Dan Wei, University of Macau, China
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Académie Internationale de Droit Comparé

International Academy of Comparative Law
Yeşim M. Atamer • Pascal Pichonnaz
Editors
Control of Price Related

Terms in Standard Form
Contracts
Editors
Yeşim M. Atamer Pascal Pichonnaz
Faculty of Law Faculty of Law
University of Bern University of Fribourg
Bern, Switzerland Fribourg, Switzerland
Faculty of Law
Istanbul Bilgi University
Istanbul, Turkey
ISSN 2214-6881 ISSN 2214-689X (electronic)

Ius Comparatum – Global Studies in Comparative Law
ISBN 978-3-030-23056-2 ISBN 978-3-030-23057-9 (eBook)
https://doi.org/10.1007/978-3-030-23057-9
© Springer Nature Switzerland AG 2020

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Preface
Competitive market economies work with the basic assumption that the supply side
cannot charge more than their cost of supply given that rational and perfectly well-
informed customers know their preferences and are responsive to any price change
in the market. However, markets are never fully transparent, and findings of
behavioural sciences show that especially consumers act based on imperfect ratio-
nality due to systematic biases. Pricing structures that serve to hide rather than reveal
the real cost of the goods and services pose one of the main challenges to markets as
they abuse biases on the demand side to the greatest extent possible. “Hiding” price-
related terms in standard form contracts is a prominent way of creating non-salient
prices and is therefore a debated issue in many countries around the world.
This book explores various approaches regarding control of price terms and
particularly discusses the effectiveness of two major paths: ex ante regulatory and
ex post judicial intervention. For the past several years, courts in many jurisdictions
are confronted with the issue of whether, and to what extent, they should intervene in
price-related terms in standard form contracts—especially so in the area of consumer
contracts. Open price clauses, flat remunerations, price adjustment clauses, clauses
giving the seller/supplier the right to ask for additional payments, bundling or
partitioning practices—a variety of price-related terms are used to manipulate
customers’ choices, often also by exploiting their behavioural biases. The result is
an unfavourable contract that is later challenged in court. However, invalidating a
given price term in standard forms e.g. of a banking or utilities contract only has an
inter partes effect, which means that in thousands if not millions of similar contracts,
the same clauses may continue to be used. Effective procedural rules are often
lacking. Therefore, pricing patterns that serve to hide rather than to reveal the real
cost of goods and services require special attention on the part of regulators.
Thanks to its broad comparative analysis, this book offers a thorough overview of
the methods employed in several countries. It also gives references to numerous
decisions dealing with abusive price terms in various jurisdictions. As such, it may
serve as a source of ideas and suggestions to identify and tackle abusive terms in
standard contract terms.
v
vi Preface
The structure of each chapter is broadly determined by the questionnaire prepared

by the editors. Each country report includes general information on the scope of
freedom of contract and control of standard contract terms, followed by a specific
chapter on judicial control of price terms used in standard contract terms. In their
country reports, the authors dwell further into details of specific regulatory pro-
visions related to control of price terms, as well as to disclosure regulations promot-
ing price transparency and competition. The detailed questionnaire is available as an
appendix to the general report included in this volume.
The book gathers twenty-seven contributions from national rapporteurs and one
supranational report for the European Union. All chapters were prepared for the
General Congress of the International Academy of Comparative Law held in July
2018 in Fukuoka; they have been updated as of July 2019. These reports are
supplemented by a general report presented at the same IACL Congress, which
includes a comparative analysis of the national and supranational reports. The
national contributors hail from around the globe, including Africa, Asia, Europe
and the Americas. We are very pleased and honoured to have such a group of
distinguished scholars contributing to this volume and are grateful to all of them for
engaging in this project and for the productive cooperation.
We would like to express our special thanks to Prof. Dr. Dr. h.c. (mult.) Katharina
Boele-Woelki and Prof. Dr. Diego P. Fernández Arroyo, respectively, President and
Secretary General of the International Academy of Comparative Law, for including
this volume in the Ius Comparatum series. This volume could not have been
published without the superb assistance of Ms Margaux Schroeter, BLaw at the
University of Fribourg, in editing the contributions. We are both indebted to her. The
editors would also like to thank sincerely Ms Anja Trautmann, Mrs Kay Stoll, Ms
Anitha Chellamuthu, Ms Sayani Dey and Mr Sabarigirinathan Thanikachalam at
Springer for their constant support and patience in completing this volume.
Bern, Switzerland Yeşim M. Atamer

Fribourg, Switzerland Pascal Pichonnaz
September 2019
Contents
Part I General Report

Control of Price Related Terms in Standard Form Contracts:
General Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Yeşim M. Atamer and Pascal Pichonnaz
Part II Supranational Report: European Union

Control of Price Related Terms in Standard Form Contracts
in the European Union: The Innovative Role of the CJEU’s Case-Law . . . 67
Sergio Cámara Lapuente
Part III National Reports

Control of Price Related Terms in Standard Form Contract
in Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Osvaldo Jorge Marzorati
in Austria: Judicial Control and Other Means of Price Control . . . . . . . 133
Florian Heindler
in Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
Reinhard Steennot
in Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
Ana Frazão
vii
viii Contents
Control of Price Related Terms in Common Law Canada:

Piecemeal Solutions to Demonstrated Problems of Unfairness . . . . . . . . 209
Joshua Karton
in Canada (Civil Law): Le prix dans les contrats de consommation,
les contrats d’adhésion et les contrats réglementés – pouvoir
d’intervention des tribunaux et autres modes de contrôle des prix
en droit québécois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231
Marie-Claude Desjardins and Nathalie Vézina
in Chile: Price Control and the External Intervention of Contracts
in Chilean Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269
Jaime Alcalde Silva and Juan Luis Goldenberg Serrano
in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293
Shiyuan Han and Teng Wu
in Croatia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315
Marko Baretić and Siniša Petrović
in Denmark: Pragmatism and General Clauses . . . . . . . . . . . . . . . . . . . 339
Kasper Steensgaard
in Estonia: Judicial Control and Other Means of Price Control . . . . . . . 359
Karin Sein
in France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 379
Gaël Chantepie
in Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405
Matthias Fervers and Beate Gsell
Three Modes of Regulating Price Terms in Standard-Form
Contracts—The Israeli Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429
Eyal Zamir and Tal Mendelson
in Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 451
Michele Graziadei
Contents ix

in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473
Hiroo Sono
in the Netherlands: Exclusion of Clauses Pertaining to the Core
of the Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 497
Ewoud Hondius
in Romania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507
Adriana Almăşan and Lucian Bercea
Freedom of Contract in Respect of Price Terms in Russian Law:
With a Special Focus on Price Terms in Standard Form Contracts . . . . 531
Artyom G. Karapetov and Andrey M. Shirvindt
in Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561
Wee Ling Loo
in Slovenia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593
Damjan Možina
in South Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 605
Jacques du Plessis and Wiaan Visser
in Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 631
Francisco de Elizalde
in Switzerland—The Control of Standard Contracts Terms:
The Swiss Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653
Thomas Probst
in Taiwan: Control of Price Related Terms Through the Legislator,
the Judiciary and the Administration . . . . . . . . . . . . . . . . . . . . . . . . . . 673
Ming-En Hsiang and Ting-Su Chen
in Turkey: Judicial and Other Means of Price Control . . . . . . . . . . . . . . 687
Kerem Cem Sanlı
x Contents

in the UK: Regulating Prices and Charges in the UK: Information
Versus Substance, General Clauses Versus Rules Developed
by Regulators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723
Christopher Willett
Contributors
Jaime Alcalde Silva Associate Professor, Pontifical Catholic University of Chile,

Faculty of Law, Santiago, Chile
Adriana Almăşan Associate Professor, University of Bucharest, Faculty of Law,
Bucharest, Romania
Yeşim M. Atamer Professor, University of Bern, Faculty of Law, Bern,
Switzerland
Istanbul Bilgi University, Faculty of Law, Istanbul, Turkey
Marko Baretić Professor, University of Zagreb, Faculty of Law, Zagreb, Croatia
Lucian Bercea Professor, West University of Timișoara, Faculty of Law, Timi-
șoara, Romania
Sergio Cámara Lapuente Professor, University of La Rioja, Faculty of Law,
Logroño, Spain
Gaël Chantepie Professor, University of Lille, Faculty of Legal, Political and
Social Sciences, Lille, France
Ting-Su Chen Dr. iur., National Taipei University, Department of Law, Taipei,
Taiwan
Marie-Claude Desjardins Associate Professor, University of Sherbrooke, Faculty
of Law, Sherbrooke, QC, Canada
Francisco de Elizalde Associate Professor, IE University, IE Law School, Madrid,
Spain
Matthias Fervers Dr. iur., Ludwig-Maximilians-University, Faculty of Law,
Munich, Germany
Ana Frazão Professor, University of Brasília, Faculty of Law, Brasília, Brazil
xi
xii Contributors
Juan Luis Goldenberg Serrano Associate Professor, Pontifical Catholic Univer-

sity of Chile, Faculty of Law, Santiago, Chile
Michele Graziadei Professor, University of Turin, Department of Law, and
Collegio Carlo Alberto Fellow, Turin, Italy
Beate Gsell Professor, Ludwig-Maximilians-University, Faculty of Law, Munich,
Germany
Shiyuan Han Professor, Tsinghua University, School of Law, Beijing, China
Florian Heindler Assistant Professor, Sigmund Freud University, Faculty of Law,
Vienna, Austria
Ewoud Hondius Professor em., Utrecht University, Faculty of Law, Utrecht,
Netherlands
Ming-En Hsiang Associate Professor, National Taipei University, Department of
Law, Taipei, Taiwan
Artyom G. Karapetov Professor, M-LOGOS Law Institute/Higher School of
Economics, Moscow, Russia
Joshua Karton Associate Professor, Queen’s University, Faculty of Law, Kings-
ton, ON, Canada
Wee Ling Loo Associate Professor, Singapore Management University, School of
Law, Singapore, Singapore
Osvaldo Jorge Marzorati Dr. iur., Buenos Aires, Argentina
Tal Mendelson Law Clerk of the Supreme Court, The Hebrew University of
Jerusalem, Faculty of Law, Jerusalem, Israel
Damjan Možina Professor, University of Ljubljana, Faculty of Law, Ljubljana,
Slovenia
Siniša Petrović Professor, University of Zagreb, Faculty of Law, Zagreb, Croatia
Pascal Pichonnaz Professor, University of Fribourg, Faculty of Law, Fribourg,
Switzerland
Jacques du Plessis Professor, Stellenbosch University, Faculty of Law, Stellen-
bosch, South Africa
Thomas Probst Professor, University of Fribourg, Faculty of Law, Fribourg,
Switzerland
Kerem Cem Sanlı Associate Professor, Istanbul Bilgi University, Faculty of Law,
Istanbul, Turkey
Karin Sein Professor, University of Tartu, School of Law, Tallinn, Estonia
Contributors xiii
Andrey M. Shirvindt Associate Professor, Lomonosov Moscow State University,

Faculty of Law, Moscow, Russia
Head of Department, Private Law Research Centre under the President of the
Russian Federation named after S.S. Alexeev, Moscow, Russia
Hiroo Sono Professor, Hokkaido University, School of Law, Sapporo, Japan
Reinhard Steennot Professor, Ghent University, Financial Law Institute, Gent,
Belgium
Kasper Steensgaard Professor, Aarhus University, School of Business and Social
Sciences, Department of Law, Aarhus, Denmark
Nathalie Vézina Professor, University of Sherbrooke, Faculty of Law, Sherbrooke,
QC, Canada
Wiaan Visser Former Research Fellow, Max Planck Institute for Comparative and
International Private Law, Hamburg, Germany
Christopher Willett Professor, University of Essex, School of Law, Colchester,
UK
Teng Wu Associate Professor, Central University of Finance and Economics,
School of Law, Beijing, China
Eyal Zamir Professor, The Hebrew University of Jerusalem, Faculty of Law,
Jerusalem, Israel
Abbreviations
A South African Appellate Division

ABCA Alberta Court of Appeal (Canada)
ABGB Austrian Civil Code (Allgemeines bürgerliches Gesetzbuch)
ABQB Alberta Court of Queen’s Bench (Superior trial court) (Canada)
ABS Association of Banks in Singapore
AC Appeal Cases (United Kingdom)
ACM Consumer and Market Authority (Autoriteit Consument en
Markt) (Netherlands)
AcP Archiv für civilistische Praxis (journal) (Austria)
AELA Application of English Law Act (Singapore)
AEUMC United States–Mexico–Canada Agreement (Accord Etats-
Unis-Mexique-Canada)
AFTA Alberta Fair Trading Act (Canada)
AG Advocate General
AG Attorney General
AGB Allgemeine Geschäftsbedingungen (Germany)
AGBG Gesetz zur Regelung des Rechts der Allgemeinen
Geschäftsbedingungen (Germany)
AGBGB Ausführungsgesetz zum Bürgerliches Gesetzbuch (Germany)
AGCM Autorità Garante della Concorrenza e del Mercato (Italy)
al. Alinéa (Canada)
ALA Agricultural Land Act (Japan)
ALENA North American Free Trade Agreement (Accord de libre-
échange nord-américain)
ALI American Law Institute
AMA Act on Prohibition of Private Monopolization and Maintenance
of Fair Trade (Japan)
ANAC National Civil Aviation Agency (Brazil)
ANATEL National Telecommunication Agency (Brazil)
xv
xvi Abbreviations
ANCOM National Authority for the Administration and Regulation of

Communications (Autoritatea Naţională pentru Administrare şi
Reglementare în Comunicaţii) (Romania)
ANEEL National Electrical Power Agency (Brazil)
ANPC National Authority for Consumer Protection (Autoritatea
Națională pentru Protecția Consumatorilor) (Romania)
ANPC Romanian National Authority for Consumer Protection
(Autoritatea Națională pentru Protecția Consumatorilor)
(Romania)
ANRE National Energy Regulatory Authority (Autoritatea Națională
de Reglementare în Domeniul Energiei) (Romania)
ANS National Supplementary Health Agency (Brazil)
ANTT National Terrestrial Transportation Agency (Brazil)
AOER Average Overall Effective Rate
APR Annual Percentage Rate
APRC Annual Percentage Rate of Charge
ARERA Autorità di Regolazione per Reti Energia e Ambiente (Autorità
di regolazione per reti energia e ambiente) (Italy)
ARPT Agency in Real Property Transactions Act (Zakon o
posredovanju u prometu nekretninama) (Croatia)
Art. Article
ASAS Standards Authority of Singapore
ASCT Act for Specified Commercial Transactions (Japan)
ASF Financial Supervision Authority (Autoritatea de Supraveghere
Financiară) (Romania)
Ass. plén. Assemblée plénière de la Cour de Cassation (France)
ATM Automated Teller Machine
AUPMR Act against Unfair Premiums and Misleading Representations
(Japan)
B2B Business to Business contract
B2C Business to Consumer contract
B2SME Business to Small and Medium Size Enterprise
BBVA Banco Bilbao Vizcaya Argentaria (Argentina)
BC British Columbia (Canada)
BC Reg British Columbia Regulations (Canada)
BCCA British Columbia Court of Appeal (Canada)
BCLR British Columbia Law Reports (Canada)
BCSC British Columbia Supreme Court (Superior trial court)
(Canada)
BeckOGK Beck’scher Online-GrossKommentar (Germany)
BeckRS Beck-Rechtssachen (Online-Zeitschrift) (Germany)
BGB German Civil Code (Bürgerliches Gesetzbuch)
BGBl Bundesgesetzblatt (Germany)
Abbreviations xvii
BGE Entscheidungen des Schweizerischen Bundesgerichtes

(Switzerland)
BGH German Federal Court of Justice (Bundesgerichtshof)
BGHZ Entscheidungen des Bundesgerichtshofes in Zivilsachen
(Germany)
BIT Behavioural Insights Team
BKR Zeitschrift für Bank- und Kapitalmarktrech (Germany)
BOE Boletín Oficial del Estado (Spain)
BPCPA Business Practices and Consumer Protection Act (BC and
Alberta) (Canada)
BRL Brazilian Real (Brazilian currency)
BT-Drs Deutscher Bundestag Drucksache (Germany)
BVerfGE Senatsentscheidungen des Bundesverfassungsgerichts
(Germany)
BvR Sicherungseinrichtung des Bundesverbandes der Deutschen
Volksbanken und Raiffeisenbanken (Germany)
c. Considérant (Canada)
c. Contre (Canada)
C. cr. Code criminal (Canada)
C.c.Q. Quebec Civil Code (code civil du Québec)
C.p.c Code de Procédure civile (Canada)
C.Q. Chevalier (ordre national du Québec) (Canada)
C2C Consumer to Consumer contract
CA Court of Appeal
CACA Credit Agreements for Consumers Act (Zakon o potrošačkom
kreditiranju) (Croatia)
CACRIPA Credit Agreements for Consumers Relating to Residential
Immovable Property Act (Zakon o stambenom potrošačkom
kreditiranju) (Croatia)
CADE Brazilian Competition Authority
Cass. Italian Supreme Court of Cassation (Corte Suprema di
Cassazione)
CBLJ Canadian Business Law Journal
CBRC China Banking Regulatory Commission
CC Civil Code
CC South African Constitutional Court
CC. Commercial Code (Turkey)
CCA Consumer Contract Act (Japan)
CCA Consumer Credit Act (Switzerland)
CCL Chinese Contract Law
CConsom French Consumption Code
CCP Code of Consumer Protection (Turkey)
CCPL Consumer Protection Law
xviii Abbreviations
CCR Romanian Constitutional Court (Curtea Constituțională a

României)
CCRC Constitutional Court of the Republic of Croatia
CDC Consumer Protection Code (Brazil)
CEL Code of Economic Law (Belgium)
CESL Common European Sales Law
CETIP Chamber of Custody and Liquidation (Brazil)
Cf. Confer
CFRA Comparability of Fees Related to Payment Accounts, Payment
Account Switching and Access to Payment Accounts with
Basic Features Act (Zakon o usporedivosti naknada,
prebacivanju računa za plaćanje i pristupu osnovnom računu)
(Croatia)
Chap, cap Chapter
CIA Credit Institutions Act (Zakon o kreditnim institucijama)
(Croatia)
Cir. Circuit
Circ. Circulaire (France)
Civ. Civil Chamber of the French Cassation Court (Chambre civile I
de la Cour de Cassation)
CJEU Court of Justice of the European Union
CJF Brazilian Council of Federal Justice
CMA Competition and Markets Authority (United Kingdom)
CMN National Monetary Council (Brazil)
CNSP National Private Insurance Council (Brazil)
CNY Chinese Yuan (Chinese currency)
CO Code of Obligations
COD (Procedure of) Codecision
COM Commission
Com. Commercial Chamber of the French Cassation Court (Chambre
commerciale de la Cour de Cassation)
CONC Consumer Credit Sourcebook (United Kingdom)
cons. Considérant (Switzerland)
Cons. Code Consumer Code
Cons. const. Conseil constitutionnel (France)
COPREC Consumer Relationships Prior Conciliation Service
(Argentina)
Corp. Corporation
Corte Cost Italian Constitutional Court (Corte costituzionale)
CPA Consumer Protection Act (Austria)
CPA Consumer Protection Act (Zakon o zaštiti potrošača) (Croatia)
CPA Consumer Protection Act (Tarbijakaitseseadus) (Estonia)
CPA Consumer Protection and Fair Trade Authority (Israel)
CPA Consumer Protection Act 68 of 2008 (South Africa)
Abbreviations xix
CPC Communist Party of China

CPC Civil Procedure Code (Codul de procedură civilă român)
(Romania)
CPD Criminal Practice Directions (United Kingdom)
CPFTA Consumer Protection Fair Trading Amendment Act
(Singapore)
CPrA Civil Procedure Act (Croatia)
CRA Consumer Rights Act (United Kingdom)
Credit CARD Act Credit Card Accountability Responsibility and Disclosure Act
CRTC Canada Radio-Television and Telecommunications
Commission
CSALB Centre for Alternative Dispute Resolution in Banking (Centrul
de Soluționare Alternativă a Litigiilor în Domeniul Bancar)
(Romania)
CSC Canadian Supreme Court (Cour Suprême du Canada)
D. Digeste
D.lgs Decreto legislativo (Italy)
DAE Annual Percentage Rate (Dobânda anuală efectivă) (Romania)
DAOJA Danish Administration of Justice Act (Lov om Rettens Pleje)
DC Décision de contrôle de constitutionnalité des lois ordinaires,
lois organiques, des traités, des règlements des Assemblées
(France)
DCA Danish Contract Act (Lov om aftaler og andre retshandler på
formuerettens område)
DCAA Danish Credit Agreement Act (Lov om kreditaftaler)
DCFR Draft Common Frame of Reference
DCFR Draft Common Frame of Reference
DHCA Danish Housing Cooperative Act (Lov om
andelsboligforeninger og andre boligfællesskaber)
DIA Danish Interest Act (Lov om renter og andre forhold ved
forsinket betaling)
DIRINCO Directorate of Industry and Commerce (Dirección de Industria
y Comercio) (Chile)
DL Decreto Legge (Italy)
DMPA Danish Marketing Practices Act (Lov om markedsføring)
DPI Direct Purchase Initiative (Singapore)
DSFT Decision of the Swiss Federal Tribunal (Switzerland)
DStv Digital Satellite Television (South Africa)
E. Case
e.g. For example
EA Energy Act (Zakon o energiji) (Croatia)
EBA European Banking Authority
EC European Community / European Commission
ECA Electronic Communications Act (Zakon o elektroničkim
telekomunikacijama) (Croatia)
xx Abbreviations
ECB European Central Bank

ECHR European Convention of Human Rights
ECHR European Court of Human Rights
ECLI European Case-Law Identifier
ecolex Ecolex Fachzeitschrift für Wirtschaftsrecht (journal) (Austria)
ECtHR European Court of Human Rights
ed(s) Editor(s)
edn Edition
EEA European Economic Area
EEC European Economic Community
EEMA Electrical Energy Market Act (Zakon o tržištu električne
energije) (Croatia)
EGBGB Einführungsgesetz zum Bürgerlichen Gesetzbuche (Germany)
EGO Emergency Government Order
EHA Asociación Hipotecaria Española (Spain)
EIR Effective Interest Rate
eMBeD Mind, Behavior, and Development Unit
ERA Electricity Regulation Act 4 of 2006 (South Africa)
et al. And others
EU European Union
EuGH Europäischer Gerichtshof (Germany)
EuZW Europäische Zeitschrift für Wirtschaftsrecht (Germany)
EvBl Evidenzblätter (collection) (Austria)
EvBl-LS Evidenzblätter-Leitsätze (collection) (Austria)
EWCA Court of Appeal of England & Wales (United Kingdom)
EWHC High Court of Justice of England and Wales (United Kingdom)
EYB Éditions Yvon Blais (Canada)
FAPL Fonds d’Amélioration de la Programmation locale (Canada)
FAPPA Financial Activities and Pre-Bankruptcy Procedures Act
(Zakon o financijskom poslovanju i predstečajnoj nagodb)
(Croatia)
FAQ Frequently Asked Questions
FCA Financial Conduct Authority (United Kingdom)
FCAC Financial Consumer Agency of Canada
ff. And the following
FID Fee Information Document
fn Footnote
FSC Financial Supervisory Commission (Taiwan)
FSCA Financial Sector Conduct Authority (South Africa)
FSMA Financial Services Market Authority (Belgium)
FTC Fair Trade Commission (Japan)
FTR Fixed Termination Rates
G2B Government to Business contract
GC General clause
Abbreviations xxi
GDP Gross Domestic Product

GG Government Gazette (South Africa)
GMA Gas Market Act (Zakon o tržištu plina) (Croatia)
GN Government Notice (South Africa)
GOÄ Gebührenordnung für Ärzte (Germany)
Gov. Government
GOZ Gebührenordnung für Zahnärzte (Germany)
GPCCA General part of Civil Code Act (Tsiviilseadustiku üldosa
seadus) (Estonia)
GPCCC General Provisions of Chinese Civil Code
HAKOM Bylaw Bylaw on the Manner and Conditions for Conducting of
Electronic Communication Networks and Services Activities,
issued by the Croatian Regulatory Authority for Network
Industries (Pravilnik o načinu i uvjetima obavljanja
djelatnosti elektroničkih komunikacijskih mreža i usluga)
(Croatia)
HANFA Croatian Financial Services Regulatory Agency
HCSTL High Cost Short Term Lending (United Kingdom)
HD Law Chamber of the Supreme Court
HERA Croatian Energy Regulatory Authority
Hfl. Dutch guilder (Dutch currency)
HG Austrian Commercial Court (Handelsgericht)
HH Official Israeli Publication of Bills of Legislation (Hatza’ot
Hok)
HNB Croatian National Bank
HOAI Honorarordnung für Architekten und Ingenieure (Germany)
HPA Hire-Purchase Act (Singapore)
HSBC Hong Kong & Shanghai Banking Corporation
i.e. In other words
ICASA South African Independent Communications Authority
ICCJ Romanian High Court of Cassation and Justice (Înalta Curte de
Casație și Justiție)
ICLQ International Comparative Law Quarterly
ICT Information and Communications Technology (Japan)
IMDA Info-communications Media Development Authority Act
(Singapore)
immolex-LS Immolex-Leitsätze (collection) (Austria)
Inc. Incorporation
IPRP Injunctions Proposal Review Panel (Singapore)
IRRA Interest Rate Restriction Act (Japan)
J.E Jurisprudence Express (Canada)
JBl Juristische Blätter (journal) (Austria)
JO Journal Official de la République française (France)
K. Decision
xxii Abbreviations
KB Court of King’s Bench (United Kingdom)

KID Key Information Document for package retail and insurance
based investment products
L Legislation
L.p.c. Loi sur la Protection du Consommateur (Canada)
L.R.C Lois Révisées du Canada (Canada)
LCD Loi sur la Concurrence Déloyale (Switzerland)
let. Letter
LG Landgericht (Germany)
LJN Landelijk Jurisprudentie Nummer (Netherlands)
LOA Law of Obligations Act (Võlaõigusseadus) (Estonia)
Ltd Limited Liability
MAS Monetary Authority of Singapore
MBCA Manitoba Court of Appeal (Canada)
MDR Monatsschrift für Deutsches Recht (Germany)
Mr. Mister
NCA National Credit Act 34 of 2005 (South Africa)
NCC National Communications Commission (Taiwan)
NCR National Credit Regulator (South Africa)
NDPC National Development and Planning Committee (China)
NERSA National Energy Regulator (South Africa)
NHS National Health Service (United Kingdom)
NJW Neue Juristische Wochenschrift (Germany)
NJW-RR Neue Juristische Wochenschrift – Rechtsprechungsreport
(Germany)
NLCA Newfoundland and Labrador Court of Appeal (Canada)
NN National Gazette of the Republic of Croatia
Nr. / no / no / n Number
NTBR Publicatielogo Nederlands Tijdschrift voor Burgerlijk Recht
(Netherlands)
O Reg Ontario Regulations (Canada)
OA Obligation Act (Croatia)
OAC Ontario Appeal Cases (Canada)
ÖBA Österreichisches Bankarchiv (journal) (Austria)
OCPA Ontario Consumer Protection Act (Canada)
OEB Ontario Energy Board (Canada)
OECD Organisation for Economic Co-operation and Development
OFGEM Office of Gas and Electricity Markets (United Kingdom)
OFT Office of Fair trading (United Kingdom)
OGH Austrian Supreme Court of Justice (Oberster Gerichtshof)
OJ Official Journal of the CJEU
ÖJZ Österreichische Juristenzeitung (journal) (Austria)
OLG Austrian Higher Regional Court (Oberlandesgericht)
OLG German Higher State Court (Oberlandesgericht)
Abbreviations xxiii
Ont CA Ontario Court of Appeal (Canada)

OODMA Oil and Oil Derivatives Market Act (Zakon o tržištu nafte i
naftnih derivate) (Croatia)
ORCC Office de Révision du Code Civil (Canada)
ÖZW Österreichische Zeitschrift für Wirtschaftsrecht (journal)
(Austria)
P & CR Planning property and Compensation Reports (United
Kingdom)
p., pp. Page(s)
PADEC Prevención, Asesoramiento y Defensa del Consumidor
(Argentina)
Par ex. Par exemple (Canada)
Para(s), par. Paragraph(s)
PC Penal Code
PD Official Israeli Law Report (Piskei Din)
PECL Principles of European Contract Law
PEN Argentinian Executive Power
PFAP Prohibition on Fraudulent Act related to Price (Jinzhi Jiage
Qizha Xingwei Guiding) (China)
PJA/AJP Pratique Juridique Actuelle/Aktuelle Juristische Praxis
(Switzerland)
PNTL system Pay Now, Terms Later
PPI Payment protection insurance
PRC People’s Republic of China
PSA Payment System Act (Zakon o platnom prometu) (Croatia)
PSA Postal Services Act (Zakon o poštanskim uslugama) (Croatia)
pt. Point
Pty Proprietary
QB Court of Queen’s Bench (United Kingdom)
QCCA / C.A. Quebec Court of Appeal (Cour d’appel du Québec)
QCCQ / C.Q Quebec Court (Cour du Québec)
QCCS / C.S. Quebec Superior Court (Cour supérieure du Québec)
QPC Question Prioritaire de Constitutionnalité (France)
R.C.S. Recueil des arrêts de la Cour suprême du Canada (Canada)
R.J.Q Recueil de jurisprudence du Québec (Canada)
RACJ Régie des Alcools des Courses et des Jeux (Canada)
RCCS Measures for Regulating Credit Card Services (China)
RCPS Measures for Regulating the Charge of Property Services,
provided by the National Development and Reform
Commission and the former Ministry of Construction (China)
RDRB Rules developed by regulatory bodies (United Kingdom)
RdW Recht der Wirtschaft (journal) (Austria)
REJB Répertoire Electronique de Jurisprudence du Barreau (Canada)
REsp Recurso Especial (Brazil)
xxiv Abbreviations
Rev Ed Revised editions (Singapore)

RGZ Entscheidungen des Reichsgerichts in Zivilsachen (Germany)
RIO Reference Interconnection Offer
RJC Responsible Jewelry Council (Argentina)
RLRQ Recueil des Lois et des Règlements du Québec (Canada)
RMAAQ Régie des marchés agricoles et alimentaires du Québec
(Canada)
RMB Renminbi (Chinese currency)
ROT Restraint of trade (Singapore)
RPSCB Measures for Regulating the Prices for Service, provided by
Commercial Banks (Shangye Yinhang Fuwu Jiage Guanli
Banfa) (China)
RR Repo Rate
RT State Gazette (Riigi Teataja) (Estonia)
S, ss Schedule(s)
s. Suivante(s) (Canada)
SAP Uperintendence of Supply and Prices (Superintendencia de
Abastecimiento y Precio) (Chile)
SAP Sentencia de la Audiencia Provincial (Spain)
SC Supreme Court
SCA South African Supreme Court of Appeal
SCAP Singaporean Code of Advertising Practice
SCC Canadian Supreme Court
SCL Standard Contracts Law (Israel)
SCRC Supreme Court of the Republic of Croatia
SCT Standard Contract Terms
SCTA Small Claims Tribunal Act (Singapore)
SERNAC National Consumer Service (Servicio Nacional del
Consumidor) (Chile)
SFFA Singaporean Freight Forwarders’ Association Standard
Trading Conditions
SFT Swiss Federal Tribunal
SGD Singaporean Dollar (Singaporean currency)
SGHC Singaporean High Court
SIDE Secretary of Intelligence of the Government
SKCA Saskatchewan Court of Appeal (Canada)
SLR Singaporean Law Report
SLR(R) Singaporean Law Reports (Reissue)
SoF Statement of Fees
SOGA Sale of Goods Act (Singapore)
SPC Chinese Supreme People’s Court
SR Systematische Sammlung des Bundesrechts (Switzerland)
St. Satz (Germany)
STF Brazilian Supreme Federal Court (Supremo Tribunal Federal)
Abbreviations xxv
STJ Brazilian Superior Tribunal of Justice (Superior Tribunal de

Justiça)
STS Supreme Court Judgment
STS Spanish Supreme Court (Tribunales Superiores de Justicia)
SUGA Supply of Goods Act (Singapore)
SUNAB Superintendência Nacional de Abastecimento (Brazil)
SUSEP Superintendence for Private Insurances (Brazil)
SZ Sammlung Zivilrecht (official collection) (Austria)
t. Tome (Canada)
TCC Technology and Construction Court of England (United
Kingdom)
TFEU Treaty on the Functioning of the European Union
Trib. Tribunale (Italy)
UCA Unfair Competition Act (Switzerland)
UCTA Unfair Contract Terms Act (Singapore)
UfR Weekly Journal for the Jurisprudence (Ugeskrift for
Retsvæsen)
UK United Kingdom
UKHL United Kingdom House of Lords
UKSC United Kingdom Supreme Court
US United States
USA United States of America
USD United States Dollar (United States currency)
UTCCR Unfair Terms in Consumer Contracts Regulation (United
Kingdom)
VAT Value Added Tax
VfGH Austrian Constitutional Court (Verfassungsgerichtshof)
VfSlg Amtliche Sammlung des VfGH (official collection) (Austria)
vol. Volume
vs. / V Versus
VSL Ljubljanan Higher Court (Višje sodišče v Ljubljani) (Slovenia)
WASPA Wireless Application Provider’s Association (South Africa)
WLR Weekly Law Reports (United Kingdom)
WM Wertpapier-Mitteilungen, Zeitschrift für Wirtschafts- und
Bankrecht (Germany)
Yargıtay HGK General Assembly of the Civil Chambers of the Turkish
Supreme Court (Yargıtay hukuk genel kurulu) (Turkey)
Zak Zivilrecht aktuell (journal) (Austria)
ZFR Zeitschrift für Finanzrecht (journal) (Austria)
ZfV Zeitschrift für Verwaltung (journal) (Austria)
ZIP Zeitschrift für Wirtschaftsrecht
ZR Zivilrecht (Germany)
ZVR Zeitschrift für Verkehrsrecht (journal) (Austria)
Decisions of the Court of Justice of the European
Union1
CJEU Judgment of 30 Mai 2013, Asbeek Brusse and Austria 27

de Man Garabito, C-488/11, EU:C:2013:341 Belgium 23
EU 22, 88, 152
Italy 28
General Report 116, 212
CJEU Judgment of 15 January 2015, Air Berlin, EU 33, 65, 166
C-573/13, EU:C:2015:11 FR 99
General Report 336
CJEU Judgment of 6 July 2017, Air Berlin, C-290/16, Austria 97, 99
EU:C:2017:523
CJEU Judgment of 18 July 2013, Alemo-Herron and Italy 5
Others, C-426/11:EU:C:2013:521
CJEU Judgment of 20 September 2017, Andriciuc Austria 48, 90, 106
and others, C-186/16, EU:C:2017:703 EU 10, 24, 62, 68, 83, 93, 101, 102, 103,
110, 130
France 55
Romania 67
Slovenia 45, 46
Spain 29, 37, 40, 64
Switzerland 53, 54
General Report 170, 181, 182, 241, 354
CJEU Judgment of 14 March 2013, Aziz, C-415/11, Belgium 19, 22
EU:C:2013:164 EU 18, 22, 88
Spain 80
UK 109, 125, 132
General Report 19, 50, 66, 102, 108
CJEU Judgment of 27 April 2017, Bachman, C-535/ EU 29
16, EU:C:2017:321
CJEU Judgment of 11 June 2015, Banco Bilbao Viz- EU 127, 152, 155, 157
caya Argentaria (BBVA), C-602/13, EU:C:2015:397 Spain 83
(continued)
1
The numbers refer to the footnotes in the respective reports.
xxvii
xxviii Decisions of the Court of Justice of the European Union
CJEU Judgment of 14 June 2012, Banco Español de Denmark 59

Crédito, C-618/10, EU:C:2012:349 EU 20, 22, 152, 153
Spain 28, 67
General Report 115, 116, 118, 123
CJEU Judgment of 5 July 2016, Banco Popular EU 130
Español and PL Salvador, C-7/16, EU:C:2016:523.
CJEU Judgment of 23 January 2017, Banco Popular Spain 49
Español, C-349/15, EU:C:2017:68
CJEU Judgment of 26 January 2017, Banco Primus, EU 9, 24, 38, 67, 85, 99, 109, 121, 142,
C-421/14, EU:C:2017:60 152
General Report 108, 109, 129, 244
CJEU Judgment of 7 August 2018, Banco Santander, EU 40, 122, 130, 154
C-96/16 and C-94/17, EU:C:2018:643 Spain 88, 89, 90
CJEU Judgment of 3 December 2015, Banif Plus EU 77, 83
Bank, C-312/14, EU:C:2015:794
CJEU Judgment of 30 April 2014, Barclays Bank, EU 122
C-280/13, EU:C:2014:279 General Report 50
CJEU Judgment of 25 January 2017, BAWAG, C-375/ Belgium 72
15, EU:C:2017:38.
CJEU Judgment of 21 December 2016, Biuro Belgium 33
podróży Partner, C-119/15, EU:C:2016:987 General Report 106, 107, 153
CJEU Judgment of 9 July 2015, Bucura, C-348-14, EU 62, 86, 102, 114, 140
EU:C:2015:447 Romania 66
Spain 40, 54
General Report 181
CJEU Judgment of 18 December 2014, CA Consumer EU 58, 166
Finance SA, C-449/13, EU:C:2014:2464 Croatia 87
CJEU Judgment of 3 June 2010, Caja de Ahorros y EU 4, 35
Monte de Piedad de Madrid, C-484/08, EU: Spain 29, 31
C:2010:309 General Report 14, 21, 170, 241
CJEU Judgment of 22 November 2011, Cape and Belgium 13
Idealservice MN RE, C-541/99, EU:C:2001:625. France 20
CJEU Judgment of 3 September 2015, Coastea, EU 161
C-110/14, EU:C:2015:538
CJEU Judgment of 21 November 2002, Codifis, EU 3
C-473/00, EU:C:2002:705.
CJEU Judgment of 10 July 2014, Comission/Bel- Belgium 82
gium, C-421/12, EU:C:2014:2064.
CJEU Judgment of 10 May 2001, EU 4, 34
Commission/Netherlands, C-144/99, EU:C:2001:257
CJEU Judgment of 7 May 2002, Denmark 48
Commission/Sweden, C-478/99, EU:C:2002:281. General Report 105
CJEU Judgment of 21 April 2016, Belgium 54
Conseil/Commission, C-73/14, EU:C:2016:283.
CJEU Judgment of 16 January 2014, Constructora France 23
Pincipado, C-226/12, EU:C:2014:10 General Report 18
CJEU Judgment of 5 July 2012, Content Services, Belgium 72
C-49/11, EU:C:2012:419;
CJEU Judgment of 3 September 2015, Costea, Belgium 14
C-110/14, EU:C:2015:538
(continued)
Decisions of the Court of Justice of the European Union xxix
CJEU Judgment of 3 October 2013, Duarte Hueros, EU 161

C-32/12, EU:C:2013:637
CJEU Judgment of 19 July 2012, ebookers.com Austria 101
Deutschland, C-112/11, EU:C:2012:487
CJEU Judgment of 22 February 2018, ERSTE Bank EU 12, 62, 83, 102, 159, 160, 167
Hungary, C-126/17, EU:C:2018:107.
CJEU Judgment of 4 June 2015, Faber, C-497/13, EU 161
EU:C:2015:357
CJEU Judgment of 18 February 2016, Finanmadrid Estonia 22
EFS, C-49/14, EU:C:2016:98
CJEU Judgment of 1 April 2004, Freiburger EU 23
Kommunalbauten, C-237/02, EU:C:2004:209
CJEU Judgment of 20 January 2005, Gruber, C-464/ EU 29
01, EU:C: 2005:32
CJEU Judgment of 21 December 2017, Gutiérrez Belgium 26
Naranjo, C-154/15, C-307/15 and C-308/15, EU: EU 16, 39, 141, 149, 150, 152
C:2016:980 Spain 49, 56, 80
General Report 115, 116, 117, 129, 245
CJEU Judgment of 17 March 2016, Ibercaja Banco, EU 152, 155, 157
C-613/15, EU:C:2016:195
CJEU Judgment of 26 April 2010, Invitel, C-472/10, Belgium 30, 31, 43
EU:C:2012:242 Estonia 20
EU 24, 33, 45, 48, 55, 56, 96, 115, 133
Spain 33
Switzerland 50
General Report 150
CJEU Judgment of 30 May 2013, Jőrös, C-397/11, EU 47, 156
EU:C:2013:340 General Report 125
CJEU Judgment of 4 October 2018, Kamenova, EU 29
C-105/17, EU:C:2018:808
CJEU Judgment of 17 May 2018, Karel de Grote – Belgium 17
Hogeschool Katholieke Hogeschool Antwerpen, EU 29
C-147/16, EU:C:2018:320
CJEU Judgment of 30 April 2014, Kásler and Austria 50, 90
Káslerné Rábai, C-26/13, EU:C:2014:282 EU 6, 41, 51, 54, 61, 62, 67, 70, 75, 76,
79, 80, 81, 83, 94, 102, 157, 158
Belgium 25
Italy 36
Romania 69
Spain 29, 34, 39, 40, 42, 64
Switzerland 48, 50
UK 58
General Report 14, 15, 116, 170, 181,
182
CJEU Judgment of 18 January 2016, Kolcunová, EU 87
C-610/14, EU:C:2016:80
CJEU Judgment of 10 September 2014, Kušionová, EU 124, 127, 129
C-34/13, EU:C:2014:2189
CJEU Judgment of 22 February 2018, Lupean and EU 12, 83, 93, 110
Lupean, C-119/17, EU:C:2018:193 Romania 68
(continued)
xxx Decisions of the Court of Justice of the European Union
CJEU Judgment of 1 December 2009, Martín Martín, EU 161

C-227/08, EU:C:2009:792
CJEU Judgment of 26 February 2015, Matei, C-143/ Belgium 43
13, EU:C:2015:127 Estonia 39
EU 7, 41, 44, 47, 54, 61, 62, 68, 82, 87,
89, 90, 95, 96, 102, 108, 118, 140
Romania 65
Spain 35, 39, 40, 53
Switzerland 51
CJEU Judgment of 27 June 2000, Océano Grupo EU 23
Editorial and Salvat Editores, C-240/98 and C-244/ Netherlands 17
98, EU:C:2000:346 General Report 134
CJEU Judgment of 20 September 2018, OTP Bank EU 11, 83, 93, 102, 108, 109, 111, 124,
and OTP Faktoring, C-51/17, EU:C:2018:750. 126, 158, 162
General Report 242
CJEU Judgment of 4 June 2009, Pannon GSM, France 15
C-243/08, EU:C:2009:350 General Report 125
CJEU Judgment of 15 March 2012, Pereničová and Belgium 18
Perenič, C-453/10, EU:C:2012:144. EU 114, 119, 140, 156
Spain 52
CJEU Judgment of 16 November 2010, Pohotovost’, EU 24, 113, 140
C-76/10, EU:C:2010:685 Romania 70
Spain 52
CJEU Judgment of 21 April 2016, Radlinger and EU 88, 161
Radlingerová, C-377/14, EU:C:2016:283
CJEU Judgment of 4 July 2007, Rampion and EU 161
Godard, C-429/05, EU:C:2007:575
CJEU Judgment of 23 January 2017, Rodríguez Spain 49
Sánchez, C-381/15, EU:C:2017:69
CJEU Judgment of 21 March 2013, RWE Vertrieb, Belgium 43
C-92/11, EU:C:2013:180. EU 5, 33, 46, 48, 57, 107, 117, 122, 126,
132
Spain 40, 41, 46
General Report 16, 355
CJEU Judgment of 29 November 2016, Sales Sinués, Spain 19, 20
C-381/14 and C-385/14, EU:C:2016:252
CJEU Judgment of 5 July 2014, Sánchez Morcillo EU 127
and Abril García, C-169/14, EU:C:2014:2099 Spain 80
CJEU Judgment of 25 January 2018, Schrems, Austria 40
C-498/16, EU:C:2018:37 EU 29
CJEU Judgment of 23 October 2014, Schulz and EU 46, 50, 59, 60, 107, 125, 166
Egbringhoff, C-359/11 and C-400/11, EU: Croatia 87
C:2014:2317. General Report 17
CJEU Judgment of 3 April 2014, Sebestyén, C-342/ EU 42, 88, 112
13, EU:C:2014:1857
CJEU Judgment of 15 January 2015, Šiba, C-537/13, EU 167
EU:C:2015:14
CJEU Judgment of 7 September 2016, Sony Europe France 96
Limited, C-310/15, EU:C:2016:633
(continued)
Decisions of the Court of Justice of the European Union xxxi
CJEU Judgment of 19 November 2015, Tarcău, EU 29

C-74/15, EU:C:2015:772
CJEU Judgment of 21 January 2015, Unicaja Banco Austria 29
and Caixabank, C-482/13, C-484/13, C-485/13 and Belgium 25, 57
C-487/13, EU:C:2015:21 EU 127, 152, 155, 158
Spain 80, 83
General Report 115, 116, 125, 213
CJEU Judgment of 23 April 2015, Van Hove, C-96/ EU 8, 61, 62, 68, 81, 84, 91, 102, 106,
14, EU:C:2015:262. 108, 164
Deutschland 101
Spain 36
Switzerland 52
General Report 14, 170, 182, 241
CJEU Judgment of 9 November 2010, VB Pénzügyi EU 24
Lízing, C-137/08, EU:C:2010:659
CJEU Judgment of 26 November 2015, Verein für Austria 67
Konsumenteninformation, C-326/14, EU:C:2015:782
CJEU Judgment of 28 July 2016, Verein für EU 24, 116, 144
Konsumenteninformation, C-191/15, EU:C:2016:612 General Report 131
CJEU Judgment of 12 May 2011, Ving Sverige, Belgium 79
C-122/10, EU:C:2011:299.
CJEU Judgment of 12 July 2012, Volksbank Româ- Romania 64
nia, C-602/10, EU:C:2012:443 General Report 363
CJEU Judgment of 18 September 2014, Vueling Austria 100, 101
Airlines, C-487/12, EU:C:2014:2232
CJEU Judgment of 9 November 2016, Wathelet, EU 29
C-149/15, EU:C:2016:840
CJEU Judgment of 7 December 2017, Woonhaven EU 125
Antwerpen, C-446/17, EU:C:2017:954
CJEU Judgment of 3 October 2013, Zentrale zur Belgium 17
Bekämpfung unlauteren Wettbewerb, C-59/12, EU:
C:2013:634.
CJEU Judgment of 26 October 2006, Mostaza Claro, General Report 134
C-168/05, EU:C:2006:675
Part I
General Report
Control of Price Related Terms in Standard
Form Contracts: General Report
Judicial Control and Other Means of Price Control
Yeşim M. Atamer and Pascal Pichonnaz
Abstract Competitive market economies work with the basic assumption that the
supply side cannot charge more than their cost of supply given that rational and
perfectly well-informed customers know their preferences and are responsive to any
price change in the market. However, markets are never fully transparent, and
findings of behavioural sciences show that especially consumers act based on
imperfect rationality due to systematic biases. Pricing structures that serve to hide
rather than reveal the real cost of the goods and services pose one of the main
challenges to markets as they abuse biases on the demand side to the greatest extent
possible. “Hiding” price related terms in standard form contracts is a prominent way
of creating non-salient prices and is therefore a debated issue in many recent high
court decisions of different countries. This paper conducts a comparative study on
developments in 28 jurisdictions and discusses the efficiency of ex ante regulatory as
well as ex post judicial intervention. The results show that controlling prices and
price related terms is a multifaceted and complicated issue which entails a holistic
approach, involving more transparency, smarter information to be provided to
customers, but sometimes also hard paternalistic interventions such as price caps.
Besides, more effective ways of collective proceedings and redress mechanisms
need to be implemented.
Y. M. Atamer (*)
University of Bern, Faculty of Law, Bern, Switzerland
İstanbul Bilgi University, Faculty of Law, Istanbul, Turkey
e-mail: yesim.atamer@ziv.unibe.ch
P. Pichonnaz (*)
University of Fribourg, Faculty of Law, Fribourg, Switzerland
e-mail: pascal.pichonnaz@unifr.ch
© Springer Nature Switzerland AG 2020 3

Y. M. Atamer, P. Pichonnaz (eds.), Control of Price Related Terms in Standard
Form Contracts, Ius Comparatum – Global Studies in Comparative Law 36,
https://doi.org/10.1007/978-3-030-23057-9_1
4 Y. M. Atamer and P. Pichonnaz
1 Presentation of the Research Question
Control of standard contract terms (SCT) in business to consumer (B2C) as well as in

business to business (B2B) contracts has long been a highly debated topic in many
jurisdictions. However, control of price related terms in standard contract terms is an
issue of more recent concern. In competitive market economies, prices, in principle,
need not to be controlled. It is conventional knowledge that in such markets the
supply side cannot charge more than their cost of supply. Rational and perfectly
well-informed consumers know their preferences and are responsive to any price
change in the market. These utility-maximizing consumers on the demand side and
profit-maximizing producers on the supply side meet on a perfectly competitive and
transparent market, which results in the best possible equilibrium price. Whenever
such market conditions are existent an intervention in the price equilibrium is likely
to reduce social welfare and will hurt consumers.
This basic market rationale is reflected in most of the Civil Codes enacted in the
nineteenth and beginning of the twentieth century, which seldom gave courts the
right to intervene in a contractual equilibrium and only under very strict conditions.
This very liberal policy approach has been dogmatically justified by the paramount
principle of autonomy of will, as well as a restricted understanding of the laesio
enormis since the natural lawyers of the seventeenth century. Natural law codifica-
tions, such as the French and the Austrian Civil codes reflect largely this approach,
which allow the disadvantaged party to avoid only certain types of contracts and
only if a fixed threshold of imbalance between reciprocal obligations is met. Under
the influence of the German historical school and the centrality of will, the newer
civil codes have substituted the fix limit by a more flexible system where an
objective requirement (gross disparity) and subjective one (circumstances imperil-
ling the free and rational will of one party) have to be met for the disadvantaged party
to avoid the contract or ask the judge to adopt it (e.g. Dutch, German, Portuguese and
Swiss civil codes). If no such exceptional circumstances are given the parties are free
to set the price as they wish.1
Leaving the price formation to market forces was also the choice for example of
Article 4(2) Directive 93/13/EEC on unfair contract terms2: “[a]ssessment of the
unfair nature of the terms shall relate neither to the definition of the main subject
matter of the contract nor to the adequacy of the price and remuneration, on the one
hand, as against the services or goods supplies [sic] in exchange, on the other, in so
far as these terms are in plain intelligible language”. Even if the price is ascertained
in pre-formulated standard contract terms no judicial review is allowed for as long as
the term is drafted in a plain and intelligible manner. The so-called ‘transparency’
requirement reflects the trust in market mechanisms: if the price term can be
1
See for a comparative overview Grebieniow (2019), pp. 3–26.
2
Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ 1993,
L 95/29.
Control of Price Related Terms in Standard Form Contracts: General Report 5
understood by an average consumer it is subject to competition and there is no need

for a judicial control.
However, this assumption of EU law is obviously far too optimistic. Especially
findings of behavioural sciences show, first, that consumers act based on imperfect
rationality due to systematic biases, second, that markets are never fully transparent
and, finally, that even rational apathy may lead consumers not to choose the best
price in the market.3 This is a widespread phenomenon and is not caused by some
exceptional situation, such as undue influence or exploitation of dependence.
According to the results of behavioural sciences the main biases impeding
welfare enhancing decisions of consumers are as follows: First of all, consumers
deal with complexity mostly by disregarding it. They simplify decisions by ignoring
insignificant looking price dimensions and taking mental shortcuts. Evidence shows
that when prices are complex, and in particular when they are two-dimensional
rather than one-dimensional, consumers have problems choosing the right price.4
The more complex the price gets, the more consumers end up with contracts that, in
hindsight, prove not to serve their interests well. Furthermore, the so called ‘opti-
mism bias’, as pointed out by cognitive studies and social psychology, entails that
individuals tend to be over-optimistic about their future.5 Accordingly, consumers
incline to be also optimistic about their future income. They often misjudge the
probability of losing a job, encountering an accident, illness or divorce, which might
bring about financial hardship. People systematically predict future choices wrongly
and hence misjudge elements of the price vector due to overconfidence.6 Consumers
tend to be myopic. They overvalue the short-term benefits of a transaction at the
expense of the future. This type of bias leads for example to the choice of mortgage
loan contracts with escalating payments, given the fact that myopic borrowers place
excessive weight on initial low payments and insufficient weight on future high
payments.7 The low introductory interest rate (the teaser rate) is a model of product
design that targets exactly consumers’ imperfect rationality in this regard. The credit
3
See in detail Bar-Gill (2012); Bar-Gill (2014), pp. 465–490; Zamir and Teichman (2018),
pp. 281–324.
4
See e.g. Grubb (2015), p. 310. The author uses the example of an electricity tariff including a fixed
fee, an initial marginal rate, and sometimes also a threshold and subsequent marginal rate. Zamir
and Teichman (2018), pp. 297–298; Atamer (2017), pp. 634–635.
5
Shepperd et al. (2015), pp. 232–237; Bar-Gill (2009), p. 1120; Faure and Luth (2011), p. 344;
Mathis and Steffen (2015), p. 40; Zamir and Teichman (2018), pp. 61–64.
6
Bubb and Pildes (2014), pp. 1595 and 1649 ff.; Zamir and Teichman (2018), pp. 64–66. A good
example is the credit-card market in Turkey. Recurring studies have revealed that Turkish con-
sumers choose credit cards not according to the default interest rate, but by comparing different
reward programs, or the option to pay the balance back in instalments. Turkish credit card users’
optimism manifests itself in the expectation of maintaining a zero-credit balance. This underesti-
mation bias results in distorted competition and credit card interest rates well above marginal cost.
Miscalculation of future borrowing shifts competition in the credit card market from the long-term
price elements such as interest rates to short-term price elements such as annual fees, or other card
related features. See Atamer (2017), p. 633 and Turkey Report.
7
Bar-Gill (2009), p. 1120.
card scheme is another such model. Due to this myopia, consumers are also naïvely
underestimating their future tendency to borrow and exercise no self-control today.8
It comes as no surprise that these types of biases are misused by sellers to exploit
consumers to the greatest extent possible.9 The two most common contract designs,
as put forward prominently by BAR-GILL, are increasing complexity and deferring
costs.10 Using standard form contracts which include terms affecting the price is a
classic way of creating such complexity. But, this is surely not the only way.
Bundling prices,11 price partitioning,12 or offering credits with ‘zero introductory
interest rates’ and disproportionally high rates kicking-in in the second year are all
common means of obfuscating. These pricing schemes are not necessarily linked to
the usage of standard terms but in most of the cases they do come along with them.
In the last couple of years, a growing concern regarding such pricing schemes has
become visible. Given that in most countries special provisions countervailing these
practices do not exist, courts had to intervene, and they mostly did so by way of
extending standard terms control also to price related contract terms. This was
especially so in the European Union, which can serve as a good example to
demonstrate the problem13:
Even though the aforementioned Article 4(2) Directive 93/13/EEC did not give
courts the right to control price terms in standard form contracts, the way to limit this
exception—and therefore to open the way for judicial control—was shown by the
CJEU in Van Hove as follows: “[c]ontractual terms falling within the concept of ‘the
main subject-matter of the contract’, within the meaning of Article 4(2) of Directive
93/13, must be understood as being those that lay down the essential obligations of
the contract and, as such, characterise it. By contrast, terms ancillary to those that
define the very essence of the contractual relationship cannot fall within the concept
of ‘the main subject-matter of the contract’, within the meaning of that provision”.14
For example, terms relating to the exchange rate to be applied to consumer credit
8
Bubb and Pildes (2014), p. 1642.
9
See in detail on such exploitation examples the book of two Nobel laureates: Akerlof and
Shiller (2015).
10
Bar-Gill (2012), pp. 17–23; Bar-Gill (2014), pp. 471–474.
11
For example, bundling the credit agreement with a payment protection insurance; or broadband
internet, subscription-based television services and landline telephones; or cell phone handsets with
an internet and calling plan are common practices.
12
Examples from the credit card market are e.g. charging an annual fee but in addition also a cash-
advance fee, balance-transfer fee, foreign currency-conversion fees, expedited payment fee, late
payment fee, over-limit fee, returned check fee, credit limit increase fee, and even a no activity fee.
In a study of 2013, the Banking Authority of Turkey has found 65 different items for which banks
charged fees. See on price partitioning as a means of influencing consumer decision making: Van
Boom (2011), pp. 364 ff.
13
For further explanations see the EU Report.
14
CJEU Judgment of 23 April 2015, Van Hove, C-96/14, EU:C:2015:262, para 33. Parallel also
CJEU Judgment of 3 June 2010, Caja de Ahorros y Monte de Piedad de Madrid, C-484/08, EU:
C:2010:309, para 34; CJEU Judgment of 30 April 2014, Kásler and Káslerné Rábai, C-26/13, EU:
C:2014:28, para 49.
contracts denominated in foreign currency (Kásler15); terms giving the right to

unilaterally alter the price of the service in a natural gas supply contract (RWE
Vertrieb,16 parallel Schulz and Egbringhoff17); terms where the duty of the seller to
pay the municipal tax on the increase in value of urban land is transferred to the
buyer (Constructora Principado18); provisions giving the bank the right to unilat-
erally set the default interest rate in a mortgage credit contract (Aziz19) were all found
to be ‘ancillary’ and therefore open to judicial control.20 These decisions seem to be
in line with the approach of the CJEU taken in Caja de Ahorros,21 where it decided
that Art. 4(2) does not preclude national legislation authorizing judicial review of the
adequacy of price and remuneration.
In fact, this discussion got more and more heated in regard to price related terms
in banking contracts.22 Many countries face the problem that in long-term contracts
the switching costs combined with consumer inertia places banks in a very advan-
tageous position.23 For instance, Germany has been very active in terms of judicial
control of price terms in banking standard form contracts. The German Federal Court
of Justice (BGH) differentiates between main and ancillary terms affecting the price,
just like the CJEU does.24 All those terms, which have an indirect effect on price
calculation, are subject to standard terms control. Especially terms that burden the
consumer with operational costs that normally should have been carried by the bank
are considered as abusive and therefore ineffective according to the national law
regime.25 One of the notable examples was the May 2014 decision of the BGH in
which it found terms in consumer credit contracts that allowed banks to charge
‘management fees’ for the opening of a credit to be invalid.26 German banks were
obliged to pay these fees back retrospectively for 10 years.27 Stiftung Warentest, a
German consumer organisation, reports that the amount to be repaid could be as high
as 13 billion Euros.28
15
CJEU Kásler and Káslerné Rábai (n 14).
16
CJEU Judgment of 21 March 2013, RWE Vertrieb, C-92/11, EU:C:2013:180.
17
CJEU Judgment of 23 October 2014, Schulz and Egbringhoff, C-359/11 and C-400/11, EU:
C:2014:2317.
18
CJEU Judgment of 16 January 2014, Constructora Pincipado, C-226/12, EU:C:2014:10.
19
CJEU Judgment of 14 March 2013, Aziz, C-415/11, EU:C:2013:164.
20
See also EU report and below 5.2.
21
CJEU Caja de Ahorros y Monte de Piedad de Madrid (n 14).
22
See Atamer (2017), pp. 648–657.
23
See on the status quo bias and the endowment effect causing switching inertia in long-term
contracts Zamir and Teichman (2018), pp. 48 ff.; Luth (2010), p. 52. The problem is also prominent
in e.g. energy, internet, cell-phone or pay TV contracts.
24
See Germany Report.
25
See also below p. 34.
26
BGH, 13.05.2014 – XI ZR 405/12, NJW 2014, p. 2420.
27
BGH, 28.10.2014 – XI ZR 348/13, NJW 2014, p. 3713.
28
http://t1p.de/test-bearbeitungsgeb.
A different approach was taken by the Supreme Court of the United Kingdom in
the 2009 Office of Fair Trading v Abbey National decision.29 The issue was whether
overdraft charges on current accounts contracted on a ‘free-if-in-credit’ basis were
price terms and would therefore be exempt from control. The England and Wales
Court of Appeal had found that the terms could be controlled, given that they were
not part of the essential bargain between the parties.30 By contrast, the UK Supreme
Court decided that overdraft charges were exempt. It rejected the idea that price
terms could be divided into those which formed the essential bargain and those
which were ancillary. According to the Court, 12 million UK citizens were regularly
incurring such charges.
Other countries, like Israel (2008), Romania (2010), China (2014) and Turkey
(2014) have preferred to give their national supervision authorities for banks the
right to issue a list of services for which they can charge fees. No other payments can
be requested, and all fees have to be disclosed on the webpage of the banks. In some
jurisdictions like the USA,31 Switzerland, Turkey or the EU legislators introduced
caps on some type of prices like credit card late payment fees, interest rates or
roaming fees.32 In the EU33 and the UK34 special measures were taken to stimulate
competition between the banks, and thereby to reduce prices by enhancing transpar-
ency and switching.
All these examples show that the issue of control of price terms, especially in
long-term contracts is problematic. However, whether the preferable way of control
is through intervention of the legislature ex ante or the judiciary ex post, or by
enhancing competition has to be ascertained carefully. Some major problems related
to judicial control are caused by the sheer volume of the contracts involved, since the
inter partes effect of court decisions is still a major obstacle in many countries.35 In
29
[2009] UKSC 6. For a critical appraisal of the decision see UK Report and for example Chen-
Wishart (2010) and Whittaker (2011).
30
[2009] EWCA Civ 116.
31
See e.g. Agarwal et al. (2015); Bar-Gill and Bubb (2012).
32
Compare e.g. for the detailed EU regulations: https://europa.eu/newsroom/highlights/special-
coverage/end-roaming-charges_en.
33
Directive 2014/92/EU of the European Parliament and of the Council of 23 July 2014 on the
comparability of fees related to payment accounts, payment account switching and access to
payment accounts with basic features, OJ 2014, L 257/214.
34
The Competition and Markets Authority has declared its “Retail Banking Market Investigation –
Final Report” on 9 August 2016 https://assets.publishing.service.gov.uk/media/
57ac9667e5274a0f6c00007a/retail-banking-market-investigation-full-final-report.pdf.
35
See regarding enforcement of consumer protection rules under EU law Micklitz (2015),
pp. 491 ff.; See for the developments in the EU Proposal for a Directive of the European Parliament
and of the Council amending Council Directive 93/13/EEC of 5 April 1993, Directive 98/6/EC of
the European Parliament and of the Council, Directive 2005/29/EC of the European Parliament and
of the Council and Directive 2011/83/EU of the European Parliament and of the Council as regards
better enforcement and modernisation of EU consumer protection rules, COM (2018) 185 final;
Communication from the Commission to the European Parliament, The Council, The European
Economic and Social Committee A New Deal for Consumers, COM (2018) 183 final. See for a
comparative overview Micklitz and Saumier (2018). Cf. also below p. 24.
addition, given that price terms are at stake, any decision of the courts has a potential
to trigger restitution claims from millions of consumers. Besides, judgements often
do not add to legal certainty given that each variation of a price term, which was
already found abusive by a court, might be subject to a new legal procedure.36
Therefore, also means of ex ante regulatory intervention have to be sought.37
Especially findings of behavioural economics show that controlling deceptive pric-
ing patterns, by either trying to subject them to the competitive forces of the market,
or sometimes by limiting their application can be more effective.38 In fact, using the
insights of behavioural economics seems to be a general trend today in national,
international and supranational settings.39
The aim of this comparative research is to determine different approaches in the
world regarding price control and particularly to discuss the efficiency of both
paths, judicial and regulatory intervention. Price control and its limits are certainly
some of the major questions arising in all liberal market economies, as well as in
more regulated markets. It is important to set an adequate limit, which maintains the
fundamental elements of a free market economy but rises also the level of protection
against abusive practices regarding price related terms. The appropriate level of
intervention may however vary from one legal system to the other, given the various
legal and non-legal players involved.
2 Presentation of the Results of the Questionnaire
The 27 national and 1 supranational reports on which this general report is based
present a scattered picture regarding how, and how far, a control of SCT in general,
and of price related terms in particular is implemented. As a first impression, it can be
stated that freedom of contract, and especially freedom of the parties to determine
goods and services in exchange for a certain remuneration is fully granted. Whether
under a socialist market economy or a fully market-oriented economy; whether in a
common law, civil law or mixed jurisdiction freedom of contract, and especially
36
Atamer (2017), pp. 639–642.
37
For a detailed report in the UK see ‘Helping people get a better deal: Learning lessons about
consumer facing remedies’, prepared by the Financial Conduct Authority and the Competition and
Markets Authority, October 2018 (https://www.gov.uk/government/publications/ukcn-consumer-
remedies-project-lessons-learned-report).
38
See in detail Bar-Gill (2012); Atamer (2017), pp. 642 ff.
39
UK: In 2010 the Behavioural Insights Team (BIT) started life inside 10 Downing Street as the
world’s first government institution dedicated to the application of behavioral sciences (https://
www.bi.team/); EU: Behavioural Insight Unit at the Joint Research Centre of the European
Commission (https://ec.europa.eu/jrc/en/research/crosscutting-activities/behavioural-insights)
OECD: http://www.oecd.org/gov/regulatory-policy/behavioural-insights-and-public-policy-
9789264270480-en.htm. The World Bank: Mind, Behavior, and Development Unit (http://
www.worldbank.org/en/programs/embed#1).
freedom of the parties to decide on the goods and services in exchange for a certain
remuneration is acknowledged. The main principle regarding the price remains its
formation on the market.
However, many of the participating countries have introduced a special legal
regime for the control of SCT, mostly in B2C relations, but sometimes also in B2B
contracts. Even though a SCT control excludes price control, the tendency of courts
to control price related terms either by qualifying them as auxiliary terms or as
intransparent price terms is existent. Besides, all of the national reports indicate that,
in some way or the other, regulators are interfering in the price formation process.
Price control is obviously a multifaceted and very complicated issue involving many
policy decisions. It happens especially in sectors where there are problems in
stimulating competition, or in regard to special goods or services where public
interest requires such interference, or where social concerns outweigh efficiency-
based arguments. This report does not aim at discussing all these different motives of
price control. Our main focus lies on price related market failures based on infor-
mation asymmetries or pricing structures that serve to hide rather than reveal the real
cost of goods and services and thereby abuse limitations in the cognitive compe-
tences of consumers.
Our general report will follow the questionnaire that we had prepared for the
national reporters.40 We will therefore begin by looking at the scope of freedom of
contract and its legal foundations (3). After a presentation of the functioning of the
judicial control of standard contract terms in general (4), we will present in more
detail how the judiciary reacts when these standard terms incorporate price related
terms (5). Next to judicial control, there are also legislative and more importantly
administrative controls either for all types of contract or for specific ones regarding
price terms. Chapter (6) is dedicated to give an overview regarding these control
methods. As competition is based on correct information regarding the price, and
SCT cause an additional information problem we have asked the national reporters
to present also various measures taken to ensure a higher level of information which
will be discussed in chapter (7). We will end with some proposals and conclusions
(8).
3 Freedom of Contract and Justifications of Its Limitation
3.1 The Justification of Freedom of Contract
Freedom of contract is recognized as a fundamental principle of contract law in all

the legal systems that have been reported to us. Even legal systems based on a
socialist market economy, such as China, recognize this fundamental principle.41
40
See below p. 58 et seq.
41
China Report.
Some reporters indicate that freedom of contract is a constitutional right,42 some

consider that it is indirectly recognized by the constitution.43 Other systems may
have not integrated freedom of contract on the constitutional level, or may not have a
constitution at all, but do recognize it as a fundamental and even ideological
principle of contract law,44 and sometimes as an on-going constitutionalization
process of private law.45
The reasons underlying the recognition of such constitutional right or funda-
mental principle of contract law may have different but complementary reasons:
• Existence of a market economy. For some legal systems, market economy may
only exist if there is freedom of enterprise. Entrepreneurs may then only fully
benefit from such freedom if there is a chance for them to decide freely to
conclude or not to conclude a contract with given parties; to decide on the content
of their contract and to choose the form in which they wish to contract. Freedom
of contract is fundamental to free-market libertarianism and thus perceived more
as an economic right.
• Freedom to develop one’s personality. Freedom of contract is also about choices
made by parties. Therefore, some legal regimes put more emphasis on the role of
freedom of contract for individuals to live a dignified life,46 to further individual
fulfilment and self-realization.47 Freedom of contract is thus perceived also as a
personality right than purely an economic right.
These different justifications may trigger different answers when fundamental
rights such as the freedom of contract versus the right to equality are conflicting and
when the lawmaker needs to balance those rights.
3.2 Limits to Freedom of Contract
Even understood as a fundamental right, freedom of contract is never conceived as

being absolute. It needs to be weighed against other fundamental rights, it can be
restricted by bills, as long as the restriction is welfare enhancing, proportionate and
does not impair the core of freedom of contract.48
The reasons for such limitations, also in the context of standard contract terms,
can be summarized as below. These reasons are obviously not mutually exclusive
but supplementary:
42
Brazil Report; Turkey Report.
43
Germany Report; Israel Report.
44
Canada Common Law Report; Croatia Report; Singapore Report; UK Report.
45
Argentina Report. See on the issue in general Micklitz (2014).
46
South Africa Report.
47
Germany Report; Taiwan Report.
48
Brazil Report.
• To ensure a proper or better functioning of the market. This is true especially

when freedom of contract is taken in its economic dimension. Antitrust regula-
tions, rules against unfair competition or consumer law are areas where interfer-
ence with freedom of contract aims at correcting market failures.
• To ensure procedural fairness. Rules on capacity, mistake, fraud, threat and the
like can be found in all jurisdictions to ensure a so-called procedural fairness.
Procedural fairness is not an aim as such, but it guarantees a higher probability of
substantive fairness. Especially regarding SCT the special requirements for
inclusion of such terms is a matter of procedural fairness. The customer must at
least be given the chance to acknowledge the use of SCT, to read them, and
bargain if he so wishes.
• To ensure substantive fairness. A structural imbalance between parties due to a
market failure may also cause an unfair imbalance between the parties’ rights and
obligations. That usage of SCT can cause such imbalance especially in B2C
contracts but also in Business to Small and Medium Size Enterprise (B2SME)
contracts is a widely acknowledged fact. The justification for a legal intervention
can be seen in the substantial welfare costs these imbalanced contracts impose.49
But fairness and the protection of the weaker party are also often used justifica-
tions for such intervention.50 Brazil is an interesting example in this context as
Section 421 of the new Civil Code expressly regulates that every contract has a
social function itself.51
A restriction on a constitutional or fundamental right needs to be proportionate
to the objectives it aims at. This involves traditionally two aspects:
• The measure shall be apt to achieve the objective it aims at. The regulation that
restricts freedom of contract should be suitable to ensure a better functioning of
the market via procedural and/or substantial fairness requirements. If it restricts
the freedom of contract without being able to achieve these goals, it might be
(rightly) challenged.
• The measure shall not go too far vis à vis what is needed. If there is a less
intrusive mechanism to restrict freedom of contract and to accomplish the same
result, then that lesser measure shall be chosen. Prices for example are typically
salient. If there are reasons to assume that there is an information problem
regarding the price this can mostly be cured by special requirements regarding
labelling, common calculation methods, like the annual percentage rate (APR), or
by facilitating a better comparison shopping through specialised websites and the
like. However, as the national reports show, this is not always enough to spur
competition. Even in regard to very simple prices, such as the credit card interest
49
Bar-Gill (2012), pp. 23 ff.
50
CJEU Judgment of 30 April 2014, Barclays Bank, C-280/13, EU:C:2014:279, para 32; see also
CJEU Aziz (n 19), para 44. See also Rösler (2010).
51
See Brazil Report.
rate52 or the default interest rate, there might be need for a judicial control or for
regulatory caps if consumers are unresponsive to any information provided.
Obviously, price relevant factors in SCT need to be scrutinized also from this
perspective.
4 Standard Contract Terms and Their Control

4.1 Rationale of Controlling Standard Contract Terms
The rationale of controlling SCT is, although not explicitly underlined by law-
makers, that a market failure impedes competition among SCTs.53 Comparison
shopping is not possible because of an information deficit on the customer side.
While using SCT decreases transaction costs of the supplier to a great extent due to
standardisation, efficient risk calculation and centralized handling of thousands if not
millions of contracts, the transaction cost for the customer rises drastically as he is
burdened with the cost of searching for the best SCT on the market. A rational
customer is well advised not to do so since in most of the cases the probability of the
SCT being employed is too low to justify the costs involved in searching for the best
SCT.54 Due to these search costs suppliers have also no chance to make up for the
information asymmetry via disclosure measures (“signalling”).55 Any information
provided by a supplier at contract conclusion phase will be disregarded by a rational
consumer (“rational apathy”).56 Hence no supplier has an incentive in drafting its
SCT in favour of the customer or even to try to make its terms more salient. If the
consumer is not going to place its limited attention on the SCT whatever the supplier
does a race to the bottom situation inevitably occurs and all suppliers end up using
the worst SCT. This market failure (“lemon problem”57) arises despite competitive
markets and calls for the lawmakers to intervene.58 In most of the reporting countries
we see such special control mechanism.59
Given this rationale of controlling SCT it comes as no surprise that price terms
even if stated in the SCT are not subject to control. Price is assumed to be subject to
52
See n 4.
53
Korobkin (2003), pp. 1203–1295; Schäfer and Leyens (2010), pp. 97–119; Atamer (2018),
pp. 35–57; Schäfer and Ott (2012), pp. 423 ff. and 449 ff.
54
Eisenberg (1995), pp. 211, 243–244; Bakos et al. (2014), pp. 1–35.
55
Schäfer and Leyens (2010), p. 104; Luth (2010), pp. 147–148; Zamir and Teichman
(2018), p. 303.
56
Faure and Luth (2011), p. 342. See also UK Report.
57
Akerlof (1970).
58
Zamir and Teichman (2018), p. 320.
59
It is also worth noting that in the USA, the American Law Institute (ALI) is in the process of
preparing a Restatement of the Law for Consumer Contracts that focuses on standard-form
contracting (http://www.thealiadviser.org/consumer-contracts).
competition as long as it is transparently formulated, and no additional information

problem exists. If for example the credit card SCT include also the yearly fee payable
for the card this does not by itself make the price term intransparent. If it is ensured
that prices are salient and subject to competition a disguised judicial control by way
of a SCT control would disrupt the market equilibrium. However, the problem lies
exactly in this presupposition: As stated above, prices are not always salient and SCT
often include terms that have an indirect but significant effect on the formation of the
price.60 In such cases, the same market failure argument is also valid for price clauses
and justifies an intervention.
In this section we briefly address the issue of definition, incorporation and
interpretation of SCT (Sect. 4.2), before analysing in more details the ambit of any
substantive control by the judiciary, the various techniques used for and the various
consequences of such substantive control (Sect. 4.3) and finally the important issue
of collective action and its efficiency (Sect. 4.4).
4.2 Definition, Incorporation and Interpretation of Standard

Contract Terms
For the sake of clarity, we understand standard contract terms as being contractual
terms that fulfil three requirements:
• Advance formulation. SCT are formulated in advance by one party. The party
using these SCT has usually drafted them, but it may also have used SCT
prepared by third parties, such as professional associations. Therefore, the party
supplying the SCT to the counter party will be named “the supplier of SCT”,
which is more precise than the “drafter”. The party to whom they are imposed will
be named as “the counter party or the customer”.
• Intention to use multiple times. SCT are standardized because they are intended to
be used in multiple contracts. This is also why they are generally drafted as a
separate document and annexed to the main contractual document. However, the
fact that these SCT have not yet been used, for instance because an administrative
authority has the power to control them,61 or that they have been used only in a
very limited number of contracts, or even just once, does not change their
nature.62 What matters more is the intent to use them for many contracts as a
standardization mechanism of contracts.63
• Absence of negotiation. SCT keep their nature of being “standard” contract terms
only if they have not been subject to negotiation. The absence of negotiation,
60
See also UK Report.
61
As is the case for some sectoral SCT in e.g. Croatia.
62
See China Report.
63
See for a Swiss perspective, Pichonnaz (2017), Art. 8 LCD para 4.
either because the customer did not ask for, or its request to discuss one term or
the other was rejected, or because it was not possible during the contracting
process (e.g. distance contracting), is the key-factor to identify SCT.64 Obviously,
there is some divergence among legal systems with regard to what amounts to
negotiation.65 Neither the mere reading of the SCT, nor the mere fact to ask
questions as to specific terms shall be considered as acts of negotiation. Indeed,
the way the SCT are drafted, i.e. in a separate document that looks as unchange-
able, and the fact that the customer is often told that one cannot change the SCT,
add to the idea that the threshold to accept that specific SCT have been negotiated
should be pretty high.66 The expectations will certainly differ according to the
value of the transaction and whether or not the counter-party is a business itself.
As explained above, the reason why there is a race to the bottom with SCT is the
fact that the transactions costs related to searching for better terms or negotiating
such terms are too high. However, the higher the transaction value the lesser the
cost of such negotiation will be in relation. Therefore, in B2C contracts negoti-
ation can seldom be presumed as the contract value is mostly low.67 Whereas in
B2B contracts this possibility is rather high.
To be binding for the parties, SCT need to be incorporated into the contract at
stake. The incorporation formalities vary significantly from one system to the other,
but also from one type of contract to the other. It is not the place to examine these
incorporation requirements in all details, but we may stress two issues:
• Acknowledgment of the existence of the SCT. In principle the customer has to give
his consent to the inclusion of standard terms at the time of conclusion of the
contract.68 This acknowledgment may be done without any form, may have
specific requirements, such as a signature, or even a handwritten acknowledgment
that the SCT have been read and understood. This acknowledgement process is
64
China Report; South Africa Report.
65
See on these elements Austria Report.
66
See furthermore the CJEU which considers that the good faith requirement implies to determine
whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably
assume that the consumer would have agreed to the term concerned in individual contract negoti-
ations: CJEU Aziz (n 19), para 69; see Belgium Report.
67
Art. 3 Directive 93/13/EEC therefore provides that a term shall always be regarded as not
individually negotiated where it has been drafted in advance, particularly in the context of a
pre-formulated standard contract. Even if a specific term has been negotiated the Directive applied
to the rest of the contract as long as the supplier does not prove that the rest has been negotiated too.
See also French Report and Art. L. 212-1 al. 6 French CConsom.
68
But see also some US Decisions, which mention the Pay Now Terms Later system
(or “shrinkwrap”), in which the parties agree on the main terms of the transaction immediately,
but the SCT arrive later, when the purchase item is delivered and opened. Some courts have
accepted the inclusion of the SCT, some have rejected it. See among others Hill v. Gateway
2000, 105 F.3d 1147 (7th Cir 1997); ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996);
Specht v. Nescape Communications Corporation, 306 F.3d 17 (2nd Cir. 2002).
based on the requirement of some sort of consent to these terms by the other party,
even if these are not effectively read, but could have been.
• Reasonable availability test. Most systems do only accept a valid incorporation
when the acknowledgment of the existence of the SCT is combined with the fact
that those terms are reasonably available.69 Again, this test may vary significantly
from one regime to the other, but also from the mode of conclusion of the
contract: a contract concluded electronically may have a regime of “clickwrap”
where one has to scroll-down a text and then consent to the text or “browsewrap”
where a link will lead to the website including the SCT. Continuing to use the
webpage is interpreted as an assent.70 Sometimes even a system of pay
now, terms later is applied where the terms arrive later with the purchased
items.71 In B2C contracts these methods are often not deemed as sufficient to
include SCT. SCT printed on the back of the ticket,72 SCT written in too small
prints for instance may also be considered as being not incorporated. One concern
might be that the ability to negotiate them does not exist at all and the risk of
abusive terms might therefore be very high.
Some legal systems, which do not have special provisions authorizing the judge
to control unfair terms, have tried to strike out such unfair clauses through a strict
application of the incorporation requirements. Thus, even though the SCT had been
handed over to the customer before concluding a contract, a surprising term, to
which a party has not specifically drawn the attention of the other party to, is deemed
not to have been incorporated into the contract.73 One may speak about a disguised
substantive control.74
Most of the legal systems have also adopted the interpretation contra proferentem
rule75 which goes back to the Roman law rule of interpretation for unilateral oral
contracts (stipulatio).76 Today, it aims at improving the quality and also the transpar-
ency of SCT. According to this rule, in case of doubt over the proper meaning of a term,
the judge has to choose the most favourable interpretation for the customer (in dubio
69
For some cases see Belgium Report which mentions a Decision of the Belgian Cassation Court
requiring that a hyperlink to SCT actually works and Italian Report.
70
This is typical for the US Court practice, see among others Nguyen v. Barnes & Noble, Inc.,
763 F.3d 1171 (9th Cir. 2014); Specht v. Netscape Communications Corp., 306 F.3d 17 (2nd
Cir. 2002).
71
See n 64.
72
See Italian Report, which cites at least two Supreme Court cases, Cass. 26 February 2004, n. 3863,
Foro it., 2004, 1, 2132, annotated by Bitetto; Cass., 20 December 2005, n. 28232; Foro it., 2006,
I 2065.
73
See Switzerland Report; UK Report (red-hand rule).
74
See below p. 18.
75
See Canada Common Law Report; China Report; South Africa Report.
76
D. 45,1,38, 18 (Ulpianus libro 49 ad Sabinum): “In stipulationibus cum quaeritur, quid actum sit,
verba contra stipulatorem interpretanda sunt.”
contra stipulatorem). The rule sets an incentive to suppliers of SCT to avoid equivocal
terms as much as possible. This term might also be central for price related terms, which
often are more complex and bear the risk of doubts or absence of clarity.
As shown by the Canada-Common Law report, the question whether contractual
interpretation is a question of fact or of law, or a mixed one,77 may also play a role
regarding control of SCT.
Once SCT have been validly incorporated into a contract, and their meaning
determined by means of interpretation, possibly by reference to the contra
proferentem rule, the judge has to move on to the substantive control of SCT.
Such control may depend on the ambit of review, but also on the tools at disposal.
4.3 Substantive Control of Standard Contract Terms
4.3.1 Ambit of Substantive Control
The substantive control of SCT may vary according to two factors, which we will
only briefly mention here:
• Control of SCT v. any non-negotiated contract term. As already mentioned, the
substantive control may be restricted to formal “standard contract terms” which
have become part of the contract and are then often called “adhesion contracts”.
However, it is not always clear why this restriction applies; especially, one could
wonder whether the control should work equally for any non-negotiated term,
whether it is formally part of SCT or not. Given that the existence of the formal
requirements of SCT can sometimes be subject to discussion the Directive 93/13/
EEC, for example, has chosen to extend control to all non-negotiated terms,
independent of the fact whether there is only one contract term or more, whether
they were drafted in advance or not, or will be used more than once. If the argument
for limiting contractual freedom is based on a structural imbalance of negotiation
powers, as affirmed for instance by the Directive,78 or in some national systems,79
then a restriction to SCT does not really make sense; the aim being a more social
private law and a kind of post-contractual rebalancing of powers to produce a
(potential) preventive effect on further contract and SCT drafting. This argumen-
tation can also be brought in harmony with the market failure reasoning as it does
not make a difference whether the exclusion of liability clause is a stand-alone
clause as seen at the entrance of e.g. a car-park, or one among a bunch of other
terms favouring the supplier as e.g. in a sales contract. The customer will carry the
costs of searching for better clauses on the market or rather rationally opt for
concluding this contract and hope for no dispute to arise.
77
See Canada Common Law Report; Sattva Capital v Creston Moly, 2014 SCC 53, para 50.
78
See EU Report.
79
See among others Belgium Report; France Report.
• B2B v. B2C control. The question whether a protection against SCT should be
given only in B2C relations or should also include B2B relations is raised in every
report. There are only a few countries which fully exclude a SCT control for B2B
contracts.80 If the argument for the control of SCT is seen in the market failure
due to high transaction costs burdened by the SCT, there is little grounds to justify
an a priori exclusion of B2B contracts without checking in each concrete case
whether the negotiating powers were sufficiently balanced. This will often be a
problem if the counter party is an SME as their financial and legal capacities are
limited and they may face the same type of structural imbalanced negotiating
powers as consumers.81 However, as put forward above, the higher the value of
the contract the higher the expectations are on the customer to get some legal
advice and/or to seek for better contract terms.
4.3.2 Various Techniques of Substantive Control
4.3.2.1 Indirect Substantive Control
We have already mentioned above techniques of indirect or disguised substantive

control linked with the incorporation requirement.82 These mechanisms are based on
the idea that standard terms that are not reasonably available at contract conclusion
have an enhanced risk of including unfair terms.83 SCT that are not reasonably
legible shall be struck down for similar reasons.84
Furthermore, some systems have dealt with surprising terms,85 which means
with terms that the other party did not expect to find in the SCT and, if the party had
known about them would probably not have agreed to them. In a way, these SCT are
surprising also because they are unfair. However, instead of striking them down at
the level of a substantive control, these terms are deemed not to have been incorpo-
rated into the contract because of lack of consent. This is why some authors have
called that approach a “disguised substantive control”.86 The Canadian common law
report mentions such technique, as one in which the Court does not assert its control
power.87
To some extent, the interpretation of SCT may also be a technique of substan-
tive control, especially when the interpretation deals with SCT for which the factual
80
E.g. Belgium Report; Canada Common Law Report; Israel Report (where also for B2C contracts
no special SCT control is practiced).
81
See e.g. Austria Report; Croatia Report; Denmark Report; France Report; South Africa Report.
82
See p. 14 et seq.
83
See p. 16.
84
See for instance Canada Civil Law Report. See also below p. 24.
85
See Romania Report; Switzerland Report.
86
Koller (2008), pp. 943–953; Pichonnaz (2017), para 94.
87
Canada Common Law Report.
matrix is far less important. Some interpretations, with or without reference to the
contra proferentem rule, may be more a question of law than of facts,88 and therefore
have a significant precedential value.
4.3.2.2 Direct Substantive Control
National reports have shown mainly two types of judicial substantive control of
SCT (as well as for invasive administrative controls, when they exist):
• Control by means of general (mandatory) provisions of contract law. Man-
datory provisions, which the parties cannot contract out, apply in any contractual
situation. However, the chance that they are applied when SCT are used is
certainly higher, given either the field of application of these norms (consumer
contracts, supply of common goods, transportation, energy, telecommunication),
the specific contracting process, which may trigger issues of mistake,89 duress or
formal unconscionability, or the typical content of SCT, such as exclusion or
limitation of liability,90 which may be expressions of violations of good morals,91
sometimes concretized by institutions such as laesio enormis92 or unconsciona-
bility, in many variations. Sometimes sector-specific mandatory rules, such as
rules protecting tenants against some issues dealt in SCT, might provide a
remedy.93 Many reports have also rightfully underlined the importance of anti-
trust rules or unfair competition regulations as both are mandatory.94
However, as mentioned above, SCT create a special market failure which
neither can be cured by the market itself nor by employing the classical restric-
tions of contract law. If the system cannot assure that SCT are read, commented or
negotiated because of the transaction costs involved, a structural imbalance in
negotiation powers is manifest. Therefore, one needs to seek for special
restricting regulations.
• SCT-specific control of unfair terms. A SCT-specific content control has been
implemented in almost all legal regimes.95 It has two main features.
– Administrative control. An administrative control may take place either before
a supplier of SCT can use them in its contracts96 or at the request of the other
88
See the Canada Common Law Report and Ledcor v Northbridge, 2017 SCC 7, para 24.
89
See for instance South Africa Report.
90
See for instance South Africa Report.
91
See Estonia Report.
92
See Brazil Report; Chile Report; Croatia Report; Romania Report; Switzerland Report.
93
See e.g. Switzerland Report.
94
Brazil Report.
95
Exception: Canada Common Law Report.
96
See China Report; Croatia Report; Taiwan Report.
party,97 who complains about them and intends to have a decision that may
influence a later lawsuit against their supplier.
– Judicial control. In most of the reporting countries this has been the preferred
choice, even if there is sometimes also an administrative control available.98
We will present briefly such judicial control below.
Given that 14 of the contributing countries are EU Member States it makes
sense to start by briefly describing the system introduced by the Directive 93/13/
EEC. However, this Directive sets only minimum standards in harmonization
(art. 899); therefore, the EU Member States are free to introduce further reaching
measures to protect customers from unfair contractual terms. Some of these
divergences we will discuss below, when dealing with price related unfair
terms.100 There is also a specific report presenting EU law, the Directive 93/13/
EEC and the relevant case law of the CJEU.101
The EU system is based on a general provision (art. 3 Directive 93/13/EEC),
which regards a not individually negotiated term as unfair if “(a) contrary to the
requirement of good faith, it causes (b) a significant imbalance in the parties’
rights and obligations arising under the contract, (c) to the detriment of the
consumer” (letters added). Despite the CJEU Aziz case102, the requirement of
good faith is not always understood as a separate requirement,103 but it certainly
underlines that the imbalance needs to be justified by objective reasons, looking at
the whole contract, or even external factors. The imbalance shall be significant,
which is also difficult to assess in abstract. This is the reason why the Directive
93/13/EEC has provided for a list of clauses that are presumed to be unfair,
reversing the burden of proof (so-called grey list) (art. 3 para 3: “The Annex shall
contain an indicative and non-exhaustive list of the terms which may be regarded
as unfair”).
However, since EU Member State are allowed to implement more stringent
measures, some have transposed this list in dividing it into terms that are regarded
as being always unfair (so-called black-list)104 and some that are only presumed
to be unfair (grey-list), and sometimes have also supplemented the list to some
97
See for instance Israel Report; Italy Report; Netherlands Report.
98
Croatia Report; Israel Report; Italy Report; South Africa Report.
99
“Member States may adopt or retain the most stringent provisions compatible with the Treaty in
the area covered by this Directive, to ensure a maximum degree of protection for the consumer”
(emphasis added).
100
101
See EU Report.
102
CJEU Aziz (n 19), para 69.
103
See Belgium Report (Belgian legislator did not incorporate the requirement of good faith in the
Belgian general provision on unfair terms).
104
E.g. Belgium Report; Italy Report.
extent.105 Moreover, the CJEU has recently considered that EU Member States
were allowed to keep a public register listing the clauses that had been considered
as unfair by authorities or judicial decisions, as long as it is “structured in a clear
manner” and kept up to date so that “in keeping with the principle of legal
certainty, terms that are no longer needed are removed promptly”.106 Authorities
can rely on these lists, but professionals who would be sanctioned for using those
terms shall have the possibility of challenging both, the assessment of the conduct
considered to be unlawful and the amount of the fine fixed by the competent
national body.107 Because of the need to assess a clause in light of all circum-
stances and in the ambit of a specific contract,108 one can consider these registers
as a kind of administrative/judicial grey-list, since those clauses are presumed to
be unfair, but a professional can still challenge their unfairness in a given case. As
underlined by the CJEU, unfairness can best be measured by comparing it to the
specific term which in the absence of an agreement by the parties would apply,
that is the otherwise applicable default rule.109
In addition to the general and special rules defining unfairness, the Directive
93/13/EEC also underlines the need for transparency in relation to substantive
control. The abovementioned art. 5 and also art. 4, para 2 of this Directive provide
that terms have to be drafted in a plain and intelligible language. This is, as will be
seen below, especially important in regard to price terms, as not being transparent
is the only justification for control of a price term under the Directive 93/13/EEC.
Most of the non-EU States have followed similar paths, having either only one
or several general provisions controlling unfair terms in consumer contracts110 or
in any type of contract.111 Some others use in addition the device of a black list112
or a grey list.113 In all these instances, what matters really are (a) the conse-
quences attached to the recognition of an “unfair” term (see below Sect. 4.3.3)
and (b) the precedential value of any judicial decision on other SCT (see below
Sect. 4.4).
105
See for instance Estonia Report; France Report. However, Denmark is an outlier as it did not
transpose the Directive 93/13/EEC Annex into Danish law and supported the Swedish position in
front of the CJEU by stressing that the general clause applicable would protect consumers in a
parallel way. The CJEU favoured this argumentation, CJEU Judgment of 7 May 2002, Commission/
Sweden, C-478/99, EU:C:2002:281.
106
CJEU Judgment of 21 December 2016, Biuro podróży Partner, C-119/15, EU:C:2016:987,
paras 38 ff.
107
CJUE Biuro podróży Partner (n 106), para 40.
108
CJEU Judgment of 26 January 2017, Banco Primus, C-421/14, EU:C:2017:60, paras 59–61 with
references; CJEU Aziz (n 19), paras 66–71.
109
CJEU Banco Primus (n 108), para 59; see also Germany Report; Turkey Report.
110
See among others Switzerland Report; Turkey Report.
111
E.g. Turkey Report.
112
See Brazil Report; South Africa Report.
113
See South Africa Report; Turkey Report.
4.3.3 Legal Consequences
Depending on the type of substantive control the legal consequences might differ.
Especially in countries where there are no specific rules for the control of SCT, the
invalidation of the unfair term might not always be the result of a substantive control.
The national reports have shown mainly three issues:
• Consequences of infringing mandatory rules. A mandatory rule does not always
specify the consequence of its infringement. In absence of any specification, legal
regimes usually consider that an interpretation of the legal norm has to consider
the aim of such provision and the proportionality test to determine the specific
consequence. Often, the answer will be invalidity of the specific SCT since the
applicable mandatory rules aim at enforcing public policy issues (e.g. consumer
protection, proper functioning of the market).114
• Invalidity of the unfair term vs. adaptation. A very important point with regard to
judicial review of unfair clauses, and especially price clauses, is to determine
whether the court could only invalidate an unfair clause as a whole, or whether it
may adapt the clause/contract so as to keep it valid. In many countries the SCT
control norm provides for the invalidity of the unfair term. At the same time, Art.
6 Directive 93/13/EEC burdens the EU Member States to lay down that unfair
terms used in a contract concluded with a consumer shall not be binding on the
consumer, and that the contract shall continue to bind the parties upon those terms
if it is capable of continuing in existence without the unfair terms.
In principle, no adaptation of the unfair term is allowed.115 The rationale is
that if courts could adapt the contract by supplementing the invalid SCT with a
default provision or one made-up by the Court, there would be quite a strong
incentive for suppliers of SCT to provide unfair terms, knowing that in any case
they would get the well-balanced option of the legislator (default rule) or of the
court.116 The CJEU has expressed this very clearly: “To this end, it is for the
national court purely and simply to exclude the application of an unfair contrac-
tual term in order for it not to produce binding effects with regard to the
consumer, without being authorised to revise its content”.117 According to
114
See also the EU Report for a broader discussion.
115
Austria Report; EU Report. See especially CJEU Judgment of 21 December 2017, Gutiérrez
Naranjo, C-154/15, C-307/15 and C-308/15, EU:C:2016:980, para 57; CJEU Judgment of 14 June
2012, Banco Español de Crédito, C-618/10, EU:C:2012:349, para 65; CJEU Judgment of
21 January 2015, Unicaja Banco and Caixabank, C-482/13, C-484/13, C-485/13 and C-487/13,
EU:C:2015:21, para 31. See however Belgium Report.
116
See especially CJEU Gutiérrez Naranjo (n 115), para 60 (“the national court may not revise the
content of unfair terms, lest it contribute to eliminating the dissuasive effect for sellers or suppliers of
the straightforward non-application with regard to the consumer of those unfair terms”); see also CJEU
Unicaja Banco and Caixabank (n 115), para 31; CJEU Kásler and Káslerné Rábai (n 14), para 78;
CJEU Banco Español de Crédito (n 115), para 69. CJEU Judgment of 30 Mai 2013, Asbeek Brusse and
de Man Garabito, C-488/11, EU:C:2013:341, paras 57 ff. (no reduction of a penalty clause).
117
CJEU Gutiérrez Naranjo (n 115), para 57.
Banco espanol de credito, this means “the contract must continue in existence, in
principle, without any amendment other than that resulting from the deletion of
the unfair terms, in so far as, in accordance with the rules of domestic law, such
continuity of the contract is legally possible”.118
Some EU Member States have still operated until now on a slightly different
basis. For instance, based on general principles of civil law, Belgian Courts have
restricted unfair terms to what was acceptable, implementing thus an adaptation
of unfair terms.119 Similarly, Estonian courts have the power to reduce the interest
for late payment according to a specific provision (§ 113(8) LOA), but it has to be
requested by one party.120 This is true also for contractual penalties.121
For non-EU States, the picture varies. Some provisions do not specifically
address the issue, such as in Swiss law, for which the dominant opinion rejects
any possible adaptation of unfair terms.122 Some States have however accepted the
possibility for courts to adapt the contract by revising the unfair clause as to avoid
any unfair result.123 One rational for allowing revision of unfair terms is to limit the
deterrence effect or punitive sanction of unfair terms to situations in which parties
have acted in bad faith.124 EU Law tends to recognize a larger benefit to consumers
in rejecting any adaptation of unfair clauses. It aims at deterring professionals from
trying to insert unfair clauses in their standard terms, knowing that in doing so they
might lose more than what they would get in being reasonable from the beginning.
An exceptional adaptation at the customer’s choice. If the invalid SCT is an
essential part of the contract, where the contract cannot be maintained without the
invalid part, then there are two options: either, the contract is void in total as a
consequence of the partial invalidity of SCT; or, one can envisage that the other
party might have agreed to have the default provision applied if it had known that
the SCT in question would have been void. The CJEU has specifically addressed
118
CJEU Banco Español de Crédito (n 115), para 65.
119
Belgium Report.
120
Estonia Report.
121
Estonia Report; but also many other systems, see e.g. Switzerland Report.
122
Switzerland Report; Pichonnaz (2017), Art. 8 LCD para 172; regarding the approach to control
surprising terms see SFT (Swiss Federal Tribunal), Decision of 18 December 2008, 4A_404/2008,
reason 5.6.3.2.1.
123
See Spain Report, which mentions that an adaptation of contract is allowed for B2B contracts,
this not being possible for B2C contracts according to CJEU Banco Español de Crédito (n 115),
para 73.
124
For such rationale of no intervention in case of bad faith, see among other decisions, Central
Adjustment Bureau, Inc. v. Ingram, 678 S.W.2d 28, 37 (Tenn. 1984), in which the court noted: “We
recognize the force of the objection that judicial modification could permit an employer to insert
oppressive and unnecessary restrictions into a contract knowing that the courts can modify and
enforce the covenant on reasonable terms. [. . .] [T]he employer may have nothing to lose by going
to court, thereby provoking needless litigation. If there is credible evidence to sustain a finding that
a contract is deliberately unreasonable and oppressive, then the covenant is invalid.”; see also
Jenkins v. Jenkins Irrigation, Inc., 259 S.E.2d 47, 51 (Ga. 14 1979).
this question,125 letting the choice to the customer (potentially with a duty for the
court to ask the party for its choice).
• Consequences of lack of transparency. As already mentioned above, Art. 5 Direc-

tive 93/13/EEC does not state the consequences of lack of transparency. The first
sentence only provides for the duty, in the case of contracts offered in writing, to
draft the SCT in plain, intelligible language. One can envisage three options:
(a) To consider the non-transparent term not to have been incorporated into the
contract, as it is practice—at least to some extent—with legal regimes using the
device of surprising terms126; (b) To consider these non-transparent terms as
unfair,127 which had been suggested by the DCFR (art. II.-9:402[1]); (c) to
weigh-in this non-transparency aspect in the overall assessment of the unfairness
of SCT,128 which was suggested by the CESL draft (art. 83[2]). The latter seems
to be the actual position of the CJEU,129 though, as rightly mentioned by the EU
Report,130 some decisions seem to have taken the second option.131
4.4 Litigating Against Standard Contract Terms: Collective

and Individual Actions Made Easy
When confronted with unfair SCT it is not easy for an individual (typically a
consumer) to get these SCT ignored, invalidated or just to get his rights respected.
Sometimes it is due to rational apathy, especially when the loss incurred is modest
and the fees to litigate high; this is often the case in consumer related issues.132
Therefore, countries have developed several strategies133:
125
CJEU Judgment of 30 May 2013, Jőrös, C-397/11, EU:C:2013:340, para. 41 (“In this connec-
tion, the Court has stated that, where the national court considers a contractual term to be unfair, it
must not apply it, except if the consumer opposes that non-application, after having been informed
of it by that court. See, to that effect, CJEU Judgment of 4 June 2009, Pannon GSM, C-243/08, EU:
C:2009:350, para. 35”); CJEU Unicaja Banco et Caixabank (n 115), para 33.
126
See p. 91; as well as some suggestions in France on the “inopposabilité” of those terms: Peglion-
Zika (2013), pp. 199–225.
127
See EU Report; Spain Report.
128
See EU Report; German Report.
129
See CJEU Gutierrez Naranjo (n 115), paras 49 and 51; CJEU Banco Primus (n 108), para 62.
130
EU Report.
131
CJEU Judgment of 28 July 2016, Verein für Konsumenteninformation, C-191/15, EU:
C:2016:612, para 71; EU Report.
132
See for EU, the Proposal for a Directive of the European Parliament and of the Council on
representative actions for the protection of the collective interests of consumers, and repealing
Directive 2009/22/EC, COM(2018) 184/3; presented in relation with the so-called “New Deal”,
April 11, 2018: http://europa.eu/rapid/press-release_MEMO-18-2821_en.htm; as well as for the
collective redress mechanism see The New Deal for Consumers: How will the new Collective Redress
Mechanism Work?: https://ec.europa.eu/info/sites/info/files/ndc_factsheet4_redress_mechanism.pdf.
133
See for a detailed overview of 28 jurisdictions and a general report Micklitz and Saumier (2018).
a) Arbitration mechanisms for consumer contracts. When speaking of arbitration,

it needs to be differed between arbitration terms dictated by the supplier of SCT
and arbitration boards established by the state for a speedy dispute resolution.
Arbitration clauses in SCT are on the grey list of the Directive 93/13/EEC and
therefore mostly seen as unfair in the EU Member States if the consumer loses
its right to apply to state courts.134 In the USA however, most disputes with
consumers are subject to arbitration,135 which renders access to case law
difficult and raises the question of how far these arbitral boards are independent.
Recently, the US Supreme Court has confirmed that (exclusive) arbitration
clauses are valid in consumer and employment contracts.136
b) Collective actions. Many national reports have stressed the importance of
collective redress mechanism or class actions.137 EU Member States had to
implement the Directive 2009/22/EC on injunctions for the protection of con-
sumers’ interests,138 which aimed at the protection of the collective interests of
consumers. That Directive provided for ‘qualified entities’139 to file claims to get
orders requiring the cessation or prohibition of any infringement (art. 2 let. a),
and to some extent order for payments into the public purse or to any beneficiary
designated in or under national legislation (art. 2 let. c). As shown by national
reports, these means have not been very satisfactory, though it may play a
crucial role as to price related terms.140 The new draft directive of 2018141
shall enhance the possibility to obtain damages and penalties, but also provide
for a mediation mechanism that facilitates multi-sided agreements.
134
See also CJEU Judgment of 27 June 2000, Océano Grupo Editorial and Salvat Editores, C-240/
98, EU:C:2000:346; CJEU Judgment of 26 October 2006, Mostaza Claro, C-168/05, EU:
C:2006:675; parallel Turkey Report.
135
Council Draft No. 3, ALI Restatement of the Law Consumer Contracts (December 20, 2016),
Reporters’ Introduction, p. 4.
136
US Supreme Court, 21 May 2018, Epic Systems Corp. v. Lewis, 584 US_2018 and already US
Supreme Court, 20 June 2013, American Express Co. v. Italian Colors Restaurant, 570 US_2013.
137
Accepted in e.g. Austria; Belgium; Brazil; Croatia; Italy; Germany; Greece; Romania; Russia;
Turkey.
138
Directive 2009/22/EC of the European Parliament and of the Council of 23 April 2009 on
injunctions for the protection of consumers’ interests, OJ 2009, L 110/30.
139
Art. 3 Directive 2009/22/EC defines “qualified entities” as “any body or organisation which,
being properly constituted according to the law of a Member State, has a legitimate interest in
ensuring that the provisions referred to in Article 1 are complied with, in particular: (a) one or
more independent public bodies, specifically responsible for protecting the interests referred to in
Article 1, in Member States in which such bodies exist; and/or (b) organisations whose purpose is to
protect the interests referred to in Article 1, in accordance with the criteria laid down by the
national law”.
140
See for some CJEU cases brought by “qualified entities”, EU Report.
141
Proposal for a Directive of the European Parliament and of the Council on representative actions
for the protection of the collective interests of consumers, and repealing Directive 2009/22/EC,
COM(2018) 184/3.
In many non-EU States, consumer associations are authorized to file claims

on behalf of consumers. They have adopted a system more or less based on the
idea of representative actions.142 Variations regarding these judicial proceed-
ings exist in several aspects:
• Type of ‘entity’ deciding on the case. In most of the countries it is the normal
civil law court which decides on the validity of the questioned terms.
However, some countries have also special courts/tribunals vested with the
power to strike out unfair terms on the application of e.g. the Attorney
General.143
• Type of ‘qualified entity’ initiating the proceedings. Some countries allow
consumer organisations and associations to file claims and seek for the
annulment of unfair terms144; some others couple it with official authorities
which can sue in courts,145 or even leave it totally to such administrative
authorities.146
• Type of possible orders sought for. Collective actions are aimed at orders
recognizing the abusiveness of standard terms; injunctions preventing the
further use of such unfair terms; but rarely any damage claim based on these
abusive terms or restitution. Some systems have an abstract review only.147
• Fees to be paid. Efficiency of the collective claims depends also on the fees
that organisations/individuals have to pay to litigate.148
Some countries have introduced either in addition to representative actions
or instead of them the class action system.149 Especially in regard to possible
damages and restitution claims of consumers the class action model is more
promising as the customers themselves are part of the litigation and can enforce
any favourable judgement immediately. The Danish report gives the example
of a class action being prepared to claim payment of wrongfully charged VAT
on the media license from the Danish Broadcasting Corporation. In fact, the
new collective redress mechanism being discussed in the EU aims also at
facilitating such damages/restitutions claims being filed by the representative
institutions.
142
Argentina Report; Estonia Report; Israel Report; Turkey Report.
143
Israel Report.
144
Brazil Report; Israel Report.
145
Belgium Report; Croatia Report; Israel Report (Commissioner of Consumer Protection); Swit-
zerland Report; Turkey Report.
146
Russia Report: special governmental agency (“Federal Agency for Control in the Sphere of
Consumer’s Rights Protection and Human’s Welfare”).
147
Austria Report.
148
In Turkey e.g. consumers are exempt from paying any fees when suing in specialized consumer
courts.
149
Belgium Report; Denmark Report.
c) Extending the res judicata effect of court decisions to third parties. One of the
major problems related to SCT control is certainly the effect of a decision,
which invalidates several terms as unfair, on other contracts where the same
supplier has used the same SCT against third parties. One step further, the
question would arise how contracts of other suppliers using similar terms in
their contracts are affected by this decision. The procedural principle in most of
the countries is that the decision only binds the parties of the legal dispute, no
erga omnes effect is granted. This is obviously a very invidious result espe-
cially in case of unfair terms or unfair commercial practices, where sometimes
millions are faced with the same clause. The whole concept of representative
actions would be undermined if the decision fought out by the consumer
organisation would only have an ex ante effect with no influence on the
contracts in which the same SCT were used by the same supplier. In fact, the
CJEU decided in Invitel150 that the declaration of invalidity in an action for
injunction will extend its effect to all consumers who have a contractual relation
with the same supplier and the same SCT even though they were not party to
the injunction proceeding.151 In the abovementioned Biuro case the CJEU goes
further, extending the effect of an unfairness declaration by the court even to
other suppliers using a similar term.152 This triggers a kind of presumption of
unfairness for all suppliers, but allows them to challenge the assessment of
unfairness in case it is based on a former decision which they think does not
reflect the specificities of their contractual relation.153 As mentioned earlier,
one can consider that the Biuro case sets a kind of grey-list value for clauses
that have been recognized as abusive by administrative bodies or judicial
entities.154
Below we will discuss another aspect of this issue in relation to price terms:
Even if the effect of the decision can be extended to third parties, this will only
be regarding the invalidity of the term. However, any restitution claims
regarding unnecessarily paid amounts of money will mostly have to be initi-
ated by the individual consumer again. This is certainly one of the major
obstacles to a cost and time-effective solution regarding e.g. fees paid without
any legal grounds. In fact, one of the aims of the proposed new Directive on
protecting collective interests of consumers155 is to remedy this situation by
giving qualified entities a right to bring representative actions seeking a redress
order.
150
CJEU Judgment of 26 April 2010, Invitel, C-472/10, EU:C:2012:242.
151
See for a parallel solution Croatia Report.
152
See Werro and Pichonnaz (2015), pp. 268 ff.; see also Belgium Report; EU Report.
153
CJEU Biuro podróży Partner (n 106), para 42.
154
See p. 21 and Austria Report, which considers that the decision is de facto often observed.
155
(n 141).
5 Judicial Control of Price Related Standard Contract

Terms
5.1 Principal Rule: Prices Are Determined Freely

on the Market
The overall picture of national reports on the judicial control of price related standard
terms is certainly dominated by one main feature: in all market driven economies the
price is determined freely on the market relying on the interaction of supply and
demand reaching an equilibrium.156 Even though the extent of regulatory interven-
tion may vary, this fundamental principle is acknowledged by all national reports.
Therefore, many legal systems are reluctant to have a direct judicial control over
price related terms, since it would hamper the efficient functioning of the market.
South Africa is probably the only exception among the studied jurisdictions as it
explicitly prohibits in its Consumer Protection Act section 48(1)(a) ‘a supplier from
entering into an agreement ‘(i) at a price that is unfair, unreasonable or unjust’.
However, the courts seem to have refrained from making use of this discretion so
far.157
It is common knowledge that in competitive market economies the supply side
cannot charge more than their cost of supply.158 Rational and perfectly well-
informed consumers know their preferences and are responsive to any price change
in the market. Utility-maximizing consumers on the demand side and profit-
maximizing producers on the supply side meet on a perfectly competitive market
that results in the best possible equilibrium price.159 That is also the main reason why
price terms even if stipulated in SCT are excluded from a SCT control. Other than
SCT in general, price is a salient feature of the contract and there is, in principle, no
need for a judicial intervention as long as the prerequisites for a functioning market
that is competition on the supply side and information on the demand side are
guaranteed.
Many of the reports underline rightfully the role of antitrust and unfair competi-
tion laws to ensure a correct functioning of the market on the supply side. As we will
see below, there are also widespread provisions in order to inform the demand side
about the price.160 These provisions are forming the baseline of a functioning
market. It is the governments’ duty to secure these prerequisites.
Besides, general provisions of contract law may find application whenever a
specific situation occurs in which the customer has consented an imbalanced contract
156
See Belgium Report; Canada Common Law Report; Chile Report; China Report; Croatia Report;
Israel Report; Japan Report; Singapore Report; Taiwan Report; Turkey Report; UK Report.
157
South Africa Consumer Protection Act 68 of 2008, section 48(1)(a).
158
DeMuth (1986), p. 216.
159
See e.g., Cooter and Ulen (2012), pp. 18–29; Kirchgässner (2008), pp. 59–61.
160
due to incapacity, misrepresentation, error, or a gross disparity situation.161 Also, the

concepts of laesio enormis,162 unconscionable contracts,163 usurious interests164 or
usury contracts165 aim at judicial correction of singular situations where the con-
tractual equilibrium has been disturbed and an unreasonably high price has been
stipulated.
5.2 Special Protection Needed if Price Terms in SCT Are Not

Subject to Competition
However, a competitive market and even detailed information requirements might

not suffice to spur competition as the case is with SCT, and also with some type of
price terms. There are for example hundreds of banks supplying credit on the EU
market and they serve the consumer in a timely fashion with the SCT, but still, no
market for SCT is developing. The customers are choosing their credit institution not
according to the content of SCT, and this is even a rational choice due to the high
transaction costs involved in searching for better terms. As long as the lawmakers do
not intervene in the substance of the SCT the risk of bad deals for customers are high.
The ratio legis of the exclusion in art. 4(2) Directive 93/13/EEC is based on this
distinction. SCT in general are not subject to competition; therefore, they need to be
controlled. However, price formation is highly competitive; here we need no inter-
vention. But, the inevitable result of this reasoning is that terms which are price
related but not subject to competition might need to be submitted to judicial control
as they inherently are carrying the same risk as other SCT: the risk that a race to the
bottom is leading to the worst clause possible.166 In fact, the overview in the national
reports of the case law shows several recurring situations which we tried to system-
atize below.
The Directive 93/13/EEC is probably the first piece of legislation which tried to
differ between the terms subject to competition and therefore exempt from judicial
control and those not subject to competition and therefore not exempt from judicial
competition. According to Art. 4(2)167 of this Directive:
161
Russia Report; Switzerland Report; Turkey Report.
162
Canada Civil Law Report; Chile Report.
163
Canada Common Law Report; China Report.
164
Canada Civil Law Report.
165
Russia Report.
166
Underlined also in the Austria Report; Germany Report; Turkey Report; UK Report. See for
details, Schillig (2011), pp. 933–963.
167
Some EU Member States did not transpose such restriction and make therefore no difference
between main subject matter and ancillary price-related terms. See EU Report for a general
overview. See also Croatia Report; after the Croatian Franak case, in which credits linked to
Swiss franc were unsuccessfully challenged, the Croatian High Commercial Court reversed its
position on 14 June 2018 and found that a contract clause denominating credits in Swiss francs was
Assessment of the unfair nature of the terms shall relate neither to the definition of the main
subject matter of the contract nor to the adequacy of the price and remuneration, on the one
hand, as against the services or goods supplies (sic) in exchange, on the other, in so far as
these terms are in plain intelligible language.
This definition has two components: any term which is not defining the main
subject matter of the contract or the ratio between price and goods or services can be
assessed in regard to its unfairness (1) and any term, even if defining the subject
matter of the contract, can be assessed in regard to its unfairness if it is formulated in
a non-transparent manner (2). The first group consists of those terms that are not
salient as they are not directly linked to the contract price and are therefore not
perceived by customers. The second group of terms is perceived as price terms, but
their content is misperceived as they are not transparent.
1 “Main” and “ancillary” obligations of the contract. The interpretation of the
first part of Art. 4(2) by the CJEU and also in the EU Member States has not been
harmonious at all. The EU report reflects the developments in detail. In brief, the
CJEU was often guided by the decisions of the BGH.168 The approach of the BGH is
to differentiate between the “main” and the “ancillary” obligation of the contract.169
The CJEU adopts this approach and explains it in Van Hove as follows: “[c]
ontractual terms falling within the concept of ‘the main subject-matter of the con-
tract’, within the meaning of Article 4(2) of Directive 93/13, must be understood as
being those that lay down the essential obligations of the contract and, as such,
characterize it. By contrast, terms ancillary to those that define the very essence of the
contractual relationship cannot fall within the concept of ‘the main subject-matter of
the contract’, within the meaning of that provision”.170
Price terms which can be controlled are those which have an indirect effect on the
price and can be substituted by courts as in every incomplete contract. The CJEU
argues: “[. . .] it follows from the wording of Article 4(2) of Directive 93/13 that the
second category of terms which cannot be examined as regards unfairness is limited
in scope, for that exclusion concerns only the adequacy of the price or remuneration
as against the services or goods supplied in exchange, that exclusion being
explained by the fact that no legal scale or criterion exists that can provide a
unfair for lack of transparency of the price-related contract term; see also Danish Report; Estonia
Report and the Slovenian Report, which underlines that there is no transposition of art. 4(2) Direc-
tive 93/13/EEC, but that the Supreme Court does control some price related terms. Italian law seems
not to have explicitly relied upon that distinction, see Italian Report. Though influenced by EU law,
Swiss law does not make a difference between main subject matter and ancillary contracts
(Switzerland Report).
168
See for details the EU Report.
169
E.g. BGH, 13. 11. 2012 – XI ZR 500/11, (2013) NJW, 995; BGH, 7.6.2011 – XI ZR 388/10,
(2011) BKR, 418; BGH, 7.5.1991 – XI ZR 244/90, (1991) Zeitschrift für Wirtschaftsrecht (ZIP),
857. For details see Germany Report.
170
CJEU Van Hove (n 14), para 33. Parallel also CJEU Caja de Ahorros y Monte de Piedad de
Madrid (n 14), para 34; CJEU Kásler et Káslerné Rábai (n 14), para 49; CJEU Judgment of
20 September 2017, Andriciuc and others, C-186/16, EU:C:2017:703, para 35.
framework for, and guide, such a review”. The CJEU as well as the BGH are both
basing their argument on the idea that prices cannot be defined in default rules.
Therefore, any contractual issue where a default rule is existent or can be derived
from the law by analogy cannot be a price term. In case the customer has been
burdened with some additional charges e.g. the court has to inquire whether default
rules regarding that specific contract type allow for such additional charge.171 If such
default rule is missing, a fair distribution of rights and obligations can be derived
from the very nature of the contractual relationship, or from general principles
of law.
However, in the OFT v Abbey National decision of 2009 the majority172 of the
UK Supreme Court tended to interpret the Article 4(2) exemption more in line with
a market rationale. According to the court, where the goods consist of a multiplicity
of items or the services were composite, there is no “principled basis on which the
court could decide that some services are more essential to the contract than
others”.173 Given that the services offered by banks to their current account
customers were comparable packages of services, it would be equally difficult to
decide which prices are essential and which are ancillary. According to Lord
Mance, the consumer’s protection under the Directive and the national regulation
is the requirement of transparency. That being present, the consumer is to be
assumed to be capable of reading the relevant terms and identifying whatever is
objectively the price and remuneration under the contract into which he or she
enters.
It is interesting to see that the Austrian Supreme Court of Justice (OGH) has based
its distinction between main and ancillary matters on whether the relevant standard
contract term is still sufficiently exposed to competition.174
Some non-EU States are also differentiating between main and ancillary price
terms. Thus, section 23(1) of the Israeli Standard Contracts Law (SCL) in its 2014
version sets an exclusion from the Statute and its scrutiny for “a condition deter-
mining the monetary consideration to be paid by the customer or the supplier for the
object of the transaction, provided that it is formulated in a simple and clear
language.” The prevailing opinion of Israeli judges and scholars175 is that the
expression shall be interpreted narrowly; thus, ancillary clauses are defined on
171
BGH, 13.05.2014 – XI ZR 405/12, (2014) Neue Juristische Wochenschrift (NJW), 2420; BGH,
28.10.2014 – XI ZR 348/13, (2014) NJW, 371.
172
OFT v Abbey National plc and others [2009] UKSC 6. The views expressed by Lord Walker and
Lord Mance were endorsed by Lady Hale (para 92) and Lord Neuberger (para 119). Lord Phillips’
argumentation and final decision are essentially the same (paras 78–91), however, underlining that
the discussion must be more about whether the method of pricing is fair, and not the question of
whether the relevant charges form part of the price or remuneration for the package of services
provided (para 80). See for details UK Report.
173
OFT v Abbey National, para 40 (Lord Walker).
174
OGH 30 March 2016 (6 Ob 13/16d) EvBl-LS 2016/119; Austria Report.
175
Israel Report.
more psychological and practical basis. When clauses are complex and less salient,
as well as more open to the supplier’s manipulation, they should be defined as
ancillary and made subject to an abusiveness control.176 Parallel provisions can also
be found in the Argentinian177 and Turkish laws.178
Québec law is interesting since it provides for a control under objective and
subjective unconscionability (“lesion objective”, “lesion subjective”) also for con-
sumer contracts, meaning that the price itself may be subject to scrutiny. As the
Report shows, some of the issues are related to ancillary terms, some others however
to main terms, such as the price for representing consumers in front of adminis-
trative bodies which has been considered as unconscionable, though it is not clear
from the report whether this was foreseen in standard terms.179 However, the same
mechanism applies to standard terms.180
2 Transparency requirement. Even if a price related term is considered as being
covered by the definition of the “main subject matter of the contract”, it is still
possible to control whether this term is unfair if the term does not comply with the
requirement of substantive transparency. Being transparent and therefore compara-
ble is the most important requirement for a competitive price formation.
Non-transparent prices hamper competition and have to be controlled. As underlined
by the CJEU in Andriciuc, “the requirement of transparency of contractual terms
[. . .] cannot be reduced merely to their being formally and grammatically intelligi-
ble, but that [it] must be understood in a broad sense”.181 This means that the
transparency requirement has to be as “requiring also that the contract should set out
transparently the specific functioning of the mechanism to which the relevant term
relates and the relationship between that mechanism and that provided for by other
contractual terms, so that that consumer is in a position to evaluate, on the basis of
clear, intelligible criteria, the economic consequences for him which derive from
it”.182 The transparency requirement is therefore a substantive one, which implies
that the other party is able to understand the legal and economic consequences of
those terms. The same approach is adopted in Israel (“simple and clear language”)183
and Turkey184 for example.
176
Israel Report.
177
Argentina Report.
178
Turkey Report.
179
180
181
CJEU Andriciuc and others (n 170), para 44; CJEU Kásler and Káslerné Rábai (n 14), paras
71 and 72; CJEU Judgment of 9 July 2015, Bucura, C-348-14, EU:C:2015:447, para 52; see also
EU Report.
182
CJEU Andriciuc and others (n 170), para 45; CJEU, Kásler and Káslerné Rábai (n 14), para 75;
CJEU Van Hove (n 14), para 50; also EU Report.
183
Israel Report.
184
Turkey Report.
5.3 Examples of Debated Terms
It is not an easy task to systematize the huge number of clauses which have been
discussed in the national reports. We tried to create a structure by first subsuming the
multiple SCT under the subheadings “ancillary price terms”185 and “non-transparent
price terms”. Under each of these sections there are several recurring categories.
However, the reader will see that some terms are combining both features—being
ancillary and non-transparent. But for the sake of simplicity we preferred not to
introduce another subsection for this type of “hybrid” terms.
5.3.1 Ancillary Price Term or Not?
5.3.1.1 Additional Fees
• In lease contracts a SCT stating that the tenant bears the costs for minor repair is
an ancillary term186;
• Renewal fee in case of renewal of a residential lease contract is considered as
valid, as long as they are not too high187;
• A clause burdening high consumption electricity users with an additional fee is an
ancillary term, and unfair in the specific case188;
• Clause burdening electricity users with so called leakage fees is an ancillary
term189;
• Admission fees paid in addition to tuition fees for an application to a university,
were considered valid, even if not refunded in case of a rejection, unless the
amount exceeds what is reasonable or would exceed an average cost190;
• In mobile phone contracts, the term that an additional fee has to be paid for a
paper invoice was considered by German courts as an ancillary term subject to the
fairness test191; it has been decided in the same way in Estonia.192 However, a
SCT in a mobile phone contract including mobile-internet access stating that after
the complete consumption of the data volume agreed, the supplier is entitled to
make available additional data volume to the customer against an additional fee is
a principal term.193 A lower German court considered on the other hand that a
185
See also the EU Report for the discussion on ancillary price terms and the case law analysis.
186
Germany Report.
187
Japan Report.
188
Slovenia Report.
189
Turkey Report. However, due to a regulatory intervention after the High Court decision banning
the electricity distribution companies from levying such fees, they were allowed to do so again.
190
Japan Report.
191
Germany Report.
192
Estonia Report.
193
Germany Report.
term that would lower the speed of the data stream if a customer would object to
an automatic additional data volume against an additional fee was an ancillary
term subject to control.194
• Banking charges:
– An issue debated in many countries is the management/administration fee
banks are charging when extending a credit. The argument of the banks is that
this fee is charged to offset the time spent while drafting the contract, checking
the credibility of the consumer, and administering the collaterals. According to
the BGH loan agreements are contracts which are regulated by law, and §
488 German Civil Code defines interest as the only consideration for lending
money. Therefore, a loan agreement can only have a run-time dependent
pricing scheme, and all possible costs incurred at contract conclusion have
to be priced in the interest rate.195 Whereas in Austria, those fees have been
considered as linked to the main object of the Contract. The Court argued, also
taking into account the decision of the BGH, that a price partitioning makes
even sense given that this will serve transparency and customers will be able to
compare with other offers.196 The Turkish High Court judged the same way as
the German one. However, the Banking Regulator who was later assigned with
the task to limit the different types of bank charges decided that a management
fee can be claimed.197
– Other banking charges which were debated were fees for deposit and with-
drawal at cash machine in a giro account198; fines applied by a bank in case the
money transfer request could not be executed because of insufficient funds199;
additional fee to use a credit card abroad200; blocking fees for a credit card201;
express fees if the customer does not comply with certain order deadlines.202
– Maintenance charges for a savings account which were increased regularly
over the years, to end up at a higher level than the interest that the bank
remunerated on those saving accounts were considered void.203 Mainly
because the amount would not only absorb the interest served, but also the
capital; this was against the very purpose of saving accounts.
– Allocating the fees incurred when notarising and registering a mortgage for a
credit agreement to the consumer creates a significant imbalance in the parties’
194
Germany Report.
195
Germany Report.
196
Austria Report.
197
Turkey Report.
198
Germany Report; Slovenia Report: in Slovenia, the Agency found that the banks had formed an
illegal cartel which allowed them to raise the fees for the use of cash machines.
199
Germany Report.
200
Germany Report.
201
Austria Report.
202
Austria Report.
203
Argentina Report.
rights and obligations arising under the contract as both expenses benefit
primarily the bank, which is interested in securing its right in rem (to which
end the public deed and its registration are required).204
• Service fees for e-ticketing, printing at home or sending to a mobile phone, in
addition to the main price for online ticket purchase was considered as unfair,
because these elements should be covered by the main price, as tickets necessarily
had to be collected as part of the main obligation.205
5.3.1.2 Terms Regarding Consequences of a Breach of Contract
• Terms which have the object or effect of “permitting the seller or supplier to
retain sums paid by the consumer where the latter decides not to conclude or
perform the contract, without providing for the consumer to receive compensa-
tion of an equivalent amount from the seller or supplier where the latter is the
party cancelling the contract” can be unfair (Directive 93/13/EEC Annex pt 1 let.
d).
• Terms which have the object or effect of “requiring any consumer who fails to
fulfil his obligation to pay a disproportionately high sum in compensation” can be
unfair (Directive 93/13/EEC, Annex pt 1 let. e).
• Terms which have the object or effect of “[. . .] permitting the seller or supplier to
retain the sums paid for services not yet supplied by him where it is the seller or
supplier himself who dissolves the contract;” can be unfair (Directive 93/13/EEC,
Annex pt 1 let. f).
• Clauses providing for a flat fee in case of loss of a highway card, despite the fact
that the actual mileage could have been proven are unfair.206
• A “non-buying” fee, which is due when the party to a car leasing contract refuses
to buy the car at the end of the contractual period, is unfair and imbalanced,
especially because it exceeded the actual costs.207
• Penalty clauses and interest for late payment are mostly judged to be ancillary
terms that can be controlled by the courts. For example the Estonian Supreme
Court has considered some very high “fees”, contractual penalties or interest on
late payment sometimes as unfair.208 The Estonian Supreme Court declared as
presumably unfair and thereby void standard terms providing for an interest rate
for late payment exceeding three times the interest rate for late payment in the
statute.209 The Spanish Supreme Court considered that default interest clauses
204
Spain Report.
205
Austria Report.
206
China Report.
207
Austria Report.
208
Estonia Report.
209
Estonia Report.
were of ancillary nature and therefore subject to an unfairness test and decided
that a contractual late payment interest of more than two percent over the statutory
default interest rate for late payment was unfair.210 However, on the ground of
“lesion objective”, Québec courts did not strike down any of the late payment
interest rates that were subject to their scrutiny.211 On penalty clauses, the CJEU
has decided that a national court can find such clauses to be unfair, however if it
does so it cannot merely reduce the amount to an acceptable level (as it might be
authorised by its national law) but it has to strike out the clause in its entirety with
regard to the consumer.212 A parallel decision was taken regarding default interest
rates which were exceeding the legal limit. The CJEU underlined the right and
duty of the national courts to evaluate the unfairness of the clause and if so judged
to nullify it in its entirety.213 Belgium law has stated that penalty clauses can only
be valid in a B2C contract if they are reciprocal and equivalent.214
• SCT which burden the customer with all costs involved with payment requests, or
collection costs were found unfair in Austria as they were not quantified and left
to the discretion of the bank.215 Danish law requires costs in relation with
collection of outstanding debts to be “reasonable and relevant”, but the legislator
has also set a statutory cap on claimable fees.216 The situation in Estonia is
parallel. Estonian courts consider such fees as unfair if “unreasonably high”
and a cap on such fees serves for legal certainty.217
• Belgian law provides also for a certain caps limiting the amount of compensation
in certain contracts, but the courts keeps the discretion to further reduce the
amount.218
5.3.1.3 Loss of Price Advantages in Case of an Early Termination
• Terms that retroactively cancel the reductions of the annual premium to the
customer for an insurance contract in case of a dispute, or in absence of renewal
of the contract by the customer is not subject to the fairness test, being a term
related to the subject matter of the contract.219
• Terms that retroactively cancel a rent reduction if the landlord has to sue for the
unpaid rent are not ancillary terms.220
210
Spain Report; see also the EU Report on this.
211
212
CJEU Asbeek Brusse and de Man Garabito (n 116), paras 57 ff.; see also EU Report.
213
CJEU Unicaja Banco and Caixabank (n 115), paras 28 ff.
214
Belgium Report.
215
§ 879 (3) Austrian CC; Austria Report.
216
Denmark Report.
217
Estonia Report.
218
Belgium Report.
219
Germany Report.
220
Germany Report.
• In case of an early termination the service provider has to return the fee for
services not provided. However, the service provider has to calculate the amount
it can charge and the amount it needs to return according to the discounted rate
and not the regular rate.221 The Japanese Supreme Court found that the terms on
restitution were similar to liquidated damages clauses that could be assessed on
their fairness.
• An 18 months non-termination period in exchange for a reduction of the price of a
cell phone subscription was found price related and accepted by the Austrian
Supreme Court of Justice; however, a 24–36 months non-termination period for a
subscription to a fitness centre at a reduced price was outlawed.222
5.3.2 Transparent Main Subject Matter or Not?
5.3.2.1 Open Price Clauses
• Terms which have the object or effect of “providing for the price of goods to be
determined at the time of delivery or allowing a seller of goods or supplier of
services to increase their price without in both cases giving the consumer the
corresponding right to cancel the contract if the final price is too high in relation
to the price agreed when the contract was concluded” can be unfair (Directive
93/13/EEC, Annexe pt 1 let. l).
• When the price shall be fixed by one party, French law states that this is valid, as
long as there is a justified reason for the amount of the price (new art. 1164 French
CC)223; this enables some control by the judge over the price determination.
• A cost-plus formula for the calculation of remuneration for maintenance services
of a commercial condominium was assessed and considered as unfair when there
was no constraint on the service provider, but acceptable when limited to reason-
able and customary costs.224
• In Austria, passing-on cost clauses are usually considered as unfair,225 unless the
clauses refer to costs actually incurred or to a lump sum, which by and large
reflects the cost incurred.
5.3.2.2 Flat Remuneration
• In a waste disposal contract, the “bring-or-pay-clause” which imposes the pay-

ment of the entire remuneration irrespective of whether the party delivered or not
221
Japan Report.
222
Austria Report.
223
France Report.
224
Israel Report.
225
Austria Report.
the agreed amount of waste, is an ancillary term; the basic remuneration however
is a main term.226
• A flat remuneration for an estate agent irrespective of the conclusion of the
transaction with the third party is unfair.227 The court did not address the issue
whether the term was related to the main subject matter, but it considered that the
clause was “rather ambiguous” so that it could be void already based on the
substantive transparency requirement.
5.3.2.3 Price Adjustment Clauses
Almost all reports discuss how price adjustment clauses are treated under their
respective national law. The issue is delicate as there are valid interests on both
sides which have to be balanced. The first differentiation one has to make is between
long-term contracts with recurring performances, and contracts which are performed
at once even though the maturity date might be in the future.
• If the contract involves only a one-time performance such as in a sales contract, a
change of the price until delivery date will mostly be qualified as unfair. Given
that the rule is pacta sunt servanda both parties carry in principle the risk of
negative price developments. But how should clauses in SCT be qualified if they
change this rule? The Directive 93/13/EEC defines in its Annex, Art. 1, let. j that
terms “providing for the price of goods to be determined at the time of delivery or
allowing a seller of goods or supplier of services to increase their price” are in
principle allowed, however, to pass the unfairness test they must be “giving the
consumer the corresponding right to cancel the contract if the final price is too
high in relation to the price agreed when the contract was concluded”. Even
though the Directive does not underline the additional requirement that the SCT
must define expressly and transparently the objective reasons for a change in price
before delivery (e.g. a car which has to be imported and where the taxes are yet
unknown) such requirement can be deduced from Annex, Art. 1, lit. j which
requests for such terms to be acceptable that they name a valid reason for the price
increase. In addition, the term can pass the test only if the customer is also given
the right to terminate the contract.
• The need to adjust prices, and contract terms affecting the price of the goods/
services is certainly more acute in long-term contracts as unexpected contingen-
cies are frequent. In principle, it would be acceptable that the seller/service
provider includes clauses to vary the contract, and especially the price term.
However, just as above, the valid/objective reason for the change needs to be
stated already at contract conclusion so that the customer can control the adjust-
ments made at a given time. Besides, the customer must be granted a reasonable
226
Germany Report.
227
Italy Report.
time to terminate the contract if such price adjustment was done according to the
contract terms but the price has become too high for the customer.228 The
objective criteria requirement is especially important in cases where the customer
technically has a right to terminate the contract but in practice would not be able
to use it. The Milgrom Estate case decided in Israel is a good example for that.
“The Supreme Court invalidated a clause that required a retirement community
resident who had moved into a nursing home to pay according to the nursing
home’s tariff for such services at the time of moving. The court reasoned that, in
the absence of objective criteria for setting and updating the tariff, the clause was
unduly disadvantageous.”229
• The requirement that the price variation has to be based on objective criteria is
underlined by several reports230 and e.g. accepted if an indexation clause was
stipulated.231 It is also emphasised that an objective adjustment clause must work
both ways in order to be qualified as fair, i.e. price increase in favour of the
business but also price reduction in favour of the customer must be possible.
• Some examples from case-law are as follows:
– The Austrian Supreme Court of Justice decided that an interest rate that would
increase or decrease parallel to the variations of the European Central Bank
(ECB) key interest rate is unfair and void if that leads to a zero interest on a
saving account, since this contradicts the mere core of a saving account.232
– The Argentinian Supreme Court considered as ineffective a clause allowing a
unilateral modification of the monthly payment and benefits due under a
contract between a Medical Company and its affiliates.233
– According to the Swiss reporter, price adjustment clauses in standard form
contracts that have not been negotiated infringe the principle of good faith and
are therefore presumed to be unfair, unless the provider proves that this has
been counterbalanced by concrete and substantive advantages by other
favourable terms.234 Courts have sometimes required also a meaningful right
to terminate the contract.235
– Belgian courts have authorized indexation clauses based on objective
criteria.236
228
See e.g. Belgium Report; Israel Report.
229
See Israel Report for a decision of the special SCT Tribunal in Israel, which found a contractual
term allowing the retirement home to raise the monthly payment up to 5% annually over and above
the rise in the Consumer Price Index, as conferring too much discretion.
230
Brazil Report.
231
Belgium Report.
232
Austria Report.
233
Argentina Report.
234
Switzerland Report.
235
DSFT 135/2008 III 1, especially p. 10, para 2.5; Switzerland Report.
236
Belgium Report.
– The same is true for Brazil albeit the indexes the parties can choose from are
ascertained by some supervisory agencies.237 This solution was also preferred
in Turkey regarding mortgage credit agreements. The parties can only choose
between several specific indexes defined by the regulator.238
– A case of unilateral introduction of indexation that was not provided for in the
contract might also be judged invalid.239
5.3.2.4 Foreign Currency Clauses
Many national courts and the CJEU had to struggle with credit agreements in
foreign currencies with interest to be converted or reconverted into domestic
currencies.240 The CJEU has decided that these terms were related to the main
subject matter of the contract,241 and that exchange rates can only be assessed under
the transparency requirement.242 However, it is interesting to see that some coun-
tries have preferred to restrict the taking of consumer loans in another currency than
the national one.243
5.3.2.5 Calculation of Interest Rates
• Method of calculating interests has been discussed in the CJEU case Banco
Primus, in which the CJEU has given concrete guidelines for checking whether
a term governing the method of calculating ordinary interest on mortgage
237
Brazil Report.
238
Turkey Report.
239
Chile Report.
240
Croatia Report; EU Report; Greece Report; Romania Report; Slovenia Report; Spain Report.
241
CJEU Andriciuc and others (n 170), para 35; CJEU Caja de Ahorros y Monte de Piedad de
Madrid (n 14), para 34; CJEU Van Hove (n 14), para 33; for an analysis, see the EU Report.
242
But the expectations regarding transparency are high: “Article 4(2) Directive 93/13/EEC must be
interpreted as meaning that the requirement for a contractual term to be drafted in plain intelligible
language requires financial institutions to provide borrowers with adequate information to enable
them to take well-informed and prudent decisions. In that regard, that requirement means that a term
relating to the foreign exchange risk must be understood by the consumer both at the formal and
grammatical level and also in terms of its actual effects, so that the average consumer, who is
reasonably well informed and reasonably observant and circumspect, would not only be aware of
the possibility of a depreciation of the national currency in relation to the foreign currency in which
the loan was denominated, but would also be able to assess the potentially significant economic
consequences of such a term with regard to his financial obligations.” CJEU Judgment of
20 September 2018, OTP Bank and OTP Faktoring, C-51/17, EU:C:2018:750.
243
E.g. France Report; Turkey Report.
can be declared intransparent by way of comparing with the statutory

interest.244
• Floor clauses (minimum percentage to be charged by a bank for a credit even if
the average interest rate is lower) were considered as unlawful in B2C contracts
under Spanish law as they were not transparent for the average consumer.245
• Estonian courts have considered that, unless one can invoke the rules on usurious
credit contracts,246 interest clauses are exempt from fairness control247; however,
the methods for determining the rate, such as a formula is subject to control.248
• Under Danish Law, interest rates are subject to the fairness test (“reasonableness
standard”249); they can be reduced,250 or even set aside when they are exorbitant,
which indicates that the other party was exploited.251
• Even if an act may limit the interest rate, such as in Japan, courts may be
struggling with the question whether voluntary payment in excess of the limita-
tion is valid or not.252 The Japanese Supreme Court decided that in such a case,
the payment would be valid, but then tried to restrict the ambit of a “voluntary
payment”.253
• Provision in the SCT stating that the bank charges a certain interest rate per
annum on debit balances, however settling the interest at the end of each quarter is
non-transparent.254 The court held that customers, as a result, will not regularly be
244
“[W]here the national court considers that a contractual term relating to the calculation of
ordinary interest, such as that at issue in the main proceedings, is not in plain intelligible language,
within the meaning of Article 4(2) of that directive, it is required to examine whether that term is
unfair within the meaning of Article 3(1) of the directive. In the context of that examination, it is the
duty of the referring court, inter alia, to compare the method of calculation of the rate of ordinary
interest laid down in that term and the actual sum resulting from that rate with the methods of
calculation generally used, the statutory interest rate and the interest rates applied on the market at
the date of conclusion of the agreement at issue in the main proceedings for a loan of a comparable
sum and term to those of the loan agreement under consideration.” CJEU Banco Primus (n 108),
para 67. See also the EU Report.
245
Spain Report. The Spanish Court decided however, against clear rules of national law, to restrict
the ex tunc consequences derived from nullifying floor clauses. The reason was that banking
institutions had acted in good faith and that there was a risk of serious economic difficulties if the
judgment were to be applied retroactively—given the estimated cost of restitution of €4 billion. The
issue was decided by the CJEU which interpreted the Directive 93/13/EEC as precluding national
case-law that temporally limits the restitutory effects connected with a finding of unfairness by a
court, CJEU Gutiérrez Naranjo (n 115).
246
Estonia Report.
247
Estonia Report.
248
Estonia Report.
249
Denmark Report.
250
Denmark Report, which indicates a case of a student loan, for which the interest rate had been
reduced.
251
Denmark Report.
252
Japan Report.
253
Japan Report.
254
Austria Report.
aware of the compound interest effect leading to higher debit balances resulting
from a quarter-end settlement in comparison to the interest rate that would have
been calculated in case of a year-end settlement.
5.3.2.6 Missing Price Breakdown
• Standard contract terms of an online ticket platform were found non-transparent

as the platform had indicated only the total price of the ticket without breaking
down the price and indicating several fees such as the agency service fee.255
• Bundled price indication of nursing agencies for a range of various services were
outlawed for the same reason. The agency offered to (a) arrange a contact with
and (b) select suitable nursing staff, (c) support, (d) educate, and (e) prepare the
nursing staff and (f) arrange transport, as well as to (g) act as paying agent for the
fees payable to the nursing staff, and (h) support the customers to apply for
subsidies, etc. In its standard contract terms, the agency charged a fixed fee
including the price of its own services as well as the price of the nursing staff,
which it invoiced in its function as a paying agent.256
6 Special Regulatory Provisions Controlling Price Terms
All legal regimes that were covered by a national report have some degree of
regulation intervening into price formations in specific markets and/or contractual
situations. Reasons may be found in the specificity of some fields, such as the supply
of public goods, energy or others that have been or still are in the hands of state-
owned businesses or businesses with specific legal ties to the state. Another parallel
argument is monopolistic or oligopolistic markets.257 We had underlined in our
questionnaire,258 that we were more in search of examples of contracts where SCT
are used widely, like long-term service contracts, insurance contracts and the like.
Our focus was more on situations which arise due to special information
asymmetries, or transaction cost problems, including switching costs. However,
given that most of the national reports have been more comprehensive, we prefer
to include also some of the recurring examples from other problem areas, which are
not directly connected to the use of SCT.
255
Austria Report.
256
Austria Report.
257
In general, all reports rightly underline the importance of anti-trust regulations in the fight against
unfair prices and collusion between actors to fix unfair price related terms. However, this report is
focusing on other types of interventions, especially needed if there is a persisting market failure
despite anti-trust regulation. As discussed above, standard contract terms cause such a transaction
cost problem which cannot be overcome by spurring competition among the market actors.
258
See Annex-Questionnaire IV.
It is interesting to see that also in this section market economies as well as

socialist market economies mostly intervene in the same areas. There are two
types of intervention: (a) direct intervention in the price formation, such as caps,
or ex ante administrative control of prices or the like259 and (b) intervention into
price related contract terms, either by limiting their application or by banning them in
total.
We have been able to define the following recurring examples in the reports
presented to us regarding direct interventions in the price formation:
• Utilities (energy, gas)260: price cap261; permission needed for setting new
price262; cap on several fees charged263; parts of the price are set by the regulator,
parts freely by the service provider264; special calculation method defined by the
regulator.265
• Railway services.266
• Some sort of intervention in the calculation formula for fuel prices; limit to the
daily/weekly change in fuel prices.
• Telecommunications: control of price escalations through state authorities267;
Prohibition or cap of certain types of fees268; cap or ban on roaming charges269;
right of special authority to control the price270; regulation for termination fees.271
• Cap on prices for postal services.
259
Sometimes the regulator has also a general right to intervene in the prices like in Israel, where the
government can regulate the prices of goods and services in monopolistic and low-competition
markets, for state-subsidized goods and services, for essential goods and services, and when goods
or services are scarce due to exceptional circumstances. In Argentina, a country plagued with high
inflation, the relevant authority can determine a special margin of profit for certain goods. See
Argentina Report; Israel Report.
260
Here a possible distinction which should be born in mind is that not all countries have liberalised
their energy markets.
261
Israel Report; Japan Report; Romania Report; Russia Report.
262
Canada Common Law Report; South Africa Report.
263
Romania Report.
264
Croatia Report.
265
Brazil Report.
266
Austria Report; Canada Common Law Report; Croatia Report; Israel Report; Japan Report.
267
Brazil Report.
268
269
Regulation (EU) 2017/920 of the European Parliament and of the Council of 17 May 2017,
amending Regulation (EU) No 531/2012 as regards rules for wholesale roaming markets, OJ 2017,
L 147/1; see also Austria Report; Belgium Report; Canada Common Law Report; China Report;
Denmark Report; Italy Report; Japan Report; South Africa Report.
270
Croatia Report.
271
Japan Report; South Africa Report.
• Interest rates:
– Annual maximum contractual interest rate.272
– Special interest rate limits for consumer credits273; for credit card interest
rate274; for overdraft account interest rate.275
– Ban on short-term teaser interest rates.276
– Limit to default interest rates277; special limit for default interest for credit
agreements.278
• Cap on fees for some special services: fees of real estate agents279 or estate
management costs280; taxi fares281; notaries282; legal services provided by
lawyers.283
• Banking/financial services charges: Basic banking service charge limited284 or
even for free285; Payment account service charge limited/free286; Fee for switching
payment accounts limited/free287; Limit to prepayment charge288; Special regula-
tion for payday loans289; Most of the basic banking services listed and either caps or
fixed by the administrator290; Some banking charges forbidden, some with cap291;
272
Brazil Report; Chile Report; Romania Report; Turkey Report.
273
Belgium Report; Canada Common Law Report; China Report; Estonia Report; Greece Report;
Israel Report; Italy Report; Japan Report; Russia Report; Taiwan Report; Turkey Report.
274
Chile Report; Turkey Report.
275
Chile Report; Turkey Report.
276
Israel Report.
277
Canada Common Law Report; Croatia Report; Denmark Report; Israel Report; Romania Report;
South Africa Report; Spain Report; Turkey Report.
278
Estonia Report; Greece Report; Russia Report.
279
Austria Report.
280
For PRC see China Report; for caps see Russia Report.
281
Austria Report; Belgium Report; Canada Civil Law Report; Turkey Report. However, it should
be underlined that through the new chances opened by the so-called sharing economies the classical
protective measures in e.g. taxi markets by introducing caps are challenged. The competition
through Uber shows that the regulator possibly needs to intervene in a different way by opening
up this market, making sure that the market remains open and that Uber does not become dominant
in the market. But this problem will certainly occupy the agenda of regulators everywhere for some
time more.
282
Turkey Report.
283
Turkey Report.
284
Belgium Report.
285
Brazil Report.
286
Austria Report.
287
Austria Report; EU Report.
288
Canada Common Law Report; EU Report; Greece Report; Turkey Report.
289
290
China Report.
291
Romania Report; Taiwan Report; Turkey Report.
Caps/bans on credit processing fees/management fees292; Cap on charges for

overdraft accounts.293
• Cap on debt recovery costs/fees.294
There are also several examples of bans on clauses that have an effect on the
price. Often this type of specific mandatory rule was introduced after the problem
had been subject to court decision that qualified such clause as unfair. However,
some countries provide for a much more general provision regarding price terms in
SCT or in consumer contracts. Several of those general provisions deserve to be
mentioned separately in advance.
• In France the Consumer Code provides for an express rule that prior to the
conclusion of a sales or services contract, the professional has to “ensure the
express consent of the consumer for any additional payment in addition to the
price of the principal object of the contract.”295 The express consent requirement
is important as the provision further underlines that if contrary to the law the
consent is assumed in the contract the consumer may claim restitution of all
payments he made without express consent.
• The Turkish Consumer Code is another example where a general provision
regulates additional charges that businesses can ask for. According to Art.
4, para 3 of the Code, suppliers cannot demand additional charges from con-
sumers in three specific instances: If the obligation in question is a legal obliga-
tion of the seller/supplier he cannot burden the consumer with the related
expenses; if the consumer was rightfully expecting that the goods/services in
question would be provided within the usual scope of the primary obligation the
supplier cannot ask for an additional payment. In these two instances, the
consumer is the beneficiary of the service; yet the supplier has a legal obligation
to serve at no charge. In the third instance, the recipient of the service is the
supplier and the law, rightfully, allocates the costs of these services to the
supplier. Whenever the expenses were encountered for the benefit of the supplier
he may not demand any remuneration.296
• Taiwan is also an interesting example where the legislator has defined 81 specific
situations related to price formation in SCT and has banned them.297 In contracts
for educational services e.g. the SCT may not contain any agreement that the
business could charge extra fees besides the fee agreed upon. Or for recreation
292
Belgium Report (capped to a 500 Euro maximum. In case of early repayment only 250 Euro);
Germany Report (banned if in SCT); Greece Report (banned); Turkey Report (capped to 0.5% of
the capital amount).
293
Italy Report.
294
Brazil Report; Canada Common Law Report; Denmark Report; Estonia Report; South Africa
Report.
295
France Report.
296
Turkey Report. When drafting this provision, the Turkish law maker was guided by the case law
of the BGH. See Atamer (2015), pp. 7–41.
297
Taiwan Report.
and travel related contracts served in relation to a membership contract there is a

ban regarding terms that the business can unilaterally raise its membership fees,
or any fee agreed in the contract.
In other jurisdictions there are several specific prohibitions regarding price related
terms. Some of them are as follows:
• A prominent example is the choice of Israel, China, Romania and Turkey of
limiting the types of charges financial institutions can demand. This list is
prepared by the relevant authority, and banks can only ask for a payment if one
of the services on the list was provided to the customer. Thus, customers can
compare the different prices much easier, especially because special websites are
designed for this.
• Limitation of penalty clauses as a percentage rate of the debt298; limit of the
penalty clause to the actual loss of the party if the amount set by the parties
appears unreasonable299; ban on penalty in case of residential lease contracts300;
ban on penalty in case of consumer credit301; limit of penalty to a proportioned
sum (control by the court).302
• Ban of a weekly billing system.303
• Limitation of cancellation fees.304
• Prohibition of round-up clauses (e.g. parking and telecommunications sec-
tors)305; mandatory rule to bill in car-parks on 15 minutes intervals and not
hourly.306
• No additional fees for pre-paid cards.307
• Unilateral price adjustment clauses prohibited for some type of contracts,308 or
limited.309
• Bundling of different goods and/or services: This is certainly a problematic case
regarding price formation as the customer cannot freely choose what and which
quantity to purchase, and also to which price to purchase it, as he is not given the
chance to compare the prices on the market and to make an informed choice. Price
bundling might conflict with transparency requirements. This type of practice is often
298
Brazil Report (10% of the debt).
299
Denmark Report.
300
Estonia Report; Turkey Report.
301
Estonia Report.
302
EU Report and Member States; Italy Report; Japan Report; Turkey Report.
303
Italy Report.
304
Canada Civil Law Report; Japan Report.
305
Spain Report.
306
France Report.
307
308
Russia Report; Turkey Report.
309
forbidden or at least subject to scrutiny under national antitrust law. However, there
are also consumer codes like the Turkish and South African310 ones, which expressly
forbid such sales practice in relation to consumer contracts. Estonia has a general
restriction applicable for SCT in consumer contracts.311 If a term prescribes that the
consumer has to enter into another contract with the party supplying the SCT or a third
party this is considered unfair, unless entry into such other contract is reasonable,
taking into account the relationship between such contract and the contract with SCT.
One of the often-cited examples is the payment protection insurance (PPI)
bundled with the credit agreement.312 The problem is two-fold: on the one hand,
such bundling of services violates competition rules as the consumers are not free to
choose another insurance company which offers better terms on the market. On the
other hand, even if the consumer is free to choose a PPI from another insurance
company, the question remains how the offer of the credit institute could be best
framed. Should the additional charge for the PPI be stated separately, or included in
the APR calculation? The best choice is probably to do both. Given that the consumer
should be free to choose on the market there is a need for a clear statement regarding
the cost of the PPI. This way the customer can choose the cheapest PPI with the
maximum coverage. However, in order to compare the effective cost of the credit
with credit offers of other institutions the consumer will also need the APR including
the PPI costs. The approach adopted in Belgium seems to convince in this regard, as it
differentiates between tying practices and bundling practices in consumer and mort-
gage credit contracts.313 As long as the consumer has the option to conclude the credit
agreement also without the additional services, a lighter protection is applied: the
information regarding prices has to be made available in a transparent and not
misleading fashion. Tying practices however, that means that the consumer is forced
to obtain the services in a bundle, are forbidden.314
For lease contracts, there are some provisions against bundling in some
jurisdictions (tying agreement).315 In an Austrian case however, the lease agree-
ment for an apartment and the furniture were deemed valid.316
Bundling of the sale of a smartphone combined with an obligation to conclude
also a mobile network services contract for a certain period is another common
example given.317 The problem here is that the customer often cannot judge what
310
South Africa Report; Turkey Report.
311
Estonia Report.
312
E.g. Austria Report; South Africa Report; Turkey Report.
313
Belgium Report.
314
See also Croatia Report; Turkey Report.
315
See Switzerland Report; Swiss CO Art. 254.
316
Austria Report.
317
Estonia Report; Japan Report. In Belgium once a period of 6 months has elapsed consumers are
by law entitled to cancel their subscription without any cost, at least with regard to the subscription
as such; however, if at the time of subscription, a device was given for free or at a reduced price, the
consumer will have to pay a compensation for the device; the amount of this compensation,
equalling the residual value of the device, has to be determined beforehand in the contract. The
the real cost of the offer is. Carriers can offer the phones for free or for a lower
price as they trust in the long-term revenue stream that is guaranteed by the lock-
in contract.318
7 Special Disclosure Regulations Promoting Price

Transparency and Competition
In this section we aim at finding out about the different regulatory means applied in
the participating countries in order to ensure price transparency and comparability
(either in addition or as an alternative to price control). A prominent example can be
given from EU law: Since 1987 creditors in a consumer credit contract are under the
duty to declare the “annual percentage rate of charge (APR)” (meaning the total cost
of the credit to the consumer, expressed as an annual percentage of the total amount
of credit) in consumer credit agreements. This should enable and give an incentive to
consumers to compare the different APR’s of different creditors and choose the
cheapest one.319 Given that the APR calculation formula is standardized by the EU,
consumers can simply resort to this figure to get an overview of the market. The
Directive 98/6/EC on consumer protection in the indication of the prices of products
offered to consumers is another example of such legislation aiming at unifying price
indications and thereby facilitating “informed choices on the basis of simple
comparisons”.320
Recently price information has also been refined in some countries by “product-
use information”. Consumers can, for example, choose the right plan for a cell-
phone contract much easier if they are not only informed about the amount they have
to pay in a month but also about the average usage of a consumer, and even better,
about their own past usage patterns. Serving this type of information during the life
span of a contract is especially important as it could motivate consumers to get
additional quotes from other providers on the market and thereby make switching
more attractive. The reporters were asked for any type of comparable provision
aiming at simplifying and fostering comparison-shopping and thereby stimulating
competition.
same solution is offered in Turkey after 1 year. The consumer has a free cancellation right, however,
must compensate for any reduced price it profited from due to a long-term contractual promise.
318
See in detail Bar-Gill (2012), pp. 185 ff.
319
Council Directive 87/102/EEC of 22 December 1986 for the approximation of the laws,
regulations and administrative provisions of the Member States concerning consumer credit, OJ
1987, L 42/48. Same also Art. 3(i) Directive 2008/48/EC of the European Parliament and of the
Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive
87/102/EEC, OJ 2008, L 133.
320
Directive 98/6/EC of the European Parliament and of the Council of 16 February 1998 on
consumer protection in the indication of the prices of products offered to consumers, OJ 1998,
L 80/27.
• The requirement to illustrate the prices in a clear and transparent manner is

provided in almost all the countries.321 It is especially underlined that the total
price including all costs has to be named.
• Most of the countries have introduced special regulations prohibiting misleading
and fraudulent acts related to prices.322 The Directive 2005/29/EC concerning
unfair business-to-consumer commercial practices in the internal market includes
also several provisions relating to prices.323 Bait and switch selling,324 low-ball
technics,325 or sale above the advertisement price326 for example, are banned as
unfair commercial practices. Often special requirements are existent for adver-
tisements including prices.327 Any time a credit is praised as “cheap” special
information has to be provided to the consumer.328 Besides, the unfair competi-
tion rules of a country burden the competitors to abstain from misleading
information regarding pricing329;
• Standardizing the way information regarding prices is served gives customers a
chance to compare. As long as apples and pears have to be compared no healthy
competition is possible.
– Art. 1 Directive 98/6/EC provides that the selling price and the price per unit
of measurement of products offered by traders to consumers shall be indicated
to improve consumer information and to facilitate comparison of prices.
Besides, both prices must be unambiguous, easily identifiable and clearly
legible (Art. 3).
– As already mentioned, the requirement to inform the consumer on the APR is
the most prominent and widespread example of standardization.330 The
requirement in Canada331 of stating the interest rate per annum and not on a
360-year day basis is serving the same purpose, i.e. to have a comparable
interest rate. This interest rate and other relevant information regarding the
321
See e.g. Directive 98/6/EC (n 320); Canada Common Law Report; Chile Report; China Report;
Japan Report; Turkey Report.
322
China Report; Denmark Report; EU Report; South Africa Report; Turkey Report.
323
Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005
concerning unfair business-to-consumer commercial practices in the internal market and amending
Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European
Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and
of the Council, OJ 2005, L 149/22.
324
Canada Common Law Report; Croatia Report.
325
Croatia Report.
326
327
Japan Report; Singapore Report.
328
329
330
Besides the EU Member States compare e.g. Singapore Report, Turkey Report.
331
Canada Civil Law Report and Canada Common Law Report. See also South Africa Report.
credit have to be conveyed to the consumer on a standardized information

sheet.332
– The same is true in regard to the limitation of claimable banking charges: if all
these charges are named the same and are comparable the consumer might
choose the cheapest offer. Directive 2014/92/EU on the comparability of fees
related to payment accounts, payment account switching and access to pay-
ment accounts with basic features was issued to tackle the problem of “com-
parability of fees related to payment accounts and payment account switching”
as the name illustrates.333 Some of the policy solutions offered by the Direc-
tive are attempts to foster competition in the market. Regarding the compara-
bility of fees connected to payment accounts Article 3 of the Directive ordered
the Member States to notify the Commission and the European Banking
Authority (EBA) until 18 September 2015 of a provisional list of 10 to 20 of
the most representative services linked to a payment account and subject to a
fee. On the basis of these lists the EBA developed the Union’s “standardized
terminology” for banking services that are common to at least a majority of
Member States and issued its Final Draft Technical Standards setting out the
standardised terminology for services linked to a payment account, and the
standardised formats and common symbol of the fee information document
(FID) and the Statement of Fees (SoF) in May 2017.334 Member States will
have to adjust their national terminology according to the final list, which will
ensure that the most important services related to a payment account use the
same nomenclature all over the EU. The Directive also asks Member States to
ensure that consumers are served with a standardized “fee information docu-
ment” in good time before entering into a contract.
– Another area which can serve as an example is air transport. According to Art.
23 Regulation (EC) N 1008/2008 on common rules for the operation of air
services335 “[t]he final price to be paid shall at all times be indicated and shall
include the applicable air fare or air rate as well as all applicable taxes, and
charges, surcharges and fees which are unavoidable and foreseeable at the
time of publication. In addition to the indication of the final price, at least the
following shall be specified: (a) air fare or air rate; (b) taxes; (c) airport
charges; and (d) other charges, surcharges or fees, such as those related to
security or fuel; where the items listed under (b), (c) and (d) have been added
to the air fare or air rate. Optional price supplements shall be communicated
in a clear, transparent and unambiguous way at the start of any booking
332
Art. 5 Directive 2008/48/EC.
333
Directive 2014/92/EU (n 33), para 4.
334
https://www.eba.europa.eu/documents/10180/1837359/Final+draft+RTS+and+ITSs+under
+PAD+%28EBA-RTS-2017-04%2C%20EBA-ITS-2017-03%2C%20EBA-ITS-2017-04%29.pdf.
335
Regulation (EC) N 1008/2008 of the European Parliament and of the Council of 24 September
2008 on common rules for the operation of air services in the Community (Recast), OJ 2008,
L 293/3.
process and their acceptance by the customer shall be on an ‘opt-in’ basis.”

The Directive especially underlines in Art. 22 that air carriers shall freely set
air fares, however, according to Recital 16 “[c]ustomers should be able to
compare effectively the prices for air services of different airlines. Therefore,
the final price to be paid by the customer for air services originating in the
Community should at all times be indicated, inclusive of all taxes, charges and
fees.” Besides, air carriers are also encouraged to indicate the final price for
their air services from third countries to the Community.336
• Special warnings at contract conclusion or during the contract period regarding
price relevant factors
– In Denmark mortgage credit agreements must include a warning regarding the
fact that possible fluctuations of the exchange rate could affect the amount
payable for loans marketed in Denmark and in currencies other than Danish
Kroner.337
– In Estonia the creditor or the credit intermediary is obliged to provide the
consumer explanations regarding the ancillary agreement proposed in relation
with a consumer credit contract relating to residential immovable property.338
– In South Africa, for electronic communications, licensees and their agents
must inform the end-user (the consumer) at the point of sale and prior to the
conclusion of the contract of various terms and conditions. These include:
“(a) deposit; (b) the connection fee; (c) administrative fees; (d) insurance costs;
(e) in and out-of-bundle rates; (f) hardware costs; (g) the possibility of tariff
changes during the contract term; (h) rules for early termination of a contract
prior to expiry of the contract term; (i) rules for the carryover of voice minutes
and data; and (j) fair usage policies”.
– In Russia the creditor is obliged by law to warn the consumer that expenses in
Rubles may turn out to be higher than expected, since the applicable variable
interest rate or the exchange rate in cases of foreign currency credits may rise,
and that the past development of the rates may not be taken as a guarantee for
future developments339;
– In the UK the Competition and Markets Authority has proposed requiring
banks to warn consumers of imminent unauthorized overdrafts and allowing a
subsequent grace period giving consumers the chance to reduce or avoid
overdrafts by adding funds.340
– If a consumer is not entitled to an overdraft in Belgium, but nevertheless an
overdraft facility of at least 1.250 euro is created (and this overdraft is not
336
See also CJEU Judgment of 15 January 2015, Air Berlin, C-573/13, EU:C:2015:11.
337
Denmark Report.
338
Estonia Report.
339
Russia Report.
340
UK Report.
reimbursed within a period of one month), the consumer must be informed on

the penalties that will apply.341
– Article 11(1) of the Directive 2008/48/EC on credit agreements for consumers
provides for the following: “the consumer shall be informed of any change in
the borrowing rate, on paper or another durable medium, before the change
enters into force. The information shall state the amount of the payments to be
made after the entry into force of the new borrowing rate and, if the number or
frequency of the payments changes, particulars thereof.”
• Price comparison mechanisms/facilitation of comparison-shopping
– Electricity and gas market.342
– Fuel prices.343
– Banking fees.344
– Products of insurance companies.345
– Air travel.346
– Car rental.347
– Telecommunication.348
• Price breakdown in special situations
– Telecommunication.349
– Banking charges.350
– Electricity and gas contracts where the seller arranges also settlement of
accounts for the network services provided by the network operator.351
• Cooling-off period to ensure information is understood. Taiwan has introduced
an interesting measure in Art. 11(1) of the Taiwanese Consumer Protection Act. It
provides for a cooling-off period for customers to review the terms of the
contract. As reflected in the Report: “Traders shall provide a reasonable period,
not longer than 30 days, for consumers to review all contract clauses, before
entering into a standard contract. The terms and conditions adopted by traders in
standard contracts which make consumers waive the right provided for in the
341
Belgium Report.
342
E.g. Austria Report; Belgium Report; France Report; Italy Report; UK Report.
343
Austria Report.
344
Belgium Report; Croatia Report; Estonia Report; Greece Report; Israel Report; Turkey Report.
345
Singapore Report.
346
EU Report; South Africa Report.
347
348
Greece Report.
349
350
Chile Report; Spanish Report.
351
Estonia Report.
previous paragraph shall be invalid [. . .]”.352 This rather long cooling-off period
is foreseen to enable a thorough analysis of all information relating to the
concluded contract, and a comparison of similar contracts in order to enhance
competition.
8 Efficiency and the Way Forward
The comparison of the 27 country reports plus the supranational EU report allows for
some conclusions and recommendations. We are not aiming at a full-blown set of
advices to the regulators, but to raise awareness for the problem of contractual
pricing structures that serve to hide rather than reveal the real cost of goods and
services and thereby abuse limitations in the cognitive competences of consumers.
This problem seems to be universal and calls for a multi-layered approach of
regulators:
• All country reports underline that freedom of contract, and especially freedom
of the parties to determine goods and services in exchange for a certain remu-
neration is fully granted. Whether under a socialist market economy or a fully
market-oriented economy, whether in a common law, civil law or mixed
jurisdiction, freedom of contract, and especially freedom of the parties to decide
on the goods and services in exchange for a certain remuneration is acknowl-
edged. The main principle regarding the price remains its formation on the
market.
• However, we see also that the issue of price related contract terms is in some way
or the other causing problems in all the reported countries. There are repeating
pricing patterns which call for a deeper analysis. These can be categorized as
follows:
– Some types of contract are prone to cause disputes: long-term service con-
tracts such as electricity, gas, internet, telecommunication contracts; banking
contracts; insurance contracts (however reported less prominently).
– Some types of pricing schemes are prone to cause disputes: price adjustment
clauses; bundling and price partitioning; deferred payments; clauses linking
the consequences of a breach of contract to the price paid (e.g. losing price
reductions in case of breach); determination of interest rates (e.g. foreign
currency credits/floor clauses).
• Reactions in the reporting countries to these problematic cases have been diverse.
One difference can be observed in common law countries. Without wanting to
overgeneralise, it might be stated that these countries are more reluctant in giving
courts the right to control SCT and especially any sort of price related terms. The
352
See Taiwan Report.
tendency is more in seeking regulatory responses to unfair price structures.353 In

civil law countries and mixed jurisdictions however, courts as well as the
regulators seem more prone to intervene to fix problems. The trend being more
that, at first, courts intervene and declare some price related SCT void, and then
the regulator reacts to introduce a legal response.
• A common regulatory reaction in all countries is promoting transparent pricing.
This includes standardizing pricing (e.g. APR), banning misleading pricing,
facilitating efficient price comparisons and the like. These are protection mea-
sures applicable independent of the use of SCT. The idea is that prices must be
transparent and salient in order to be subject to competition.
Transparency is often also a requirement for any price related term in SCT to
pass the validity test. In recent years, the CJEU has underlined several times that
the meaning of the transparency requirement is not purely formal but also
substantive. The customer shall be able to understand the terms in their economic
and legal consequences. In a specific case dealing with mortgage credit in foreign
currency, this involved also understanding which risk was assumed. The CJEU
stated that354:
[. . .] first, the borrower must be clearly informed of the fact that, in entering into a loan
agreement denominated in a foreign currency, he is exposing himself to a certain foreign
exchange risk which will, potentially, be difficult to bear in the event of a fall in the value of
the currency in which he receives his income. Second, the seller or supplier, in this case the
bank, must be required to set out the possible variations in the exchange rate and the risks
inherent in taking out a loan in a foreign currency, particularly where the consumer borrower
does not receive his income in that currency. Therefore, it is for the national court to check
that the seller or supplier has communicated to the consumers concerned all the relevant
information enabling them to assess the economic consequences of a term, such as that at
issue in the main proceedings, on their financial obligations.
This approach of the CJEU reflects all the hope in a formula once introduced
by the Directive 93/13/EEC in 1993: as long as price related terms are made
salient and therefore subject to competition the consumer will have the chance to
pick the best possible deal. Given e.g. the risks involved in a foreign currency
transaction, he would more likely choose one with the local currency.
The same approach was also taken in price adjustment clauses. The CJEU
imposed high demands for adjustment clauses to survive a transparency con-
trol.355 According to the court, the main question is
353
A very good example is certainly the UK where the Financial Conduct Authority and the
Competition and Markets Authority take a very active role in seeking for new remedies to address
problems in consumer markets. See e.g. Helping people get a better deal: Learning lessons about
consumer facing remedies, prepared by the Financial Conduct Authority and the Competition and
Markets Authority, on behalf of the UK Competition Network, 2018; Digital Comparison Tools:
Consumer Research Final report, prepared by Kantar Public as part of the Competition and Markets
Authority’s (CMA) market study in relation to digital comparison tools, 2017.
354
CJEU Andriciuc and others (n 170), para 50.
355
CJEU RWE Vertrieb (n 16), para 49.
[. . .] whether the contract sets out in transparent fashion the reason for and method of the
variation of those charges, so that the consumer can foresee, on the basis of clear, intelligible
criteria, the alterations that may be made to those charges. The lack of information on the
point before the contract is concluded cannot, in principle, be compensated for by the mere
fact that consumers will, during the performance of the contract, be informed in good time of
a variation of the charges and of their right to terminate the contract if they do not wish to
accept the variation.
However, it is very doubtful if this approach is leading to a meaningful

solution of the problem. As explained above, the results of behavioural sciences
show that consumer deal with complexity mostly by disregarding it. They sim-
plify decisions by ignoring insignificant looking price dimensions and taking
mental shortcuts. Evidence shows that when prices are complex, and in particular
are two-dimensional rather than one-dimensional, consumers have problems
choosing the right price. A price adjustment clause for example cannot be written
in such a simple and transparent form that a consumer could possibly look for the
best alternative clause offered on the market. Furthermore, the so called optimism
bias, as pointed out by cognitive studies and social psychology, entails that
individuals tend to be over-optimistic about the future. People systematically
predict future choices wrongly and hence misjudge elements of the price vector
due to overconfidence. Any sort of foreign currency credit inherently builds on
this overconfidence. Even if the consumer is informed about the possible risks of
taking a foreign currency credit, he will not be in a position to judge the future
correctly. In such case, the transparency requirement, which is praised so much
by the CJEU, will be of little help to consumers.
• In many countries, courts intervene in unfair price terms also based on the
argument that these are only “ancillary” terms, that is price terms which are
not directly determining the price and therefore subject to a judicial control.
Independent of the fact that these terms are transparent, they are put to scrutiny
in order to ascertain if they cause a significant imbalance in the parties’ rights and
obligations contrary to the requirement of good faith. The problem with this
approach is, as with the case of transparency, that it is subject to the courts’
discretion and that the judgments may often vary. A prominent example is the
credit management fee charged in many countries. The German High Court
qualified these fees as ancillary terms controllable by the courts and decided
that they were causing a significant imbalance. The Austrian High Court how-
ever was of the exact opposite view qualifying the management fee as part of the
main subject matter of the contract. In Turkey on the other hand, the High Court
has joined the German one and annulled such terms. But the Turkish legislator
later intervened and gave financial institutions the right to charge management
fees by statute. The whole debate in Turkey lasted for more than 5 years during
which banks had to pay back fees which they then were allowed to charge again
from 2015 onwards. It is certainly a common phenomenon that courts decisions
may vary whenever certain discretion is involved. This is nothing new. However,
the problem with price related terms in SCT is that they can involve thousands if
not millions of contracts where according to the decision amounts in millions

have to be restituted.
Controlling this type of price terms ex post via court intervention means that
for every type of price adjustment clause, for any credit agreement in foreign
currency, or for any management fee charged the courts will have to intervene if
the customer challenges the term. However, it is an established fact that con-
sumers often do not sue. If by any chance there is an active consumer who gets the
SCT annulled, the inter partes effect of the court decision will constitute another
major problem. Most of the countries report that persons or organizations having
a legitimate interest under national law in protecting consumers have a right to sue
against the continued use of unfair terms in consumer contracts. But, consumer
organizations have seldom the financial means to follow this type of suits.
Besides, the effect (individual vs. erga omnes/with the same provider vs. for
any provider) of any judgment declaring a contractual term to be unfair in a case
lead by an individual or by a collective entity remains controversial. Even the
requirement for national courts to consider ex officio any judgment annulling a
certain unfair term is not beyond doubt. And, if by a special national provision,
the inter partes effect of a decision can be surmounted, the restitution claim for
any sums paid based on an invalid price-term has still to be filed by every
individual consumer. Unless the sum involved is high, or in exceptional cases
attracts much publicity, like fees in the energy or banking sector, one can imagine
that consumers will be unwilling to undertake the burden of suing the companies.
Finally, for those consumers prepared to claim what they paid in excess, limita-
tion periods regarding this type of restitution claim will be a final obstacle. Before
consumers are able to inform themselves about the invalidity of the relevant term,
a restitution claim may already have become time-barred. Obviously, businesses
will not be willing to change their terms and pricing policies as long as no
effective remedy is enforced.
• Another related argument against an ex post judicial intervention is the lack of
legal certainty. The number of judgments for example regarding price adjustment
clauses or banking fees in many countries proves that the businesses are persistent
in creating new clauses allowing for some sort of price modification. But the cost
of adjudicating each dispute seems by far to outweigh the effect of the judgments
in solving the problem. The Israeli case of Bank Leumi lasting for 25 years is a
unique but good example regarding the inefficiency of court proceedings.356 With
every decision a new variant of the respective price term is used by the banking or
energy sector. This incurs enormous enforcement costs with often no perspective
of putting an end to the legal problem. Legal certainty which is needed for a
functioning market is not granted. Furthermore, when arbitration in consumer and
especially SCT disputes is allowed, accessibility of such awards will not always
be granted, which again causes lack of foreseeability.
356
Attorney General v. Bank Leumi, PM 5763(1) 481 (2004), see Israel Report.
• All in all, the option of a regulatory intervention regarding some price terms
used in millions of contracts needs further consideration. This is also in line with
the principle of the separation of powers. As underlined by Lady Hale in the UK
Supreme Court decision Abbey National: “[. . .] it is not clear to me whether the
proper solution is to find some way of forcing the suppliers to compete with one
another in the terms they offer or whether the solution is to condemn one
particular model of charging for those services. Fortunately, however, that is
for Parliament and not for this Court.”357 Indeed, some national regulators have
chosen to intervene and to ban e.g. the taking of a consumer credit in foreign
currency, or to limit the type of banking charges to certain items and to ban any
other type of charges. The benefits of certainty to a legal system are obvious:
increased predictability, reduced information costs, increased speed of dispute
resolution, and the consequential reduction in litigation expenditures.
But more important than that, effective consumer protection cannot be
achieved solely by allowing or forbidding some pricing structures. Even if a
court finds, for example, a price adjustment clause or an overdraft charge to be
perfectly transparent and therefore fair, the need to protect consumers against
behavioural market failure remains.358 Regulatory interventions could in fact
be designed in a tailor-made fashion taking into account the findings of cognitive
sciences. Given that the major problem with price terms in SCT is that they are
not subject to market forces the aim of any regulation should be to change this. If
consumer awareness can be raised regarding some pricing schemes the need for
judicial control would also diminish. Soft paternalistic remedies are already
applied in some of the countries. Simplifying the choice environment by stan-
dardizing price information; facilitating comparison-shopping by specialized
websites and intermediaries359; informing consumers of their usage data and
making switching in long-term contracts easier are some prominent examples.360
A perfectly transparent price adjustment clause would probably help consumer
less than a monthly prominent information about the fare applied to them and the
alternative (better) prices on the market plus a right to freely change the contract.
Even though consumers are sometimes aware of the unfavourable conditions
of their contract, they hesitate to look for new options given its costs and
unpredictable outcome. Changing the status quo entails the cost of gathering
357
[2009] UKSC 6, Lady Hale, para 93.
358
Policymakers certainly have to be aware of the cultural differences affecting human judgment
and decision making and adjust their regulatory interventions accordingly, see Zamir and Teichman
(2018), pp. 124–127.
359
See the detailed report prepared for the UK market: Digital Comparison Tools: Consumer
Research Final report, prepared by Kantar Public as part of the Competition and Markets
Authority’s (CMA) market study in relation to digital comparison tools, 2017.
360
See on behaviourally informed lawmaking Zamir and Teichman (2018), pp. 162 ff. and 313 ff.;
see on different regulatory means to spur competition on the market for long-term services and
banking contracts Atamer (2017), pp. 644–657; or on the market for credit-card, mortgage and cell-
phone contracts Bar-Gill (2012), pp. 51 ff.
information, comparing it and finding the best offer on the market. This can be
costlier than the additional benefits of the change itself. Under such circumstances
the apathy of the consumer might even be rational. If this information has to be
given to the consumer correctly each month by the service provider this would
have a nudging effect to switch. Obviously, the inhibition threshold for suing
your service provider is much higher than the one for just terminating your
contract. The lawmakers would be well advised to intervene at this stage.
• However, it is questionable whether enhancing comparison shopping or nudging
to change the service provider is really enough to tackle the bounded self-control
problem of present biased consumers. As Bubb and Pildes put it “[n]aïveté and
overconfidence persist despite consumers’ accumulated experience of their own
weakness of will. Printed words on a page are unlikely to cure what painful
experience has not”.361 Whereas making prices salient and comparable, and
thereby spurring competition, might work in some cases, hard paternalistic
interventions will be needed in others, like the case with over-limit fees or default
interests. Smart disclosure might lead consumers to the service provider with the
lowest charge. Monthly or yearly statements might also show consumers that they
have a self-control problem given that they are ending up paying these fees, but it
might not necessarily help them to overcome the self-control problem. If there is a
bias which is hard to overcome by nudging and which can be exploited very
easily by suppliers, hard paternalistic interventions, especially limiting the
amount of this type of charges have to be thought of.
• Controlling prices and price related terms is a multifaceted and complicated
issue. This report tries to seek for some alternative methods to the trend of judicial
ex post control which is developing in the last decades. It is undeniable that courts
often play a pioneer role in ascertaining problem areas. But it might be the time
for regulators to think of more effective ex ante regulations to unburden the
courts. Besides, more effective ways of collective proceedings and redress mech-
anisms need to be found as, obviously, businesses can also violate an ex ante
regulation. The role of courts in controlling less prominent as well as less widely
applicable price related terms will certainly remain.
Annex: Questionnaire for the National Reporters
General Information on the Scope of Freedom of Contract
In this introductory part, brief information should be provided on the acceptance of

freedom of contract as a rule, and if this is the case, the provisions/court decisions
guaranteeing this freedom. It is important to see whether the parties, in principle, are
free to set the contractual price, whether the rules of liberal market economy are
361
Bubb and Pildes (2014), p. 1650.
applied, and whether there is a mechanism (autonomous body or state department) to

protect competition in the market.
General Information on Control of SCT
This part should give an overview on judicial (and if the case might be administra-
tive) control of standard contract terms. Especially whether control is applied only in
B2C contracts or also in B2B contracts; the general norm allowing for a judicial
review of standard terms; whether there is a “black” (forbidden without discretion of
the judge) and/or “grey” list of unfair terms (presumed to be unfair); the effect of an
“annulment” of an unfair term by courts/or an administrative body; the inter partes
effect of a court decision and its exceptions; possible registers in which unfair terms
are listed and their effect; whether there are means of collective action against usage
of unfair terms in standard contract terms.
Judicial Control of Price Terms in SCT
Are there special provisions that give the courts the right to control price terms in
SCT, or forbid such control? Do courts control price terms in SCT even though there
is a limitation or no express authorization? If yes based on which arguments? If there
is a parallel provision to Article 4(2) Directive 93/13/EEC do courts distinguish
between main and ancillary price terms? Please also advise if an administrative body
is vested with this function instead of courts.
Representative examples from case law are very important in this section. The
authors are free to give all kind of additional information, which they judge to be
relevant.
Special Regulatory Provisions Controlling Price Terms
This section should give information on different regulatory responses directly

intervening into price terms. Obviously, these interventions can occur in very
different sectors. However, given the scope of the topic the major contracts we
look for are those were standard contract terms are widely used and therefore also a
judicial control of price terms could occur. Insurance contracts, contracts with
energy, internet, cell-phone, pay-TV providers, banking contracts, contracts with
health clubs would be typical examples. However, price caps introduced by the
regulatory regarding e.g. pharmaceuticals are not relevant. Examples of regulatory
intervention could be:
• Limiting the number of services banks can charge: examples from Israel,362
Romania363 and Turkey.
• Setting price caps:
– General caps regarding contractual and default interest rates364 or special caps
applicable just for e.g. interest rates in credit card contracts or overdraft
accounts;
– Special caps regarding some charges, e.g. roaming charges365;
– Caps regarding contractual penalty fees, specifically in the banking sector,366
or generally for consumer contracts;
• Forbidding certain types of fees or penalties;
• Limiting or forbidding price bundling or price partitioning;
• Any comparable regulatory provision.
It would also be very important to explain the interrelation of administrative
provisions and judicial price control. That is, if courts can still practice price control,
or do so de facto, even though a regulatory provision regarding price control is
existent.
362
http://www.boi.org.il/en/ConsumerInformation/ConsumerIssues/Pages/AmalotReform.aspx.
363
According to the information provided in the CJEU Judgment of 12 July 2012, Volksbank
România, C-602/10, EU:C:2012:443, para 14 the Romanian legislator has limited fees which can be
charged in relation to credit agreements: “Article 36 EGO No 50/2010 provides: ‘For the credit
granted, the creditor may levy only a charge for the processing of the application, a credit
administration charge or current account administration charge, compensation in the event of
early repayment, insurance costs, penalties if appropriate, and a single charge for services
provided upon request by consumers.”
364
See e.g. for a comparative study Reifner et al. (2010).
365
https://ec.europa.eu/digital-single-market/en/roaming-tariffs.
366
For example, in the USA, Section 149(a) of the Truth in Lending was changed with the Credit
Card Accountability, Responsibility And Disclosure Act of 2009 as follows: “The amount of any
penalty fee or charge that a card issuer may impose with respect to a credit card account under an
open end consumer credit plan in connection with any omission with respect to, or violation of, the
cardholder agreement, including any late payment fee, over-the-limit fee, or any other penalty fee
or charge, shall be reasonable and proportional to such omission or violation.” On 15 June 2010
the Federal Reserve Board of the US has announced that it “[p]rohibits credit card issuers from
charging a penalty fee of more than $25 for paying late or otherwise violating the account’s terms
unless the consumer has engaged in repeated violations or the issuer can show that a higher fee
represents a reasonable proportion of the costs it incurs as a result of violations. Prohibits credit
card issuers from charging penalty fees that exceed the dollar amount associated with the
consumer’s violation. For example, card issuers will no longer be permitted to charge a $39 fee
when a consumer is late making a $20 minimum payment. Instead, the fee cannot exceed $20. Bans
“inactivity” fees, such as fees based on the consumer’s failure to use the account to make new
purchases. Prevents issuers from charging multiple penalty fees based on a single late payment or
other violation of the account terms. Requires issuers that have increased rates since January
1, 2009 to evaluate whether the reasons for the increase have changed and, if appropriate, to
reduce the rate.”
Special Disclosure Regulations Promoting Price Transparency

and Competition
In this section it is aimed to find out about the different regulatory means applied in
the participating countries in order to ensure price transparency and comparability
(either in addition or as an alternative to price control).
A prominent example can be given again from EU law: Since 1987 creditors in a
consumer credit contract are under the duty to declare the “annual percentage rate of
charge APR” (meaning the total cost of the credit to the consumer, expressed as an
annual percentage of the total amount of credit) in consumer credit agreements at the
latest at time of conclusion of the contract. This should enable and give an incentive
to consumers to compare the different APR’s of different creditors and choose the
cheapest one.367 Given that the APR calculation formula is standardized by the EU,
consumers can simply resort to this figure to get an overview of the market. The
Directive 98/6/EC is another example of such legislation aiming at unifying price
indications and thereby facilitating “informed choices on the basis of simple
comparisons”.368
Recently price information has been refined in some countries by “product-use
information”. Consumers can, for example, choose the right plan for a cell-phone
contract much easier if they are not only informed about the amount they have to pay
in a month but also about the average usage of a consumer, and even better, about their
own past usage patterns. Especially serving this type of information during the life
span of a contract is important as it could motivate consumers to get additional quotes
from other providers on the market and thereby make switching more attractive.
Any type of comparable provisions which aim at simplifying and fostering
comparison-shopping and thereby stimulating competition is of interest in this section:
• Special labelling requirements for prices,
• Comparative listing of prices by independent institutions on websites,369
• Transparency requirements which balance the effect of price-partitioning370 or
price bundling.371
367
Council Directive 87/102/EEC (n 319).
368
(n 320).
369
Directive 2014/92/EU (n 33) for example obliges EU Member States in Article 7 to “[. . .] ensure
that consumers have access, free of charge, to at least one website comparing fees charged by
payment service providers for at least the services included in the final list referred to in Article 3
(5) at national level. Comparison websites may be operated either by a private operator or by a
public authority”.
370
See n 5. Parallel to the APR regulation in consumer credits, Article 23 Regulation (EC) N 1008/
2008 for example includes a special provision to countervail intransparent price information via
price-partitioning: “The final price to be paid shall at all times be indicated and shall include the
applicable air fare or air rate as well as all applicable taxes, and charges, surcharges and fees which
are unavoidable and foreseeable at the time of publication.”
371
See n 4.
• Product-use information at contract conclusion and regularly during the contract

performance.372
• Special information whenever a fee or penalty is going to be applied. E.g. alert
systems for overdraft accounts.373
Just like under section IV, this section too should include comment on the relation
of transparency/disclosure regulations to judicial price control. Whether these
exclude each other or applied together is of crucial importance.
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Part II
Supranational Report: European Union
Form Contracts in the European Union:
The Innovative Role of the CJEU’s
Case-Law
Sergio Cámara Lapuente
Abstract The starting-point of this paper is an analysis of the regulatory framework

provided by Directive 93/13/EEC on unfair contract terms regarding price-related
terms, distinguishing between aspects that it regulates and those that it leaves out of
its scope of application. I then examine the central role the Court of Justice of the
European Union (CJEU) has played in the development of certain concepts related to
the transparency principle as applied to contract prices (what it is, what it affects,
how it should be applied, what terms are exempt, and the consequences of a lack of
transparency). The Court has put forward autonomous and innovative interpretations
of what it considers the main subject matter of a contract and the nature of the
assessment of transparency (which goes beyond a mere grammatical or formal
understanding); it has identified its basis in the trader’s duty of information; it has
adopted an objective standard of the average consumer for assessment of the
intelligibility of a term; and it has clarified the nature and consequences of the
ineffectiveness which results from a lack of transparency of a term. Nonetheless,
the CJEU may have exceeded its own powers of interpretation by treating the
assessment of transparency as a particular case of unfairness, as Directive 93/13/
EEC does not establish any consequence of non-compliance with the duty for plain
intelligible language, other than requiring the interpretation most favourable to the
consumer. Finally, this paper considers future issues, which are likely to arise in this
area, which the CJEU will have to face and aspects of its existing case-law that it
should refine, and it puts forward a critical approach to the scheme of controls
designed by the Directive.
S. Cámara Lapuente (*)

University of La Rioja, Faculty of Law, Logroño, Spain
e-mail: sergio.camara@unirioja.es

https://doi.org/10.1007/978-3-030-23057-9_2
68 S. Cámara Lapuente
1 Introduction
In developing effective consumer rights protection regarding contract terms

governing prices, the work of the judiciary has been decisive. Although there are
several European Union directives and regulations that introduce some limits on the
way prices are set, stated or altered, based on the essential principle of contractual
freedom, the fundamental rule in this regard is undoubtedly Directive 93/13/EEC on
unfair contract terms.1 However, despite some unsuccessful proposals and attempts2
at legislative reform, lately it is not either the European legislator nor the enforce-
ment by the European Commission that has led the way in paradigm shifts in the
review of price-related terms, but rather the determined action by the Court of Justice
of the European Union (CJEU) in the 25 years the Directive has been applied.
CJEU case-law has been constructed by means of the mechanism of judicial
cooperation between national courts and the European court (Article 267 TFEU). In
recent years the former lodged a notably increasing number of preliminary reference
proceedings related to unfair terms. It is striking that in the first 15 years of
application of Directive 93/13/EEC (1994–2009), the CJEU issued 14 judgments
on unfair terms; after 2009, a significant trickle of judgments began, especially on
the ex officio review of unfair terms by judges, and just in the last 5 years
(2013–2018) the CJEU has issued nearly 40 judgments and orders on the matter!
A large percentage of these concern price-related terms (especially in contracts for
financial services and, also, to a lesser extent, for universal services such as gas,
electricity or telephony) and in particular, the principle of transparency enshrined in
the Directive both for “core terms on prices” (art. 4.2) and for “price-related terms”
that do not constitute the definition of the main subject matter of the contract (art. 5).
If it were necessary to select the main milestones of this case-law to assess its
evolution over time, and leaving aside earlier and unclear judgments (Cofidis, 2002)3
or the first ones that dealt specifically with the transposition of the aforementioned
Article 4.2 Directive 93/13/EEC (Commission v. Netherlands, 2001; CajaMadrid,
2010),4 the first judgment that enhanced and expanded the possibilities and the
features for transparency review of price-related terms was RWE Vertrieb (2012).5
Thereafter, the specific application of transparency to price terms as the main subject
1
Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ 1993, L
95/29.
2
Arts. 30–39 of the Proposal for a Directive of the European Parliament and of the Council on
consumer rights, 8.10.2008, COM (2008) 614 final, discarded (as also any relevant amendment in
Directive 93/13/EEC) in the approved Directive 2011/83/EU (n 32) (see Art. 32). See also Arts.
82–86 of failed CESL (Proposal for a Regulation of the European Regulation of the European
Parliament and of the Council on a Common European Sales Law, COM (2011) 0635 final).
3
CJEU Judgment of 21 November 2002, Codifis, C-473/00, EU:C:2002:705.
4
CJEU Judgment of 10 May 2001, Commission/Netherlands, C-144/99, EU:C:2001:257; CJEU
Judgment of 3 June 2010, Caja de Ahorros y Monte de Piedad de Madrid, C-484/08, EU:
C:2010:309, known as “CajaMadrid” case.
5
CJEU Judgment of 21 March 2013, RWE Vertrieb, C-92/11, EU:C:2013:180.
Control of Price Related Terms in Standard Form Contracts in the. . . 69
matter of a contract (including delimitation of when it concerns this specific type of

term exempt from substantive review if they are transparent) occurred with Kásler
(2014),6 whose influence continued in Matei (2015),7 van Hove (2015),8 Primus Bank
(2017),9 Andriciuc (2017)10 and Ylyés (2018),11 and its latest effects and confirma-
tions in orders such as Lupean (2018) and Czakó (2018),12 and in recent judgments
such as EOS KSI Slovensko (2018),13 Dunai (2019)14 and GT (2019).15 Moreover,
other crucial judgments, such as Gutiérrez Naranjo (2016)16 originate in this area, but
have a general relevance to the whole unfair terms regime and the consequences the
“non-binding” character of terms found unfair.
Such a torrent of questions to the CJEU from national courts has numerous
causes, some more technical and others more socio-political: among the former is
obviously the need for clarification of the terms of Directive 93/13/EEC, but also a
certain desire to fill some of the gaps in the regime required by the Directive by
means of case-law, as well as to seek the CJEU’s opinion on the unfair nature of
certain widely-used terms of doubtful fairness. In addition, the CJEU has used
Directive 93/13/EEC as a crosscutting tool to address issues not fully resolved by
sector-specific directives such as those on consumer credit (in aspects such as
penalty clauses, acceleration clauses, etc.).17 Among the socio-political causes in
this abundance of preliminary rulings, the most notable is the use of the Directive as
a means to combat some particular unfair effects of the economic crisis commencing
in 2008, especially in the context of mortgage foreclosures.18 Indeed, the courts of
first instance of some Member States have shown themselves able to use the
Directive’s scheme of control of unfair terms as the only quick and efficient means
6
CJEU Judgment of 30 April 2014, Kásler and Káslerné Rábai, C-26/13, EU:2014:282.
7
CJEU Judgment of 26 February 2015, Matei, C-143/13, EU:C:2015:127.
8
CJEU Judgment of 23 April 2015, Van Hove, C-96/14, EU:C:2015:262.
9
CJEU Judgment of 26 January 2017, Banco Primus, C-421/14, EU:C:2017:60.
10
CJEU Judgment of 20 September 2017, Andriciuc and others, C-186/16, EU:C:2017:703.
11
CJEU Judgment of 20 September 2018, OTP Bank and OTP Faktoring, C-51-17, EU:
C:2018:750.
12
CJEU Order of 22 February 2018, Lupean and Lupean, C-119/17, EU:C:2018:193; CJEU
Order of 22 February 2018, ERSTE Bank Hungary, C-126/17, EU:C:2018:107.
13
CJEU Judgment of 20 September 2018, EOS KSI Slovensko, C-448/17, EU:C:2018:745.
14
CJEU Judgment of 14 March 2019, Dunai, C-118/17, EU:C:2019:207.
15
CJEU Judgment of 5 June 2019, GT, C-38/17, EU:C:2019:461.
16
CJEU Judgment of 21 December 2017, Gutiérrez Naranjo, C-154/15, C-307/15 and C-308/15,
EU:C:2016:980.
17
On this point, Micklitz (2014), p. 164.
18
See as a milestone CJEU Judgment of 14 March 2013, Aziz, C-415/11, EU:C:2013:164.
of finding protective solutions for citizens and families in serious economic distress,
even where this calls into question their own national legislation or case-law.19
The CJEU’s active role in dealing with unfair terms has been changing over the
last quarter century in two respects. On the one hand, initially its judgments
concerned the improper implementation of the Directive 93/13/EEC or the assess-
ment of specific standard terms (notably, choice of jurisdiction clauses), but from
about 2012,20 the Court has gone on to review legal rules in national laws, unrelated
to the Directive; that is, with the tools of the principles of equivalence and effec-
tiveness,21 the CJEU has declared that certain Member States’ legislative acts (civil,
commercial or procedural) contravene this EU norm, thus forcing regulatory
changes in areas that are in principle unrelated to unfair terms or even to consumer
protection.22 In the course of this, the European Court has also created, for the
benefit of the consumer, the powerful principle of the “dissuasive effect” of the
Directive (since Banesto, 2012). On the other hand, although at first the CJEU
adopted a low profile in terms of its views on the lawfulness or otherwise of a
specific contract term put forward by a national court, acknowledging that is for the
national courts to apply the Directive’s test of unfairness taking into account the
factual circumstances of the case and the context of national law itself (Freiburger
Kommunalbauten, 2004),23 subsequently it has moved to providing such detailed
guidelines on the Directive’s concepts (good faith, imbalance, disproportion, etc.)
applicable to the specific case24 that it virtually eliminates any real discretion for the
national court to decide in a way inconsistent with the “suggestions” of the CJEU
that such a term would or would not pass the Directive’s hurdles.25
19
For a detailed development of the argument, see Gómez Pomar and Lyczkowska (2014), pp. 4 ff.
See also Micklitz and Reich (2014), pp. 805 ff.
20
Leaving aside some pioneering judgments such as CJEU, 21.11.2002 (Cofidis, n 3) (on the invalid
legal time-limit to challenge unfair terms in France), this approach becomes significant from CJEU
Judgment of 14 June 2012, Banco Español de Crédito, C-618/10, EU:C:2012:349 on.
21
See Ebers (2016), pp. 249 ff.
22
See CJEU Banco Español de Crédito (n 20), (with subsequent change of Spanish TR-LGDCU);
CJEU Judgment of 14 March 2013, Aziz, C-415/11, EU:C:2013:164 (with change of the Span-
ish Law of Civil Procedure); CJEU Judgment of 30 May 2013, Asbeek Brusse and de Man
Garabito, C-488/11, EU:C:2013:341 (with change of art. 94.1 Dutch BW), and a long etc.
since then.
23
CJEU Judgment of 1 April 2004, Freiburger Kommunalbauten, C-237/02, EU:C:2004:209,
rectifying a more proactive role used in CJEU Judgment of 27 June 2000, Océano Grupo Editorial
and Salvat Editores, C-240/98 and C-244/98, EU:C:2000:346.
24
See CJEU Judgment of 9 November 2010, VB Pénzügyi Lízing, C-137/08, EU:C:2010:659, paras
52–55; CJEU Judgment of 16 November 2010, Pohotovost, C-76/10, EU:C:2010:685, paras 71 and
73; CJEU Judgment of 26 April 2010, Invitel, C-472/10, EU:C:2012:242, paras 24 and 30. For
recent instances related to price terms, see CJEU Judgment of 28 July 2016, Verein für
Konsumenteninformation, C-191/15, EU:C:2016:612, paras 68, 69 and 71, and CJEU Andriciuc
(n 10), paras 54–56; see also the detailed criteria offered by the CJEU as for ordinary interests in
CJEU Banco Primus (n 9), para 65.
25
A sum up of this approach in Micklitz (2014), pp. 149–152; Gerstenberg (2015), pp. 599–621;
Stempel (2017), pp. 106–116.
In this task of specifying what should and should not be considered an unfair
term, and also which terms should and should not be seen as ones relating to price, in
practice it is much easier for the CJEU to construct an independent concept of
transparency for the review of contract terms rather than to develop pan-European
notions about aspects of the substantive review of fairness itself, not least because
the latter necessarily has to relate to the contrast between the contract term and the
relevant national default law, something that is not relevant to the application of the
transparency requirement.26 In this respect, while judicial harmonization of the
requirement of transparency seems simpler, in some cases the relative proper com-
petences of the CJEU and national courts may have been compromised.27
This paper starts by analyzing the regulatory framework provided by Directive
93/13/EEC regarding price-related terms, distinguishing between aspects that it
regulates and those that it leaves out of its scope of application (Sect. 2). Then, I
will examine the case-law on the transparency principle as it is applied to contract
prices (what it is, what it affects, how it should be applied, what terms are exempt,
and the consequences of a lack of transparency) (Sect. 3). Finally, this paper deals
with future issues, which the CJEU will have to face and aspects that it should refine,
as well as putting forward a critical approach to the system designed in the Directive
(Sect. 4). Together with CJEU case-law, there are short notes comparing laws of
some national systems.
2 Directive 93/13/EEC: Scope of Application (Price-Related

Terms and Core-Price Terms) and Types of Controls
Included
Directive 93/13/EEC seeks to achieve a minimum harmonization of the laws of the

Member States. Consequently, as well as being able to increase the level of protec-
tion in their own rules, Member States can use their discretion to regulate issues that
the Directive does not cover or excludes from its scope of application. In this respect,
it is clear that for “individually negotiated” terms (cf. Articles 3.1 and 3.2) and those
included in contracts between two businesses or professionals (cf. Article 1.1), the
controls set out by the European regulation are not applicable, even though Member
States, on the basis of very different models may (and some indeed do) expand the
Directive’s protection or similar rules to cover those scenarios.28 So far the CJEU’s
26
See Stempel (2017), p. 114.
27
See below at Sect. 3.5.2.
28
See the depiction and overview of four different legislative models (“the no particular problem
model, the standard form contract model, the consumer protection model and the general unfairness
model”) in Wilhemsson and Willet (2010), pp. 158–191. As for the review of “unfair” terms in B2B
contracts, see recently the chapters on Germany and Spain by Gsell (2017), pp. 237–258; Cámara
Lapuente (2017b), pp. 195–235.
broad interpretation of the concept of “consumer”29 has never gone beyond the legal
framework which the Directive requires so as to protect genuine professionals in
their capacity of non-drafting parties who accept standard terms drafted by the other
party.
However, among the more controversial aspects of the Directive have been the
exclusions established by Article 1.2 (on the so-called declarative terms that repro-
duce “mandatory statutory or regulatory provisions”)30 and in Article 4.2. This, in
particular, states:
Assessment of the unfair nature of the terms shall relate neither to the definition of the main
subject matter of the contract nor to the adequacy of the price and remuneration, on the one
hand, as against the services or goods supplies in exchange, on the other, in so far as these
terms are in plain intelligible language.
It is well known that this provision was not included in either the 1990 Proposal
for a Directive or the amended one of March 1992, but was introduced at the last
moment after deliberations in the EU Council in September 1992, influenced by
Germany’s liberal approach in § 8 of its General Conditions of Contract Law
(AGBG) and its national case-law. The basis for excluding these terms on the
main subject matter and the price-quality ratio (sometimes called “core terms”)
from a review of their substantive unfairness only when they pass the transparency
filter is found in several arguments: the principle of the “autonomy of the will”
governing all contracts; the possibility of considering that on the main subject matter
(including the price) there was an individual agreement that in itself would be
excluded from the control under the Directive (e.g. Article 3.2); the attention
which the consumer pays to these essential elements of contracts, thereby giving
genuine consent; the difficulty of reviewing the fairness of meta-legal, purely
economic issues (rejection of the doctrine of justum pretium) except for really
exceptional cases; the economic-constitutional model that safeguards the freedom
29
See, e.g., CJEU Judgment of 20 January 2005, Gruber, C-464/01, EU:C: 2005:32 (protection in
double finality or mixed contracts); CJEU Judgment of 19 November 2015, Tarcău, C-74/15, EU:
C:2015:772 (guarantors); CJEU Judgment of 27 April 2017, Bachman, C-535/16, EU:C:2017:321
(guarantors); CJEU Judgment of 9 November 2016, Wathelet, C-149/15, EU:C:2016:840 (use of
intermediaries); CJEU Judgment of 25 January 2018, Schrems, C-498/16, EU:C:2018:37 (initial
personal use swifting to professional use); CJEU Judgment of 17 May 2018, Karel de Grote –
Hogeschool Katholieke Hogeschool Antwerpen, C-147/16, EU:C:2018:320 (student versus higher
educational establishment financed mainly by public funds). Cf. also, in relation with the concepts
of “trader” (in Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005
of the Council, OJ 2005, L 149/22) CJEU Judgment of 4 October 2018, Kamenova, C-105/17, EU:
C:2018:808 (person who publishes on a website a number of offers to sale new and second-hand
goods).
30
See below at Sect. 3.4.
to set prices based on a correctly operating market and the principle of free
competition, etc.31
However, in this exclusion, transparency review has become of foremost impor-
tance as it is the only way of allowing a decision holding the invalidity of these core
terms. Such a review is not exclusive to Directive 93/13/EEC, and in relation to
price-related terms it is included in other EU norms,32 on which the CJEU has also
constructed its interpretation of the scope of an authentic principle of transparency
linked to price information.33
From the outset, transparency review was considered so fundamental that the
CJEU in its judgment Commission v. Netherlands (2001) noted that the Netherlands
had breached the obligations of the Directive by having made an incomplete
adaptation of it: by not reflecting the final paragraph of Article 4.2 on the require-
ment for plain and intelligible writing, and by omitting the examination of the core
terms on this basis, the result reduced the level of protection in the Directive; the
allegation that national case-law meant that an interpretation of Dutch regulations
was in accordance with the Directive was dismissed by the CJEU.34
But to correct what the CJEU considered an “erroneous reading” of that judgment
to the effect that Article 4.2 Directive 93/13/EEC constituted a mandatory and
binding provision which Member States were obliged to transpose,35 in its judgment
in Cajamadrid (2010) it rejected that interpretation and clarified that Member States
can keep more protectionist regulations even where that means not transposing
31
See Cámara Lapuente (2006), pp. 19 ff., with comparative references. On the (perfect) market
rationale behind art. 4.2 see Atamer (2017), pp. 627 ff.
32
E.g., Arts. 5, 6, and 8.2 of Directive 2011/83/EU of the Parliament and of the Council of
25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive
1999/44/EC of the European Parliament and of the Council and repealing Council Directive
85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council, OJ 2011, L
304/64; Art. 23 of Regulation (EC) No 1008/2008 of the European Parliament and of the Council of
24 September 2008 on common rules for the operation of air services in the Community, OJ 2008, L
293/3; Annex I (1), mainly (c) of Directive 2009/72/EC of the European Parliament and of the
Council of 13 July 2009 concerning common rules for the internal market in electricity and
repealing Directive 2003/43/EC, OJ 2009, L 211/55; Art. 185.5-6 of Directive 2009/138/EC of
the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of
the business of INsurance and Reinsurance (Solvency II), OJ 2009, L 335/1; arts. 5 and 20.5 of
Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on
insurance distribution, OJ 2016, L 26/19; see also the rules on the Directives on price indications,
consumer credit, home loans, the next Directive on supply of digital contents, or the European
Commission’s Proposal for a Regulation as regards certain charges on cross-border payments in the
Union and currency conversion charges (Brussels, 28.3.2018 COM(2018) 163 final).
33
See below (Sect. 3.1), CJEU’s judgments as Invitel, (n 24) RWE Vertrieb, (n 5) or CJEU Judgment
of 15 January 2015, Air Berlin, C-573/13, EU:C:2015:11.
34
CJEU Commission/Netherlands (n 4), para 21.
35
CJEU Caja de Ahorros y Monte de Piedad de Madrid (n 4), paras 37–40.
Article 4.2, and so raising the level of protection to review as unfair even fully
transparent core terms. But where Article 4.2 is transposed, this should be done in its
entirety, making clear that the prohibition of the assessment of the unfair nature of
these terms refers only to those written in a clear and intelligible manner. In this way,
the map of the EU today is divided into areas with countries that, with equal validity,
(a) have transposed Article 4.2 as-is; (b) have not transposed it at all (Nordic
countries); and (c) have transposed it by raising the level of protection (e.g., the
UK, which since 2015 has required greater transparency for the core terms).36
Although therefore Cajamadrid clarified an important point in a way which is
completely correct from the point of view of EU law, it resulting in some
overreaching and blurring in relation to the law from which the matter originated,
due in reality to a bad approach by the Spanish Supreme Court.37 In fact, in that
country, lost in a curious limbo in “group (b)”, above, Article 4.2 was not transposed
due to an error in Parliament, which did not intend to raise the level of protection.
The Supreme Court itself corrected this omission, declaring that the article and its
limits were applicable as from the Supreme Court Judgment (STS) of 9th May 2013.
Surprisingly, even in recent CJEU judgments, one or other Advocate General
continues to say that transparent price terms can be reviewed in Spain.38
In Gutiérrez Naranjo (2016), the CJEU also stated that when a Member State
applies a “material” or “substantive” transparency review (legal and economic
understanding of the contract, not only grammatical or formal), it does not thereby
raise the level of protection under the Directive, but merely applies the concepts of
Article 4.2.39
Having clarified what is not contemplated by Directive 93/13/EEC, we now
define what it does regulate and does cover in relation to price-related terms.40 It
is important to stress that the Directive’s approach provides for review of these terms
in ways that differ depending on whether they are “price-related terms” (any term
related to price, of an accessory nature, such as calculation methods, forms of
36
Section 64 of the Consumer Rights Act 2015 (“transparent and prominent”).
37
See Cámara Lapuente (2013), pp. 581–613. The case dealt with terms rounding up interest
payments on mortgage loans; the Supreme Court considered that they were terms that defined the
main subject matter of the contract and that in Spain, as there had not been a formal transposition of
Article 4.2, the judges could rule on any type of term not negotiated individually, including all those
relating to the price. Both issues (the first doubtful, the second incorrect), were ratified as current
law in Spain by the CJEU.
38
Opinion AG (Maciej Szpunar) 2.2.2016 on CJEU Banco Primus (n 9), para 64.
39
CJEU Gutiérrez Naranjo (n 16), paras 47–49, denying so the claim made by Spanish government.
40
For instance, according to CJEU Judgment of 7 August 2018, Banco Santander and Demba, C-96/
16 and C-94/17, EU:C:2018:643, dealing with the unfairness of terms setting the default interest
rate, underlines in para 39, that the “directive applies only to contractual terms and excludes mere
practices”.
payment, penalties for late payment, etc.), which are subject both to an intelligibility
control (Article 5.1) and a fair content control (Articles 3 and 4.1), or are “core price
terms” (the main or essential subject matter, the price itself) that can not be subject to
content review if they pass the transparency review (Article 4.2). The CJEU clarified
that transparency review (Articles 5.1 and 4.2) is identical for both sub-sets of
terms41 and that with the first type of stipulations, adequate and complete informa-
tion does not necessarily make it less unfair.42
Of course, there are certain price-related terms that are expressly contemplated in
the Directive’s Annex that contains an indicative and non-exhaustive list of the terms
which may be regarded as unfair: this is the case mainly as regards terms “allowing a
seller of goods or supplier of services to increase their price without in both cases
giving the consumer the corresponding right to cancel the contract”, or allowing
them to fix the price at the time of delivery [both in paragraph 1 (l) of the Annex].43
But also with terms which enable “the seller or supplier to alter the terms of the
contract unilaterally without a valid reason which is specified in the contract” [1 (j)]
or “any characteristics of the product or service” [1 (k)] or even to impose “a
disproportionately high sum in compensation” for non-performance of consumers’
duties (1.E). In any case, it is important to emphasise that these provisions do not
deal with the economic balance of the contract itself, or with the definition of its
subject matter, but rather with the imbalance of rights and obligations between the
parties, in other words, a legal imbalance, not an economic one. As highlighted by
the judgment in Matei (2015), not all price-related terms necessarily fall within the
scope of Article 4.2 of the Directive, and when such a term is expressly contemplated
in the list in the Annex, it is not possible to resort to the exemption under Article 4.2
to avoid its content review.44
The CJEU has had the opportunity to give its opinion on unilateral price
variation clauses on a number of occasions (in telephone services,45 gas and
electricity supply,46 and bank loans,47) and it has identified at least two parameters
that must be met in order to avoid being declared unfair and therefore invalid, taking
into account the legitimate interest of the company in being able to change the price
of its service: first, that the company’s power to vary the price is contemplated in the
contract from the beginning, and, secondly, that the consumer is notified in advance
41
Since CJEU Kásler (n 6), paras 67–69; CJEU Matei (n 7), para 73.
42
CJEU Judgment of 3 April 2014, Sebestyén, C-342/13, EU:C:2014:1857, para 34 (on an arbitra-
tion clause).
43
Section 2 (d) of the Annex clarifies that that provision “is without hindrance to price-indexation
clauses, where lawful, provided that the method by which prices vary is explicitly described”.
44
CJEU Matei (n 7), para 56. This is actually stated by the UK’s recent implementing legislation:
Consumer Rights Act 2015 s.64(6).
45
CJEU Invitel (n 24).
46
CJEU RWE Vertrieb (n 5); CJEU Judgment of 23 October 2014, Schulz and Egbringhoff, C-359/
11 and C-400/11, EU:C:2014:2317.
47
CJEU Judgment of 30 May 2013, Jőrös, C-397/11, EU:C:2013:340; CJEU Matei (n 7).
of the change so that he has the opportunity to terminate the contract.48 Additionally,
European case-law specifies that the consumer “must be given adequate notice,
before that adjustment takes effect, of the reasons and preconditions for the adjust-
ment, and its scope”, and it has even slipped in some references to what is considered
fair beyond the text of the Directives (2003/54 and 2003/55 on markets for electricity
and natural gas49): “In addition to their right to terminate the supply contract, as
provided for in point (b) of Annex A to each of those directives, customers must also
be entitled to challenge adjustments to the price of supply”.50
Returning to core terms governing price, where the filter focuses on transparency
(Art. 4.2), it should be stressed that the only remedy that Directive 93/13/EEC
expressly contemplates for the case of obscurity, ambiguity or incomprehensibility
is interpretation contra proferentem (Art. 5.2), where “the interpretation most
favourable to the consumer shall prevail”. Consequently, according to the most
correct reading of Directive 93/13/EEC, the EU legislator left out other possible
consequences of lack of transparency, which should be left to the exclusive compe-
tence of the Member States. However, this has not been the view of the CJEU, at
least since the end of 2016, as we will see later in this article.
3 The Principle of Transparency for Price Terms
3.1 What Is It? Evolution in the CJEU
The CJEU has developed an autonomous interpretation of many of the concepts used
by Directive 93/13/EEC. For our own purposes, the fundamental steps were taken in
relation to the concepts used by Article 4.2 in Kásler (2014).51 For some commen-
tators, this work consisted in identifying the shortcomings of the Directive52 and so
in effect amended the legislation, while for others it merely filled in gaps.53 If my
counting is reliable, from the CajaMadrid (2010) judgment to the present day, the
court has issued 19 judgments on transparency, many of which dealt with the main
subject matter of the contract, and of these mainly about the price.
48
Since CJEU Invitel (n 24), paras 34, 26 and 28; and CJEU RWE Vertrieb (n 5), paras 46 and 49.
49
Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning
common rules for the internal market in electricity and repealing Directive 96/92/EC, OJ 2003, L
176/37 and Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003
concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC,
OJ 2003, L 176/57.
50
CJEU Schulz and Egbringhoff (n 46), paras 46–47.
51
CJEU Kásler (n 6), paras 37 and 38, since art. 4.2 “does not contain any express reference to the
law of the Member States for the purpose of determining its meaning and scope”. See Pfeiffer
(2014), pp. 3069 ff.
52
Gavrilovic (2013), pp. 163–180.
53
E.g., Gerstenberg (2015), p. 604.
An important starting-point is that “the requirement of plain, intelligible language

applies in all cases”, both in relation to essential elements of the contract and to any
other non-negotiated terms, since the requirement contained in Article 4.2 “has the
same scope as that referred to in Article 5 of that directive.”54 Consequently, all the
case-law on the requirement of transparency carried out when judging price-related
terms not included in Article 4.2 (e.g., on unilateral alteration by the company of the
agreed price) applies equally to the core terms contemplated in that article. In this
respect, the CJEU has stated that:
(a) “The consumer should actually be given an opportunity to examine all the terms
appearing in the GBC [this repeats the wording of recital 20 of the Directive
providing guidance on Art. 5] and the consequences of those terms”.55
(b) In the assessment of the unfair nature of a term (ex Art. 3), “the possibility for the
consumer to foresee, on the basis of clear, intelligible criteria” of the conse-
quences of the contract is of fundamental importance56
(c) To comply with the transparency principle, there are two moments: the company
must provide clear and intelligible information both before and during the
performance of the contract, but “the lack of information (. . .) before the
contract is concluded cannot, in principle, be compensated for by the mere fact
that consumers will, during the performance of the contract, be informed”.57
(d) The duty of transparency must be complied with in good time before the
conclusion of the contract58 and, in any case, the information must be provided
in an appropriate time before it becomes binding on the consumer.59 Conse-
quently, these judgments emphasize that “a high level of consumer protection in
relation to the transparency of the contract terms and conditions” must be
guaranteed.60
In relation to the transparency review of the essential elements designated by
Article 4.2 Directive 93/13/EEC, the CJEU has stated that, although this provision
merits a restrictive interpretation as it sets out an exception to the substantive review
of standard terms,61 the requirement of transparency “cannot therefore be reduced
merely to their being formally and grammatically intelligible”, but “must be under-
stood in a broad sense (. . .), so that the consumer can foresee, on the basis of clear,
54
CJEU Kásler (n 6), paras 67–69; ratified by CJEU Matei (n 7), para 72.
55
CJEU Invitel (n 24), para 27.
56
57
CJEU RWE Vertrieb (n 5), paras 50, 52–53 and 55.
58
CJEU Judgment of 18 December 2014, CA Consumer Finance SA, C-449/13, EU:C:2014:2464
(paraphrasing Art. 5 of Directive 2008/48/EC of the European Parliament and of the Council of
23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC, OJ
2008, L 133/66).
59
CJEU Schulz and Egbringhoff (n 46), para 47.
60
CJEU Schulz and Egbringhoff (n 46), para 45.
61
CJEU Kásler (n 6), para 42; CJEU Matei (n 7), para 49; CJEU 23.4.2015 (van Hove, n 8) at 31.
intelligible criteria, the economic consequences for him which derive from it”.62 In
this way, the Court assumes the distinction, established in many legal systems,
between “formal transparency” (grammatical clarity) and “substantive (or material)
transparency” (which allows the other to have a full understanding, both legal and
economic, of the risks and obligations to be assumed).63 In several of the national
law implementing the Directive, a lack of substantive transparency in a contract
terms leads in itself to its unfairness, a position towards which the CJEU is clearly
moving.
In this evolution, one can detect a subtle transformation of the nature of the
transparency requirement in the drafting of contract terms: what began as a control
linked to the contracting process is becoming a requirement of positive and effective
information, that is, from a negative review (which allows the elimination of unclear
terms) towards a rule that demands (positive) duties of active information.64 This
change is completed by making transparency operate not only in its originating
scope in the contract formation process, but also in the contract performance phase,
and the disadvantages caused at that stage by initial lack of transparency. Transpar-
ency becomes conceived not only as reception of information needed to understand
the contract, but also as enabling comparison between offers in the market65 as the
consumer has data comparable across different contracts. Thus, the function of
analysing contract transparency is joined with that of strengthening the transparency
of markets themselves by reviewing unfair terms.66
62
CJEU Kásler (n 6), paras 71–75; ratified by CJEU Matei (n 7), para 73; CJEU Van Hove (n 8),
para 31; CJEU Judgment of 9 July 2015, Bucura, C-348-14, EU:C:2015:447, para 52; CJEU
Andriciuc (n 10), para 44; CJEU ERSTE Bank Hungary (n 12), paras 32 and 34; CJEU EOS KSI
Slovensko (n 13), para 61; CJEU GT (n 15) para 32.
63
On the difference between the “procedural and substantive tests of reasonableness” in the UK, see
Willett (2007), pp. 152 ff. (who in that moment, 2007, underlined that the CJEU had not yet
connected at all transparency and unfairness test, see pp. 108, 111 and 256–257) and about the
emergence of a “procedural unfairness” see Bright (2007), pp. 179–186. See also on the notion of
substantive (and not merely formal) transparency in Brunetta d’Usseaux (1998), pp. 324 ff. Com-
paring UK and Italy on this point, Nebbia (2007), pp. 445 ff. and 134 ff. In Germany, this concept
stems from AGB-Gesetz of 1976 and case-law which construed the so called Transparenzgebot
from 1988 on (now in § 307 BGB); see, for instance Armbrüster (2004), pp. 437–439; Coester
(2013), § 186 y ss.
64
See Micklitz and Reich (2013), pp. 457 ff. [also Micklitz and Reich (2014), p. 786]. See more
broadly, Sefton-Green (2005), pp. 171–188. Also Leone (2014); Nebbia (2007), p. 137.
65
This aim (comparable prices) is explicitly declared, for instance, in Recital 16 of Regulation
(EC) No 1008/2008 (n 32), as regards to price transparency in air services, and is underlined in
several judgments, such as CJEU Air Berlin (n 33), paras 34 and 41.
66
On the idea, for all, Micklitz (2014), pp. 144–145.
3.2 What Does It Affect?
3.2.1 Overview
Article 4.2 of the Directive leaves two matters exempt from review as long as they
were presented to the consumer with due clarity: on one hand, “the definition of the
main subject matter of the contract” and on the other, “the quality/price ratio”
(as recital 19 calls it, in simpler and clearer wording than those of the article itself,
which puts the accent on the “adequacy” of one to the other). Since 2014, the CJEU
has been forced to explain in some detail certain general features as to when a term
contains the “main” subject matter of the contract, although it does not seem
comfortable when qualifying a specific term in them; when the characterisation of
the term is doubtful, it tends to delegate such a task to the national court,67 in
accordance with the jurisdictional delimitation of competences between both courts,
even if it goes into some detail when, in its opinion, the term is clearly a core term.68
The evaluation of the second item, the price-quality ratio, has been relegated to a
marginal role and in practice it has not included any case within this aspect of the
exclusion in Article 4.2, especially if one takes into account that it is not really even a
“term” or “standard/general condition” in technical terms.69
3.2.2 Definition of the Main Subject Matter of the Contract
Even starting from the undoubted premise that as an exception to the substantive
review of the fairness of terms Article 4.2 must be interpreted restrictively, there are
different approaches about what is considered “main subject matter” in terms of
price. So, both scholars70 and some national case-laws71 consider three theories: the
“essence of the price argument,” the “exchange” argument (which includes not only
the strictly “main” ones as the terms related to the main subject matter although they
are not part of its core); and the “monetary consideration” argument (because in
67
Cf., for instance, the ambiguity in CJEU Kásler (n 6), or CJEU Banco Primus (n 9).
68
E.g., CJEU Van Hove (n 8), para 36 or CJEU Andriciuc (n 10). Or when is clearly of an ancillary
nature, such as in CJEU Matei (n 7).
69
Whittaker (2004), p. 893 (cf. 2015, para 38-224); Riesenhuber (2003), pp. 328–329.
70
Schillig (2011), pp. 951–958. When deciding on the issue AG N. Wahl (opinion of 12.2.2014, on
CJEU Kásler (n 6), para 48) quotes this work. See recently, from an economic approach, Gómez
Pomar (2019).
71
The crucial judgment of the Spanish Supreme Court of 9.5.2013 considers the following theories:
distinguish between main subject matter and the ancillary or additional terms; include anything
price-related no matter how irrelevant; or assume that the term about the main subject matter refers
to “the importance that it has for the consumer and its impact on the economic behaviour decision”.
The Supreme Court declines to adopt any and refers to the literal text of the directive to “define” the
main subject matter. In subsequent judgments (since STS 22.4.2015) the distinction between
“main” and “ancillary” drawn up by the CJEU will be followed.
some areas, given how difficult it is to distinguish the main subject matter, a global
approach is taken that includes all kind of counterperformances, fees and charges).
Undoubtedly, the first approach makes the exception narrower and, therefore, by
ensuring greater consumer protection, by exempting only the examination of core
prices, it would seem more suitable to ensure the effet utile of the Directive.72
However, the disparity of approaches between national courts is well known, as
illustrated by the United Kingdom case-law in the “bank charges case”, that takes
the third approach which therefore leaves clearly ancillary price-related terms
un-reviewed, compared to the most protectionist in other countries such as Germany
or Poland,73 which tend more towards the first argument. Therefore, the harmonizing
work of the CJEU in answering the question about the nature of “price” is of the
utmost importance: any charge for any goods or services supplied, only charges for
some goods or services, or only charges for the main goods or services supplied?74
The CJEU had to tackle the issue directly75 in Kásler. This was a case in which
consumer borrowers took out a loan in a foreign currency, secured by a mortgage.
The bank granted a loan in Hungarian forints at the buying-rate in Swiss francs on
the day of reception of the loan; the borrowers had to repay that sum over 25 years in
monthly instalments set in Hungarian forints at the Swiss franc selling-rate the day
before each due date. In essence, it was a way of calculating the amount of the loan,
but with a profit for the bank due to the difference between the buying and selling
rates. Here, the CJEU forged its general criterion in this regard: clauses which define
the main subject matter of the contract “must be understood as being those that lay
down the essential obligations of the contract and, as such, characterise it. By
contrast, ancillary terms to those that define the very essence of the contractual
relationship cannot fall within the notion”.76 The CJEU did not rule on whether the
specific term in foreign currency-denominated loans constitutes the main subject
matter, and remitted this question to the Hungarian court, which finally qualified it as
defining the main subject matter.77
This case shows that for the CJUE the “main subject matter” coincides with an
essential element of the contract, following in this respect the tradition of some
countries (such as the established distinction in Germany between Hauptelemente or
Hauptleistungen, and Nebenleistungen or Preisnebenabreden or ancillary agree-
ments on price, secondary performances). To date, the Court has not considered
other possible generic parameters, such as the merely possible or contingent
72
Thus Cámara Lapuente (2006), p. 114; Cámara Lapuente (2013), pp. 587 ff.
73
See for comparison Schillig (2011), pp. 933 ff.; Rott (2016), p. 294.
74
As puts it Willett (2012), p. 426.
75
CJEU Kásler (n 6), para 29: the referring court asks whether Art. 4.2 “covers every element of the
consideration to be paid in cash by the borrower (. . .), or whether only the payment of the nominal
rate of interest, in addition to the grant of the loan, is covered by that notion”.
76
CJEU Kásler (n 6), paras 49 and 50.
77
As refers CJEU Judgment of 3 December 2015, Banif Plus Bank, C-312/14, EU:C:2015:794,
paras 43 and 44.
character of application of the term78 (as in the case of penalty clauses, for example),
nor has it delved into another genuine idea of the essentialia negotii: if a ancillary
term is deleted, the contract is still valid, but if the term is an essential element, it is
not,79 which, in itself, is a parameter for deciding the nature of the term.
Along with the essential/ancillary dichotomy, the CJEU has specified some other
general guidelines: the fact that a term has been negotiated “cannot constitute a
criterion making it possible to assess whether that term falls within the main subject
matter of the contract”; if it were to have been negotiated, it would simply fall
outside of the scope of the directive.80 It added that the test determining whether a
term is part of the main subject matter “must be carried out having regard to the
nature, general scheme and the stipulations of the contract and its legal and factual
context”.81 And in some cases the CJEU has provided some indicators of the
ancillary nature of particular terms.82
To date, the terms submitted to the CJEU to determine whether or not they can
constitute the main subject matter of a contract are: those related to foreign currency-
denominated loans (in different forms)83; those that define risk covered by insur-
ance84; those that establish the method of calculating ordinary interest85; and those
that describe the APR (annual percentage rate of charge) for consumer loans. With
the first three types of terms, if the CJEU guidelines lead one to think that they are
part of the main subject matter of the contract, the European Court has remained hes-
itant to rule on the nature of the APR for these purposes,86 and has gone as far as to
78
Mentioned as a feature to determine the ancillary character of a term by the Law Commission and
the Scottish Law Commission, Unfair Terms in Contracts, Law Com n 292, Scot Law Com n
199, Cm 6464, SE/2005/13, London, 2005, pp. 33–35, with reform proposal.
79
Cf. CJEU Kásler (n 6), paras 80–85.
80
CJEU Kásler (n 6), paras 47 and 48.
81
CJEU Van Hove (n 8), para 37, relying in CJEU Kásler (n 6), paras 50 and 51.
82
CJEU Matei (n 7), para 62; “an indication of the ancillary nature of such terms may also be the
fact that, since they essentially contain an adjustment mechanism enabling the lender to alter the
term setting the interest rate, they do not appear to be separable from the term fixing the interest rate
which is likely to be part of the main subject-matter of the contract”.
83
Both in credit agreements in foreign currencies (such as CJEU Andriciuc (n 10); CJEU Lupean
(n 12); CJEU ERSTE Bank Hungary (n 12), with repayment in foreign currency as well) and in
credit arrangements index-linked to foreign currencies, where the repayment is always made in the
national currency (such as CJEU Kásler (n 6), CJEU OTP Bank and OTP Faktorin (n 11), CJEU
Dunai (n 14), and GT (n 15) para 25; cf. CJEU Banif Plus Bank (n 77), paras 55–57). See the
distinction in AG Wahl’s Opinion 27.4.2017 (Andriciuc) at 51 and 52, ratified by the CJEU
Andriciuc (n 10), para 40. The CJEU seems prone to consider it a core term in the first case, and
shows some hesitation or indefinition in the latter case (the last judgments include the term whithin
the scope of Article 4.2 relying in such qualification by the referring national courts: see CJEU GT
(n 15) para 30).
84
CJEU Van Hove (n 8). Cf. Recital 19 of the Directive 93/13/EEC.
85
CJEU Banco Primus (n 9).
86
E.g., in CJEU Bucura (n 62), the Court says at 50 and 61–63 that the lack of mention to
compulsory information such as APR is equivalent to lack of transparency in the sense of Directive
93/13/EEC and its Art. 4.2. See more cases in notes 105 and 106.
reformulate a preliminary question with this direct question87 so as to avoid entering

this terrain, but finally has done so in the EOS KSI Slovensko (2018) case. In other
contractual relationships, when it is totally clear that the term does not constitute the
main subject matter, Article 4.2 is not mentioned or even cited, and instead the
dispute is resolved by interpreting the Annex to the Directive or the general concept
of unfair terms in Article 3.88
But the most eloquent way of illustrating how the CJEU works with the concept
of “main subject matter” and the scope of the exemption in Article 4.2 is to outline its
most important judgments on the provision.
Therefore, in the Matei case the CJEU reformulated the interesting question
whether all the concepts included in the APR (interest, fees, and expenses) can be
included in the concept of “main subject matter” or of “price,” and focused instead
only on examining two specific contract terms, one called “risk charge” and the other
allowing unilateral changes in the interest rate. The Court’s judgment assumes that
the scope of the concepts used by Article 4.2 Directive 93/13/EEC cannot be equated
to the concept of “total cost of the loan for the consumer” in Article 3 (g) of Directive
2008/48/EC on credit agreements.89 The Court of Justice considered that the first
term was in fact a supplementary guarantee and did not provide part of the remu-
neration, and the second one suffered from an arbitrary vagueness (alterations
according to “significant changes in the money market”) that also did not deal
with the main subject matter. In doing so, the European Court provided guidance
as to what is ancillary and what forms part of the “main” subject-matter, and it
concluded—with an active role far removed from its own approach in Freiburger
Kommunalbauten—that such terms do not fall within of the exclusion under Article
4.290: they are not transparent and could be unfair.
In the Van Hove judgment the problem was whether a contract term defining total
incapacity for work in an insurance policy linked to two mortgage loan contracts, in
a way which differed from the definition set by the French Social Security law,
provided for the main subject matter of the contract and, if so, whether it was
transparent. The CJEU again clearly suggested that this term should be considered
to be part of the main subject matter of the contract, although it formally left the
87
See CJEU Matei (n 7), para 36, and 44–46. See also the six preliminary questions formulated (and
finally withdrawn) by the Okresný súd Prešov (Slovaquie) in CJEU Judgment of 18 January 2016,
Kolcunová, C-610/14, EU:C:2016:80. The most direct judgment including finally the description of
the APR withing the scope of Article 4.2 is CJEU EOS KSI Slovensko (n 13), paras 65–68.
88
This happens, for instance with an acceleration clause and penalty interests in a loan contract
(CJEU Aziz (n 18)), a penalty clause in a house rental (CJEU Asbeek Brusse and de Man Garabito
(n 22)), the previous information on an arbitration clause (CJEU Sebestyén (n 42)), the accumula-
tion of different compensations and penalties due to non-performance of the borrower of a loan
(CJEU Judgment of 21 April 2016, Radlinger and Radlingerová, C-377/14, EU:C:2016:283).
89
CJEU Matei (n 7), para 47. Directive 2008/48/EC (n 58).
90
CJEU Matei (n 7), paras 58–63 for the term on unilateral alteration of the interest rate and at
64–72 for the “risk charge”. On the “active role” of the CJEU see statements such as those in
paragraphs 63 or 69; and at 76–77 states that the clause “is prima facie not transparent”.
decision to the Nîmes court of reference.91 The most interesting aspect, though, is
found in the parameters given to the national court to distinguish what is essential
and what ancillary, these being the nature of the contract, its general configuration
and express terms, and its legal and de facto context. Here, therefore, the CJEU
rejected both an exclusively subjective approach (the main subject matter should be
understood by reference to “wills” or perceptions of the contracting parties) and an
exclusively objective approach (the subject-matter should be understood by refer-
ence to the objective “type of the contract” as categorised by legislation) and instead
required an assessment of both legal and factual aspects.
In Banco Primus the Court was faced with a term that could actually be thought to
not be about the price itself, but about the way in which it is calculated, which
according to the most strict interpretation of the possible ones described at the
beginning of this section, would not lead one to deal with it as the “main subject
matter” and, therefore, allow it to be subject to review under the Directive. In a
mortgage loan, the term relating to ordinary interest stipulated that it would be
calculated using “a formula, by which the outstanding loan principal and interest
accrued is divided by the number of days in a financial year, namely 360 days” (and
not 365) [§20]. Both the Spanish Court of First Instance and the AG considered that
this term constituted the main subject matter of the contract, while the CJEU avoided
pronouncing on the point except ambiguously.92 In any case, the main novelty was
that Banco Primus introduced the criteria for comparing that “price” to assess whether
it is unfair or not, assuming that, if this “main subject matter” is not transparent, it
could be unfair according to the aforementioned comparison or contrast with legal
interest rates, usual market rates, etc. (see below, at the end of Sect. 3.3).
In Andriciuc the CJEU unambiguously took up its proactive role in determining
whether a term fits in with the idea of a “main subject matter”, even while formally
respecting the jurisdiction of the national court for this purpose. In a resolute and
direct manner, the CJEU considers that:
“in the present case, a number of elements in the documents before the Court indicate that a
term (. . .) incorporated into a loan agreement concluded in a foreign currency (. . .) on terms
by which the loan must be repaid in the same currency, is covered by the notion of ‘main
subject matter of the contract’ (. . .). The essential obligations of such a contract relate to a sum
of money which must be determined by the stipulated currency in which it is paid and repaid”.
Thus, following the AG’s observations, “the fact that a loan must be repaid in a certain
currency relates, in principle, not to an ancillary repayment arrangement, but to very nature
of the debtor’s obligation, thereby constituting an essential element of a loan agreement”.93
91
CJEU Van Hove (n 8), para 36: “In those circumstances, it cannot be ruled out that such a term
will circumscribe the insured risk and the insurer’s liability and lay down the essential obligations of
the insurance contract at issue, which is, however, a matter for the referring court to determine”. A
comment on the case by Heirman (2017), pp. 30–34.
92
On the idea of the Spanish court see para 64 of the judgment of 26.1.2017, which the CJEU does
neither confirm or reject. As refers to the AG Szpunar (Opinion of 2.2.2016), see para 59 of the
opinion (yes, within art. 4.2).
93
CJEU Andriciuc (n 10), paras 37–38. See also CJEU Lupean (n 12), paras 17 ff; CJEU OTP Bank
and OTP Faktoring (n 11), despite assessing a quite similar contract term, the Court does not return
3.2.3 Quality/Price Ratio
The second element excluded from assessment as long as presented transparently is a

category that “is limited in scope” because “no legal scale or criterion exists that can
provide a framework for, and guide, such a review”.94 The CJEU has been careful to
further distinguish between the two limbs of the exclusion in Article 4.2 and to make
clear the very residual nature of this second limb, which appeals to the fair price and
to economic justice, and not to the balance of rights, because “Terms relating to the
consideration due” or “or having an impact on the actual price (. . .) do not, in
principle, fall within the second category of terms, except as regards the question
whether the amount of consideration or the price as stipulated in the contract are
adequate as compared with the service provided in exchange by the lender”.95
Therefore, the quality/price ratio exemption does not apply, for example, to unilat-
eral price alteration terms.96
3.2.4 Indirect Review of the Quality/Price Ratio?
The Directive states that the economic balance of the contract cannot be reviewed,
and that judicial control of prices on the ground that they are too high is impossible
(provided that the transparency test is passed), but can we refer to the price as
circumstance that should be taken into account in assessing the unfair nature of other
terms (not price terms) of the contract in a systematic interpretation of all its
elements? This question is known as the “circumstantial test”. If the answer is yes,
in the sense that what is unfair at one price might not be so at a much lower price
(“price argument”), one could talk about an “indirect review” of the economic
equivalence of the contract: the quality-price ratio would be another element in the
systematic interpretation established in Article 4.1 of the Directive. This position
seems to be supported by recital 19 Directive 93/13/EEC, which, after highlighting
that the assessment of unfair character shall not be made of terms on price nor the
quality/price ratio, adds that “the main subject matter of the contract and the price/
quality ratio may nevertheless be taken into account in assessing the fairness of
other terms”. In general terms, the national transpositions of the Directive have not
included this clarification, and interpretations in the different Member States vary
widely: German legal commentators are reluctant to allow such an indirect review;
to the argument, but just presumes that the clause is a core term included in Art. 4.2 Directive 93/13/
EEC. In a similar fashion, see in 2019 CJEU Dunai (n 14) para 48 and CJEU GT (n 15) para 30.
94
CJEU Kásler (n 6), paras 54 and 55. Therefore, the Court decided that it can not be applied in
relation to the asymmetric obligation for the consumer to pay the amounts derived from the
difference between the foreign currency selling and buying rates, since they do not imply any
“remuneration” for any exchange “service”—see at 57 and 58 (there is no such service with mere
calculation), so it is not appropriate to evaluate the “adequacy” between them.
95
CJEU Matei (n 7), para 56.
96
CJEU Invitel (n 24), para 22; CJEU Matei (n 7), para 57.
Italian and Spanish commentators are divided; in the English context, there were
authoritative voices in favour; while the French commentators seem to have paid
little attention to the subject, which is alien to its tradition.97 In any case, it must be
borne in mind that some Member States have transposed the Directive’s Annex as a
blacklist (terms that are “always” unfair) rather than a grey one (which would reduce
the significance of the issue considerably), and also that if there is genuine negoti-
ation (unfavourable term negotiated for a lower price) the Directive’s reviews would
not operate (though the latter is not, of course, true of some implementing national
laws).98
The CJEU has not given a ruling about this indirect review apparently allowed by
the (interpretative) recital 19 and perhaps by Article 4.1. The question was raised by
the Spanish court in Banco Primus,99 but the CJEU avoided responding—without
dismissing the question—while the Advocate General ruled in favour of indirect
review.100
3.3 How Should It Be Done? Guidelines for Transparency

Review
Having considered which terms fall under the transparency review (all
non-negotiated terms, including those dealing with the main subject matter of the
contract101), we must examine what criteria the CJEU has provided for putting it into
practice. The Court suggests a very broad interpretation of the rule that the terms
must be in plain intelligible language, in both its two aspects: to have the opportunity
to read them before signing the contract (as in recital 20) and to be intelligible in all
their legal and economic consequences for the consumer. This is specified in three
parameters or guidelines: (a) the average consumer as recipient and yardstick of
understanding; (b) the moment at which transparency and the level of information
required should be assessed; (c) and specification of the criteria by which to evaluate
97
A comparative overview in Niglia (2003), pp. 173–175. This topic was hotly debated in the
Brussels Conference (1–3 July 1999) organized by the European Commission (2000a) (see contri-
butions by Wilhelmsson and Roppo, pp. 97 and 142).
98
For the UK see Consumer Rights Act 2015 s. 62; for French law, art. L.212-1 Code of
consommation.
99
CJEU Banco Primus (n 9), para 25: preliminary question number 4 (“In what way may the
quality/price ratio affect the review of the unfairness of non-essential terms of a contract?”), adding
a kind of inverse question also in number 4 (“Is it possible that terms that are valid when viewed in
abstract cease to be so where it is found that the price of the transaction is very high by comparison
with the market standard?”). The CJEU (at 55–67) merges the answer to questions 4 and 5 and skips
somehow answering the former.
100
AG Szpunar (Opinion of 2.2.2016) at 72, against the arguments posed by the Spanish
Government.
101
CJEU Andriciuc (n 10), para 43.
the unfair character in case of lack of transparency, taking into account the rules in
Article 4.1 Directive 93/13/EEC.
(a) When dealing with the question as to whom the general conditions of a contract
must be intelligible, whether to the specific contractor or to an average con-
sumer, the CJEU opts in principle for the latter, for the first time in Kásler.102
This is correct, as a business uses the same terms identically in a standard
contract for many consumers, and the objective definition of “consumer” in
Directive 93/13/EEC does not include among its features any greater vulnera-
bility or expertise of the weaker contracting party. To enter into each individual
consumer’s consent formation, legal systems have other tools such as defects of
consent; transparency seems instead to rest on the CJEU’s construction on
compliance with duties of sufficient information to ensure that any average
consumer can understand the consequences of the term. Transparency, as the
Court underlines, “requires, in the case of loan agreements, financial institutions
to provide borrowers with sufficient information to enable them to take prudent
and well-informed decisions”.103
Naturally, this pattern may raise questions (and in fact has raised in certain
national cases) as to whether such an objective approach should apply only in
proceedings in collective actions, whereas in proceedings in individual actions
the specific consent of the individual contracting party should be assessed. The
CJEU does not seem to have made a distinction in this respect for the moment
and, given the foundation on which it has built the principle of transparency
(duties of information), it does not seem that it will do so.
On the other hand, despite the Court’s express references to the “observant
and circumspect” nature of this average consumer, some scholars consider that it
should not be equated with the high level of attention required in the Unfair
Commercial Practices Directive, given that the legislation and case-law on unfair
terms starts from the weakness and inferiority of the consumer104; and they add
that it can be assumed that the average consumer’s knowledge about certain
financial operations and of economics, is quite low enough to warrant adopting
such a high level of circumspection.105 The CJEU has specified that “the
102
CJEU Kásler (n 6), para 74: “it is for the referring court to determine whether (. . .) the average
consumer, who is reasonably well informed and reasonably observant and circumspect, would (. . .)
be able to assess the potentially significant economic consequences for him” of the term. In similar
fashion, CJEU Matei (n 7), para 75; CJEU Van Hove (n 8), para 47; CJEU Bucura (n 62), para 66;
CJEU Andriciuc (n 10), paras 47 and 51; CJEU Erste Bank Hungary (n 12) para 32; CJEU OTP
Bank and OTP Faktoring (n 11), para 17, and CJEU GT (n 15) para 34. Whittaker (2015), paras
38-240 and 38-259 suggests that this average consumer “is generally an objective standard variable
according to its context”.
103
104
Loos (2015), pp. 188–189.
105
See Rott (2016), pp. 290 and 296.
consumer can not be required, when concluding related contracts, to have the
same vigilance” as when he enters into individual, unrelated contracts.106
(b) As to the type of information that businesses must provide to make the term
intelligible and the moment at which they must do so, although it is obvious that
the pre-contract phase is of key importance, the European Court has reiterated
that this duty of clarification must be before, during and even after concluding
the contract.107 To ensure this, the advertising and information given when
negotiating the contract is examined.108 However, should the circumstances
after the conclusion of the contract be taken into consideration?109 The CJEU
has only held that in order to evaluate the possible unfair nature of a term that
was not fully transparent (for not having provided all necessary information
about its impact) it is necessary to take into account “all the circumstances which
could have been known to the seller or supplier at that time, and which were of
such a nature that they could affect the future performance of the contract, since
a contractual term may give rise to an imbalance between the parties which only
manifests itself during the performance of the contract”.110 Subsequent circum-
stances themselves are not taken into account,111 except to the extent to which
the professional could foresee them but did not inform the consumer. However,
the provision of all possible information does not amount to negotiating or
106
CJEU Van Hove (n 8), para 48 (less attention on the risks covered by an insurance contract linked
to two loan contracts).
107
Mainly since CJEU RWE Vertrieb (n 5), paras 52–53; too CJEU Schulz and Egbringhoff (n 46),
para 47.
108
CJEU Matei (n 7), para 75; CJEU Van Hove (n 8), para 47; CJEU GT (n 15) para 35. Any
additional information provided before the conclusion of the contract (such as a sheet containing
examples of specific calculations of the risk) should be read in conjunction with the contract term
under review: CJEU OTP Bank and OTP Faktoring (n 11), para 77.
109
The question was raised (but not solved) in CJEU Banco Primus (n 9), para 56. From another
point of view (on the impact of legal rules adopted after the contract and on the duty to disclose
future risks known by the bank at the time of concluding the contract), see CJEU OTP Bank and
OTP Faktoring (n 11), paras 70 and 80–83: “the subsequent entry into force of Laws DH 1, DH
2 and DH 3, in so far as they made mandatory and ex tunc amendments to certain terms contained in
the loan contract at issue, is not included among the circumstances which the referring court must
take into account when assessing the transparency of the term relating to the foreign exchange risk”.
110
CJEU Andriciuc (n 10), para 54; CJEU Lupean (n 12), paras 29 and 31. CJEU GT (n 15) paras 35
and 40 shares a similar view, but adds this balancing statement, less consumer-friendly: “However,
the seller or supplier cannot be expected to have specified all those details at the time the agreement
was concluded”.
111
Even the ex post nullity of some contractual terms should not be taken into account for the
transparency review of other terms: according to CJEU OTP Bank and OTP Faktoring (n 11), para
83, “the plainness and intelligibility of the contractual terms be assessed by referring, at the time of
conclusion of the contract, to (. . .) all the other terms of the contract, notwithstanding that some of
those terms have been declared or presumed to be unfair and, accordingly, annulled at a later time
by the national legislature”.
eliminating the review of substantive unfairness in stipulations other than the

core terms.112
With these guidelines, the CJUE has explained that, due to certain misleading
omissions of information, the following terms can potentially be considered as
not being written in plain intelligible language—although it is up to the national
court to verify this—the omission the APR in a consumer loan113 or the
concealment of relevant concepts within it114; failing to inform about the
mandatory legal provisions specifying aspects of the way of altering the price
in a long-term service contract115; omitting reference to the mandatory regula-
tion applicable to the contract and thus creating a false impression that a different
law (of another country) that guarantees consumer rights, is applicable116 or, in
general, referring to a regulation that is not applicable to the contract117; chang-
ing the name of a term without altering its content or masking the real reasons for
a term which does not encompass any effective service to be remunerated.118
(c) If a core price term does not pass the transparency test under the CJEU’s
(debatable) position, it is appropriate to examine its unfair character (see
below). To this end, the European Court also offers some general guidelines
and, on one occasion, has suggested specific guidelines for a particular type of
price terms. As regards the general criteria, it is appropriate to look at the
essential elements of any unfair term by reference to Article 3.1 Directive
93/13/EEC (significant imbalance, detriment, good faith. . .) and put the term
in the context of the wider elements provided for by Article 4.1 (the nature of the
goods or services, all the circumstances attending the conclusion of the contract,
all the other terms of the contract); moreover, the Court has held that where a
commercial practice is considered unfair, then this can be another indication of
the unfairness of the term on which that practice was based.119 In Banco Primus,
the CJEU gave concrete guidelines for the first time for checking whether a
112
Cf. CJEU Sebestyén (n 42), paras 22–24 and 34.
113
CJEU Pohotovost (n 24).
114
CJEU Judgment of 15 March 2012, Pereničová and Perenič, C-453/10, EU:C:2012:144; CJEU
Bucura (n 62). In CJEU EOS KSI Slovensko (n 13) the lack of mention of the APR, referring only to
a mathematical formula for its calculation “without the information necessary to make that
calculation” and the lack of mention of the rate of interest are omissions that lead to conclude
that the transparency test is not fulfilled.
115
116
CJEU Verein für Konsumenteninformation (n 24), paras 69 and 71: “where the effects of a term
are specified by mandatory statutory provisions, it is essential that the seller or supplier informs the
consumer of those provisions”; otherwise the transparency requisites of art. 5 might not be fulfilled.
117
See CJEU RWE Vertrieb (n 5), para 50.
118
CJEU Matei (n 7), para 76.
119
CJEU Pereničová (n 114), paras 43 and 47. See the interrelation between both Directives in
Ilešič (2013), pp. 1–45.
(potentially non-transparent) term governing the method of calculating120 ordi-

nary interest on a mortgage can be declared unfair, stating that such a term must
be comparable with:
the actual sum resulting from that rate with the methods of calculation generally used, the
statutory interest rate and the interest rates applied on the market at the date of
conclusion of the agreement at issue in the main proceedings for a loan of a comparable
sum and term to those of the loan agreement under consideration. In particular, it will be
required to ascertain whether the fact that ordinary interest is calculated by using a
360-day year as a basis, instead of a 365-day calendar year, is such as to render Clause
3 unfair.121
In the absence of either mandatory or default rules on interest in this type of

contract with which to detect an imbalance (of rights) in the term, the CJEU even
suggests looking to market custom to detect (economic!) imbalance, which is
harmful to the consumer.
3.4 Excluding Declarative Terms (of Mandatory Rules)

Under Article 1.2
Another important exception in the scope of application of Directive 93/13/EEC that

affects certain price terms exempt from review, is that contained in Article 1.2: “The
contractual terms which reflect mandatory statutory or regulatory provisions (. . .)
shall not be subject to the provisions of this Directive”. As recital 13 indicates, that
provisions “are presumed not to contain unfair terms”, because the legislator is
already supposed to have made a balanced assessment of the interests at stake.122
Although this rule seems clear, and for many Member States so obvious that they
have not even transposed it as a sort of general principle123 it raises many questions
in practice and, in fact, this has been alleged before the CJEU on numerous
occasions, without there being complete certainty about its application.
120
With criticism on this judgment, asserting that the method of calculation is not a core term,
among other possible shortcuts, Alfaro Águila-Real (2017).
121
CJEU Banco Primus (n 9), para 65.
122
CJEU RWE Vertrieb (n 5), para 28; CJEU Judgment of 30 April 2014, Barclays Bank, C-280/13,
EU:C:2014:279, para 41. See also CJEU Judgment of 7 August 2018, Banco Santander, C-96/16
and C-94/17, EU:C:2018:643, para 43. But see the very important nuance introduced in CJUE
Judgment of 3 April 2019, Acqua Med and Skóra, C-266/18, ECLI:EU:C:2019:282: “the presump-
tion that the national legislature has struck a balance between all the rights and obligations of the
parties to certain contracts cannot justify that contractual term being excluded from the scope of
Directive 93/13. It is a matter, in such a case, of assessing the wording of that contractual term and
its effects on the consumer’s expectations”.
123
Schulte-Nölke et al. (2008), pp. 225–226.
The European Court has established that it is an exception and, therefore, merits a
restrictive interpretation124; also that if a contract term reproduces exactly a manda-
tory rule applicable to the category of contract concluded that fixes the prices of
certain services (e.g., on gas or electricity supply), the controls of Directive 93/13/
EEC do not apply125; but where a non-negotiated term is aimed at applying a
national mandatory rule to a contract which does not fall within the actual scope
of that rule, as in this situation the term may be declared unfair.126 The legal safety
net that the declarative terms give the trader, however, does not completely protect
its validity: the CJEU has not been reluctant to declare that certain national manda-
tory rules are contrary to the principle of effectiveness of Directive 93/13/EEC.127
One point on which the CJEU has provided clarification (perhaps even correc-
tion) of the interpretation that seemed to be inferred from the Directive concerns the
question whether contract terms which reflect default law also fall outside the tests of
unfairness and transparency. According to recital 13, the words “‘mandatory statu-
tory or regulatory provisions’ in Article 1 (2) also cover rules which, according to the
law, shall apply between the contracting parties provided that no other arrangements
have been established”. However, the CJEU seems to presuppose the merely inter-
pretative nature of that phrase, which is not binding on it,128 since the Kušionová
judgment129 established that if the term reproduces a default law it may be subject to
assessment; along the same lines, reflecting a default law of the Romanian Civil
Code does not prevent an assessment of the term.130 Yet one can think of certain
types of law that are neither mandatory nor default, as happens with some procedural
124
CJEU Judgment of 10 September 2014, Kušionová, C-34/13, EU:C:2014:2189, para 77. And see
especially an important instance of this restrictive application in CJEU OTP Bank and OTP
Faktoring (n 11), paras 54, 64–66 and 70, also used as a strong argument to admit the referred ques-
tions in CJEU GT (n 15) para 25.
125
CJEU Schulz and Egbringhoff (n 46), paras 50–52. Also see CJUE Judgment of 7 December
2017, Woonhaven Antwerpen, C-446/17, EU:C:2017:954, paras 29 and 31: a high penalty clause
which is a mere copy of a norm on social house rentals is safeguarded by art. 1.2.
126
CJEU RWE Vertrieb (n 5), paras 29–31 and 37–39. A comment on this groundbreaking
judgment by Terryn (2013), pp. 677–699. On the German approach, see Rott (2013),
pp. 717–745. See recent applications of this guideline in CJUE OTP Bank and OTP Faktoring
(n 11), paras 64–70 and CJEU GT (n 15) para 25.
127
E.g., see CJEU Judgment of 5 July 2014, Sánchez Morcillo and Abril García, C-169/14, EU:
C:2014:2099. And mandatory norms will be deemed in conformity with the Directive in so far they
do not hinder the duty of the court to void an unfair term: see for instance CJEU Kušionová (n 124);
and (below) CJEU Unicaja (n 152) and CJEU BBVA (n 152).
128
Thus Micklitz (2014), p. 136: “does not constitute an official definition” and “is not binding on
the ECJ”.
129
CJEU Kušionová (n 124), paras 78–80. Lately, for instance, CJEU Banco de Santander and
Demba (n 41) para 43.
130
CJEU Andriciuc (n 10), paras 28–31 and, more clearly, AG Wahl’s opinion at 58. But if a rule in
a Civil Code is mandatory, it is included in the exception of art. 1.2 Directive 93/13/EEC: CJEU
Judgment of 5 July 2016, Banco Popular Español and PL Salvador, C-7/16, EU:C:2016:523, paras
23 and 25, confirmed by CJEU Banco Santander (n 122), para 45, which adds that art. 1535 of the
Spanish Civil Code (on assignment of debts) “does not appear to relate to the control of unfair
rules that are applied only in case of existing express agreement, and therefore are
not contemplated in the exemption under Article 1.2 Directive 93/13/EEC.131
Despite Article 1.2 Directive 93/13/EEC, the broad nature the CJEU grants to the
principle of transparency does not leave totally unscathed any terms that are based on
a mandatory rule: on one hand, the duty of writing in plain and intelligible language
is not always complied with by a mere reference in a standard term to a rule that
establishes rights and duties for the parties132; on the other hand, even if there is such
a mandatory rule, it is essential to inform the consumer of its content.133 Therefore,
what appears to be a clear exclusion may turn out to be problematic in more than
one case.
3.5 Consequences: Non-transparent Term ¼ Unfair Term?
3.5.1 The Directive’s “Neutral” Position
Directive 93/13/EEC does not set out the consequences of the lack of transparency
(neither in Article 4.2 nor in Article 5) except to the extent to which Article 5.2
provides (for written terms) for interpretation contra proferentem. This is a gap in the
Directive long denounced by European commentators.134 Since these consequences
are left to Member States’ discretion, both in their national regulations and in
European harmonization drafts, such as the DCFR or the CESL, they have opted
for one of these three models135 to fill in the gap: not including the non-transparent
term in the contract136 (with an ineffectiveness—non-incorporation—similar to that
arising from terms that do not pass the “formal” transparency test); declaring the
term invalid as it is automatically considered unfair137; or declaring the term invalid
terms”(which is obvious, but immaterial on the issue). Similarly, CJEU Banco de Santander and
Demba (n 41) para 45.
131
According to the opinion by AG Szpunar (2.2.2016) in Banco Primus at 79 and 80, on art. 693.2
of the Spanish Law on Civil Proceedings.
132
CJEU RWE Vertrieb (n 5), para 50. See also CJUE Acqua Med and Skóra (n 122) paras 35–38.
133
CJEU Invitel (n 24), para 29. And Loos 185.
134
E.g., Schulte-Nölke et al. (2008), pp. 248–251; von Bar and Clive (2010), p. 632.
135
For instance, Loos (2015), pp. 180–181; Cámara Lapuente (2015), pp. 562–563 and 570–589
(with comparative insights on Germany, UK, Italy, France, Spain, DCFR and CESL); European
Commission (2017a), pp. 82–83.
136
See for France the reflections on the inopposabilité of those terms by Peglion-Zika (2013),
pp. 199–225.
137
It has been the position of the Spanish Supreme Court from the judgment of 9.5.2013 until some
resolutions in 2017, when it seems to swift to a nuanced assessment of the unfairness of some
non-transparent terms. It is also the solution proposed by art. II.–9:402(1) DCFR (the term “may on
that ground alone be considered unfair”), influenced by a interpretation in that sense of § 307 Ger-
man BGB; but see some contradiction with art. II.–9:407(1) DCFR. A modification of the wording
of the Spanish Consumer Protection Act (Article 83 of the TR-LGDCU) by the Law 5/2019, of 15
(typically nullity) as an unfair term after weighing up the lack of transparency

together with the other requirements of articles 3 and 4.1.138
That the European legislator decided against harmonizing at the European level
the consequences of not complying with the duty of transparency is reflected in the
well-known Report of the European Commission on the First Five Years of Appli-
cation of the Directive139:
“infringement of the principle of transparency is not penalised in the strict sense of the word,
because contractual terms which do not comply with the criteria of clarity and intelligibility
are neither removed from the contract nor regarded as unfair”, though foresees the possibility
of establishing specific sanctions in the future.
3.5.2 Interpretations and Overreaching by the CJEU
Therefore, when the CJEU, in its judgments of 2016 and 2017 connected Article 4.2
Directive 93/13/EEC (transparency of core terms) with Article 6 (consequences of
unfairness) and with Article 3.1 (definition of unfair term) it acted rather like a
legislator, clearly overreaching its powers, to sanction that a non-transparent essen-
tial term can be declared unfair (not directly, but after weighing up all the circum-
stances) and, in accordance with Article 6, will be non-binding for the consumer. If,
in specifying the meaning of the term “non-binding” in Article 6 the CJEU is within
the scope of its powers (infra) on the autonomous interpretation of the terms of the
Directive, by holding that Article 6 sanctions terms not in plain intelligible language,
it exceeds its functions and encroaches on the powers that the Directive preserves for
Member States on this point.
This connection between Article 4.2 and Articles 3, 4.1 and 6 was latent in
previous judgments, which, however, were limited to indicating that the
non-transparent clause “could” eventually be unfair (“is likely to confer on that
term an unfair nature within the meaning of Articles 3 and 4 Directive 93/13/EEC”
or “a national court is empowered to assess the unfair nature” of that term).140 But
the solution has been consummated, first in the Gutiérrez Naranjo judgment, which
clearly links unfairness with lack of transparency (adopting the term “substantive
of March of 2019, has clarified that “the terms incorporated in a non transparent way into a contract
to the detriment of the consumer will be fully void”.
138
It is the prevailing interpretation (but not the only one) in Germany, after the new wording of §
307.1 BGB by the 2002 reform. It was the solution adopted in art. 83.2 CESL (similar to II.–9_402
(2) DCFR, and deleting the rule proposed in art. 9:402(1) DCFR).
139
European Commission (2000b), pp. 17–18.
140
In expressions used by CJEU Pohotovost (n 24), paras 72–73; similarly, CJEU Pereničová
(n 114), paras 44–47; CJEU Matei (n 7), para 72 (“those terms must, in any event, be subject to an
assessment of their unfairness if. . .” they are not transparent); CJEU Bucura (n 62), paras 50 and
61–63.
transparency,”141 so characteristic of German doctrine), whose consequences the

CJEU understands to be within the scope of the Directive; the Court and later on,
definitely, in the Banco Primus judgment which points out that these terms are
exempt from the assessment as to whether they are unfair “only in so far as” that they
have been drafted in plain, intelligible language142 and advocates a weighted (not
direct) unfairness, for which it offers criteria for market benchmarking, as seen
above.
An analysis of the causes of this decision by the CJEU, which “completes” the
Directive, rather than interprets it, suggests that German doctrine weighs heavily on
the Court. In fact, in the opinions of several General Advocates on decisive matters
relating to unfair terms, citations of German literature (sometimes as almost the only
source) predominate.143 The weight of the German training of various AGs and
CJEU judges could be leading the Court to see some of the Directive’s precepts
through glasses tinted with the colour of a national standard subsequent to the
Directive itself, as is § 307.1 BGB. According to this article, “an unreasonable
disadvantage may also [kann auch] arise from the provision not being clear and
comprehensible” and, therefore, can be unfair. But this rule is not in Directive 93/13/
EEC (despite the well-known influence of German academics in drafting Article
4.2).
There are, however, some isolated CJEU judgments that seem to depart from that
line of thinking. In the almost contemporary Amazon judgment, instead of
maintaining that to arrive at the unfair character of the non-transparent term the
judge has to examine all the parameters of Article 3 and 4.1, it states that such a term
“is unfair in so far as it leads the consumer into error by giving him the impression
that only the law of that Member State applies to the contract”.144
In pending cases, recent opinions delivered by AG Hogan in 21 of March of 2019
(Tóth case) and 15 of May of 2019 (Kiss case) try to reduce the role of articles 4.2
and 5 of the Directive as containers of the “substantial transparency” test; according
to the AG’s words, “the wording of Article 5 does not expressly state that a clause
which was not drafted in plain and intelligible language itself constitutes a separate
ground by which to declare a term unfair”; “Article 5 does not constitute an
141
CJEU Gutiérrez Naranjo (n 16), paras 49 and 51: “the assessment of the unfairness (. . .) of a
contractual clause relating to the definition of the main subject-matter of a contract falls within the
scope of that directive in general and of Article 6(1) of that directive”.
142
CJEU Banco Primus (n 9), para 62. This approach has been consummated in 2019 in CJEU GT
(n 15): according to the court, if the term was not drafted in plain intelligible language, “the
agreement concerned may be dismissed as invalid only if, first, it has been established that the term
is unfair, within the meaning of Article 3(1) of the directive (…). In carrying out that assessment, the
national court must take into account, as required under Article 4(1) of Directive 93/13, the nature of
the goods or services” and the circumstances referred in this Article.
143
See references in Cámara Lapuente (2015), p. 591 and (n 126).
144
CJEU Verein für Konsumenteninformation (n 24), para 71. And at 67 it states: “is unfair only in
so far as it displays certain specific characteristics inherent in its wording or context which cause a
significant imbalance in the rights and obligations of the parties”. See further explanation by AG
Saugmandsgaard øe in his opinion at 97–98.
alternative test of unfairness: it rather simply provides an interpretative rule in order

to determine the legal effect produced by such terms”.145 In this context, it is not
surprising that the European Commission, in its conclusions about the process for
the Fitness Check of Directive 93/13/EEC, in May 2017, continues to repeat146 the
uncertainties about the legal consequences of the lack of transparency of a term, so
this will needs clarification in a future reform of the Directive.
3.5.3 Consequences of the “Non-binding” Effect of the Price Term
(a) Retroactive Ineffectiveness Another of the autonomous interpretations pro-

vided by the Gutiérrez Naranjo judgment consisted of delimiting the scope of the
rule on the ineffectiveness of unfair terms (after considering that the non-transparent
terms may be unfair) contained in Article 6.1 Directive 93/13/EEC (an unfair term
“shall not be binding on the consumer”). The European legislator chose these broad
terms due to the lack of European harmonization of the contract ineffectiveness
categories, and the diversity of national solutions.147 Here, the CJEU, acted within
the scope of its powers of interpretation of the concepts of the Directive,148 and
equated that the non-binding character of a terms with its complete non-existence, so
restoring the consumer to a situation in which “the said term had not existed,” with
restitution of all amounts unduly received by the trader under that stipulation.149 In
this way, Member States cannot lower the minimum protection granted by Article
6 regarding full retroactivity of invalidity (or non-existence),150 which is as much as
creating a sort of European contractual ineffectiveness (ex tunc) in this area, without
there being any type of obligation for the consumer based upon a non-binding
clause. Thus, the CJEU, radically departing from the criterion of AG Mengozzi,151
declared contrary to EU law the Spanish Supreme Court’s creation of a kind of
reduced and prospective invalidity limited to non-transparent terms (ineffective only
since 2013, the date of the first judgment on the substantive issue); the Spanish
145
Opinions by AG Hogan 21.3.2019 on CJEU Tóth, C-34/18, EU:C:2019:245 and 15.5.2019 on
CJEU Kiss, C-621/17, EU:C:2019:411, paras 59–61.
146
European Commission (2017b), p. 95.
147
European Commission (2000b), pp. 19–20, although the document already warned that Member
states should at least respect some principles such as the ex tunc inefficacy of the unfair term and the
ex officio judicial review. In the next years, CJEU would confirm both ideas.
148
Another question is whether its solution should be maintained in the future for the non-binding
nature of all types of clauses, and not only of the “floor clauses” judged under it; the three “in
principles” used in the judgment (§§ 61 and 62) indicate a certain caution by the CJEU itself. See
Cámara Lapuente (2017a), p. 6.
149
CJEU Gutiérrez Naranjo (n 16), paras 61–63.
150
CJEU Gutiérrez Naranjo (n 16), paras 71–73.
151
Opinion of AG P. Mengozzi of 13.7.2016 at 52–55 and 61–64. The AG endorsed the Spanish
case-law by arguing that the “ambiguity” of art. 6 amounts to a sort of “neutrality”: nullity should
not be the only way to satisfy the Directive’s aims and “it is probably not for the Court to do so”.
Supreme Court’s solution was not only contrary to Spanish law itself (Article 1303
of the Civil Code) but also to EU Law, thus taking the CJEU a giant step towards its
harmonization.
(b) Deterrent Effect and Reduction to Maintain the Contract To enhance the
effectiveness of the Directive, the Banesto judgment vetoed a judicial power to
moderate the effects of an unfair clause up to a tolerable limit: the possibility of
moderating penalty interest would remove the dissuasive effect for traders of
non-application of these terms.152 This prohibits what is known in German doctrine
as geltungserhaltende Reduktion, and this has had a major impact, with changes in
both the laws and case-law of different countries.153 Nonetheless, the CJEU will still
soon have to deal with questions about whether some judicial decisions on price-
related terms (bank fees, penalty interest and even the setting of ordinary interest
rates) are subject to that prohibition.154
(c) Replacement with Default Law One aspect of not being able to “heal” a term
invalidated as unfair with judicial correction of it more in line with the law, is that it
cannot be replaced by the default law applicable had the term never existed.155 In
accordance with the design of the Directive (Article 6.1 in fine), if a clause is unfair
and, therefore, non-binding, only the affected clause will be considered non-existent,
152
CJEU Banco Español de Crédito (n 20), paras 65, 69 and 71. And ratified by CJEU Asbeek
Brusse and de Man Garabito (n 22), paras 56–60 on a penalty clause; CJEU Judgment of
21 January 2015, Unicaja Banco and Caixabank, C-482/13, C-484/13, C-485/13 and C-487/13,
EU:C:2015:21, paras 28 ff., on default interests; CJEU Gutiérrez Naranjo (n 16), paras 57–60, on a
“floor clause” in a mortgaged loan; CJEU Banco Primus (n 9), paras 71, 73 and 75: the dissuasive
effect of the Directive cannot be contingent on whether an accelerated repayment clause was
actually applied or not; CJEU Judgment of 11 June 2015, Banco Bilbao Vizcaya Argentaria
(BBVA), C-602/13, EU:C:2015:397, paras 33–39 (on default interests); CJEU Judgment of
17 March 2016, Ibercaja Banco, C-613/15, EU:C:2016:195, paras 39–39 (on default interests
and acceleration clauses); CJEU Judgment of 26 March 2019, Abanca, C-70/17 and C-179/17, EU:
C:2019:250, paras 53–55.
153
In Spain, from where the CJEU Banco Español de Crédito (n 20) case stems, article 83 of the
Consumer Protection Law had to be changed by Law 3/2014 (and see next note). As for the impact
and debates on this prohibition comparing Dutch and German Law, see Hondius (2016),
pp. 466–469; in Germany a increasing number of authors consider that the prohibition encompasses
also the so called “supplementary interpretation of the contract” (ergänzende Vertragsauslegung):
see Micklitz and Reich (2014), p. 793; Rott (2016), p. 303. As for the impact in Estonia, see
Kalamees and Sein (2017), pp. 124–126.
154
The CJEU Abanca (n 152) did so recently on the issue of the reduction of unfair default interests
to the amount of the ordinary interests; and see, related, the CJEU Banco Santander [n 122]); against
the reasoning of the Supreme Court in judgment 669/2017 of 14.12.2017, there is another
preliminary ruling lodged by order of the First Instance Court number 38 of Barcelona on
16.2.2018 (on the calculation of ordinary interests by the so-called “IRPH index”); and most
probably, an imminent preliminary ruling challenging the decision of the Supreme Court in
judgments 147/2018 and 148/2018 of 15.3.2018, on the consequences of the unfairness of terms
about expenditures in the Registry, Notary and Taxation in mortgaged loans.
155
CJEU Unicaja Banco and Caixabank (n 152), para 33; CJEU BBVA (n 152), para 38 (but see
some striking arguments at 42 and 45); CJEU Ibercaja Banco (n 152), para 38.
and it will not affect the validity of the rest of the contract.156 Nonetheless, there is a
major exception to this rule in relation to core terms, including price terms where
they form the main subject matter of the contract: in the CJEU’s view, if, by
invalidating an essential element of the contract, the whole contract would be
invalidated under national law to the detriment of the consumer,157 then replacing
the term with default law is justified; otherwise, the deterrent effect of invalidating an
unfair clause would be undermined, since the collateral effect of invalidating the
whole contract would penalize the consumer more than the trader that imposed the
unfair term.158 Naturally, the difficulty, when dealing with core price terms is that
sometimes there is no default law with which to complete the contract, and where
this is the case there is uncertainty about the margin of discretion allowed to each
judge in each legal system.159 Therefore, if the contract cannot survive without these
core terms (because there is no default law or because it is ultimately detrimental to
the consumer), Article 6.1 Directive 93/13/EEC does not preclude completely
invalidating the whole contract.160
4 Prospects and Criticism
In the near future, the CJEU will face various challenges about the assessment of
core price terms and price-related terms under Directive 93/13/EEC. Obviously,
more potentially unfair clauses will be submitted for its opinion, with a request for
further clarifications on the demarcation between each category and for more specific
guidelines to define what the main subject matter of a contract consists of; also,
especially in the field of public services and contracts for the provision of universal
services usually subject to ad hoc government supervision and price regulation, the
Court will have to further clarify the scope of the exemption provided by Article 1.2
156
CJEU Pereničová (n 114), paras 33 and 35; CJEU Jőrös (n 47), paras 45 ff. (except if the
consumer refuses the nullity, in conformity with the Pannon case; and the whole contract “may be
declared invalid as a whole where that will ensure better protection of the consumer”).
157
E.g., “the outstanding balance of the loan becomes due forthwith, which is likely to be in excess
of the consumer’s financial capacities”: CJEU Kásler (n 6), para 84. This might happen with a loan
denominated in foreign currency if the contract could not subsist; but the invalidity of default
interests (which are not core terms) cannot bring negative consequences for the consumer: CJEU
BBVA (n 152), para 39; neither will the nullity of an acceleration clause, as CJEU Ibercaja Banco
(n 152), at para 39, puts it; but see on this the new (messy) insights of CJEU Abanca (n 152) paras
56–64, allowing the use of default law also in this case. To check wheter the contract may subsist
without a price-related term, the court must verify “in accordance with the rules of domestic law,[if]
such continuity of the contract is legally possible, which is to be determined objectively”, as CJEU
Dunai (n 14) para 51 and CJEU GT (n 15) para 42 underlined.
158
Since CJEU Kásler (n 6), paras 80 ff.; CJEU Unicaja Banco and Caixabank (n 152), para 33;
CJEU, OTP Bank and OTP Faktoring (n 11), paras 60–61; CJEU Abanca (n 152) para 58.
159
Cf. the third question in CJUE ERSTE Bank Hungary (n 12), paras 23 and 42.
160
CJUE ERSTE Bank Hungary (n 12), para 40.
Directive 93/13/EEC. But, fundamentally, sooner or later, it will also have to address
a series of novel issues that have not yet been raised:
(a) Following the syllogism, if transparency assessment can lead to a term being
declared unfair, should the judges assess ex officio the transparency test for
standard terms?161 Implicitly, the CJUE seems to be moving in this direction
in Ilyés: in a case dealing with the transparency review of core terms (such as a the
exchange rate in a loan contract denominated in a foreign currency), it states that
“it is for the national court to identify of its own motion, in the place of the
consumer in his capacity as an applicant, any unfairness of a contractual term”.162
(b) Should the assessment of transparency and the objective standard average con-
sumer be applied in the same way in individual lawsuits and collective actions?163
(c) In the case of ambiguous, questionable or obscure (but not totally unintelligible)
terms, in a conflict between an interpretation most favourable to the consumer
provided for in Article 5 Directive 93/13/EEC and invalidity as an unfair term
for lack of transparency, which should prevail?164
(d) To what extent should reinforced transparency assessment of prices and main
services in some contracts in European sector-specific regulations (transporta-
tion, insurance, consumer credit, home loans, and soon in the supply of digital
content, etc.)165 influence CJEU decisions on the transparency of standard terms
in general?166
Although the CJUE has been able to avoid some opportunities to deal with other
issues,167 sooner or later it will surely have to deal with these. As for the European
161
As a logical consequence was deemed so, for instance, in the Spanish Supreme Court Judgment
(STS) 534/2014, of 13 October (at § 8); see also STS 222/2015, of 29 April. This approach can be
supported with the phenomenon of the extension of the ex officio control to other Directives:
consumer credit (via the CJEU Judgment of 4 July 2007, Rampion and Godard, C-429/05, EU:
C:2007:575; CJEU Radlinger and Radlingerová [n 88]) doorstep selling CJEU Judgment of
1 December 2009, Martín Martín, C-227/08, EU:C:2009:792; (CJEU Judgment of 3 October
2013, Duarte Hueros, C-32/12, EU:C:2013:637); and even with the ex officio control of the
capacity of consumer: CJEU Judgment of 4 June 2015, Faber, C-497/13, EU:C:2015:357, para
48; and CJEU Judgment of 3 September 2015, Coastea, C-110/14, EU:C:2015:538, para 22.
162
CJEU OTP Bank and OTP Faktoring (n 11), paras 90–91.
163
See the debate and new proposals on the possibilities of applying art. 4.1 (assessment of the
circumstances of the case) in collective litigation, in Micklitz (2014), pp. 148–149.
164
Cf. CJEU Van Hove (n 8), para 49. On the solution in Germany and the Netherlands, see Rott
(2016), p. 301; Hondius (2016), p. 463.
165
See above (n 31 and 32).
166
It is a fact the high level of transparency required by the CJEU when interpreting those norms:
see, for instance CJEU Schulz and Egbringhoff (n 46); CJEU Consumer Finance (n 58); CJEU Air
Berlin (n 33); On the argument, see Cámara Lapuente (2015), pp. 598–599.
167
In CJEU Judgment of 15 January 2015, Šiba, C-537/13, EU:C:2015:14, the real issue at stake
was the amount of fees due to a lawyer and the method to calculate them. In CJEU ERSTE Bank
Hungary (n 12), the third (unsolved) question about a loan in foreign currency was: “Dans
l’hypothèse où la validité du contrat pourrait être déclarée, le montant pourrait-il être déterminé
de la manière la plus favorable au consommateur?” Future judgment on the Kiss case (AG Hogan
legislator, the difficulty of regulating these matters and, in particular, the aspects
related to Article 4.2 (including the question whether core terms or even any
individual agreement should be controlled under the substantive rules on unfair
terms) has already been evidenced in heated debates about the solutions adopted by
the DCFR and the CESL. The 2017 results of the fitness check programme on
Directive 93/13/EEC demonstrate the desirability for, or the need to, undertake
some reforms.
Meanwhile, in legal scholarship proposals abound, and the controversy about
certain points is well-known: for example, should two unfairness assessments be
regulated, one for non-negotiated clauses and one for negotiated clauses, or
distinguishing between B2B and B2C contracts?168 Or, as behavioural sciences
studies show, despite the insistence on imposing greater duties of price information
does not seem to have increased consumer protection.169 So, should we abandon this
strategy170 and consider other mechanisms less linked to disclosure of
pre-contractual information? Are the controls under Directive 93/13/EEC really
effective from a legal and economic point of view?171
5 Conclusions
The CJEU has played a central role in the construction and the development of
certain general concepts of Directive 93/13/EEC which are decisive for demarcating
the assessment of price-related contract terms with particular intensity over the last
decade. The court has left behind its earlier, more tolerant attitude (Freiburger
Kommunalbauten) which left this clarification in the hands of the national courts,
and has been very active, especially in the last 5 years, suggesting autonomous and
innovative interpretations of what it considers the main subject matter of a contract;
clarifying the nature of the assessment of transparency (which goes beyond a mere
grammatical understanding) and identifying what is its basis in a trader’s duty of
information; determining the objective standard for assessing the intelligibility of a
term by reference to the average consumer and explaining the nature and effect of
ineffectiveness arising from lack of transparency of a term (non-existence, ex tunc).
Nonetheless, the Court may have overreached its own powers in defining transpar-
ency assessment as a particular example of unfairness, as Directive 93/13/EEC does
not establish any consequence of non-compliance with the duty for plain intelligible
opinion of 15.5.2019) will rule on whether Art. 4.2 requires that each price clause mentions the
specific services provided in return.
168
Hellwege (2015), pp. 129–134 and Schulte-Nölke (2015), pp. 195–216; both based in the
context of the CESL choices on this.
169
See Atamer (2017), pp. 624–660; Willett and Morgan-Taylor (2012), pp. 143–163.
170
Against, Hondius (2016), p. 462; Schaub (2017).
171
Gómez Pomar et al. (2018).
language, other the interpretation most favourable to the consumer. When

connecting articles 4.2 and 5.1 with articles 6 and 3 Directive 93/13/EEC, it has
adopted a quasi-legislative role that encroaches on the very different national
solutions to this issue to date.
As stated above, there are still a number of future issues for the CJEU to clarify
further, such as providing more criteria about what is considered main and ancillary
in price-related terms, demarcating the exemption for terms that reproduce national
mandatory dispositions, deciding on the possibility of the “indirect assessment”
mechanism for price/quality ratio, and the scope of transparency in this ratio, for
now relegated to a secondary role since it is not technically a “term.” Also, sooner or
later, the Court will have to rule on whether judges should assess the transparency of
contract terms ex officio, the hierarchy of remedies for interpretation and for striking
out a term from a contract, the way in which the courts are to carry out transparency
assessment as between class or individual proceedings, and whether it should
transfer to the case-law on unfair terms its own high-level interpretations of protec-
tion (in terms of price information clarity) in relation to other directives, etc. In short,
the CJEU has a long and fruitful task ahead in its mission of providing legal certainty
in the application of EU law in such an economically crucial area as this one.
Acknowledgment This chapter is a result of the research project DER2017-84748-R, funded by

the Spanish Ministry of Economy, Industry and Competitiveness. The author is very grateful to
Prof. Dr. Simon Whittaker for his valuable suggestions in relation to an earlier version of this paper.
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Part III
National Reports
Form Contract in Argentina
Osvaldo Jorge Marzorati
Abstract Under Argentine current Civil and Commercial Code, as enacted and in
effect since August 1 2015, the price in consumer relations cannot be contested by
Consumers. The Code merely confirmed such principle established that under
former specific consumer legislation ratified by the Code, the consumer right is to
return the unused product within 10 days and get his money back. The research
question proposed by the Academy is whether under Argentine law contract terms
that are ancillary or connected to the price of the product or service imposed to
consumers by suppliers have an aggregate effect of increasing the “quoted” price for
consumers and therefore may be legally challenged.
The review of jurisprudence shows that argentine cases reject challenges to the
amount of the price itself and do not consider those terms as accessories. There is
however a Court case at the Supreme Court level that considered objectionable the
amount of a bank commission versus the rate of interest paid by the bank to his
client. The rate was indeed fixed by the bank and did have the prior authorization of
the Central bank, but the rate of interest was fixed freely by the bank. The Court
ordered to revert all paid commissions in excess of the interest rate when found that
the commission over the years was increased by the bank in excess of the interest rate
paid to the client. This precedent but may lead to future challenges
1 Argentina. Scope of Freedom of Contract
The purpose of this article is to provide an overview of Argentina law and evolution
on the above subject for discussion at Fukuoka, Japan 2018 in the Congress of the
International Academy of Comparative Law. Argentina is a typical example of a
country, which Civil Code was enacted in the nineteenth century following the
Codification of Civil Law based on the French Civil Code. However, it is to be
noted that in 1853 Argentina voted a Federal Constitution based on the American
O. J. Marzorati (*)
Marzorati Law Firm, Buenos Aires, Argentina

https://doi.org/10.1007/978-3-030-23057-9_3
106 O. J. Marzorati
Constitution approved by the old Confederate States. The Argentine Constitution

provides a list of fundamental rights and guarantees to any person being resident of
the country and extends most of such rights to foreigners living in Argentina,
Furthermore, it declares such rights and guarantees the Supreme Law of the land,
and no law passed by Congress could ignore or circumvent such principles. The civil
and commercial codes enacted by Congress subsequent to the constitution suffered
various modifications in the twentieth century regarding family law and contract law,
mainly through special legislation and after various failed projects including sub-
stantial amendments to the Civil Code in 1993 and 1998. In this century, in 2015,
there was a major restructuring of the civil and commercial legislation derogating the
civil and commercial codes and replacing both by a sole civil and commercial code,
hereinafter the Code.
Such Code replaced over 5000 articles by a single Code with 2756 articles and
maintaining various specific laws, such as the Navigation and aeronautical legisla-
tion, the bankruptcy law, the company law, the patent and trademark laws among
many others, which are identified and specifically ratified under the new Code.1 Said
norm permitted contracts in force at the time that the new Code came into effect on
August 1, 2015 were to be interpreted under the old legislation, which was then in
effect.
Such a major change permitted that contracts agreed and executed after the Code
came into effect were to be construed under the new Code. However, some manda-
tory provisions were applied in the meantime based on the fact that the paradigm in
contract law has changed; permitting judges to interpret contracts unilaterally written
by one party and consented by the other party and deemed as contracts of adhesion,
which may be carefully screened by judges, who may ignore clauses that are
considered abusive, and rewrite them. In such fashion, three types of contracts
were defined under the Code: B2B where parties have negotiated its terms; called
parity contracts; B2B where parties negotiate some clauses but the vast majority
were unilaterally dictated by one party defined as contracts of adhesion where
abusive provisions may not be enforceable; and B2C, consumer contracts which at
the time the Code came into effect were covered by special legislation protecting the
consumer as the weaker party, establishing the “in dubio pro” consumer principle
and considering unwritten all abusive clauses, even those that were negotiated and
accepted by the weaker party. This Special Consumer Law section of the Code
1
Law 26,994 was approved by Congress on October 1, 2014; it was promulgated by the Executive
Power on October 7, 2014 and published in the Official Gazette on October 8, 2014 and declared
that it will come into effect on August 1, 2016. Subsequently, and with no further explanation
Congress decided to anticipate in one year the date the Code was to become into effect to August
1, 2015 which caught everyone including Academy by surprise, due to the extent of the Reform and
the short term allowed between its enactment and its real application, particularly because it did not
have a transition period.
Control of Price Related Terms in Standard Form Contract in Argentina 107
covering B2C contracts partially supersedes specific existing legislation, which we

shall comment on as well. C2C contracts were not considered or regulated in the new
Code.2
Argentina has enacted the autonomy of will, allowing parties to freely write
contracts and the obligations contracted for by parties to a contract that were deemed
to have the same value of law as prescribed under the French Civil Code. Argentina’s
old civil code under section 1197 thereof enacted such principle that had been into
effect for over 140 years. Particularly we need to mention four norms of the Code;
for example, section 957–9603 that limit such principle. In my opinion the most
pervasive modification is expressed in section 960, which reads that Judges do not
have powers to modify clauses of contracts, except in cases that one of the parties so
requests when the law contemplates the exercise of such right, or by the judges ex
officio when it clearly and manifestly affects the public order.
The Code reflects in part, the trend of constitutionalizing common legislation by
incorporating fundamental rights in common legislation by bringing new constitu-
tional rights into private rights, which were incorporated in the Argentine Constitu-
tion of 1994. We refer to social and human rights, such as health, consumer
protective legislation or environmental legislation4 among others.
Before the enactment of the Code, in the second half of the twentieth century,
these rules were somewhat relaxed by means of court cases and the enactment of
different statutes, which restricted the freedom of such parties or limited the object of
2
However, the new Code brings about important changes in the family sections and in contracts,
including the validity of electronic contracts and of electronic consent, digital signature, considering
electronic signature as a principle of evidence in writing, but as we shall see later, the most
important is the change in the paradigm of the free autonomy of parties in contract law, which
was limited to those contracts that were negotiated freely between the parties and subject all of the
others such as contract with standard clauses unilaterally written by one party (contracts of
adhesion) to different legal mandatory limitations, which permit the judges to intervene or interfere
in the clauses of the contract such as it happens in all B2C contracts affected by consumer
legislation already existing in Argentina.
3
Section 957 defines a contract as the legal act whereby two or more parties express their consent to
create, regulate, modify, transfer or extinguish relations of an economic legal content.
Section 958 establishes the first limitation setting forth that the parties are free to enter into a
contract and determines its contents, within the limits imposed by law, public order, moral and good
usages. Section 959 declares the obligatory effect of contract between the parties. It contents cannot
be suppressed, modified or extinguished except by the consent of the parties or in the cases provided
for under the law.
4
Section 42 protects users and consumers requiring adequate and true information, freedom of
election and dignity and equitable treatment, guaranteeing the defense of competition, control of
monopolies, quality and efficiency in public services and the organization of association of
consumers and users. Further, section 43 of the same Constitution provides injunctions and other
precautionary measures to protect such rights against any form of discrimination related to
consumer environment and defense of competition as well as to rights of collective incidence
from any action that affects or may affect arbitrary or with manifest illegality rights and guarantees
established in the Constitution.
108 O. J. Marzorati
the contract or imposed many mandatory provisions, or deemed unwritten abusive

clauses,5 or declared the prevalence of mandatory provisions that could not be
overridden by the parties, or infringe principles of public order. All such cases
mostly affected ancillary provisions except those related to the object of the agree-
ment or in case of a clear illegality of the agreed provision, but they did not address
the issue of the price, which was negotiated by the parties. Hence, it could be
affirmed that the price of the contract, even in those three categories of contracts,
was untouched by the Courts and laws, respecting the will of the parties. The
contract could be annulled for other legal reasons. No special considerations to
market forces were provided for in the Constitution or in the subsequent legislation
until the enactment of antitrust legislation.
However, control of price terms in standard form contracts were discussed with
the purposes of protecting consumers, or antitrust regulations concerning the defense
of competition or condemning unfair practices. This allowed a debate on whether
price conditions affecting the price formed part of the essential rights of the contract
or not. We shall discuss the subject following the order of the topics set for the
national reports.
2 General Information on Control of SCT

and Consumer Law
A specific legislation relating to consumer protection was enacted under Consumer

Law 24,240.6 The law was enacted to protect consumers on what is known as B2C
contracts. A consumer was defined as any person that purchases good or services for
its own use or consumption. The purpose of the law was to incorporate the provision
that any contract with a consumer should be spelled out in clear unequivocal and
intelligible terms. Any vague provision or any other provisions, including ancillary
provisions should be construed against the writer of the provision and for the benefit
of consumer. Finally, the place where the consumer should have received the
product entitles the consumer in case of goods or performance of services, to select
the jurisdiction. Price was not included in consumer law, originally, but rather was
subject to defense of competition rules or unfair commercial practices legislation. To
the extent that the price of a product or a service was clearly expressed, the norms did
not address the price as such but penalized horizontal or vertical agreements to fix
5
Law 24,240 was enacted during the tenure of Mr. Menem as President of Argentina under a very
liberal economic approach and Mr. Menem vetoed section 40 of the law that made to whoever
advertise its mark in a product marketed in Argentina under its trademark jointly and severally liable
with the importer, distributor, reseller or retailer that markets the product or performs the service if
they were defective by the consumer. Such veto made unenforceable the provision of the law, and
thus the solidarity could not be enforced by the consumer since the veto power made not existent or
unenforceable such solidarity. Some years later new legislation suppressed the veto.
6
Section 1 of Law 24,240.
the price or condemn unfair methods to condition the price, but not the price itself.
Any other extension of the jurisdiction was not admitted7 under consumer local
legislation.
This law was amended by Law 26,631, which expanded the concept of a
consumer; under the definition not only physical persons but companies’ alike, if
the purchase of an item was not due to professional activities, but when the purpose
of the purchase was for consumption purposes.8 This amendment has been widely
criticized, but it is still in effect.
The overhaul of the old law was substantial. For example, section 4 of this law
obliges the supplier to furnish to the consumers in determined, clear and detailed
form, anything that is related to the essential features of the goods or services that are
furnished and the conditions of its commercialization. Such information shall be
given at no cost to the consumer and supplied with the necessary detail that allows
consumer understanding, This requirement is particularly relevant not only for a
single purchase or a specific service, such as the telephone or banking service, but
also for two dimensional purchases such as those for rights acquired in outdoors
clubs, or private cemeteries, shared time interest in property or equipped facilities or
similar figures and the small letter that formerly describe its features now should be
written in plain language to proportionate a fair treatment to consumer putting in an
equal foot purchasers of good and users of service facilities in order to avoid abusive
practices observing the principle of good faith in the execution, interpretation and
performance of an agreement.
The supplier must guarantee a fair and equitable treatment of a consumer and
abstain from behaving in such a fashion to place a consumer in shameful or indignity
conditions, including intimidation practices. Again, the amendment of the consumer
law failed to include that the principles of protecting the consumer related to abusive
clauses were also applicable to the case of the price itself, or price conditions for
goods or services, limiting thus the Courts’ review. This system has been upgraded
by the existence of court cases and the enactment of the recent Antitrust Law 27,442
in May 2018 that we shall discuss below. Foreign consumers were protected while in
Argentina again price discrimination, technical or commercial qualities or any other
relevant practices over the goods or services marketed, unless an exception was
7
Such law was enacted on March 4, 2008 and promulgated on April 3, 2008.
8
Further, under Law 26,361, section 1 par 2, consumer or user is anyone who is not a party of a
consumer relationship, but that as a consequence of or in connection with, a consumer relationship
purchases goods or uses services as final beneficiary in his own name or on behalf of its familiar or
social group and to any other person that in any manner is exposed to a consumer relationship. A
consumer relationship is considered (section 3 of the law) the legal link between a supplier and the
consumer or user. Finally, supplier under section 2 thereof is defined as a physical or legal entity of
public or private nature that develops in a professional manner, even occasionally, production,
assembly creation, construction transformation, importing or concession of trademarks, distribution
and commercialization activities on of goods and services whose final beneficiaries are consumer or
users.
110 O. J. Marzorati
authorized by the Authority of Application of the law for reasons of general interest
duly grounded.9 During some periods of rigid exchange controls, hotels and com-
merce set different prices for tourists (higher prices) than for residents, based on the
presentation by the purchaser of an Argentine document of identity, which contains
the place of its residence.
In addition, new Section 40 of Law 24,240, as modified, defines as direct
damage to any detriment to the rights of the user or consumer that may have caused
in the goods or in the person of the consumer, if a damage could be estimated in
terms of a monetary value, as a result of the action or omission of the supplier or
whoever rendered the services. The existence of such damages obliges any of them
to indemnify up to a sum determined by the administrative authority allowing such
authority to grant damages not in excess of a cap based on a basket of goods of
primary needs. An appeal on such administrative judgment under the terms of
Section 45 of the New Law is allowed and once it is confirmed becomes “res
iudicata” for judiciary enforcement.
Other advantages of the new law for consumers is the authorization to tribunals to
grant civil fines as contemplated under section 25 of the law, authorizing judges to
establish a civil fine, a sort of punitive interest, established in section 52 b) of the law
in favor of the consumer in an amount for each case not to exceed the maximum
amount contemplated under section 47 of the former consumer law10 without a
penalty that may be applicable to the supplier, or if more than one supplier is liable
the civil fine will be imposed jointly and severally to both.
The New Law modifies Section 36 of Law 24,240 requiring financial institutions
that provide financial and credit services to consumers to clearly inform those
consumers of specific mandatory information that is detailed as follows.11
The above features are supplemented with the law of unfair commercial practices
Law 22,802 and specifically Law 25,156 denominated the antitrust law, or law of
defense of competition or such laws than, in the future, replace any of them as done
under law 27442 in 2018. In case of doubt in the interpretation of the principles
established between such laws and the consumer law the latter shall prevail over the
former.
As far as public services are concerned, this law contains several articles allowing
to whoever rescinds a public service contracted by phone or electronically to use the
9
Section 6 of Law 26,361.
10
Such amount cannot exceed Peso 5,000,000, which at today exchange rates amount to somewhat
US$131,000 and such civil fine and the determination of its amount results from the appreciation of
the judge of the circumstances of the case and the importance of the transgression.
11
(1) the description of the good or service that is the object of the transaction; (2) the cash price;
(3) the amount of money that the consumer will have to pay as down-payment and the total financed
amount; (4) the effective annual interest rate; (5) the total amount of interest that the consumer will
pay; and (6) the system of amortization and the method for cancellation of interest. (3) Section 36
provides that if the financial institution omits the information above, the consumer may request the
nullification of the contract or some of its clauses. (4) In case that the financial institution fails to
specify the interest rate in the contract, the New Law fills this interest rate with the average
borrowing annual rate released by the Argentine Central Bank, which is much lower than the
lending rate that commercial banks in Argentina charge their customers.
same format to communicate with the public service, to avoid consumer the expense
of giving formal notice of discontinuance. All the offices of such service provider
should clearly place signs containing the information that the user may claim for an
indemnity in case that the service provider attempts to include and collect undue
services or claim for invoices already paid.12
In addition, the consumer has the following rights: (a) to claim the application of a
civil fine judicially, if pertinent; (b) to revoke his acceptance to any proposal within
10 days of his communication of acceptance or delivery of the product or execution
of the contract without any liability. Such refusal right cannot be legally waived by
the consumer and if such waiver is ignored by the service provider company, it has
no legal effect; (c) Further, the service provider has to have in his office, a registry
where any claim of the consumer must be recorded and a certification of such claim,
even if made by phone or electronic post or fax or any other means, shall be
delivered to the claimant, identifying clearly the object of the claim. Such claim
has to be answered within the term indicated by regulations then in effect, without
prejudice to the personal attention of the user of the service that must be available at
every office; (d) in case of unseasonal consuming from the user, the service provider
has to take into account the average consume of the last 12 months prior to the date
of the invoice to consumer; (e) Among the sanctions, the law provides the closure of
supplier’ establishment or suspension of the unpaid service for a term up to 30 days;
(f) In the application of the sanctions contemplated in section 47 of Law 24,240, the
Authority of Application shall have to take into account the damage caused by the
aggrieved consumer or user, the position in the market of the infringer, the amount of
the benefit obtained, the intentionality, and the relevance of the social damages
occasioned by the infringement or the reiteration of the offense and other relevant
circumstances of fact. Reiteration is punishable when the infringement takes place
within 5 years of sanctioning the Code.
The statute of limitations to make claims and the administrative sanctions is
3 years. In the event that other laws establish different terms, the term most favorable
for consumer shall apply.
Expenses due to goods in warranty that require transportation to the establishment
of the producer or manufacturer shall be for the account of the party liable for the
warranty, including freight and insurance and any other expenses that are applicable
until its completion.
It becomes necessary to include other constitutional protected rights implemented
by Law 25,156 related to the Defense of Competition which prohibits the acts or
behavior related to the production or exchange of goods or services that: (a) limit,
12
Section 31 of Law 24,140, as amended, establishes procedures with specific terms for the
protection of consumer including the right to appeal or claim to the Authority of Application.
Including the maximum rate that the service producers can charge for interest on unpaid invoices
but including—in case of a successful claim—the right of consumer to collect the same rate of
interest on the amount returned by the service provider plus an indemnity of 25% of the amount
unduly collected or claimed incorrectly.
112 O. J. Marzorati
restrict, distort or misrepresent competition or the access to the market or constitute

an abuse of a dominant position13 such as fixing, concerting or manipulating directly
or indirectly the sales price or the purchase price of goods and services offered in the
market or the exchange of information to the same effect; (b) establish restricted
quotas for production processing distribution or purchase only a limited or restricted
amount of goods or restrict or limit the number, volume or frequency of services;
(c) distribute horizontally zones, markets clients and sources or supply; (d) concert
or coordinate biddings in public bids or price competition. To fix impose or practice
directly or indirectly with competitors or individually on any form the conditions of
sale, or of purchase of any good, or the rendering of services or its distribution;
(e) suspend the supply of a service in dominant conditions of monopoly in the
market to any concessionaire of public services, among others. Fines may be applied
by the Authority of Application of the Law up to Pesos 150,000,000 and the statute
of limitations is 5 years. In addition, the tribunal may request, to a competent Judge,
to impose conditions to neutralize the distortion of the competition or request harsher
measures such as the dissolution and liquidation of the infringers, if they are legal
entities.14
To complete the picture of the consumer protection in 2014 Law 26,993 was
enacted,15 providing a system of resolving conflicts in consumer relations, whereby
a service of prior conciliation of consumer relations was thereby created under the
name of COPREC.16 Further the Code enacted by Law 26,994 contains a chapter
specifically regulating consumer contracts. Moreover, under section 11 of such law,
Abuses of dominant position were also regulated, in Arts. 1092/93. The consumer
law and its regulation reiterates the principle of consumer protection “in dubio pro
consumer”, and in case of doubt between different laws the obligations to apply the
13
Dominant position is defined as when one or more persons enjoy a dominant position for a
determined type of product or service is the sole provider or buyer within the national market or
when despite that it has not such position is not exposed to substantial competition or by the degree
of horizontal or vertical integration is in condition of determining the economic viability of a
competitor in the same market.
14
This law was modified and overhauled by law 27,443 approved in May 2018 and published May
15, 2018.
15
As we have seen the Code came into effect in August 1, 2015. Title III, Chapter 1 of said law
regulated consumer contracts, chapter 2 deals with abusive practices in the formation of consumer
consent, Chapter 3 Special features of consumer contracts including electronic contracts and the
right to revoke any purchase and return it within 10 days of the purchase and Chapter 4 regulates
abusive clauses.
16
COPREC’s competence was limited to individual conflicts with consumers not exceeding a value
in excess of 55 minimum vital salaries. The conciliation is mandatory and a condition to make any
claim before the auditing authority or as the case may be to file a judicial claim before the Court for
consumer relations created under the law. The law modifies the Law of Defense of Competition
substituting any claim under such law before the Consumer Forum thus created and providing for a
Court of Appeals with jurisdiction over the Consumer tribunals. Incorporating a new Forum as the
Civil, Commercial Administrative the Consumer relations tribunals. The tribunals were created but
the process of appointing judges had been delayed for the selection process and the tribunals are yet
not fully operative.
law less onerous for consumers was included, while sections 1096/1099 of the Code
sanctions abusive practices and sections 1100/1103 regulates information and adver-
tising addressed to consumers.
One of the more important clauses related to our report is section 1119, which
states “without prejudice to special laws on the subject, it declares that a clause is
abusive, despite it has been negotiated individually, when it has the purpose to
produce a significant imbalance between the rights and obligations of the parties to
the detriment of consumer.”
But in relation to our main subject clause, 1121 of the Code sets out: “It cannot be
declared as abusive the clauses relative to the relation between the price and the
goods or services provided”. In short, the Code that came into effect in August
1 2015 considered that the price of the good or of the service could not be attacked as
abusive in consumer regulations. Before closing a transaction for goods or services
the consumer has to make a choice to buy or not to buy, he does not enjoy the legal
right to contest the price, except by refusing to buy. He has however, a second
chance because he may return the goods or reject the service within 10 days of the
purchase, and he is back to square one undamaged. This is a clear answer under
Argentine law as recently as year 2015 addressing the issue under analysis.
Further, the same section of the Code declares that such clauses that reflect norms
in effect as result of international treaties (approved by Argentina) and those based
on legal mandatory norms cannot be declared abusive.
Other than the above exceptions, the law on abusive clauses shall be guided by
the following rules:
– Administrative approval of the contract does not prevent the control of same by
the judges, such as insurance agreements or regulations approved by the Central
Bank or finance contracts.
– Abusive clauses are deemed, as a matter of law, as clauses that have not been
consented by consumers.
– If the tribunal declares the partial voidance of the contract the judge is obliged to
replace the clauses so voided in order to complete the contract. Otherwise the
contract cannot continue without compromising its purposes (under the theory of
final causation, which the code has adhered to).
– When the abusive legal situation is proven as result of a contract connected with
the contract under screening, Courts may declare the partial or total voidance of
an agreement under review, as requested by claimant, even if the principal
contract itself has been performed correctly (the Code permits considering such
connected contracts to be analyzed as one contract with a single economic
purpose).
The conclusion of this chapter is that Argentina has evolved from the autonomy
of the parties to set the contracts as bargained, save in case of infringing moral
principles or good manners or public interest. The new Code has created additional
types of contracts, clearly subject to mandatory provisions, public interest and even
constitutional norms related to human rights and social rights including, specifically
consumer protection. A plain major difference between consumer contracts and
114 O. J. Marzorati
contracts of adhesion is that under the former we are protecting consumers as the
weak party, while in the latter we are protecting the private rights of a party whose
consent is given by adhesion. A great number of all contracts between companies are
contracts of adhesion because the consent is either expressed in general conditions or
printed in standard printed form, in certain type of trades. For example, in maritime
law or insurance or in any loan granted by the World Bank, the Inter American Bank
or any major central bank, where, in my opinion, there are not abusive clauses but
abusive exercise of rights under certain situations covering one party more than the
other. However, some risks that are consciously taken in international commerce are
based on the speculation that business obtained through execution of the agreement
may be more economically rewarding than those risks assumed under the contract.
A second difference between contract of adhesion and consumer contract in
Argentine law, is that in the former the parties are free to negotiate individual clauses
that are not subject to general conditions, while in consumer contracts the fact that
the consumer has negotiated on an individual basis makes such clauses irrelevant
and unenforceable.
However, as we have explained, the price paid in consumer relation cannot be
questioned in consumer contracts and in contracts of adhesion, and no reference to
market principles is mentioned, except in antitrust laws. Under the Code if the price
is fixed it cannot be reviewed, but as we shall see in the last chapter of political
decisions on price control, a high inflation, gradual dollar devaluations and foreign
exchange regulations have permitted three other mechanisms to control prices
(including a sort of slight revision of price related terms). We shall review such
mechanisms under the last chapter, following the order established for the topics in
this report.
3 Judicial Control of Price Terms in SCT
There are many decisions related to the protection of consumers. However, for years,
all of the decisions were based on civil or commercial decisions, since the consumer
tribunal and forum created under Law 26,993 have not come to exist yet. Hence in
addition of both type of tribunals there are Federal Court decisions with competence
in administrative matters, which are appealed to the Court of Appeals in adminis-
trative matters and resolved there. Despite the existence of such a law, the new
tribunals are not in operation, nor the process of selecting the judges has been
completed and the end result is that consumer claims end up in those different
types of tribunals in federal or national jurisdiction and politicians are still discussing
how to make the provisions of Law 26,993 compatible with 24 articles on consumer
contracts prescribed in the Code (Law 26,994). The Code provides its own system
preferences when there are collisions between special legislation, such as consumer
laws (Laws 24,240–23,619) and general legislation on the same matter. To that
effect, the Code establishes an order of priority application. (a) Mandatory norms of
special legislation and mandatory norms of the Code, (b) Special clauses of a
contract, (c) Supplementary norms of special laws, and (d) Supplementary norms of
the Code, but the amendment to consumer legislation provided in the Code failed to
mention the special judicial forum to hear consumer cases.
Notwithstanding the above, Section 52 of the previous Law 24,240 was amended,
which permits the consumer and the user to bring judicial actions when its interests
are threatened or affected by third parties. The judicial action could be filed by the
consumer or the user on its own right, or it could be filed by the Authority of
Application, national or local, as the case may be, and the fiscal agent, or the
Association of Consumers and Users, the Ministry of Public Affairs and the
Ombudsman (Defensor del Pueblo) were to intervene in the process.
However, as a result of the lack of consumer specialized forum with jurisdiction
on consumer contracts, including cases of collective incidence, such Associations of
Consumers and Users were given legal standing to represent consumers in cases of
collective incidence before different national and provincial courts. All such pro-
cedures were in principle brought before the jurisdiction of the competent judge,
according to the place where they were filed. All such actions bringing individual
claims pursuant to the law were in principle exempted from all court taxes.
If the action was of collective incidence according to Law 26,631, the Associa-
tions of Consumers and Users duly organized and registered as legal entities
recognized by the Authority of Application were given legal standing to act as
plaintiffs when the interest of consumers and users was threatened or affected,
without prejudice that the consumer or users may claim for the individual damages
that they estimate, based on remediation of the damage according to the principle of
integral (full) indemnity. The law was also pioneer in contemplating that the
Authority of Application of the law shall support the organization of arbitration
tribunals acting as amicable arbitrators in equity or law arbitrators that should base
the award on applicable law. These arbitration tribunals were not set in operation for
many years, and the situation has not changed. Law 26,993 created new tribunals of
first instance and the Court of Appeals to hear the consumer and user claims, with a
conciliating phase followed by a judicial action before a Forum, which is waiting
State action since 2014. Unfortunately, the process has not finished yet and the
consumer and user claims still have to recourse to civil and commercial tribunals,
who are the ones that have established guidelines on the subject.
For that reason we cannot bring real cases decided by the Consumer and User
tribunals and we decided to pick three precedents based on landmark decisions of
our Supreme Court on the subject, to show that consumer and users slowly have had
its day in court, guided by the decisions of the Supreme Court, and supplemented
with a selected group of other Court of Appeals decisions, applicable to consumer
transactions. In all of such decisions Argentine courts did not make any reference to
the difference between essential clauses related to the price and ancillary provisions
as contemplated in German precedents under EU national laws. Our first case is
Halabi.17 Eduardo Halabi promoted an “amparo” requesting the declaration of
17
Halabi, Ernesto c/P.E:N. (National Executive Power) Law 25,873 dec. 1563/04, s/amparo
(precautionary injunction). Law 16,986. Fallos 332:111.
116 O. J. Marzorati
unconstitutionality of Law 25,872 and its Regulatory Decree 1563/04, considering

that its provision infringed the guarantees established under Articles 18 and 19 of the
Argentine National Constitution. This in view, that said decree authorize the inter-
ference on telephone communications, as well as internet communication, without a
law determining in which cases and under which grounds, such procedures were
justified.
Claimant argued that such interference was a violation of its rights to privacy and
intimacy as a user, and affected the privilege of confidentiality that as any lawyer,
this one claimant enjoys in the communication with his clients. The national
government answered the actions requesting its dismissal arguing that the “amparo”
action was not appropriate, claiming that such action was not apt to debate the
arguments of the claimant. And a secondary argument was that the question was
actually abstract, by virtue of the existence of Decree 357/05 that suspended the
application of Regulatory Decree 1563/04. As result of such suspension, the possi-
bility of an actual or imminent damage for claimant or for any other user of the
system was temporarily eliminated.
The court of first instance accepted Halabi complaint and declared the unconsti-
tutionality of sections 1 and 2 of Law 27,873 and its Regulatory Decree 1563/04
pointing out that (a) there was not sufficient legislative debate prior to the approval of
the law, which lacks motivation and appropriate grounding; (b) from the compara-
tive law background it becomes clear that foreign legislations undertook precautions
to avoid the violation of the right of intimacy, such as limiting the temporal
maintenance of keeping the data obtained; (c) the law is vague as to the extension
under which the service providers may hear and keep the communication without an
appropriate judicial order; (d) the orders for intervention are dictated by the Gov-
ernment or under the Argentine Executive Power (PEN) authorization were drafted
in such fashion that the data obtained had the risk that could be used for different
ends and; (e) the PEN exceeded its constitutional right to regulate laws when enacted
decree 1563/04. The Argentine Executive Power appealed and the Federal Chamber
of Appeals in administrative matters confirmed the decision pointing out that the
defense of the governments had technical defects (an euphemism used by judges
when the appeal is poorly drafted), and the fact that the decree was suspended for an
undetermined time but not derogated, meant that the discussion was not abstract and
the law itself continued in effect because it was not derogated. Furthermore, the
arguments of Mr. Halabi were not theoretical, but as a lawyer using different
telecommunication services, he had a concrete interest, and the amparo, being a
summary action, was the appropriate remedy to stop and protect the rights under
analysis and the constitutional right of protection of correspondence that could not
be opened except by prior judicial consent, and the apparent end of the legislation
was a vague statement “to combat delinquency”.
The Government filed an extraordinary appeal before the Supreme Court on the
basis that there was a dispute involving section 43 of the national Constitution, the
appeal was granted by the Chamber of Appeals and the Supreme Court accepted to
hear the case. The Supreme Court took the case and noted that both the Public
College of Lawyers and the Argentine Federation of Colleges of Lawyers make
filings, as “amicus curiae”, supporting the contentions made by claimant and a public
informative hearing was held before the court with all parties where it became clear
that the arguments of the Argentine Executive Power, were only addressed to
disqualify the effect erga omnes of the decision implying that it was not restricted
to the case but applicable to any person invoking an individual action involving
homogeneous rights, accepting the arguments that the Chamber of Appeals
established when confirmed the first instance decision, establishing that the Argen-
tine Executive Power claimed, on appeal, that the case was presented by Mr. Halabi
on an individual basis but the case had a collective dimension, but under the law in
order to confer such standing the intervention of the (Defensor del Pueblo) ombuds-
man was required and his presence was omitted.
The Supreme Court arguments were focused on deciding the case in determining
the legal nature of the right under discussion and established as a matter of proce-
dural standing was necessary to precise three categories: individuals rights, rights of
collective incidence that protect collective rights or properties and rights of collec-
tive incidence covering homogeneous individual interests. In any of those categories
the existence of a case is necessary, according to Article 116 of the national
Constitution supported by several precedents18 of the Supreme Court.
Actions that pursue the control of legality of an inferior tribunal are not acceptable
for the Court it must have a case, depending on the configuration of a case, which is
typical and different for each of the categories as well as the circumstance whether
the infringement has occurred or it is imminent or is a future predictable causal lesion
involved.
The general rule is that the lesion to individual rights should be defended by the
individual person protected, except if involves homogeneous rights. The fact that the
case is brought by only one claimant does not change the nature of the procedural
issue. These cases are protected under section 43 of the Argentine Constitution, and
result from the well known precedents Kot and Siri,19 which created the amparo as a
Pretorian decision to protect constitutional rights, based on arbitrary decisions,
whereas the rights of collective incidence are exercised by the Defensor del Pueblo
or registered Associations protecting collective interests. This does not mean that an
individual right is also affected and the evidence at such case is not focused on an
individual right but on an offense to a collective right.
However, under section 43 of the Argentine constitution’s second paragraph,
there is a third category of collective rights referred to homogeneous individual
rights. Such is the case of personal individual or patrimonial rights derived from
environmental infringements of rights under competition legislation, affecting the
rights of consumer and users and the rights of discriminated subjects, because there
is a collective right but affecting individual rights entirely divisible but provoked by
a sole fact that is continued and affect each of them and hence it is an identifiable
factual homogeneous cause, where it leads to consider reasonable to analyze in only
one lawsuit, with expansive effects as to the res iudicata erga omnes resulting from
18
Fallos 310:2441, 7th recital, Fallos 311:2580, 3rd recital and Fallos 326:3007, 7th recital.
19
Fallos 239:459 and 241:91.
118 O. J. Marzorati
the decision, except as to the determination of individual damages. However, there is

not in Argentine Law (at the time and still at present time) a specific norm making
and authorizing such distinction. Such law is necessary to establish whether in case
of such homogeneous rights the legitimize and correspond exclusively to a member
of such class o include public agencies or associations, how these processes should
be conducted, which are the expansive effects of such judgments and how such
judgments are effectively enforced, pointing out that congress was in default of
enacting legislation in that respect.
The Supreme Court thus interpreted and established, in view of the inexistence of
precise legislation to solve the problem, that it considered section 43 of the consti-
tution was by itself operative, and it was the obligation of the Justice to make it
effective, when the evidence of the case is clear that a fundamental constitutional
right is affected, then there should be access to justice for the individual. Thus, that is
the basis of the right to amparo, which was created by the Court on the basis that
when there is a right, there is a legal remedy every time that the right is contested
because constitutional guarantees exists and protect to individuals by the sole fact
that are part of the Constitution, with independence of the existence of regulatory
laws, which could not been an obstacle for the effective existence of such guarantees.
The Court added that in the search for such effective protection the adoption of
guidance for establishing such remedy required the existence of a fundamental right;
like the right to intimacy which encompass not only an individual claimant but all of
the individuals that could be affected by the ruling, since the right to intimacy is a
right granted to all citizens. The Court made reference to the existence of Law
25,67520 and the fact that Law 25,873 permitted the public Ministry and the courts to
authorize any of them to ask the service telecommunication provider to intercept and
deposit of the information so interfered for up to 10 years; further including the
registers of traffic of all communications on clients for consultation without any
charge applicable to the justice or the Public Ministry. In addition, the Secretary of
Intelligence of the Government (SIDE) was the organ designated by the Ministry to
the Public to tap the telecommunication lines.
The Court found that such actions clearly runs against the personal and collective
intimacy right protected and the guarantee against any interference abusive or
arbitrary in private life as resolved under International Conventions approved by
Congress pursuant to Art. 75 par. 22 of the Argentine Constitution21 incorporated
under article 1071 bis of the Civil Code and article 18 of the communication law
declaring that the correspondence by telecommunications is inviolable. Its intercep-
tion is only admitted by requirement of a competent judge quoting cases of the
20
Law 25,675 provides in section 33 in fine thereof, that the judgment shall be res iudicata with
effect erga omnes, except when the action is vacated even partially.
21
Universal Declaration of Human Rights, art. 12 and Inter American Convention on Human
Rights, sec. 11 both treaties enjoy constitutional Hierarchy over laws passed by congress.
tribunal where the inviolability of the correspondence was validly restricted, in

specific cases and justifications22 complying all due process steps.
The second case decided by the Supreme Court23 was based on a case brought by
PADEC, an association of consumers and users against Swiss Medical Company
with the object that a civil court declared the invalidity of the clauses contained in the
standard contract that is given by the company to all its affiliates. Insofar it contem-
plates the right of Swiss Medical to unilaterally modify the amount of the monthly
payments and the benefits of such plan, it exempts from liability for damages
resulting from the lack of expertise, negligence willful intent (dolo or culpa) or
imprudence of its agents or those that provide the health support, as well as the
liability for suspension of their services.
Further, the claimant required that the Supreme Court leave without effect the
increase in value of its monthly payment recently decided last year by the Swiss
Medical on three opportunities based on sections 52 and 53 of Law 24,240.
The Procuración General del Tesoro sort of public general solicitor made a
resume of the decision of first instance and the Civil Chamber based the fact that
individual rights totally divisible does not conform a collective action and require
prudence in the judges because making the judgment erga omnes obliges to other
individual clients of Swiss Medical to be party in a case in such they were not
notified and therefore the judgment could not oblige a person that was completely
unaware that his patrimony was at stake because in a collective action any of the
consumers has by law the option to decline to participate in the litigation and he is
then excluded from the effects of an adverse or favorable judgment. PADEC
sustained that the judgment infringes the rights of consumers and users and even
when there are no norms that regulate a collective process, this class of actions is
contemplated in Art 42 and 43 of the National Constitution and section 55 of
Consumer Law 24,240, while the decision under recourse invoking the silence of
the legislation avoids to discuss the substantive matters. Further the decision is
inconsistent with its own by laws and makes non operative article 43 of the National
constitution, ignoring the Halabi precedent, pointing that before diverse interpreta-
tions of legal norms should have selected that interpretation compatible with the
22
Supreme Court, Fallos 318-1794 with the vote of Justices Fayt, Petracchi and Boggiano. All such
arguments doctrinal and international conventions were considered sufficient to prove that the
interference of telecommunications as contemplated in the legislation excludes that the authoriza-
tion by agents of the Administration placed in their hands with full discretion to give such
authorization and proceed with the interception and registry particularly taking into account that
the Political direction of SIDE falls within the political orbit of the PEN, bypassing that the
instruction of authorizing an interference requires Judicial Power consent. The case was decided
for a majority of four positive votes plus three partial dissidences but overall supporting all of them
the decision on its substance and the reservation of the last Minister on the need of intervention of
the Defensor del Pueblo.
23
Padex vs. Swiss Medical S. A. on nullity of contractual clauses dated August 21 2013 was
originally decided by a civil court that rejected the claim confirmed by the Civil Chamber of
Appeals and was introduced to the court by an extraordinary appeal granted by the chamber and
accepted by the Supreme Court.
120 O. J. Marzorati
rights and guarantees of the Fundamental Argentine Law, the constitution. More-
over, it did not apply to the American Convention on Human Rights and the doctrine
of the Inter American Commission of Human rights both ratified by Argentina. Both
impose on States the obligation to remove obstacles where individuals are vested
with rights admitted by the Convention in a case that the extraordinary federal appeal
is admissible because it involves a federal question.24 On the basis of specific
provisions that the constitutional amendment of 1994 contemplated. Furthermore,
the individual defense of their rights is not effective because the size of the lesion is
less relevant than the cost of litigating in their own right and concluded that the
association of consumer and users and Defensor del Pueblo broadened the spectrum
of legitimacy of an individual to file a claim on his rights even if they have a
collective incidence25 the Procuracion del Tesoro quoted to jurist Piero
Calamandrei26 that the legal order contemplates cases of anomalous legal standing
or extraordinary legal standing when a person alien to the process may participate as
legitimate parties, doctrine accepted by the Court in fallos 330-2800 assimilating to
the Defensor del Pueblo as a case of anomalous legal standing and those facts are
applicable to the only remaining petition existing on the case of this case the right
granted in the contract of adhesion to Swiss Medical to unilaterally increase the
value of the monthly payments there under, since all of the other causes of action
contained in different clauses of the contract were not any longer in effect.
PADEX has legal standing to bring this action and the Court already declared that
the judicial protection is not limited to the amparo as such, but it is admissible to be
extended to other procedural remedies such as the habeas corpus the conclusion
permits the affirm that the claimant enjoys legal standing to file the complaint, but
since there are not minimum procedural guidelines regulating the class collective
action guaranteeing the right of defense in an action that the consumer had no
effective possibility to oppose or participate, it is admissible to revoke the judgment
insofar as it does not accept the legal standing of PADEX and continue with the
process on the substance of the clause.
On August 21, 2013 the Supreme Court accepted and agreed with the opinion of
the Procurador del Tesoro declared the admissibility of the extraordinary appeal,
leave without legal effect the judgment of the Civil Chamber and returned the dossier
24
Supreme Court. Fallos 311-2553, 314-529, 331-861 among many others.
In such regard the Halabi precedent becomes applicable analyzing the nature of the action
particularly the rights of collective incidence related to individual homogeneous interests as
explained by the Court; declaring that such rights are covered by the second paragraph of article
43 of the Argentine Constitution because they relate to consumers and users. The court found that
there was a clear limitation to the access to Justice, in case of denial, despite that there was one
factual homogeneity legitimated according to article 43 to bring an action of analogous features than
those actions existing in USA.
25
Legal opinion of the Procurador (Solicitor General) accepted by the Supreme Court to reject the
plea of lack of legal standing in re Asociacion de Grandes Consumidores vs. Provincia de Buenos
Aires et alter s, declarative action. Fallos 320-690 and opinion A 186 ib Asociación Beghalensis
et alter vs. Health Ministry s/amparo, Law 16,986 judgment, June 1, 2000 Fallos 323-1339.
26
Instituciones de Derecho Procesal, 2nd Italian, Vol 1, pp. 261 et alter.
to the first instance court to follow the procedure and comply with section 54 of Law
24,240.27
Finally, we selected PADEX vs. BANCO DE BOSTON published on March
14 2017. This recent case was subject to an extraordinary appeal after two instances
in the first instance commercial court and the federal Court of appeals in adminis-
trative matters decided against PADEX a consumer association that filed the claim as
a collective action as requested the repayment of those charges which were not run
over by the statute of limitations against Banco de Boston, the Bank, claiming the
restitution of the periodical charges for maintenance the savings account that the
Bank imposed to holders of savings account, over many years and demanded the
repayment over a period of 10 years, claiming that the maintenance charges were
increased more than the interest paid by the bank on such account and such
procedure was abusive as defined by the consumer law, asking the restitution “in
integrum” of them, since it claimed that the amount of the increases were always
fixed by the bank and the increase in the rate of interest paid by the bank was
significantly lower to the detriment of the holder. The bank answered the complaint
and claimed that the holder consented to all such increases over the years and he
never claimed that the charges were high or objected to such increases.
At any rate the Bank claimed that all such interest increases in addition of being
impliedly consented by the holder were approved in each and every increase for the
finance authority, the Central Bank of Argentina, who has never made any objection
to such increases and offer as evidence the bank consent and the savings account
statements delivered to the holder with any such increase over the years with the
legend that the rendering of the account was finally settled if the holder did not object
within 30 days after the reception of such statements, period also established and not
objected by the Central Bank. Moreover, the defendant informed that the bank sold
all accounts to the Standard Bank including the savings account discussed and its
balances to the purchaser. Such a transaction was approved by the Central Bank
18 months before the claim of PADEX was filed so there was an impossibility to
return the interest since the account was maintained in another bank and the holder
was aware of such situation, which was public and the petition to make a retroactive
claim was incorrect because it was a petition that only was between the Bank and a
client.
Claimant based his contention that the methodology installed by the bank was
clearly abusive and a violation of consumer rights under Law 24,240 as amended
requesting the “restitutio in integrum” provided for under section 54 of the
27
Section 54 of law was incorporated by Law 26,361 and disposes that the judgment of Court
favoring the pretension shall be res iudicata for the party demanded and for all the consumers that
are in similar conditions, except those that manifest its will not to participate before the judgment is
decided in the terms and conditions determined by the Judge sitting in the case and it shall follow
the third paragraph of Law 24,240 as to the disposal of the economical indemnity on the basis or the
principle of integral restitution and if the damage is different for each consumer groups shall be
established or classes between them under separate incidents to estimate the particular indemnity
that correspond to any consumer.
122 O. J. Marzorati
Consumer Law. The Bank argued that the holder has impliedly consented to the
increase of interest on an individual private account and hence he does not have a
case. The argument was accepted by the first instance commercial court rejecting the
claim. PADEX appealed to the Commercial court of appeals which confirmed the
decision of the first instance court and confirmed the first instance decision on both
arguments raised by Defendant rejecting the petition to render a retroactive judgment
for the last 10 years. In addition, it was impossible to enforce the judgment against
the Bank because all of the assets of the Bank had been transferred to Standard Bank
18 months before the action was filed by PADEX. PADEX filed an extraordinary
federal appeal sustaining that financial consumers were deprived of the protection
granted by Art 43 of the Constitution. The appeal to the Supreme Court was granted.
The Supreme Court accepted the case and revoked the inferior courts’ decision
for the following considerations:
– Clauses that establish a charge for maintenance of account, of a savings account
are null, because the eventual existence of costs whose value may absorb not only
the interest offered by the Bank, but also the capital saved by the client, provokes
the destruction of the economy of the contract, dissolves the ends for which a
savings account is set and affects the saving efforts of citizens, of clear general
interest.
– Approvals of the Central Bank of the amount of a commission for “maintenance
of an account” related to savings account by Communications A 3042 and A
3336 and the eventual lack of objection to such norms does not prevent its judicial
review, because such norms do not permit the rejection of the alleged abusive,
section 12 and 1138 of the Code.
– A commission approved by the Central Bank for maintenance of an account, may
be implemented on its origin in a licit fashion but afterwards in a determined
moment of the contractual “iter” becomes abusive as result of an economic
modification of such charge that generates an imbalance or the reciprocal obli-
gations predictable in the contractual type.
– The tacit consent of consumer to the collection by the bank of a commission for
“maintenance of account”, applied to the saving account does not validate the
revision of the clause inserted in the banking contract, because Law 26,739 and
its regulatory decree in effect and the Code section 1118 allow to disqualify
abusive clauses even if negotiated individually or approved expressly by the
consumer.
– The chamber should have not validated the tacit consent or the expense by
consumer, when the precedent normative in effect at the time made operative
the protective principle contained in our Constitution. Such decision is arbitrary,
the extraordinary appeal granted and the judgment revoked, legal costs to the
defendant. The dossier is returned to the first instance court to make a decision
compatible with the present decision. Nowadays is still pending on the merits.
– Recent cases related to the powers of associations of consumers recognized the
legal standing of such associations to bring such cases in favor of consumers are
to be discussed below as well as other legal users précising exactly which type of
rights were successfully recognized to consumers as result of court actions that

took a long time because they involve constitutional rights, which final decision
belongs to the Supreme court of Argentina. Such matters involve in many cases
procedural questions involving Civil and commercial courts of the provinces as
we shall describe below.
4 Various Relevant Consumer Cases Including Recent

Cases Published in 2017 and 2018
A civil association promoted an action on behalf of 18 banks and finance companies

claiming the charges collected by banks during 10 years for contingent drawings in
their accounts claiming that all cases be unified in one sole procedure before one
court. After denials or other solutions at the different courts the case was finally
heard by the Supreme Court and decided on July 10/2018. The Supreme Court
recognized the legal standing of the Association to plead and ordered that all cases be
heard before the Tribunal which was more advanced among the 18 cases filed in
different Courts to avoid the inconsistency of contradictory decisions, unifying all
cases before Court N 1. (CSJ Consumidores Financieros c. Banco Itaú, et alter.).
– The civil and commercial courts of the province of Mendoza c/Prudencia Cía.
Argentina de Seguros, final decision 28/03/2018. The Argentine Supreme Court
finally decided that The Civil Association had a generic legal standing to defend
consumers in relation to consumers rights of collective incidence to the extent that
they refer to individual homogeneous interests, limiting the petition to a sole
ground in the case and ratifying the PADEX decision quoted above.
– Consumer rights. Griselda Liliana vs. Caja de Seguros S.A. on payment of
insurance for labor disability published on RCCyC on July 13, 2018. The petition
was denied both on first and second instance because the petition of the indemnity
was limited to the insurance policy, but on appeal to the Supreme Court of the
province the court admitted the claim applying the consumer law instead of the
insurance regulations for considering that the consumer law was of public order
reflecting a constitutional mandate under article 42 of the Constitution which
should be privileged.
– Cámara en lo Civil y Comercial of the Province of Cordoba 7/11/2017 RJC
vs. BBVA Banco Francés on damages. The Court decided that according to the
principles of consumer law the indemnity for damages arising out of the theft of
funds in a safe box of the Bank, which was owned by the son of the victim, his
father, who had lawful access to the safe should be acknowledged, despite that the
owner did not suffer the damage but his father, who was duly authorized to have
access to the safe, though that the safe was not in his name and accepted that the
amount of US$196,000 dollars received by the father for the sale of transfer of a
property was made in the same bank were deposited in the safe the same date that
the public deed was executed condemning the Bank to pay moral damages and
124 O. J. Marzorati
loss of chances since the lease for a safe was a contract of adhesion which could
not be opposed under the circumstances to the authorized user of the safe.
– Barbosa Noemi vs. Banco Hipotecario. 7/11/2017. The court condemned Banco
Hipotecario for not considering the request to annul the credit card of the bank,
obliged to do it later and established a charge which was not agreed in the
conditions of issuance of the credit card establishing moral damages and punitive
damage (civil damage) against the Bank as an advice not to incur in the future in
such practices
– Ortiz S.J. vs. Liderar Insurance Company. Mendoza Civil and Commercial Court
decision of the Court of Appeals, Mr. Ortiz worked for the police force and went
daily in his motorcar to work he suffered an accident while going to work which
result on physical permanent damage on his arm, the company discussed over
15 years that accident in a motorcar were excluded in a general policy included
with mosquito bites, nuclear disaster, earthquakes, etc. The Court considered the
policeman a consumer that specifically contracted the policy for his motorcar and
he was not advised of the exclusions. The court based on the consumer law
decided against the insurance company for failing to advice and inform clearly
what was the coverage of the policy, delivered after the insurance was contracted
and maintained the position for 15 years updating the value on the motorcar,
establishing interest during all such term considering that the insurer was in
default since he denied the compensation to give full indemnity to the consumer.
– HSBC Argentina vs. Berejano on enforcement of guaranty in rem on his car. The
judge established that this was a non-commercial but a private operation since the
car was for private use and established the existence of a consumer relation
protected under section 42 of the Constitution and under section 36 of the
consumer law the Chamber of Appeals in commercial matters decided that the
extension of the jurisdiction was illegal and he should have been demanded in his
domicile situated in an Argentine province and not in the city of Buenos Aires
making the liable for the legal costs incurred in the defence of the case.
– Limitations to consumer. Masri vs. Swiss Medical S.A. judgement 5/07/2018.
The consumer asked a declaration that he was exempt of litigation costs before
bringing a lawsuit against Swiss Medical. The Court of Appeals, chamber D,
decided that the consumer has right to be excluded of the Court tax 1.5% on the
amount of the claim payable on filing the claim as consumer but once he
continues the claim he has to support, and afford the eventual t litigation costs
and if his claim is rejected he has to pay the litigation costs since the consumer
law does not give him any other franchise to litigate without expenses.
– National Court for Commercial Matters judgment dated May 10, 2018. PFP
et alter vs. Bank Supervielle S.A. The banking contract is not a consumer
contract. The fact that one party is a weak party does not change its nature and
the fact that both parties have an unequal bargaining power does not make such
contract a consumer contract. Hence, punitive damages cannot be charged to
claimant on a non-consumer relationship. However he is entitled to moral dam-
ages because the bank reported the Central Bank that his client has issued checks
without provision of funds and for that reason he was forbidden to have a
checking account and he is entitled to moral damages and loss of chances because
he could not complete a commercial deal.
– Current Banking Account. 14/05/2018 Banco Santander Río vs. Silvera Garcia.
The summary action was rejected because it was based on the balance of the
account which included a loan unpaid to the bank that should not be forming part
of the balance of his credit card. Such action is contrary to section 36 of the
Consumer law as all items related to the bank loan were omitted, legal costs were
charged to the Bank.
Due to inflationary pressures over the last years attributed to a poor handling of
public affairs by prior governments including the manipulation of official indexes or
the appropriation of the profit of the Central Bank or contributions of the pension
system to finance public expenses generated the need to extend the declaration of
public emergency. The new elected government moved to suppress part of the local
financing with the emission of bonds or similar papers in the local and later with
external funds and looked for World fund financing to turn the economy and to
reduce public expense to current income have created certain instability with the side
effect of producing a continuous run between merchants, industrialists and labor to
compete in the increase of prices and salaries with the obvious purpose of
maintaining or making gains over the monthly inflation rate or at least over the
devaluation of the peso, trying to avoid application of supply laws.
Law of Commercial Loyalty 22,902 is related to our subject28 Section 1,
commented at the footnote, is supplemented under section 6 thereof, making pro-
ducers and manufacturers, packers or whoever, fraction the merchandise as well as
importers to identify the product according to the requirements of section 1 thereof,
forbidding to merchants either wholesalers or retailers to commercialize all type of
products, which identification is not in accordance with the requirements of the law.
Furthermore, the precedent parties shall be liable for the truthfulness of the indica-
tions typed on the labels when they do not show the documents that identify, beyond
any doubt, the parties responsible of its manufacture, importation or commerciali-
zation in bulk or fractioned.
28
This law came into effect as of May 5 1983 and is still in force. Succinctly, the law provides for
the identification of goods related to its contents and the packaging of any good marketed in
Argentina being manufactured in the country or abroad, detailing the obligation of labeling its
denomination, name of the manufacturer, country, the quality, purity of its content or mixture, and
the net weight and measure of its content; forbidding in brochures, presentation, labels, or packages
words, phrases, descriptions trademarks or any other sign that may induce to confusion, error or
cheating on the nature, origin, quality, purity or quantity of fruits or products its properties features
and uses, marketing conditions or production techniques.
126 O. J. Marzorati
All misleading advertising, propaganda that contain false representations may

lead to error or confusion or may induce to error, cheating or confusions with respect
of features or properties, nature, origin, quality, purity, or mixture for products of
national origin or from foreign origin or its quantity, use, PRICE, or conditions of
marketing or techniques of production on personal movable property or real estate or
services is thereby forbidden (section 9 of the law) as well as the offer of rewards or
gifts as a condition to purchase or to hire services when said premiums are subject to
pure gambling or promote the concourses competitions of any nature or when the
participation in whole or in part is conditioned to the acquisition of a product or the
contracting of a service Section 10 of Law 22,802. All merchants are obliged to
exhibit and advertise prices, and those that provide services should inform in detail
the features of such services. All products manufactured in Argentina need to
indicate their origin on the label.
Those that infringe this law shall be sanctioned with fines up to Pesos 5,000,000
(US$131,000), suspension up to 5 years on the registry of suppliers for the Govern-
ment, loss of concessions, privileges, special fiscal or credit regimes and closing of
the establishments. All such measures may be independently or jointly imposed on
those infringers.
The above circumstances coupled with an increase of government expense and
certain postponement on tariffs had a combined effect on a very gradual reduction on
inflation rates that obliges to control prices on every level of the economy. Such
control is made by applying old former laws still in effect or new laws to monitor and
systemize the system of prices or through surveys on prices at the wholesale level or
through a soft control of careful pricing agreed between the Secretary of Commerce
and shopping malls with the threat to apply the supply law and the sanctions on
infringement the level of prices with legislation. Thus, different control price
mechanisms such as old Supply Law 20,680 as updated by Law 26,991,29 Law of
Public Emergency and reform to the exchange system30 and a system to monitor
compile and systematize prices were developed to control the visible monthly
increase of prices by wholesalers or retailers. The oldest law of public emergency
was repeatedly used by former governments and is still in effect, although not
applied. Such law declared the public emergency in social, economic administrative,
financial and foreign exchange delegating into the Executive Power all the powers to
re-shape the economy, the debt and the foreign exchange system and activate the
development of the economy. It is not the purpose to discuss such law in detail, as
regulated by decree 89/2001, but is Article 13 thereof is still alive giving powers to
the Executive Power to regulate transitory prices of raw material goods and services
29
Law 20,680 was enacted on June 27, 1974 attempting to regulate the offer which created a black
market out of control on balance the law failed and its enforcement was complex and it was updated
by Law 26,991 that created a new authority of application the law was enacted in September
19, 2014.
30
Law 25,561 enacted on January 6, 2002 with the big political crisis and economic situation as
Argentina freed the equivalence between or peso equivalents to one dollar while 5 years later the
exchange is US$1 ¼ Peso 15.45.
to protect the rights of consumers and users, from the eventual distortion of the
markets caused by monopolies or oligopolies actions.
This law on supply on goods and services (abastecimiento) regulates the sale and
the purchase of assets, the barter and renting of movables, and the location of works
and services of any nature, including contracts or legal relationship, for free or
onerous, of permanent or accidental character for production, construction, hygiene,
housing, processing distribution, health, food supply, sports, culture, transportation
and logistics, as well as leisure or movables, or services that directly or indirectly
provide for basic or essential needs oriented to a better living of the population. The
law forbids setting of artificial prices, or prices without any justification with no
proportional increase of the costs or the generation of abusive profits or revaluation
of existing stocks, except if authorized, and sanctions the high stock of raw materials
or products or denials to supply goods in stock.
The Authority of Application was authorized to fix maximum and minimum
prices or level of profits in any stage of the economic process Art. 2, Law 26,991,
fines up to 10,000,000 pesos and the closing of a business up to 3 days with
withdrawals up to 30 days of all products on material in infraction to the provisions
of the law. So far this law has not been applied in recent times after being enacted
and published.
6 Observatory of Prices to Monitor and Advise

on Systematized Price Trends
A second price mechanism was to create an Observatory of Prices and availability of

materials.31
This is also a national law. Its purpose was to monitor, maintain statistics and
systematize prices and the availability of necessary materials, finished goods and
services produced, commercialized or rendered, as the case may be, in the national
territory. The Observatory of prices shall be integrated by high governmental
officers, public entities, and up to three associations of defense of consumers
involved in a wide range of commercial or industrial activities.
In addition to such activities of controlling prices and availabilities of material
goods and services, the duty of the Observatory is to report any behavior that distort
prices in the market that can be detected during its process of compiling, monitoring
and systematization. Additionally, upon request of the Authority of application
issues technical opinions on prices and availability of goods and services.32 The
composition of the members of the Observatory was regulated by Dec. 41/2015
published January 31, 2015.
31
This Law 26,992 was enacted on September 17, 2014 a few days later than the updating of the
Supply Legislation.
32
Section 5 and 6 of Law 26,992.
128 O. J. Marzorati
7 Special Disclosure Regulations Promoting Price (Precios

Cuidados)
A third mechanism is the adoption of a system of Careful Pricing or controlled prices

called Precios Cuidados in Spanish. This system regulated wholesale prices as well
as prices to the public with monthly or quarterly updates including the value of raw
material, productive components, cost of salaries, value of energy and gasoline/
gasoil. It was regulated by the secretary of Commerce under resolution 20/2014,33
which consist of different agreements with leading companies or groups that deter-
mine product pricing, such as Big Malls or other price formation leaders or groups or
companies, but affected to large groups selling products of massive consumption and
the resolution approved all of the agreements made with such parties signed by the
Secretary of Commerce, attaching a six pages list of all the products subject to price
regulation and the violation of such prices involve sanctions applied by the Secretary
to infringers.
All such price control systems or price monitoring and their cost controlled not
only a reasonable profit but also transparency in the formation of pricing included the
permanent reestablishment of the Delegation of powers to the Argentine Executive
Power and the severe sanctioning system commented above, imply the control of all
economic processes with the exception of micro or Pymes (small and medium size
companies), provided that such Pymes do not have a dominant position of the
market, but conform a large group. In this regard the Supreme Court revoked
injunctions or precautionary measures decided by the Commission of Defense of
competition on grounds that Commission lack such powers, since it was not the
original Tribunal of the Defense of Competition but just a commission that could
only recommend sanctions imposed by the Authority of Application. In this respect
the enactment of Law 27,442 mentioned in note 14 updated and overhauled the
Defense of Competition legislation, since the law created per se infringements of the
competition system by declaring that y practice absolutely restrictive of competition
is null and void under the new law and contrary to the general economic interest,
(a) direct or indirect agreements between competitors that fix the purchase or resale
pricing of goods or services, (b) establish obligations to produce, process distribute
or commercialize a limited quantity of products or render a restricted number,
volume or frequency of services, (c) divide, assign, distribute or impose an horizon-
tal format for segments of a market, clients or supply sources, (d) establish, agree or
coordinate abstentions or rigging offers in public bids, or other forms of bidding.
With respect to our subject matter the law also defines as individual practices
restrictive of free competition to subject the sale or the condition of not using, or
33
Res. 20/2014 is related to the system of Precios Cuidados which basically consisted in the control
of products of massive consumption, with the purpose to administer and ensure supply to the market
with correct admitted and transparent prices of products and services, previously monitored and
recently the Government attempted to postpone this regime recently offering a 2% increase in the
price level trying to curb prices.
acquiring, or resale or supply product or services processed, marketed of distributed

by a third party or to: to fix the price of products or services or exchange information
to the same effect, or condition the sale of a product to the acquisition of something
else, or the contracting of another service or to subject the rendering of a service to
the use of another service which of course modifies the total price of the product or
service which is a subtle method to fix and to control the price through a related term,
such as a common banking practice to lease a safe box in their vaults if the lessee
takes an insurance on another piece of property with a related company associated to
the bank. The law also defines a dominant position when the offeror is the sole
offeror for a product or service or even if it is not the sole supplier, is not exposed to a
substantial competition or when he is in the position to determine the economic
viability of competitors. The law creates the clemency system to permit legally
denounces from persons that bring enough evidence of anticompetitive actions
rewarding him with no penalties or sanctions for his contribution to uncover
evidence on an scheme distorting competition, the creation of a Court of Appeals
to hear on appeal the defense of competition cases which now have become national
crimes. The downside of the system was that there is not an effective system to
compare prices except for shopping malls, which are inspected, and some minor
supermarkets mostly Chinese but Pymes, which compose the majority of the small
stores don the country are excluded of the system—In short there are many prices
that are not reviewed, making comparison partial on national scale on even on a
regional one. There are multiple small shops where the merchant fixes the price
according to his own needs limited only by competition of similar stores in his area,
particularly with respect of products sold under unknown trademarks. Such sort of
kiosks establish pricing, but also coupled with some strings, taking into account the
most immediate competitor or, in affluent locations or communities, selling well
known products at higher prices, based on a closely held clientele.
8 Conclusions
– Argentina has passed from a system of traditional freedom of contracts based on

party autonomy to a system of protection to parties which consent is obtained by
adhesion, where abusive clauses may be deemed unwritten including clauses that
have received administrative regulatory approval unless they were negotiated,
except in case of consumer agreements.
– Such provisions apply to B2B commercial contracts. They do not apply to
consumer contracts where abusive clauses even if negotiated with consent of
the consumer are null, and deemed unwritten notwithstanding that the consumer
has expressly agreed to such clause.
– However, in consumer contracts the law does not permit to consider abusive the
relation between the price and the goods or service rendered or those reflecting
conditions different to those agreed in international treaties or in mandatory
norms.
130 O. J. Marzorati
– Until 2015/6 market considerations related to price control by standard contracts

have been ignored since neither the government nor Court decisions made any
distinction between essential terms and ancillary terms in any type of contracts.
– However, prices can be controlled by the action of private companies and
government agencies in antitrust proceedings based on the abuse of dominant
positions in a relevant market or by government on public emergencies of supply
or by fixing maximum, caps or minimum prices to certain type of products.
– Courts in Argentina are empowered to protect consumer and users because the
Argentine Constitution has included since 1994 social rights that are basic and
fundamental rights that have been protected by the Supreme Court of Argentina
in different commented cases in the absence of class actions regulations.
– Such cases relate to claims filed by the Association of Users and Consumers
making null and void maintenance charges collected by a bank to a savings
account, which exceeded the amount of interest paid by the bank even if such
increases were authorized by the Central Bank, or in case of insurance by the
Argentina Insurance Regulator bypassing or ignoring the administrative approval
as a valid defense of the Bank or the Insurer.
– The decision of the Supreme Court circumventing the defense or the express
approval of the amount of the commission by the Central Bank has raised
concerns on the banking system, since it is the first time that a commission
approved by the Central Bank has come under Court screening and the decision
of the Supreme Court overcame the original prior authorizations of the central
Bank as to value of the commissions as a valid defense to raise against the
consumer. It is to be noted that the decision of the Supreme Court is valid only
for the case in which the Court has expressed its opinion.
– In short, in the absence of distinctions between essential and ancillary terms the
Argentine Courts have supported consumers on the basis of Constitutional
principles and consumer legislation derived from such constitutional provisions
and the principle of good faith, the Courts have framed decisions on the validity
of price related terms in certain cases, supporting the legal standing of Associa-
tion of consumers and users on behalf of consumers in cases related to individual
homogeneous rights.
– As a direct effect of such Supreme Court precedents and despite that Argentina
does not have a system to protect control of price related terms in standard form
contracts; and it does not have a regulated system of class actions, the combined
actions of the law on supply on goods and services, the Observatory on pricing
and the control of Precios Cuidados, roughly translated as careful pricing applied
in shopping and wholesalers have contributed to control prices offered to the
general public.
– The new law on defense of competition brings new possibilities to attack the
relation between cost and margins or profit on costs, including a clemency system
to forgive the first persons filing a denounce of an anticompetitive concerted
action or individual practice or any conspiracy to ring prices in infraction of the
law if he brings adequate proof of the anticompetitive practice, rewarding the
denouncer of any sanctions on himself. Once the system is tuned and becomes
operative in a couple of years, when the whole system is implemented, the

tribunal members are designated and the Court of Appeals is established, the
defense of competition forum shall help to control the issue of price related terms
with the monitoring of the Observatory on pricing and the effective control of
Precios Cuidados by the Authority of Application.
– In the meantime, the combined effect of antitrust actions based on consumer
protective legislation has been active on regulated business such as banking,
insurances, production and sale of medications, private medicine and public
services by fixing caps to fees applied to complete transactions or reject price
related terms as unfair practices under consumer legislation or deferring price
increases by administrative action in transportation, basic food items for the
population or restrictions on delivery of products to the general public and the
need to have public hearings for any increase on public services.
– On the other hand, the system is not perfect and particularly the increase of prices
in private health has not been properly implemented. History records show that
price control in the sale of products and the delivery of services has been poorly
planned and Court litigation involve lengthy procedures which final decisions
take years of litigation that cannot be afforded by consumers of limited resources
that prefer to resign their rights avoiding litigation, for costs considerations.
Notwithstanding the above, it deserves to be noted that a landmark recent
decision of the Supreme Court allowing the unification of 18 cases against
banks related to the same issue in one single first instance Court, based on the
need to avoid inconsistent decisions on the same subject, seems a signal that the
future may be brighter for consumers.
Form Contracts in Austria: Judicial Control
and Other Means of Price Control
Florian Heindler
Abstract This chapter describes and analyses the tension between freedom of
contract and contractual justice with regard to price terms in standard contract
terms. It focuses on the considerable body of judicial decisions by Austrian courts
and provides general information about the Austrian legal framework with regard to
price terms in standard contract terms. Thus, the chapter deals with general rules of
private law as well as sector specific regulation in the field of consumer protection.
1 General Information on the Scope of Freedom

of Contract
1.1 Party Autonomy and the Liberal Market Economy Nexus

in Austrian Law
Austrian civil law accepts freedom of contract as a basic component of party

autonomy (Privatautonomie). It thus awards individuals the possibility to freely
express wishes and subordinate to rules and prices freely chosen and agreed among
themselves. The underlying rationale promoting the principle of party autonomy,
and subsequently freedom of contract, is the fundamental idea of the justice that is
seen in awarding autonomy to an individual (Person) who is expected to be able to
make reasonable decisions and bear responsibility and thus as a human being must
be accepted in his or her dignity and identity.1 Nowadays, interdisciplinary research
challenges this rationale. In particular, psychological and neurobiological findings
1
Canaris (2000), p. 284; Mankowski (2011), p. 154.
F. Heindler (*)
Sigmund Freud University, Faculty of Law, Vienna, Austria
e-mail: florian.heindler@jus.sfu.ac.at

https://doi.org/10.1007/978-3-030-23057-9_4
134 F. Heindler
question the concept that an individual decides in an independent and reasonable

manner.2
Austrian constitutional law protects freedom of contract and party autonomy.
Although it does not directly recognize either party autonomy or freedom of contract
as a fundamental right, their protection is guaranteed in connection with the funda-
mental rights applied to the performance of economic activities (Art 6 Austrian State
Basic Act 1867) and the right to property (Art 5 Austrian State Basic Act 1867; Art
1 additional protocol no 1 ECHR).3 However, this does not mean that the rules of
Austrian constitutional law are necessarily associated with a competition-driven
liberal market economy.4 Furthermore, the Austrian Constitutional Court is very
hesitant to repeal price caps or other limitations to freedom of contract, but rather
emphasizes the legislator’s broad margin of discretion to limit party autonomy and
freedom of contract.5 Nevertheless, enacting restrictions to the freedom to choose a
business partner and agree on prices requires substantive legal justification from the
legislator.6
§ 1060 Austrian Cc stipulates that apart from referring to gross imbalance in the
meaning of leasio enormis (§§ 934–935 Austrian Cc), a sales contract cannot be
challenged on the basis of price issues. The said norm, which is outlined in the
section on sales contracts, applies to any other contract for consideration. However,
it does not exclude the application of other rules directed at challenging transactions,
but serves as a principle.
1.2 Defect of Consent
The scholastic concept of pretium iustum still applied in earlier instruments leading
up to the drafts of the Austrian Cc.7 When it was enacted in 1812, the concept was
already outdated, and the Austrian Cc did not include it, but followed a very liberal
approach to policy in accordance with the era of enlightened absolutism and
economic liberalism. Nevertheless, the fundamental tension between freedom of
contract (Vertragsfreiheit) and contractual justice (Vertragsgerechtigkeit) has never
2
For an overview with many further references, see Atamer (2017), pp. 629–632.
3
VfGH 15 June 1990 (G 56/89) VfSlg 12.379; Griller (1983), p. 115.
4
Heindler (2015), p. 68.
5
See VfGH 19 July 2017 (G 428/2016, V 75/2016) immolex 2017, 227: upholding price caps for
renting certain types of apartments; VfGH 11 March 2010 (V 56/09 et al) VfSlg 19.033: upholding
restrictions to changing gasoline prices intraday; cf. VfGH 9 October 2018 (G 9/2018, G 10/2018)
repealing the provision on free-of-charge use of ATMs as a violation of the right to property.
6
See Krejci (2007), p. 97.
7
See Entwurf Horten III 9, 25 and Codex Theresianus III 9, 57.
Control of Price Related Terms in Standard Form Contracts in Austria 135
been rejected by Austrian doctrine.8 This fundamental tension applies particularly to

price adequacy.
Hence, it is only as an aspect of the underlying principle of freedom and personal
autonomy that lack of will (Willensmangel) might lead to defect of consent.9 This is
because a transaction requires that the parties intending to transfer a right, to allow or
give something, to do something, or refrain from something (see § 861 Austrian Cc)
are both exercising their personal autonomy in so doing.10 Therefore, lack of will is
frequently a decisive reason for the legislator to set restrictions. In 1812, the Austrian
Cc introduced rules on lack of will, such as § 879(2)(4) on usury (Wucher): ‘If
someone exploits the simple mindedness, situation of duress, mental incapability,
inexperience or excitement of someone else in a way that he is promised or granted
consideration for a service by a third party in an amount of striking imbalance to the
value of the service.’11
The rule on usury combines subjective elements concerning the freedom of the
individual’s expression with an imbalance between the agreed performances. Both
elements must be taken into consideration within the context of a flexible system;
meaning that, for instance, a higher degree of imbalance requires only a smaller
degree of lack of will.12 This system of combining and weighing up different legal
elements in a flexible way, termed ‘bewegliches System’, was first mentioned in
Austria13 in the 1950s and later applied by the Austrian judiciary. It proved extraor-
dinarily suitable for the application of § 879(2)(4) on usury (Wucher) and for
regulating standard contract terms with regard to the degree of detrimental effects
of a term and the freedom of the individual submitting to the term (see Sect. 2.1
below).
2 General Information on the Control of Standard Contract

Terms
2.1 Defect of Consent and Standard Contract Terms
Expanding upon the above points on lack of will, certain limits to free expression
and choice when submitting to standard contract terms and price clauses can be
observed in Austria. For instance, it has been established that persons who accept
general terms are inter alia impressed by the language employed to convince the
8
See Winner (2007), p. 25; Heindler (2016), p. 797.
9
See Bydlinski (1996), pp. 147–148.
10
OGH 5 July 1989 (1 Ob 9/89) SZ 62/130.
11
Translation by Eschig and Pircher-Eschig (2013).
12
Krejci (2014) § 879 para 366.
13
See Wilburg (1950).
136 F. Heindler
other party.14 The style in which standard contract terms are drafted together with the
time pressure exerted on parties to accept the term limit the party’s autonomy. In
addition, it is noteworthy that legal experts draft standard contract terms. Enterprises
using standard contract terms have to bear the drafting expenses only once, but may
re-use the terms for multiple transactions thereafter.
Furthermore, customers are frequently told that standard contract terms are not
negotiable with the contractual partner15; they can either accept them or abstain from
entering into the contract. In addition, standard contract terms are now used as a
matter of course in almost any area relevant to consumers. Austrian enterprises also
observe the standard contract terms of their competitors, which leads to a large
degree of harmonization between such terms used in Austria. In certain sectors,
enterprises even cooperate when creating and amending standard contract terms.
Consumers’ lack of bargaining power combined with their tendency to disregard the
content of standard contract terms results in an absence of competition to achieve
more favourable terms. Thus, the acceptance of formal expression of will as the basic
principle for exercising personal autonomy and freedom became challenged.
Bearing in mind the given dynamics, the Austrian legislator addressed standard
contract terms in the 1970s. The increasing importance of standard contract terms
has led to the introduction of special rules in the Austrian Cc to regulate these terms
during the past 50 years. The general norm for the regulation of standard contract
terms is laid down in § 879(3) Austrian Cc: ‘A contractual provision contained in
general terms and conditions or contractual forms, which does not determine either
of the mutual main obligations, is void in any event if it is materially detrimental to
one party when considering all circumstances of the case.’16
Thus, any person is entitled to invalidate a standard contract term that is supposed
to be materially detrimental. However, fees and charges, which are qualified as main
obligations, cannot be declared null and void under § 879(3) Austrian Cc.
2.2 Consumers and Entrepreneurs
§ 879(3) Austrian Cc fundamentally applies to both B2C and B2B transactions.17 As

the norm includes the phrase ‘when considering all circumstances of the case’, it is
generally applied differently to consumers and enterprises, depending on the
particularities relating to the bargaining power of the involved parties.18 In addition,
the norm is applied and drafted according to a flexible system (see Sect. 1.2 above),
14
Graf (2017) § 879 para 278.
15
OGH 11 May 2011 (7 Ob 173/10g) RdW 2011, p. 657.
16
17
OGH 12 August 2004 (1 Ob 144/04i) SZ 2004/123; OGH 12 March 2008 (7 Ob 28/08f); OGH
28 November 2012 (7 Ob 93/12w) SZ 2012/132.
18
OGH 12 August 2004 (1 Ob 144/04i) SZ 2004/123.
meaning that a lower degree of imbalance requires a higher degree of lack of will and
vice versa in order to challenge a clause.19 However, it should be borne in mind that
courts assume a typical imbalance of bargaining power in B2C contracts20 and in this
context refer to a formal definition of entrepreneurs or enterprises and consumers
taken from the norms in the Austrian CPA (Konsumentenschutzgesetz) and the
Austrian Commercial Code (Unternehmensgesetzbuch) without taking into consid-
eration the particularities of the case (for instance, bargaining powers in transactions
entered into between a wealthy attorney or a private foundation [family office] and a
small tradesman).
In addition to § 879(3) Austrian Cc, § 6 Austrian CPA provides norms regulating
the standard terms applied to B2C contracts. In particular, standard terms applied to
B2C contracts must be drafted in ‘plain, intelligible language’ and thus meet the
‘transparency condition’ (Transparenzgebot) set out in § 6(3) Austrian CPA. With
regard to the standard terms applied in B2B and B2C contracts, § 869 Austrian Cc
stipulates that ‘consent to a contract must be declared freely, seriously, determined,
and clearly’.21 § 864a Austrian Cc holds that ‘[u]nusual provisions used by a
contractual party in general terms and conditions or standard forms do not become
part of the contract if they are detrimental for the other party and he would have to
expect these provisions due to the circumstances, in particular due to the formal
appearance of the contract; unless one contractual party has expressly made the other
aware thereof’.22
In relation to B2C contracts, a ‘black list’ of unfair terms is laid out in § 6
(1) Austrian CPA together with a ‘grey list’ in § 6(2) Austrian CPA. Whereas the
terms contained in § 6(1) Austrian CPA shall be declared void per se, the terms
described in § 6(2) Austrian CPA may be upheld if it can be proven that they have
been explicitly agreed between the parties.
Austrian courts do not extend the application of the rules of the Austrian CPA to
standard contract terms in B2B contracts, even in cases of gross imbalance of
bargaining power, and thus use a strictly formal notion of consumers and busi-
nesses.23 Courts may, however, take into consideration the types of clauses men-
tioned in § 6(1) and § 6(2) Austrian CPA for the interpretation of § 879(3) Austrian
Cc with regard to standard contract terms in B2B contracts.24
19
Krejci (2014), para 367; OGH 13 April 1983 (1 Ob 581/83) JBl 1983, p. 534 (annotation by F
Bydlinski).
20
OGH 4 June 1985 (5 Ob 541/85) JBl 1986, p. 373; OGH 13 June 2006 (10 Ob 145/05d) ecolex
2006, p. 754.
21
OGH 15 May 2014 (6 Ob 68/14i) ZFR 2014, p. 339.
22
23
OGH 15 March 2016 (10 Ob 102/15w) ZFR 2016, p. 555.
24
OGH 4 June 1985 (5 Ob 541/85) JBl 1986, p. 373.
138 F. Heindler
2.3 Legal Effects
Under Austrian law, traditionally the annulment of an unfair term ought to be

claimed by the contracting individual concerned.25 This domestic approach may
conflict with the interpretation of Directive 93/13/EEC on unfair contract terms26
issued by the Court of Justice of the European Union, which states that courts must
assess the legality of standard contract terms ex officio.27
Fundamentally, unfair contract terms in accordance with § 879(3) Austrian Cc
shall be declared entirely null and void. However, in certain cases it is feasible to
reduce an unfair term to its legally permitted core. Such a partial retention can be
used in relation to terms of B2B contracts that do not fall under the Directive 93/13/
EEC.28 With regard to B2C contracts, Austria’s Supreme Court of Justice refers to
the case law of the CJEU stating that ‘courts are merely required to exclude the
application of an unfair contractual term . . . without being empowered to revise the
content of that term’,29 and accordingly refuses to reduce an unfair term to its legally
permitted core, instead setting it aside if the term is within the scope of the this
Directive.30
The repeal of clauses can result in gaps in the contractual framework between the
parties. In such cases, these gaps must be filled with reference to existing
non-mandatory legal provisions, or by applying a supplementary interpretation of
the contract that reflects the hypothetical intentions of the parties, bona fide and
established practices, and the principle of good faith (Grundsatz von Treu und
Glauben).31 The prevailing opinion in Austrian doctrine affirms that supplementary
interpretation may be applied after retention of unfair standard contract terms.32
25
OGH 9 November 1988 (1 Ob 666/88) SZ 61/235; OGH 9 September 2008 (10 Ob 73/08w).
26
95/29.
27
CJEU Judgment of 30 Mai 2013, Asbeek Brusse and de Man Garabito, C-488/11, EU:
C:2013:341, paras 40–46.
28
OGH 13 November 2013 (7 Ob 143/13z) Zak 2014, p. 92; OGH 30 May 2017 (4 Ob 76/17f) Zak
2017, p. 254.
29
CJEU Judgment of 21 January 2015, Unicaja Banco and Caixabank, C-482/13, EU:C:2015:21,
para 28.
30
OGH 20 January 2016 (3 Ob 132/15f) ecolex 2016/163; OGH 25 April 2018 (9 Ob 85/17s) ecolex
2019/86.
31
OGH 19 March 2014 (7 Ob 11/14i) ZFR 2015, 162 (annotation by U Palma).
32
Schauer (2012), pp. 639–641; Geroldinger (2013), p. 40; Bollenberger (2017) § 879 para 30.
2.4 Representative Actions
Austrian civil procedural law currently (as at July 2019) does not allow class actions
for standard contract terms.33 Apart from individual actions, procedural law only
permits representative actions (§ 28 Austrian CPA), which may be brought by
certain associations, such as the Austrian Consumer Information Association, the
Austrian Chamber of Commerce, or the Austrian Chamber of Labour. In proceed-
ings relating to representative actions in the meaning of § 28 Austrian CPA, the
claimant files an action for injunction with reference to one or several standard
contract terms. Formally, the subsequent court decision obliges only the defendant to
not use the standard contract term any further. Other users of similar or the same
terms are not formally bound by the decision, although in practice such decisions are
frequently observed by other entities using the same or similar terms. Court deci-
sions regarding individual claims do not have effect inter partes, either, but similarly
to decisions relating to representative actions, once a term is declared void in
individual proceedings, the threat that other cases may be decided in the same
manner usually exerts enough pressure on other users of the same standard contract
term to amend it.
Representative actions demonstrate some key particularities, as standard contract
terms are reviewed in an abstract manner. In contrast to individual proceedings, no
singular contract has been entered into, thus questions pertaining to a party’s
expectations and intentions or the content of a given contract do not arise. Accord-
ingly, any attempt to partially uphold a clause is rejected by Austrian courts, since
the aim of the representative action is to ensure that only lawful standard contract
terms are used.34 Furthermore, in proceedings relating to representative actions,
Austrian courts typically insist on applying the most consumer-unfriendly interpre-
tation to standard contract terms.35 The intention of the Austrian courts thereby is
thus to avoid upholding clauses in a proceeding relating to representative actions that
might adversely affect a consumer’s position in an individual claim. However, this
frequently used language is to be avoided. After all, the standard contract terms in
representative-action proceedings shall be subject to the same rules of interpretation
as in individual-claims proceedings. Hence, it can only be said that when there is
doubt, § 28 of the Austrian CPA aims to outlaw a standard contract term. As a result,
the purpose of the norm is to find an unclear contract term unlawful.36
33
Bielesz and Krepil (2018), p. 12.
34
OGH 13 January 1987 (2 Ob 523/85) EvBl 1987/107; OGH 27 May 2015 (8 Ob 58/14h) ZFR
2016, 84; OGH 27 June 2016 (6 Ob 17/16t) ZFR 2017, p. 85.
35
OGH 9 March 1999 (5 Ob 227/98p) SZ 72/42; OGH 30 September 2009 (7 Ob 91/09x) iFamZ
2010, 200 (annotation by W Faber); OGH 11 May 2011 (7 Ob 173/10g) RdW 2011, 657; OGH
23 January 2013 (7 Ob 201/12b) ZFR 2013, 202 (annotation by M Gruber); Kathrein and
Schoditsch (2017) § 28 KSchG para 5; critical in consideration of the meaning and severity of
this mode of applying § 28: Kellner (2013), pp. 37–39.
36
Kellner (2013), p. 38.
140 F. Heindler
2.5 Type of Austrian Collective Action
As outlined above, Austrian civil procedural law does not allow class actions for
standard contract terms. Nevertheless, since Austrian civil law allows assignment of
claims, it is generally possible to bring an action for a class of claimants. This
Austrian style of collective action37 is more difficult to bring than a typical collective
or class action, since any claim must be assigned individually to the person bringing
the action. Furthermore, it is not feasible to assign only the right to bring an action
and the whole claim must be openly assigned to the person doing so.38 In addition,
even if claims are transferred to a person in accordance with the applicable law of
assignment, problems can still occur. In the case of an Austrian data protection
activist suing Facebook, the Supreme Court of Justice lodged a request for a
preliminary ruling with the CJEU in order to clarify whether the (collective) action
may be brought at the domicile of the data protection activist, relying on Art
16 Brussels I Regulation (place of jurisdiction at the domicile of the consumer).39
The CJEU ruled that ‘Article 16(1) Regulation No 44/2001 must be interpreted as
meaning that it does not apply to the proceedings brought by a consumer for the
purpose of asserting, in the courts of the place where he is domiciled, not only his
own claims, but also claims assigned by other consumers domiciled in the same
Member State, in other Member States or in non-member countries’.40
3 Judicial Control of Price Terms in Standard Contract

Terms
3.1 Prices as Main Consideration
When applying § 879(3) Austrian Cc to price terms in standard contract terms,

Austrian courts observe the wording of the rule excluding any term ‘which does not
determine either of the mutual main obligations’. Apart from the exclusion of clauses
determining the principal subject matter of the contract, there is no general exclusion
of price terms. Consequently, it must be determined whether the price term concerns
the price as the main consideration for the principal service or good of the contract,
or whether it relates to ancillary services or goods provided to the customer. This
37
OGH 12 July 2005 (4 Ob 116/05w) JBl 2006, p. 48.
38
OGH 18 June 2013 (4 Ob 245/12a) JBl 2014, p. 267; OGH 16 November 2016 (2 Ob 1/16k) JBl
2017, p. 242.
39
OGH 20 July 2016 (6 Ob 23/16z) Zak 2016, p. 343.
40
CJEU Judgment of 25 January 2018, Schrems, C-498/16, EU:C:2018:37, para 42; on the
international jurisdiction of Austrian courts for Austrian style collective actions relating to the
Volkswagen Dieselgate scandal, see OLG Linz 2 May 2019 (6 R 51/19s) <https://
verbraucherrecht.at/cms/uploads/media/Beschluss_-_OLG_Linz.pdf> (accessed 3 July 2019).
formal approach seeks to employ a literal interpretation of the meaning of § 6 Austrian

Cc and is the prevailing opinion in doctrine.41
However, there is an argument in favour of excluding even terms regarding the
main obligation to pay the price for a service or good; it is simply the most apparent
term of a contract. Thus, lack of will is unlikely to occur in relation to the purchase
price or price for the service as the main consideration in the contractual relation-
ship.42 All the aims described above, be they to re-establish material party autonomy
or to avoid a race to the bottom, are unlikely to occur in connection with the price
paid for the service or good. Accordingly, when scrutinizing standard contract terms,
the Austrian judiciary focuses on whether the issues regulated by standard contract
terms are still sufficiently exposed to competition43; the emphasis being that scruti-
nizing standard contract terms can also be advocated economically speaking, as in
the absence of judicial control the most adverse terms for the other party would
prevail over less adverse terms in the long run.44
The exclusion of provisions concerning the main subject matter of the contract
from the judicial review of price terms furthermore only concerns the primary price
determination itself. Other types of price terms, such as price adjustment clauses in
long-term contracts, are not excluded from judicial control.45 Moreover, only the
standard contract terms describing the type of service, the amount, and the quality of
the service or price are excluded.46 As such, the Supreme Court of Justice has ruled
that an extra charge (express fee) that is invoiced if the customer does not comply
with certain order deadlines is part of the main payment obligation and thus excluded
from judicial review.47 Consequently, in the case of price partitioning, courts are
required to assess whether the price clause concerns a consideration of the main
obligation or of an ancillary service. In a case decided by the CJEU, the standard
contract term prescribing that repayment must be made ‘in the same foreign currency
as that in which it was contracted’ was found to be within the concept of the main
subject matter of the contract.48
41
See Graf (2015), pp. 301–302; Bollenberger (2015), pp. 396–397.
42
Heindler (2015), p. 797.
43
OGH 30 March 2016 (6 Ob 13/16d) EvBl-LS 2016/119.
44
Heindler (2015), p. 797; Schillig (2011), p. 936.
45
OGH 19 October 2005 (7 Ob 216/05y) ZVR 2009, p. 427 (annotation by M Schauer).
46
OGH 18 August 2004 (4 Ob 112/04f) EvBl 2005/47.
47
OGH 4 May 2006 (9 Ob 15/05d) JBl 2007, p. 42.
48
CJEU Judgment of 20 September 2017, Andriciuc and others, C-186/16, EU:C:2017:703, para
41.
142 F. Heindler
3.2 Control of Imbalanced Consideration
§ 879(3) Austrian Cc was introduced in 1979 and thus originally did not transpose
Art 4(2) Directive 93/13/EEC. However, nowadays it shall be interpreted in line with
this Directive.49 In its interpretation of it, the CJEU has emphasized that the ratio of
the price for a service and the costs for and quality of a service is difficult to define.50
Thus, Austrian courts usually do not compare the costs and quantity or quality of
services. However, from time to time, lower-instance courts assess prices in the
opposite way and try to put forward their ideas on what is to be considered
reasonable. One example occurred at the Higher Regional Court of Innsbruck,
which weighed up a fee of €3500 for 23 h of work and found it to be strikingly
imbalanced.51
Courts regularly exert judicial control over prices regarding ancillary price terms.
Thus, it has been found imbalanced to charge a handling fee in amount of €35 for
cancelling of air tickets in addition to reduced price of the air ticket.52 In another
case, a court found imbalance to charge a fee which was agreed upon in a standard
contract term, for customers asking to block a credit card.53
It can be observed that many drafters of general contract terms avoid language
referring to fees or prices for ancillary services but use phrases like ‘compensation
for costs’, even though these costs are incurred by the enterprise as variable or fixed
costs. Unfortunately, Austrian courts, and even doctrine, have adopted this mislead-
ing terminology and discuss a large part of ancillary price terms in the language of
passing on costs. In terms of the substance, courts tend to refuse so-called ‘passing
on cost’ clauses, unless the clauses refer to costs actually incurred or consolidated in
a lump sum, which, on average, cannot be found to exceed the costs actually incurred
by and large.54 Thus the courts reject any additional ancillary fees charged under
particular circumstances that exceed the costs actually connected with the situation
in question. In principle, the body of decisions regarding the feasibility of passing on
costs focuses on price partitioning and the reasonability of costs for ancillary
services.
In this respect, for example, a clause used for lease-financing cars was found to
be contrary to § 879(3) Austrian Cc. The standard contract term addressed a fee,
which became due if the lessee refused to buy the car after the lease period and the
lease-financing institute had to find an alternative buyer. The fee was designated
compensation for the costs incurred by the lease-financing institute for searching for
49
Graf (2015), p. 303; Heindler (2015), p. 798; Krejci (2014), para 373.
50
CJEU Judgment of 30 April 2014, Kásler and Káslerné Rábai, C-26/13, EU:C:2014:282, paras
54–55.
51
OLG Innsbruck 12 November 2015 (2 R 140/15b).
52
HG Wien 19 October 2018 (60 R 80/18x).
53
OGH 28 January 2009 (10 Ob 70/07b) ÖBA 2013, p. 553 (annotation by B Koch).
54
OGH 24 February 2010 (3 Ob 268/09x) EvBl-LS 2010/106; OGH 11 March 2008 (4 Ob 5/08a)
RdW 2008, 392.
a buyer and handling the sale. It was payable as a fixed instalment. The Supreme
Court of Justice held that the clause establishing the fixed instalment was illegal,
since the instalment was deemed to regularly exceed the actual costs incurred by the
lease-financing institute.55
In another decision concerning an online ticket platform, the Austrian Supreme
Court of Justice found ‘service fees’ contrary to § 879(3) and § 864a Austrian Cc.56
The ticket platform charged the customer a service fee of (1) €2.50 for printing
tickets at home, (2) €2.50 for e-tickets to be sent to the customer’s mobile phone,
(3) €2.90 for tickets to be deposited at the box office, (4) €1.90 for tickets to be
deposited in a ‘Libro’ store, or (5) €1.90 for tickets to be deposited at ‘oeticket’
headquarters. The Surpreme Court outlawed the standard contract terms governing
the service fees for tickets to be deposited at ‘oeticket’ headquarters (5), stating that
charging a service fee in addition to the main purchase price, which should include
the ticket platform’s profit, is unusual and detrimental for the customer. Since
providing the tickets at its premises was regarded as part of the seller’s obligations,
it was deemed to be particularly unjustified to charge an extra fee for collecting the
tickets at the seller’s office.
Similarly, the Supreme Court of Justice regularly rejects clauses that would
require a customer to pay certain fees for demand notes, as well as to bear the
costs of any other debt enforcement measures and collection costs. For instance, this
has been ruled to apply to banks’ standard contract terms referring to any debt
enforcement costs ‘whatsoever appear to be appropriate’.57 A clause charging
€21.80 (in 2008) for each demand note was also found to infringe § 879(3) Austrian
Cc.58
In contrast, a bank’s standard contract terms for delivering securities in connec-
tion with a depository account stipulating fees of €15.00 or €20.00 have been found
lawful.59 Similarly, the Austrian Supreme Court of Justice, contrary to its German
counterpart, confirmed the lawfulness of lump-sum administration fees
(‘Bearbeitungsgebühren’) for taking out a credit. Both the fees for delivering
securities in connection with a depository account and administration fees were
considered fees for the main obligation. The partitioning of each price was found to
enhance price transparency and thus considered to be appropriate.60 The argument
was that the ‘costs’ incurred by the bank handling the depository account or credit
could also be packed into the main payment obligation of the customer. Neverthe-
less, early repayment or a change of bank would lead to higher administration costs
for the service provider, which could be passed on to the customer in question by
way of lump-sum administration fees. Thus, price partitioning in the form of lump-
55
OGH 22 June 2011 (2 Ob 198/10x) ZVR 2012, p. 166 (annotation by G Kathrein).
56
OGH 25 April 2018 (9 Ob 8/18v) RdW 2018, p. 567.
57
OGH 20 March 2007 (4 Ob 221/06p) ecolex 2007, p. 601 (annotation by G Wilhelm).
58
OGH 8 September 2009 (4 Ob 59/09v) ecolex 2010, p. 37.
59
OGH 7 August 2008 (6 Ob 253/07k) ZFR 2008, p. 233 (annotation by A Schopper).
60
OGH 30 March 2016 (6 Ob 13/16d) RdW 2016, p. 394.
144 F. Heindler
sum administration fees for taking out a credit was accepted. Furthermore, the formal
argument emphasized by the Supreme Court of Justice in the case of administration
fees was that the Austrian Cc, as opposed to German civil law, does not explicitly
stipulate that interest rates are the only permitted way of charging fees for credit.
Indeed, § 988 Austrian Cc stipulates that ‘consideration, as a rule, is in the form of
interest payable by the borrower’. In the end, the Supreme Court of Justice deemed
the administration fee to be a genuine fee rather than a clause about passing on costs,
and attributed the charges to the main consideration.61
3.3 Price Adjustment Clauses
Adjustment clauses are another type of price term. Whereas the calculation of the
price for the service is outside the scope of judicial review, standard contract clauses
referring to price adjustment are within the scope of § 879(3) Austrian Cc and
subject to judicial review. It is occasionally discussed whether a simple price
calculation or indexation rule supports price and is subject to judicial review.
Notably, the Austrian judiciary and doctrine generally recognize the need for price
adjustment in long-term contractual relationships.62 However, standard contract
terms allowing one party to unilaterally adjust prices at its own discretion are
outlawed.63 Moreover, price adjustment rules must be described in a transparent
fashion, neutral, and unalterable from the entrepreneur’s side.
In relation to B2C contracts, § 6(1)(5) Austrian CPA outlaws standard contract
terms that would allow the entrepreneur to demand ‘a higher consideration for his
service than that fixed when the contract was made’ except where the circumstances
that determine such an increase are described in the contract and cannot be influenced
by the entrepreneur (price-indexation clauses). Thus, Austrian consumer protection law
prevents clauses that would help enterprises amend prices at their sole discretion.
Furthermore, any such price-indexation clauses have to provide for both increases
and reductions to the price in accordance with the specified circumstances.64 The
Supreme Court of Justice applied the said rule also to clauses found in credit agreements
with variable rates (calculated by adding a margin to a floating index rate such as the
LIBOR or EURIBOR rate for price-indexation). These clauses, which have been used
in view of negative interest rates charged inter alia by the European Central Bank and
Swiss National Bank, stipulated a floor equal to the margin itself where a negative index
(negative EURIBOR) would lead to an interest rate below the margin.65
61
See Heindler (2015), p. 798.
62
With further references Riss (2014); OGH 25 April 2019 (6 Ob 226/18f).
63
OGH 11 December 2006 (7 Ob 201/05t) RdW 2007, p. 469.
64
OGH 17 December 2002 (4 Ob 265/02b) ecolex 2003, p. 334 (annotation by M Leitner); OGH
20 March 2007 (4 Ob 227/06w) RdW 2007, p. 661.
65
OGH 21 March 2017 (10 Ob 13/17k) ecolex 2017, p. 825 (annotation by G Wilhelm); OGH
30 May 2017 (8 Ob 101/16k) ZFR 2017, p. 393.
An exception to the above rule in § 6(1)(5) Austrian CPA is made for telecom-
munication service providers, which, according to § 25(2) and (3) Telecommunica-
tions Act 2003, are entitled to change tariffs, in which case subscribers are entitled to
terminate the contract free of charge.66 This exception was found to be in line with
EU law,67 in particular with Article 20 section 2 Directive 2002/22/EC68:
(2) Changes in general terms and conditions as well as in tariffs shall be notified to the
regulatory authority before they take effect and shall be promulgated in an appropriate form.
Changes not exclusively favourable for the subscriber shall be subject to a promulgation and
notification period of two months. Other provisions of the Consumers Protection Act,
Federal Law Gazette No. 140/1979, as well as the General Civil Code [ABGB] shall remain
unaffected.
(3) The essential information about changes that are not exclusively favourable shall be
communicated to the subscriber in written form at least one month before the change takes
effect, e.g. by printing it on a periodically drawn up bill. At the same time, the subscriber
shall be advised of the time of entry into force of the changes as well as of the fact that he
shall be entitled to terminate the contract until that time free of charge. The full text of the
changes shall be sent to the subscribers at their request. The regulatory authority may issue
an ordinance defining the level of detail, content and form of communication to the
subscriber. In this ordinance, the regulatory authority must take into account that the
communication must be transparent to the subscriber. Changes in communications network
or service operators’ general terms and conditions as well as tariff conditions which become
necessary solely due to an ordinance issued by the regulatory authority on the basis of this
provision and which are not exclusively favourable shall not entitle the subscriber to cancel
the contract free of charge.69
In a case concerning the calculation/adjustment of interest rates for savings books

(Sparbücher), the Supreme Court of Justice scrutinized a standard contract term stating
that the initial interest rate would be increased or reduced in accordance with changes to
the ECB key interest rate. Thus linked to the steady decrease of the ECB key interest
rate, the clause eventually led to a zero interest rate for the savings book. First, the
Supreme Court of Justice decided that such a price adjustment rule referring to the ECB
key interest rate would not fall under the main consideration exemption, being different
from the mere description of the main obligation. Second, it stated that the effect of the
rule, namely a zero interest rate for a savings book, was found to contradict the
objectives of savings books. In particular, the fact that the standard contract term linked
the interest rate for the savings book to the ECB key interest rate was detrimental to the
customer, since the ECB key interest rate was found to pursue completely different
aims from those pursued by the holder of a savings book. It was deemed that the ulterior
66
OGH 17 July 2018 (4 Ob 113/18y), MR 2018, p. 194.
67
CJEU Judgment of 26 November 2015, Verein für Konsumenteninformation, C-326/14, EU:
C:2015:782.
68
Directive 2002/22/EC of the European Parliament and of the Council of 7 March 22 on universal
service and users’ right relating to electronic communications networks and services, OJ 2002, L
108.
69
Translation by RTR-GmbH (Austrian sector-specific supervisory authority), Federal Law Gazette
I No. 70/2003, as amended by Federal Law Gazette I No. 44/2014.
146 F. Heindler
aim of a savings book is to achieve a high interest rate. The clause was ultimately found
to be materially detrimental in the meaning of § 879(3) Austrian Cc, and thus a zero
interest rate on saving books has been outlawed.70
This decision is remarkable both in terms of the legal reasoning and its outcome.
The Supreme Court of Justice drew a very vague but essential distinction between
price terms and price adjustment terms, attributing a flexible interest rate to the latter.
It is, however, rather doubtful whether a flexible credit interest rate term would fall
under the scope of judicial review,71 particularly in view of the fact that instead of
embedding such a floor, a credit could be offered with a different margin. In addition,
it is surprising to outlaw a reference to the ECB key interest rate, as this cannot be
assumed to be more favourable to banks than to their customers. Moreover, under
Austrian law, it is not necessary for indicators to be more favourable to customers.
The ECB key interest rate can be regarded as a neutral indicator that cannot be
influenced by the bank, and thus cannot be found to be materially detrimental.
Therefore, it was simply the price or margin added to the ECB key interest rate
that resulted in a zero percent interest rate that was subsequently found to be
materially detrimental.
Faced with the downward trend in interest rates, Austrian banks reacted to
negative key interest rates by amending the standard contract terms of credit
contracts. The interest rate indexation clause, which most often refers to the
LIBOR or EURIBOR rate plus a margin, was amended. Since 2014, banks have
used standard contract terms stating that the minimum interest rate, irrespective of
any link to the LIBOR or EURIBOR rate, shall be subject to a floor that is equal to
the stated margin. The Supreme Court of Justice outlawed the addendum, since it
limited the potential for reducing the interest rate without providing a cap for any
increase to the interest rate in the indexation clause.72 Following up on this decision,
in a representative action the Supreme Court of Justice annulled a standard contract
term stating that the minimum interest rate should be equal to the margin when a
bank was capping the increase in the interest rate indexation clause to 16%. The
court stated that 16% would have been clearly inadequate.73
70
OGH 13 October 2009 (5 Ob 138/09v) ÖBA 2010, p. 452 (annotation by B Koch).
71
For the opposite view, compare BGH 10 June 2008 (XI ZR 2011/07) NJW 2008, p. 3422; OGH
18 May 2016 (3 Ob 47/16g) ecolex 2016, p. 759 (annotation by G Graf), ÖJZ 2017, 284 (annotation
by M Leitner); HG Vienna 31 July 2018 (17 Cg 55/17w).
72
OGH 28 June 2017 (9 Ob 35/17p) ZFR 2017, 550; OGH 30 May 2017 (8 Ob 101/16k) ZFR 2017,
393; OGH 30 May 2017 (8 Ob 107/16t) ecolex 2018, p. 129.
73
OGH 23 May 2019 (3 Ob 46/19i).
3.4 Price Bundling
Price bundling often conflicts with price transparency requirements. In a case

decided by the Supreme Court of Justice, the Austrian subsidiary of a Spanish
bank was bundling a credit agreement with a payment protection insurance.74
Sector-specific legislation required the bank to declare the annual percentage rate of
charge, also including the costs of the services intrinsically linked to the credit. In the
given case, the Supreme Court of Justice established that the payment protection
insurance was mandatory for entering into the credit agreement, while the bank
termed it as voluntary insurance. This was therefore found to be contrary to the
obligation to declare the annual percentage rate of charge.
In contrast, the Supreme Court of Justice accepted price bundling in a lease
agreement for a furnished apartment.75 The lease of an apartment is subject to
price regulation depending on a variety of factors (see Sect. 4.2 below), whereas the
price for leasing furniture can be agreed upon freely. The lease agreement indicated
only a total price. Subsequently, the tenant was required to determine whether the
apartment rent was in-line with the strict price regulation for leasing apartments
and/or whether the furniture rent conflicted with the prohibition of leasio enormis.
The Supreme Court of Justice decided that the furniture rent was simply to be
defined as the difference between the total rent and the highest legally permitted
apartment rent.
Intertemporal bundling is addressed in § 6(1)(1) Austrian CPA. Standard
contract terms in a B2C contract are outlawed if they provide for an unduly lengthy
period for terminating a contract, or if the period is not adequately described.
Austrian courts are required to assess all the facts relevant to the contract when
applying § 6(1)(1) Austrian CPA.76 In this context, the Supreme Court of Justice
accepted termination periods of 18 or 24 months for a mobile telephone contract that
also awarded a reduction for the purchase of a mobile phone.77 In contrast, a
standard contract term prescribing a termination period of 24 or 36 months for a
subscription to a fitness centre was outlawed. Even though the fitness centre offered
a (more expensive) monthly subscription as an alternative, the Supreme Court of
Justice found the termination period of 24 or 36 months to be unduly lengthy.78
74
OGH 18 September 2013 (7 Ob 44/13s) ZFR 2014, p. 180.
75
OGH 10 November 2009 (5 Ob 129/09w) immolex-LS 2010/12.
76
OGH 29 June 2009 (9 Ob 68/08b) GesRZ 2009, p. 361 (annotation by M Oppitz).
77
OGH 10 June 2008 (4 Ob 91/08y) RdW 2008, p. 710.
78
OGH 29 May 2012 (9 Ob 69/11d) ecolex 2012, p. 965 (annotation by G Graf).
148 F. Heindler
4.1 Examples Applicable in Austria
Legislative intervention regarding price terms occurs either on a purely national level
or by means of EU legislative initiative.
One of the EU’s attempts to regulate prices concerns the caps for roaming
charges in the telecommunications sector that have been introduced by the EU
roaming regulations.79 A further example can be found in Directive 2014/92/EU on
access to payment accounts,80 which requires fee caps and limits the number of
services for which banks can charge. This Directive has been transposed into
Austrian national law, in particular by the Austrian Consumer Payment Account
Act (Verbraucherzahlungskontogesetz). As a result, banks may charge fees for
services provided in connection to switching bank accounts only under certain
conditions (§ 20 Austrian Consumer Payment Account Act). § 26 Austrian Con-
sumer Payment Account Act directly introduces a price cap of €80.00 per annum for
the services provided under a payment account contract.81 The said provision trans-
poses Art 18(1) Directive 2014/92/EU that requires credit institutions to offer
services ‘free of charge or for a reasonable fee’. In addition, vulnerable groups
defined in a special ministerial ordinance82 must be awarded a special reduced price
of €40.00 per annum. Another example can be found in the § 4a of the same Act,
which outlaws charging fees for the use of ATMs, irrespective of whether the
payment account provider itself must pay a fee for the use of ATMs by customers
not belonging to the same network. § 4a is clearly excessive in limiting the property
rights of payment account providers and was repealed as unconstitutional.83 As part
of the amendment implementing § 4a Austrian Consumer Payment Account Act, the
legislator promulgated a provision (§ 4 section 2 of the same Act) rendering a
contractual term illegal if it requires a customer to pay a fee for withdrawing
79
Regulation (EU) No 531/2012 of the European Parliament and of the Council of 13 June 2012 on
roaming on public mobile communications networks within the Union, OJ 2012, L 172/10, and
Commission Implementing Regulation (EU) 2016/2286 of 15 December 2016 laying down detailed
rules on the application of fair use policy and on the methodology for assessing the sustainability of
the abolition of retail roaming surcharges and on the application to be submitted by a roaming
provider for the purposes of that assessment, OJ 2016, L 344/46.
80
comparability of fees related to payment accounts, payment account switching, and access to
81
With reference to the price cap, the Austrian Supreme Court of Justice repealed a contract term
requiring a customer to pay €14 for an additional debit in card in case of name change, loss, or
change to a debit card for people with eyeside problems, see OGH 24 January 2019 (9 Ob 76/18v)
Zak 2019, p. 116.
82
Ordinance of the Austrian Minister of Labour, Social Affairs, and Consumer Protection to
determine socially and economically exposed groups of consumers.
83
VfGH 9 October 2018 (G 9/2018, G 10/2018).
money from an ATM, unless it has been individually negotiated. Explaining the
notion of ‘individually negotiated’ in its preparatory works, the legislator declared
that offering 2 different sets of standard contract terms of which one would not
include a fee for cash withdrawals would satisfy the requirements of § 4 section 2.84
On a purely national level, manifold restrictions apply to the fees charged by real
estate agents. Based on the Austrian Trade Order (Gewerbeordnung), the Austrian
Minister of Science, Research, and Economy enacted an Ordinance on Professional
Ethics and Rules of Practice (Standes-und Ausübungsregeln) for real estate agents.
The ordinance contains a number of caps to real estate agents’ fees. Its legislative
basis refers to maintaining the good reputation of the ‘class’ (Stand) of real estate
agents and thus contributes to a classified economic structure.85 The said ordinance
stipulates that real estate agents are not entitled to charge an amount exceeding
3 times the monthly lease rate when arranging a lease agreement relating to an
apartment. Similarly, when arranging the sale of an apartment or a house, the fee
may not exceed 3 percent of the purchase price.
Taxi fare prices are subject to local regulation in Austria. In accordance with §
14(1) Austrian Occasional Traffic Act (Gelegenheitsverkehrsgesetz), the head of
each Austrian region is entitled to regulate local taxi fares, which should enable the
enterprises to recover their costs and achieve a reasonable profit. Taxi fares for cross-
regional traffic require the approval of the Austrian Minister of Science, Research,
and Economy. Vienna, for instance, the largest Austrian city, traditionally regulates
taxi fares.86 The same applies to Salzburg, the historic city with its world-famous
festival of classical music and commensurately high demand for taxi services.
Furthermore, Austrian legislation contains price caps for renting certain types of
apartments in accordance with the Austrian Tenancy Act (Mietrechtsgesetz). The
rules on maximum prices for renting apartments depend on a variety of factors and
apply only to certain types of apartment, as classified in accordance with multiple
factors such as their size and when the house was constructed. Since neither the
factors related to price regulation nor the amount chargeable are objectively based,
such regulation is regularly challenged in terms of its constitutionality and might be
declared unconstitutional.87
Another restriction to B2C concerns the price cap established for default interest
rates in standard contract terms, which must not exceed 5 percent per annum (§ 6(1)
(13) Austrian CPA).
84
Explanatory report to motion 2284/A, 25th legislative period, 3; § 4 section 2 was upheld as
constitutional.
85
See Heindler (2015), p. 83.
86
Ordinance of the Governor of Vienna dated 27 November 1997.
87
See ECtHR 10 January 2017, case 62864/09 Mečiar et al v Slovakia and case 44218/07 Riedel
et al v Slovakia.
150 F. Heindler
4.2 Interrelation of Regulatory Provisions and Judicial Price

Control
There are no cases to illustrate courts applying norms that would allow them to exert
price control in areas that fall under regulatory price control. However, it is necessary
to determine whether price controls should be exerted in a situation governed by a
rule setting a price gap, or whether 2 rules, both limiting the applicability of price
terms, should be applied. In the first case, a court would not exert price controls if the
price set is in line with a strict price cap. However, courts may still question whether
a clause that is in line with a strict price cap is unclear or unintelligible in the
meaning of § 6(3) Austrian CPA. For example, a standard contract term on default
interest rates that was in line with the price cap set out in § 6(1)(13) Austrian CPA
(see Sect. 4.1 above) was found to be unclear in the meaning of § 6(3) Austrian CPA
(see Sect. 5.1 below).
As for the combined application of judicial control of price terms, the Supreme
Court of Justice ruled on a case concerning a real estate developer, bearing in mind
that special price transparency regulations apply to contracts in this sector. According to
§ 4(3) Austrian Real Estate Developer Contract Act (Bauträgervertragsgesetz), the
price payable to the real estate developer must be either a fixed price or a variable price
consisting of a basic price in combination with a number of cost factors. In the latter
case, the cost factors must be clearly defined and contain a cap. The price and all other
financial contributions for additional services as well as all taxes and the drafting costs
for the contract must be indicated in the contract (§ 4(1)(3) Austrian Real Estate
Developer Contract Act). The Supreme Court of Justice has emphasized that both § 4
(3) Austrian Real Estate Developer Contract Act and § 6(1)(5) Austrian CPA
(outlawing standard contract terms on price increase; see Sect. 4.1 above) must be
observed when assessing a B2C real estate developer contract in the meaning of the
Austrian Real Estate Developer Contract Act.88

5.1 Judicial Control of Unclear and Unintelligible Price
Terms
Standard contract terms in B2C contracts must comply with the transparency
requirement (Transparenzgebot) established in § 6(3) Austrian CPA.89 The said
88
OGH 16 December 2015 (7 Ob 93/15z) ecolex 2016/173 (annotation by M Melcher); OGH
21 March 2017 (10 Ob 17/16x) immolex-LS 2017/35.
89
§ 6(3) Any contractual provision included in the General Terms and Conditions or contractual
form shall be ineffective if it is unclear or unintelligible.
norm also applies to standard contract terms covering the main subject matter of the
contract.90 In addition, § 864a Austrian Cc, which applies to both B2C and B2B
contracts, outlaws standard contract terms if they are ‘detrimental for the other party
and he would not have to expect these provisions due to the circumstances, in
particular due to the formal appearance of the contract’.91 Thus, standard contract
terms on prices must be clear and transparent with regard to the amount payable and
must be broken down if a number of connected services are to be performed.92
General terms providing for an hourly rate of €98 invoiced for any operations
beyond normal account management are unclear and have been repealed by the
Austrian Supreme Court of Justice.93 In general, references to price tables or other
documents are feasible94; however, such references must be precise. A reference to
entire other bodies of standard contract terms is regarded as unclear and therefore
outlawed.95
Under application of the above rules, the Supreme Court of Justice rescinded the
standard contract terms of a debt collection agency stating that the customer should
reimburse the agency for any collection costs incurred, since the customer must be
informed of the amount in question before accepting any such terms.96
In a case decided by the CJEU, the court held that air carriers ought to indicate
the ‘air fare, as well as taxes, airport charges and other charges, surcharges or fees,
where these items have been added to the air fare’ in addition to the final price.97
This decision was based on the sector-specific regulation 2008/1008/EC98 and its Art
23(1), which ‘seeks to ensure, in particular, that there is information and transpar-
ency with regard to prices for air services’.99 Under the regulation 2008/1008/EC,
the air carrier may freely set airfares. This includes, in particular, the price to be paid
for the carriage of passengers on air services and the conditions under which those
prices apply. In a prior decision, the CJEU has already held that ‘pricing freedom is
complemented by Article 23(1)’.100 Since it should be possible to compare prices,
90
43; CJEU Judgment of 30 April 2014, Kásler and Káslerné Rábai, C-26/13, EU:2C:014:282, para
68.
91
92
OGH 5 February 2008 (5 Ob 247/07w) ecolex 2008, p. 528.
93
OGH 24 January 2019 (9 Ob 76/18v) Zak 2019, p. 116.
94
OGH 20 March 2007 (4 Ob 227/06w) RdW 2007, p. 661.
95
OGH 13 September 2001 (6 Ob 16/01y) JBl 2002, 178.
96
OGH 5 February 2008 (5 Ob 247/07w) ecolex 2008, p. 528.
97
CJEU Judgment of 6 July 2017, Air Berlin, C-290/16, EU:C:2017:523, para 23.
98
Regulation (EC) No 1008/2008 of the European Parliament and of the Council of 24 September
2008 on common rules for the operation of air services in the Community, OJ 2008, L 293/3.
99
CJEU Judgment of 6 July 2017, Air Berlin, C-290/16, EU:C:2017:523, para 30.
100
CJEU Judgment of 18 September 2014, Vueling Airlines, C-487/12, EU:C:2014:2232, para 32.
152 F. Heindler
price supplements are to be communicated in a clear, transparent, and unambiguous

way ‘at the start of any booking process’.101
In a similar case, the Supreme Court of Justice held that the standard contract
terms of an online ticket platform were unclear, as the platform had indicated only
the total price of the ticket without breaking down the price to reveal its agency
service and the entrance fee.102
Similarly, the Supreme Court of Justice found a nursing agency’s bundled price
terms for a range of services unclear and accordingly outlawed its standard contract
terms.103 The agency offered to (1) arrange contact with and (2) select suitable
nursing staff, (3) support, (4) educate, and (5) prepare the nursing staff, (6) arrange
transport, (7) act as paying agent for the nursing staff’s remuneration, and (8) assist
the customers in applying for subsidies, etc. In its standard contract terms, the
agency charged a fixed fee covering the price of its own services together with the
price of the nursing staff, which it invoiced in its role as paying agent. The customers
were unaware of the distribution of costs between the different contracting partners.
The repercussions of this omission were considerable, as the different notice periods
that applied upon termination of the contract meant that the customers would
actually be entitled to claim back parts of the advance payments.
In another case, the Supreme Court of Justice outlawed the standard contract
terms of an insurance company.104 The terms in question stated that annual insur-
ance premiums may also be paid semi-annually, quarterly, or monthly, in which
case extra fees would be charged. This clause was unclear, as it did not prevent the
insurer from setting the extra fees unilaterally and thus left the insured party in a state
of uncertainty.
In a case concerning the standard contract terms of an Austrian bank, the Supreme
Court of Justice outlawed a term describing the calculation of interest on debit
balances.105 The terms in question stated that the bank would charge a certain
interest rate percent per annum on debit balances, making quarter-end interest
settlements. The court held that this would lead to customers not regularly being
aware of the compound interest effect, meaning that higher debit balance interest
rates per annum result would from a quarter-end settlement than would be the case
with a year-end settlement.
On other occasions, courts can be seen to have misinterpreted the transparency
requirements. In a recent case, the CJEU stated that Art 4(2) Directive 93/13/EEC
indicates that borrowers must be provided ‘with sufficient information to enable
them to take prudent and well-informed decisions’;106 whereas in stipulating that the
101
CJEU Judgment of 18 September 2014, Vueling Airlines, C-487/12, EU:C:2014:2232, para 34;
CJEU Judgment of 19 July 2012, ebookers.com Deutschland, C-112/11, EU:C:2012:487, para 14.
102
OGH 30 August 2012 (2 Ob 59/12h) RdW 2013, p. 190 (annotation by M Kellner).
103
OGH 14 January 2016 (6 Ob 234/15b) ecolex 2016, p. 869.
104
OGH 17 February 2016 (7 Ob 5/16k) ZFR 2016, p. 435.
105
OGH 11 October 2016 (10 Ob 31/16f) ZFR 2017, p. 246.
106
51.
general contract terms used by a company shall be drafted in plain and intelligible
language, which of course includes that they should not be incomplete or misleading
in economic terms and with regard to the substance of the contract (for instance
hiding a compound interest effect), the Directive 93/13/EEC is not addressing
additional pre-contractual information requirements.
5.2 Regulatory Transparency Rules
Apart from court decisions about unclear and unintelligible terms, special rules
promoting price transparency apply to certain sectors of the Austrian economy.
The general rules governing price labelling can be found in the Austrian Price
Labelling Act (Preisauszeichnungsgesetz), which applies to B2C transactions relat-
ing to the sale of goods, the provision of services, and specifically to the sale of flight
tickets to consumers. The Austrian Price Labelling Act imposes an obligation to
indicate the gross price for goods or services as well as their general characteristics.
With regard to booking platforms for hotels and other accommodation, § 7 of the
Austrian Price Labelling Act outlaws best price and price maintenance terms in
contracts between the accommodation provider and the booking platform.
Other comprehensive price transparency provisions were introduced in the Aus-
trian CPA, including the transposition of Art 5 Directive 2011/83/EU in 2014.107
Consequently, entrepreneurs have to inform consumers ‘in a clear and comprehen-
sible manner’ about the total gross price of the goods or services, the manner in
which the price is to be calculated, and, if applicable, all additional freight, delivery,
or postal charges that may be payable (§ 5a(1)(3) Austrian CPA).
In relation to those consumer credit agreements subject to the Austrian Con-
sumer Credit Agreement Act (Verbraucherkreditgesetz) or the Austrian Mortgage
Credit Agreement Act (Hypothekar- und Immobilienkreditgesetz), consumers must
be informed of the annual percentage rate of charge (effektiver Jahreszinssatz)
calculated in accordance with § 27 Austrian Consumer Credit Agreement Act and
§ 29 Austrian Mortgage Credit Agreement Act. Both of these calculations are based
on provisions in EU directives. They encompass the majority of price factors and
thus help consumers to compare obligations between credit agreements, whether or
not a bank uses price bundling or partitioning mechanisms.
Extraordinary legislative attention is paid to petrol stations’ fuel prices in Austria.
In order to enhance price competition, the Austrian legislator has implemented a rule
that outlaws intraday price increases, allowing only one price increase to be made
107
Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on
consumer rights, amending Council Directive 93/11/EEC and Directive 1999/44/EC of the
European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive
97/7/EC of the European Parliament and of the Council, OJ 2011, L 304/64.
154 F. Heindler
daily at noon.108 In addition, the Austrian regulatory agency for the electricity and
gas markets has been mandated to establish and run an online fuel price comparison
platform109 and an online electricity price comparison platform.110
Enhancing price transparency is also a goal pursued by the EU legislator in
various sectors. One current initiative concerns cross-border parcel delivery, for
which the EU Commission has drafted a regulatory proposal including price trans-
parency rules.111 In accordance with Art 6(3) of the Regulation, delivery service
providers would be obliged to publish a reference offer containing all the relevant
terms and conditions, including prices. This should make it easier for customers to
compare different providers in terms of both services and prices, according to the
weight, size, and format of the items in question.
5.3 Interrelation of Transparency and Disclosure Provisions

and Judicial Price Control
Austrian law does not provide for a formal nexus between transparency or disclosure
provisions on the one side and courts exerting price control on the other. However,
courts tend to take existing transparency and disclosure measures into account. For
instance, the Supreme Court of Justice has argued that in order to accept lump-sum
administration fees for entering into a consumer credit agreement (see above Sect.
3.2) these must be incorporated into the annual percentage rate of charge (effektiver
Jahreszinssatz) calculated in accordance with § 27 Austrian Consumer Credit
Agreement Act. This ensures the comparability of prices, whilst in effect meaning
that the Supreme Court of Justice has approved the legality of lump-sum adminis-
tration fees for entering into a credit agreement.112
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Form Contracts in Belgium
Reinhard Steennot
Abstract The main objective of this national report is to offer an insight into the
way that control of price related terms in standard form contracts takes place in
Belgium. It will be shown that prices are in principle determined by the market
mechanism. The principles of freedom of contract and the autonomy of the will
imply that parties can also agree freely on price related terms (in standard form
contracts). However, consumer legislation and sector-specific rules have a substan-
tial impact on the parties’ freedom. Most far-reaching are rules determining the
maximum price that can be charged and the limitations of the possibility to insert
price alteration clauses in (consumer) contracts. Both aim at protecting the weaker
party.
1 Introduction
The main objective of this national report is to offer an insight into the way that
control of price related terms in standard form contracts takes place in Belgium.
More specifically, it will examine to what extent the courts can control the use of
price related terms in standard form contracts and whether government authorities
play a(n important) role in the control of such terms. It will be shown that, whereas in
B2B relations the contractual parties are in principle free to incorporate price related
terms into the contract’s standard terms consumer law provisions contain specific
requirements which substantially restrict the possibility to incorporate such terms
into the contract. Further, this paper will focus on some existing restrictions with
regard to the price that can be charged for certain services.
R. Steennot (*)
Ghent University, Financial Law Institute, Gent, Belgium
e-mail: Reinhard.Steennot@ugent.be

https://doi.org/10.1007/978-3-030-23057-9_5
158 R. Steennot
2 Freedom of Contract and Free Competition: Some

Introductory Remarks
2.1 Freedom of Contract and the Insertion of Standard

Contract Terms into the Contractual Relation
One of the basic principles of Belgian contract law is the freedom of contract. One is
free to conclude, or not, a contract and parties can freely determine the content of the
contract (principle of autonomy of will), including the price to be paid.1 Moreover,
parties are free to agree on price related terms, such as the possibility for one of the
parties to increase the price unilaterally. Price related terms can be a part of the main
contract provisions, but are in practice often incorporated in the standard contract
terms, i.e. terms that are formulated in advance, that are intended to be used in
multiple contracts and that have not been subject to negotiation.
When price related terms are incorporated in standard contract terms, the user of
these terms will only be able to invoke them against the counterparty when certain
conditions are met. If not, the standard contract terms cannot be binding upon the
counterparty.
More specifically, standard contract terms become an integral part of the contract
when (1) the counterparty of the user of the terms is given a reasonable possibility to
take notice of the terms (reasonable availability test); (2) this possibility exists
before the conclusion of the contract2; and (3) the counterparty accepts these terms
(explicitly or implicitly).3 In Belgium, case law accepts in B2B relations as well as in
B2C relations that an undertaking can prove that these requirements are met through
the declaration (in writing or electronically) of the counterparty that he has received
(or read) the standard terms and accepts these terms.4 However, a mere declaration in
the standard contract terms that the counterparty accepts these terms does not prove
that the counterparty also had the possibility to take notice of these terms before the
1
De Page (1934), p. 402; Van Gerven and Covemaecker (2006), p. 71; Van Oevelen (1991), p. 104;
Veroughstraete (1990), p. 1165.
2
However, if a trader receives an invoice, mentioning standard contract terms for the first time, and
does not protest these terms, he will be presumed having accepted these terms: Court of Cassation
(7 January 2005), AR C.03.129.N http://jure.juridat.just.fgov.be/view_decision.html?justel¼F-
20050107-2&idxc_id¼201479&lang¼FR.
3
See for example: Court of Cassation (19 December 2011), AR C.10.0587.F http://jure.juridat.just.
fgov.be/pdfapp/download_blob?idpdf¼N-20111219-4; Brussels (23 March 2012), Tijdschrift
Consumentenrecht (2013), nr. 99, p. 53, note van der Bruggen; Bosmans (1981), p. 9; Dirix
(1988), p. 1181; Kruithof et al. (1994), p. 269; Steennot, Bruloot (2013), pp. 366–374; Van
Ommeslaghe (1986), pp. 140–146.
4
Brussels (21 November 2003), Journal des Procès (2004), 25; Antwerp (12 January 2006), Bank
en Financieel Recht (2006), p. 91; Court of first instance Brussels (2 December 2008),
Rechtskundig Weekblad (2010–2011), p. 377. See also Steennot and Bruloot (2013),
pp. 375–380 (who argue that such terms might be considered unfair since they reverse the burden
of proof); (see Art. VI.83, 21 CEL).
Control of Price Related Terms in Standard Form Contracts in Belgium 159
conclusion of the contract.5 In an electronic context, both the regime of “clickwrap”

(meaning that one has to scroll down the text of the standard contract terms and then
click on a “I agree”-button) and “browsewrap” (meaning that there is a link leading
to the standard contract terms which are on a different webpage on which one can
click before accepting the standard contract terms) are accepted. However, the Court
of Cassation stressed that if reference is made to the standard contract terms through
a hyperlink (browsewrap), it is necessary that this hyperlink actually works.6 If not,
the standard contract terms cannot bind the counterparty.
The principles of the freedom of contract and the autonomy of will are based on
the idea that the contractual parties are in an equal position. Today, this is, especially
in B2C relations, no longer the case, the undertaking having the possibility to
determine the content of standard contract terms beforehand and the weaker party
not having the possibility to influence the content of the standard contract terms
(“take it or leave it”). This finding has brought the (European) legislator to enact
specific rules in order to protect the weaker party (most often the consumer). These
rules of mandatory law substantially restrict the possibility to insert terms into the
contract that allow the undertaking to increase the price unilaterally. Also, in B2C
relations, the transparency requirement, which requires that the price, as well as
contract terms are clear and comprehensible, plays an important role.
2.2 Free Competition
As a basic principle, prices in Belgium are determined by free competition, i.e. by the
market mechanism (Art. V.2 Code of Economic Law [hereafter CEL]). Only if
problems occur with regard to prices, margins or price evolutions, measures can
be taken (Art. V.3-4 CEL). The Minister competent for economic affairs has the
power to determine maximum prices, but this power is seldom used. In addition, in a
few exceptional cases, specific (consumer law) provisions limit the price that can be
charged (e.g. consumer credit).
In order to ensure the proper functioning of the market, Article IV.1 CEL and
Article 101 TFEU prohibit agreements between undertakings that have as their
object or effect to prevent, restrict or distort competition. They forbid in particular
those agreements that directly or indirectly fix purchase or selling prices.7 Further,
the abuse of a dominant position, which can, for example, consist in directly or
indirectly imposing unfair purchase or selling prices is prohibited in European law
(Art. 102 TFEU), as well as in Belgian law (Art. IV.2 CEL).
5
Court of Cassation (20 April 2017), AR C.16.0341.F http://jure.juridat.just.fgov.be/view_deci
sion.html?justel¼N-20170420-3&idxc_id¼310477&lang¼NL.
6
Court of Cassation (16 December 2016), AR C.14.0424.N http://jure.juridat.just.fgov.be/view_
decision.html?justel¼N-20160916-2&idxc_id¼305997&lang¼NL.
7
European law applies if the agreement may affect trade between Member States.
160 R. Steennot

Terms
As far as the control of standard contract terms is concerned, it is important to make a

distinction between B2B and B2C relations.
In B2B relations, it is rather exceptional that standard contract terms can be
considered unfair on the basis of general rules of civil law. The most important
examples are:
– the prohibition of terms excluding liability for damages that are caused intention-
ally and of terms excluding liability for the non-performance of the essential
obligation of the contract8;
– the prohibition of excessive penalty clauses and excessive interests for late
payment (infra no. 29).
Terms allowing one of the parties to alter the price unilaterally are considered
valid in B2B relations.9 However, since the use of the right to alter the price
unilaterally is considered a “partijbeslissing”, the courts retain the possibility to
control ex post whether this right was not used in a manifestly unreasonable manner
(so called “marginale toetsing”).10
Contrary to what is the case in some other countries, standard contract terms
cannot be considered unfair merely because they are surprising, i.e. solely because
the counterparty did not expect to find such a term in the standard contract terms.
In B2C relations the story is completely different, since one must apply the
detailed and elaborate rules on unfair contract terms that are included in Book VI
of the Code of Economic Law. These rules transpose Directive 93/13/EEC on unfair
contract terms.11 In the following paragraphs we will discuss their scope, structure
and enforcement.
3.1 Scope of Application
First, it is important to emphasize that the scope of application of the Belgian rules
on unfair contract terms is (at least for now12) strictly limited to B2C relations.
8
Court of Cassation (25 September 1959), Revue Critique de Jurisprudence Belge (1960), p. 1, note
Dabin. The Court decided that an exclusion of liability for damages resulting from a serious mistake
is in principle valid.
9
Stijns (2005), p. 98; Van Gerven and Covemaecker (2006), pp. 134–135.
10
Stijns (2005), p. 99.
11
95/29.
12
The Minister competent for Economic Affairs intends to propose to broaden the scope, in order to
protect small and medium sized companies.
Only consumers can invoke the protection, which is incorporated in the rules on
unfair contract terms. Consumers are defined as natural persons13 that act for
purposes that fall outside of their trade or profession (Art. I.1, 2 CEL). Whether a
natural person can be considered a consumer, has to be determined exclusively in
function of the purposes for which the goods or services are acquired, not taking into
account the expertise or the specific knowledge a person possesses.14 Although not
determined explicitly in the text of the Code of Economic Law, it seems that natural
persons can be considered consumers as soon as they conclude a contract for
primarily private purposes (accessorium sequitur principale).15
Consumers can only invoke the rules on unfair contract terms when they conclude
a contract with an undertaking, meaning every natural or legal person pursuing an
economic aim in a sustainable manner (Art. I.1, 1 CEL).16 Taking into account the
CJEU’s case law, the concept of an undertaking has to be interpreted very broadly,
meaning every natural or legal person acting for purposes relating to his trade,
business or profession, i.e. every person concluding an agreement in the context of
his professional activity, whether publicly or privately owned.17
Finally, it is worth mentioning that contrary to the Directive 93/13/EEC, the
Belgian rules on unfair contract terms also apply to terms that have been negotiated
individually. Therefore, their scope is broader than the control of standard contract
terms (as defined supra in no. 2). All contracts between consumers and undertakings
are within the scope, irrespective of their subject matter.
13
Legal persons cannot be considered a consumer and therefore never enjoy the protection offered
by the Belgian rules on unfair contract terms. See also: CJEU Judgment of 22 November 2011,
Cape and Idealservice MN RE, C-541/99, EU:C:2001:625.
14
Antwerp (30 November 2004), Rechtskundig Weekblad (2006–2007), 100, note Wellens; Gent
(4 April 2007), Nieuw Juridisch Weekblad (2008), p. 174; Commercial Court Hasselt (8 Januari
2003), Nieuw Juridisch Weekblad (2003), p. 425. This is in line with the case law of the CJEU. See
in particular: CJEU Judgment of 3 September 2015, Costea, C-110/14, EU:C:2015:538. See also:
Terryn (2016), p. 273.
15
Court of Cassation (17 October 2014), C.13.0400.N (http://jure.juridat.just.fgov.be/view_deci
sion.html?justel¼N-20141017-1) (in the context of consumer credit); Antwerp (30 June 2009),
Nieuw Juridisch Weekblad (2010), p. 504 note Steennot; Gent (19 October 2012), Nieuw Juridisch
Weekblad (2014), 32, note R Steennot; Gent (29 June 2009), Tijdschrift Consumentenrecht (2012),
afl. 94, 90 (in the context of consumer sales). However, not everyone shares this view in Belgian
literature: Straetmans (2015), p. 50.
16
See also: Straetmans and Stuyck (2015), pp. 6–12.
17
CJEU Judgment of 17 May 2018, Karel de Grote – Hogeschool Katholieke Hogeschool Antwer-
pen, C-147/16, EU:C:2018:320; CJEU Judgment of 3 October 2013, Zentrale zur Bekämpfung
unlauteren Wettbewerb, C-59/12, EU:C:2013:634.
162 R. Steennot
3.2 Structure of the General Rules on Unfair Contract

Clauses
As already mentioned, the Belgian rules on unfair contract terms transpose the
Directive 93/13/EEC, which is based on the principle of minimum harmonization
and therefore enables Member States to incorporate additional protection measures
into their national legislation.18 Whereas this Directive only contains a general
clause/prohibition on unfair contract terms (i.e. terms which cause, contrary to the
requirement of good faith,19 a significant imbalance in the parties’ rights and
obligations arising under the contract, to the detriment of the consumer) and an
indicative list of terms that might be considered unfair, the Belgian legislator
enacted, in addition to the general prohibition on unfair terms, a black list of per
se prohibited terms.
The black list (Art. VI.83 CEL) enumerates 33 contract terms that have to be
considered unfair under all circumstances.20 As we will illustrate later, this list,
amongst others, restricts the possibility to insert terms into the contract that enable
the undertaking to change the price unilaterally and contains several rules on the
validity of penalty clauses.
The general prohibition on unfair contract terms has been inserted in the Code of
Economic Law in a rather peculiar way. What exactly constitutes an unfair term is
determined in the definitions of the Code (in Book I, Article 8.22 ). The criteria that
have to be applied to determine whether a term is unfair are found in article 82 of
Book VI of the Code. Taken together, every term creating a significant imbalance
between the rights and obligations of the parties to the detriment of the consumer, is
prohibited. Contrary to the Directive 93/13/EEC, Belgian law does not require the
consumer to prove that the term is contrary to the requirement of good faith. Criteria
that the courts must take into account according to Article VI.82 CEL include the
circumstances of the case, the other contract terms of the contract, and the clear and
comprehensible nature of the contract terms. Although not explicitly mentioned in
the text of Article VI.82 CEL, other factors, such as the extent to which the
contractual term deviates from rules of supplementary law, also play a role, as is
shown in national case law21 as well as in the case law of the CJEU.22
18
CJEU Judgment of 15 March 2012, Pereničová and Perenič, C-453/10, EU:C:2012:144.
19
In order to assess whether the imbalance arises ‘contrary to the requirement of good faith’, it must
be determined whether the seller or supplier, dealing fairly and equitably with the consumer, could
reasonably assume that the consumer would have agreed to the term concerned in individual
contract negotiations: CJEU Judgment of 14 March 2013, Aziz, C-415/11, EU:C:2013:164.
20
See for example: Steennot (2017).
21
Gent (18 February 2009), Tijdschrift Verkoop Vastgoed (2009) afl. 4, p. 47.
22
CJEU Judgment of 14 March 2013, Aziz, C-415/11, EU:C:2013:164.
3.3 Enforcement
3.3.1 Unfair Contract Terms Are Null and Void
According to Article VI.84 CEL unfair contract terms are null and void. They have
to be deleted from the contract, which itself will retain its validity (unless it cannot
continue into existence without the unfair term). The sanction of nullity implies, as
the CJEU requires,23 that unfair terms cannot be revised or reduced to a level that can
be considered acceptable. Traditionally, Belgian courts allowed for the application
of provisions of supplementary law after the annulment of the unfair term.24
However, this view is contrary to the interpretation of Article 6 Directive 93/13/
EEC by the CJEU since 2015, which limits the possibility to apply rules of
supplementary law to situations where such application is beneficial to consumers.25
When consumers have paid an amount on the basis of an unfair contract term,
e.g. an invalid price increase term or penalty clause, they are entitled to restitution.
According to the CJEU, it is not possible for a national court to limit temporally the
restitutory effects connected with a finding of unfairness to amounts overpaid under
such a clause after the delivery of the decision in which the finding of unfairness is
made.26 Therefore, consumers who have paid an amount on the basis of an unfair
term before the invalidity of the term was recognized by the courts, remain entitled to
reimbursement, as long as their claim has not been prescribed. In Belgium, the
limitation period is in principle 10 years (Art. 2262bis Civil Code).
3.3.2 Collective Redress
The Belgian Code of Economic Law provides for the possibility to launch a class
action for violations of, amongst others, the provisions on unfair contract terms (Art.
XVII.35 and following CEL). In such a procedure, which can only be initiated by
certain consumer associations (Art. XVII.39), consumers who have suffered dam-
ages through the use of an unfair contract term can be compensated. Basically, the
procedure consists of three phases.27 First, it has to be determined whether the claim
23
CJEU Judgment of 30 May 2013, Asbeek Brusse and de Man Garabito, C-488/11, EU:
C:2013:341.
24
Gent 26 October 2012, Jaarboek Marktpraktijken (2012), 286, note Cambie; Liège (25 February
2013) Tijdschrift voor Belgisch Burgerlijk Recht (2014), p. 183.
25
CJEU Judgment of 30 April 2014, Kásler and Káslerné Rábai, C-26/13, EU:C:2014:282; CJEU
Judgment of 21 January 2015, Unicaja Banco and Caixabank, C-482/13, EU:C:2015:21.
26
CJEU Judgment of 21 December 2016, Gutiérrez Naranjo, C-154/15, EU:C:2016:980. However,
the CJEU does not require a national court to disapply domestic rules of procedure conferring
finality on a decision, even if to do so would make it possible to remedy an infringement of a
provision, contained in the Directive 93/13/EEC. Also, the CJEU allows for the application of
prescription rules that provide for a reasonable period of time.
27
Voet (2015).
164 R. Steennot
is admissible (Art. XVII.36). If so, the group is composed by the court, which can
choose between a composition of the group on the basis of opt-in (only consumers
that indicate that they want to be a part of the group are included) or opt-out (all
consumers are included, except for those indicating that they do not want to be a part
of the group) (Art. XVII38 CEL). In case of a violation of the rules on unfair contract
terms, it is to be expected that the court will choose for a composition of the group on
the basis of the opt-out principle.
After the group is composed, a round of compulsory negotiations takes place
between the group representative and the undertaking during which they will try to
agree on the amount of the compensation. The court determines the duration of this
period (Art. XVII.45 CEL). If an agreement is reached, this agreement needs to be
homologated by the court (Art. XVII.47 and 49 and following CEL). If no agreement
is reached, it will be up to the court to decide whether the rules on unfair contract
terms have been violated, and, if so, which are the damages this has created on behalf
of consumers (Art. XVII. 52 and following CEL). The compensation will equal the
amounts paid by the consumers on the basis of the unfair contract clause.
Until now, Belgian consumer associations have not yet started a class action
procedure that is specifically based on the unfairness of a contractual term.
3.3.3 Erga omnes Effect of Injunctions Brought in the Public Interest
In addition to the possibility for consumers to invoke the unfairness and the nullity of
a contract term and the possibility of collective redress, several entities have the
possibility to apply for an injunction, preventing the further use of an unfair contract
term. More specifically, certain consumer associations, competing undertakings, the
Minister competent for economic affairs, the Economic Inspection and certain
professional organizations can apply for injunctions (Art. XVII.7 CEL). In the
past, especially consumer associations have applied for injunctions against, amongst
others, banks, insurance companies and airlines.28
Traditionally in Belgium, the effect of a court decision is limited to the parties in
the procedure.29 However, one needs to take into account the CJEU’s case law,
creating at least in certain cases an erga omnes effect of judicial decisions. In
Invitel,30 the CJEU decided that where the unfair nature of a term in the general
business conditions has been acknowledged in an action for an injunction (brought
in the public interest and on behalf of consumers by a body appointed by national
law to assess the unfair nature of a term included in the general business conditions
28
See for example: Antwerp (19 April 2012) Milieu- en Energierecht 2014, 13, note Schoors &
Rasking; Liège (26 januari 2007) Bank en Financieel Recht 2007, p. 344, note Van den Haute;
Commercial Court Namur (10 March 2010), Tijdschrift Consumentenrecht (2011), n. 92–93,
108, note Steennot.
29
Thiriar et al. (2016), p. 152. See also: Keirsbilck (2013) p. 1467.
30
CJEU Judgment of 26 April 2010, Invitel, C-472/10, EU:C:2012:242.
of consumer contracts), national courts are required, of their own motion, and also
with regard to the future, to ensure that consumers who have concluded a contract
with the seller or supplier to which those general business conditions apply will not
be bound by that term.
In Invitel, the erga omnes effect is limited to cases where consumers contracted
with the same supplier.31 However, it can be argued that the erga omnes effect
should be extended to the relation between consumers and other suppliers, which use
identical contract terms in similar circumstances.32 An argument for this view can be
found in the recent Biuro case,33 in which the CJEU had to decide on the compat-
ibility of the Polish register of unfair contract terms with the right to be heard. In this
case, the CJEU focused on the fact that such register can only be used to impose
sanctions on suppliers that use identical terms if the undertaking is given the
possibility to submit its arguments against the invalidity of the term. Therefore, if
one accepts that the erga omnes effect can be extended to disputes between con-
sumers and other suppliers that were not involved in the collective action brought in
the public interest, their right to be heard must be respected. They must be given the
possibility to argue why, in their view, a contract term cannot be considered unfair.
3.3.4 Public Enforcement: Warnings and Transactions
In addition to private enforcement, several public enforcement mechanisms are

available. We already mentioned the possibility of injunctions brought in the public
interest by the Minister competent for economic affairs and the Economic Inspec-
tion. Also, the Economic Inspection has the possibility to issue warnings (Art.
XV.31 CEL) and to propose so-called transactions, i.e. proposals to pay a certain
amount in order to prevent criminal prosecution (Art. XV.61 CEL).34 Although
technically different, they function as administrative sanctions. In practice, the
control on the use of unfair contract terms by the Economic Inspection is rather
limited. Therefore, private enforcement plays a far more important role than public
enforcement.
31
In her conclusion, the Advocate-General argues that the erga omnes effect cannot be extended to
other suppliers: A.G Trstenjak, CJEU Judgment of 6 December 2016, Invitel, C-472/10, EU:
C:2011:806. The CJEU itself, in its decision is silent on this matter.
32
See also: Micklitz and Reich (2014), p. 795.
33
CJEU Judgment of 21 December 2016, Biuro podróży Partner, C-119/15, EU:C:2016:987.
34
See for example: Tallon (2015), pp. 304–305.
166 R. Steennot
4 Judicial Control of Price Terms in Standard Contracts
4.1 The Black List: The Validity of Clauses Allowing

the Undertaking to Determine or Alter the Price
Article VI.83, 2 and VI.83, 3 CEL determine the validity of terms allowing the
undertaking to determine the price at the moment of delivery, as well as the validity
of price increase terms in consumer contracts.35 When assessing the validity of such
terms, a distinction has to be made between contracts of a definite nature and
contracts of an indefinite nature.
In contracts of a definite nature, terms that enable the undertaking to determine
the price at the moment of delivery, as well as clauses which allow the undertaking to
increase the price unilaterally on the basis of elements which solely depend on the
undertaking’s will, are prohibited (Art. VI.83, 3 CEL). The prohibition of price
increase terms is absolute and cannot be set aside by allowing the consumer to
terminate the contract before the new price is applied.36 However, it is important to
emphasize that price variation clauses are only prohibited if the power to increase the
price unilaterally is not based on objective criteria. Therefore, indexation clauses,
which determine the price in function of clear and objective criteria, remain possible
even in consumer contracts of definite nature.
Published case law on Article VI.83, 3 CEL is rather limited. The most inter-
esting case to mention is a decision of the court of appeal in Brussels stating that a
term in a real estate brokerage contract determining that the consumer will receive
from the broker a fixed amount following the sale of his house (in this case 125.000
euro), irrespective of the actual price paid by the buyer, is not unfair. Since the
consumer knows very clearly in advance which amount he will receive, the under-
taking is not given the possibility to change the price unilaterally (although the
amount of the remuneration depends on the price the buyer pays).37
In contracts of an indefinite nature the undertaking has the possibility to insert
terms which enable the undertaking to increase the contractual price unilaterally, the
only requirement being that the consumer is informed beforehand on the price
(increase) and is given a reasonable period to cancel the contract before the new
price applies (Art. VI.83, 2 CEL). Once again, the scope is limited to price increases
which solely depend on the undertaking’s will. Therefore, this rule does not apply to
indexation clauses calculating the new price on the basis of clear and objective
factors, which are determined beforehand in the contract.38 These terms remain valid
35
Article VI. 83, 27 CEL can also be mentioned: it prohibits terms that permit the undertaking to
retain sums paid by the consumer where the latter decides not to conclude or perform the contract,
without providing for the consumer to receive compensation of an equivalent amount from the seller
or supplier where the latter is the party cancelling the contract.
36
Bogaert and Van Baeveghem (2011), p. 34; Lombart (2010), p. 109; Stuyck (2015), p. 530.
37
Brussels (1 December 2009), Nieuw Juridisch Weekblad (2010) p. 631, note Steennot.
38
Bogaert and Van Baeveghem (2011), p. 33.
even if they do not offer the consumer the possibility to cancel the contract when the
new price is determined.
In 2011, the court of appeal in Brussels had to decide whether a term in the
general business conditions of a supplier of electricity, determining on the one hand
that the final amount to be paid at the end of the year is calculated in function of the
electricity actually consumed, and on the other hand that the electricity company, if it
has not been informed by the administrator of the net on the amount of electricity
actually used, is entitled to calculate the amount due at the end of the year on the
basis of an average of electricity consumption over the months on which information
is available, is contrary to Article VI.82, 2 CEL. The court argues that this is not the
case since the amount charged from the consumer does not solely depend on the
supplier’s will, but is calculated on the basis of information that is available.39
Taking into account the different regime for contracts of a definite and an
indefinite nature, it is important to distinguish between both types of contracts.
The court of appeal of Liège had to decide whether a contract, which is concluded
for an indefinite period of time but could not be terminated by the consumer within
the first year, had to be considered a contract of a definite or an indefinite nature. The
court decided that the mere fact that the consumer cannot terminate a contract within
an initial period of time does not change the nature of the contract, which remains a
contract of an indefinite nature.40 Therefore, the undertaking had the possibility to
insert a contractual term, entitling the undertaking to increase the price unilaterally,
the only requirements being that the consumer is informed beforehand on the
increased price and is given a reasonable period to terminate the contract.
Finally, it is important to stress that the abovementioned rules do not apply to
terms enabling the provider of financial services to change the interest rate unilater-
ally.41 Such change is even possible without prior notification if there is a valid
reason to change the interest rate without prior notification (e.g. monetary reasons).42
However, the consumer should have the possibility to terminate the contract. As I
will illustrate later, specific rules apply to consumer and mortgage credit agreements.
4.2 The General Clause and the Impact of the Transparency

Requirement
According to Article VI.82 CEL, the assessment of the unfair nature of a term does
not relate to the definition of the main subject matter of the contract, or to the
39
Brussel (20 September 2011), Jaarboek Marktpraktijken (2011), p. 266.
40
Liège (9 October 2014), Nieuw Juridisch Weekblad (2015), p. 459. See also: Brussels (5 July
2014), Jaarboek Marktpraktijken (2014), p. 272.
41
See for example: President Commercial Court Brussels (16 June 2003), Tijdschrift
Consumentenrecht (2004), afl. 63, 69.
42
Stijns (2000), p. 159.
168 R. Steennot
adequacy of the price and remuneration on the one hand, as against the services or
goods supplied in exchange, on the other; the condition being that these terms are
clear and comprehensible (i.e. in plain intelligible language). In other words, terms
that determine the price of the contract cannot be declared invalid on the basis of the
general clause prohibiting terms that create a significant imbalance between the
parties’ rights and obligations, as far as these are formulated in a clear and compre-
hensible manner.
It is clear that a distinction must be made between contract terms that directly
determine the price to be paid and which cannot be assessed (unless when they are
not sufficiently clear or comprehensible), and ancillary contract terms, such as those
that enable an undertaking to increase the price unilaterally or to charge extra costs in
the future, which can and must be assessed on the basis of the abovementioned rules
(Art. VI.83, 2 and 3 CEL). With regard to these ancillary price related terms, the
general clause may also play a role, as is shown by the CJEU.43 For example, terms
in contracts for indefinite nature that enable the undertaking to increase the price
unilaterally on the basis of her own will, will have to indicate very clearly that the
consumer is entitled to terminate the contract without any cost, within a certain
period of time. Further, indexation clauses will have to determine very clearly how
the adaptation of the price must be calculated. If these requirements are not met,
these terms could be unfair because they are not sufficiently clear for the average
consumer.
Where there is doubt about the meaning of a contract term, the interpretation most
favourable to the consumer prevails (art. VI. 37 CEL).44 However the interpretation
most favourable to the consumer is not the only option. It is also possible that the
court decides that the term creates a significant imbalance between the rights and
obligations of the parties (and is therefore unfair) because of its unclear nature.45 In
that case, the court can also declare the term null and void.
43
CJEU Judgment of 26 April 2010, Invitel, C-472/10, EU:C:2012:242.; CJEU Judgment of
21 March 2013, RWE Vertrieb, C-92/11, EU:C:2013:180. See also: CJEU Judgment of 26 February
2015, Matei, C-143/13, EU:C:2015:127 (on contract terms which enable the creditor to change the
rate of interest unilaterally).
44
The rule is stricter than the general contra preferentem rule included in article 1162 of the Civil
Code that applies in B2B relations. Article 1162 of the Civil Code can only be applied if it is not
possible to determine the common intention of the parties with complete certainty on the basis of the
intrinsic and extrinsic elements of the agreement submitted to the court. Moreover, Article 1162
Civil Code only requires an interpretation to the benefit of the person that has committed himself
and not the for that person most favourable interpretation.
45
Waelkens (2014), pp. 1040–1041.
4.3 Abuse of Law
When a contractual term as such is fair, it remains possible that the way in which the
term is applied by the undertaking is manifestly unreasonable (abuse of law). In such
situation, general principles of civil law allow the court to restrict the application of
the term to what is acceptable.46 The distinction with the situation where a term is
unfair on the basis of the rules on unfair contract terms is clear. The contract term
itself remains valid. Only, the way in which it is exercised is restricted. Since this
possibility is based on the theory of abuse of law, it can also be applied in B2B
relations.
In this section, we will discuss limitations which apply to the compensation, which
the debtor has to pay when he does not meet his obligation to pay the price in due
time on the one hand, and on the other hand some specific rules that impact prices
charged and price related terms in certain types of contract (leges speciales).
5.1 Interests and Penalty Clauses in Cases of Late Payment
When a debtor pays late, compensation will be due. In the absence of any specific
contractual arrangements, the debtor needs to pay interests at the statutory rate of
interest (2% if the debtor is a consumer, 8% if the debtor is an undertaking) and a
compensation of at least 40 euro (if the debtor is an undertaking).47 Since such
compensation does not always cover the costs of a late payment, many creditors,
especially in B2C contracts, insert in their standard contract terms, terms that require
the debtor to pay interest at a higher interest rate than the statutory rate, as well as a
penalty clause which entitles the creditor to a fixed amount (most often a percentage
of the contract price with a certain minimum, e.g. 10% with a minimum of 50 euro).
In principle, such terms are valid. However, certain restrictions must be kept in mind.
In B2B relations, there is a possibility for the courts to reduce the interest rate
agreed upon if that interest rate is manifestly higher than the damages actually
suffered by the creditor (Art. 1153 CC).48 Further, penalty clauses that entitle the
creditor to a compensation that is manifestly higher than the amount of the
46
Court of Cassation (8 February 2001), AR C.980470.N (http://jure.juridat.just.fgov.be/pdfapp/
download_blob?idpdf¼F-20010208-8).
47
Article 1153 Civil Code and Articles 5 and 6 of the Act of 2 August 2002 on combating late
payment in commercial transactions.
48
Ghent (6 January 2010), Nieuw Juridisch Weekblad (2012), p. 728.
170 R. Steennot
foreseeable damage at the time of conclusion of the contract can be reduced (Art.
1231 CC).49 It is up to the courts to determine when an interest rate or a penalty
clause is manifestly too high. Reduction of the interest rate or a penalty clause can
take place on demand of the debtor, as well as ex officio. When the court decides to
reduce the interest rate, a creditor will still be entitled to the statutory rate of interest,
as determined by the Act of 2 August 2002 on combating late payment in commer-
cial transactions (at the moment 8%).50 In case of a reduction of a penalty clause, the
creditor remains entitled to compensation of the damages that were reasonably
foreseeable at the time of conclusion of the contract (such compensation cannot be
lower than the actual damages suffered).51
In addition to these rules, which protect the debtor, there are also rules that protect
the creditor against conventional interest rates that are too low, as well as against
other terms limiting the compensation to be paid by the debtor.52 Article 7 of the Act
of 2 August 2002 allows for the courts to revise conventional interest rates and
penalty clauses that create a significant imbalance between the rights and obligations
of the parties, to the detriment of the creditor, however only on demand of the
creditor. Terms that state that the creditor is not entitled to a compensation for the
collection of the debt are presumed to be unfair. Terms that determine that the
creditor is not entitled to interest are automatically unfair. However, the mere fact
that the conventional interest is lower than the statutory rate of interest is not
sufficient to decide that there is a significant imbalance. In several cases it was
decided by the courts that there is no possibility to revise (increase) the conventional
rate of interest, if the lower interest rate is determined by the standard contract terms
of the creditor. In such situation it is indeed impossible that the lower conventional
rate of interest was imposed by the debtor having a greater bargaining power.53
In B2C relations, one needs to take into account the black list of unfair contract
terms (Art. VI.83 CEL). According to Article VI.83, 24 CEL penalty clauses
(including terms determining the interest due in case of late payment) are prohibited
if they manifestly exceed the damages that the undertaking is likely suffer. When
assessing whether the compensation due by the consumer is manifestly too high, it is
necessary to evaluate the cumulative effect of all the penalty clauses in the contract
49
Court of Cassation (22 October 2004), AR C030088 N (jure.juridat.just.fgov.be/view_decision.
html?justel¼N-20041022-20); Commercial court Liège (26 April 2015), Jurisprudence Liège,
Mons et Bruxelles (2016), p. 854.
50
Court of first instance Dendermonde (21 November 2003) Tijdschrift voor Belgisch Burgerlijk
Recht (2005), p. 225.
51
Court of Cassation (22 October 2004), AR C030088 N (jure.juridat.just.fgov.be/view_decision.
html?justel¼N-20041022-20).
52
These rules transpose Directive 2011/7/EU of the European Parliament and of the Council of
16 February 2011 on combating late payment in commercial transactions, OJ 2011, L 48/1.
53
Commercial court Hasselt (5 January 2005), Nieuw Juridisch Weekblad (2005), 117; Commercial
court Hasselt (5 July 2004), Tijdschrift voor Belgisch Burgerlijk Recht (2007), p. 575; Terryn
(2012), p. 30.
in question, regardless of whether the creditor actually insists that they all be satisfied
in full.54
As such, the rule is quite similar to the articles 1153 and 1231 CC. However, in
case the compensation agreed on manifestly exceeds the foreseeable damage, which
once again is left to the discretion of the courts,55 the compensation cannot be
reduced or revised, but must be declared null and void (Art. VI.84 CEL).56 This
implies that the undertaking that inserted an invalid compensation regime in its
standard contract terms will no longer be entitled to compensation. Hence the CJEU
decided that, when a term is null and void, one may no longer apply provisions of
supplementary law that are disadvantageous for the consumer.57
In addition to article VI.83, 24 CEL, article VI.83, 17 CEL determines that
penalty clauses can only be valid in a B2C relation if they are reciprocal and
equivalent. This rule is quite typical and does not reflect any provision in the
Directive 93/13/EEC’s indicative list. Article VI.83, 24 CEL implies that if the
contract determines which compensation the consumer must pay if he does not meet
his obligations, the contract must also determine to which compensation the con-
sumer is entitled in case the undertaking does not fulfil its obligations.58 For
example, if, according to the contract, the late-paying consumer needs to pay
compensation, the consumer must also be entitled to an equivalent (not equal)
compensation when the undertaking does not deliver or delivers too late.
If this requirement of reciprocity or equivalence is not met, the penalty clause is
not valid and therefore null.59
For certain types of contract there are specific rules. This is, for instance, the case
for consumer and mortgage60 credit agreements. The most important difference with
54
CJEU Judgment of 21 April 2016, Conseil/Commission, C-73/14, EU:C:2016:283.
55
See for example: Brussels (13 October 2009), Tijdschrift Notariaat (2010), p. 639; Gent
(25 January 2013), Nieuw Juridisch Weekblad (2014), p. 557, note Steennot; Gent (11 February
2008), Nieuw Juridisch Weekblad (2008), p. 934, note Steennot. Attempts to introduce fixed caps
failed.
56
Vred Bruges (26 February 2016), Tijdschrift voor Vrederechters (2016), 328. See also Peeraer
(2013), p. 324; Geiregat (2016), p. 133.
57
CJEU Judgment of 21 January 2015, Unicaja Banco and Caixabank, C-482/13, EU:C:2015:21..
Traditionally, Belgian courts allowed for such a compensation based on Article 1153 CC: Brussels
(12 February 2001), Jaarboek Handelspraktijken (2001), p. 274; Gent (4 January 2012), Nieuw
Juridisch Weekblad (2012), 70, note Steennot; Liège (25 February 2013), Tijdschrift voor Belgisch
Burgerlijk Recht (2014), p. 183.
58
See for example: Brussels (12 February 2001), Jaarboek Handelspraktijken (2001), p. 274; Gent
(26 oktober 2012), Tijdschrift voor Gentse Rechtspraak (2013), p. 46; Gent (4 January 2012),
Nieuw Juridisch Weekblad (2012), 70, note Steennot; Liège (5 February 2002), Jurisprudence
Liège, Mons et Bruxelles (2002), p. 1764.
59
See for example: Gent (4 January 2012), Nieuw Juridisch Weekblad (2012), p. 70, note Steennot.
60
With regard to mortgage credits, different rules apply to mortgage credits with a movable purpose
and mortgage credits with an immovable purpose. The rules for mortgage credits with a movable
purpose are identical to the rules for consumer credits. See Articles 147/22 and VII.147/23 CEL for
mortgage credits and Art. VII. 106 CEL for consumer credits.
172 R. Steennot
the general provisions, mentioned above, is that these provisions limit the amount of
the compensation to a certain percentage (e.g. interest for late payment or capped to
the [APR61 + 10% of the APR]62; in the case of resolution of a consumer credit,
penalty clauses can never exceed 10% of the capital still due). However, this does
not mean that courts have no discretionary power at all. Even if the compensation
agreed upon in the standard terms of contract is compatible with the requirements set
in the law, the courts retain the possibility, even ex officio, to further reduce the
compensation agreed upon if they consider this compensation disproportionate or
unjustified (Art. VII.199 and VII.213 CEL). In particular with regard to consumer
credits, courts have used this power quite often.63 The Court of Cassation has
acknowledged in this context that courts can take into account an unfortunate
situation in which the consumer ended up, when assessing whether compensation
is unjustified.64
5.2 Prior Approval Needed Within Specific Sectors
Within certain sectors it is necessary to obtain a prior approval before a price

increase can take place. This is the case for services that relate to elderly care, the
supply of drinking water, the distribution of broadcasting services and taxi services.
Until January 1st, 2015, the federal government controlled this. Since then, it has
become a regional power.
5.3 Maximum Prices
As already indicated (supra no. 5), prices are in principle free. In some cases,
however, there is a maximum price that can be charged.65 This is, for example, the
case for several petroleum products, where the maximum price is calculated on the
basis of formulas, incorporated in an agreement concluded between the Belgian
Petroleum Federation and the Ministers competent for economic affairs and energy.
Further, it is worth mentioning that certain consumers can enjoy from a social rate
61
Annual percentage rate. The APR represents the total cost of the credit and is expressed as a
percentage on an annual basis.
62
For example, if the APR is 8%, the rate of interest for late payment is maximum 8.8%.
63
See for example: Court of first instance Antwerp (6 January 2009), Jaarboek Kredietrecht (2009),
p. 87; Cantonal Court Grimbergen (20 March 2013), Jaarboek Kredietrecht (2013), p. 73; Cantonal
Court Verviers (2 May 2011), Jaarboek Kredietrecht (2011), p. 60.
64
Court of Cassation (5 March 2004), C.030281 F, http://jure.juridat.just.fgov.be/pdfapp/down
load_blob?idpdf¼N-20040305-6.
65
In this paper we will not elaborate on the maximum price of medicines, implants and hearing aids.
for electricity and gas. Also, there is a maximum price that suppliers of taxi services
can charge.
Also, liberal professions are not always free to determine the remuneration due
for the services they deliver in the context of their activities of public interest. For
example, Royal Decrees determine the rate of certain services delivered by bailiffs
and notaries.66 Specific rules apply in the health sector but are outside the scope of
this article.
Finally, the costs of consumer credits and the basic banking service are limited to
a certain amount (infra Sects. 5.4 and 5.5).
5.4 Price and Price Related Terms in Consumer

and Mortgage Credits
Specific rules apply in the case of consumer and mortgage credit agreements. First,
we will discuss these rules which relate directly to the cost of a credit agreement.
After that, we will focus on the possibility to change the borrowing rate after the
conclusion of the contract.
5.4.1 Maximum Annual Percentage Rate
In the context of price control, it is interesting to refer to article VII.94 CEL that
determines that the maximum cost of a consumer credit agreement (the maximum
annual percentage rate [APR]) is determined by Royal Decree in function of the
type, amount, and duration of the credit agreement.67 Creditors cannot agree on an
APR that is higher than the one that is determined by Royal Decree.68 If they do so,
they can be sanctioned by the Economic Inspection of the Ministry of Economic
Affairs, which can even require the Financial Services Market Authority to suspend
the creditor’s authorization (however, this is not common). Moreover, a specific civil
remedy applies, which implies that the amount that the consumer needs to reimburse
is reduced to the amount borrowed (no cost or interest are due). The consumer retains
the benefit of reimbursing the creditor in instalments (Art. VII. 196 CEL).69
66
Royal Decree of 30 November 1976 determining the rates for acts in civil and commercial matters
and Royal Decree of 23 August 2015 determining the rate of activities of bailiffs in penal matters;
Royal Decree of 16 December 1950 determining the fee of notaries.
67
Royal Decree of 14 September 2016, concerning the costs, percentages, duration and reimburse-
ment modalities of consumer credits. See for the maximum cost: http://economie.fgov.be/nl/
consument/consumentenkrediet/Kredietkosten/Maximale_tarieven/#.WdyxomcUkSs.
68
In most cases this is due to the fact that not all costs, which had to be included in the APR were
included.
69
Court of first instance Antwerp (29 April 1999), Tijdschrift Vrederechters (2000), p. 124.
174 R. Steennot
In one case it was argued that, although the APR agreed upon did not exceed the
maximum APR determined by Royal Decree, there was a violation of the prohibition
on usury in the Civil Code.70 If the APR does not exceed the maximum APR
determined by Royal Decree, it is exceptional the rules on usury are applied.
Mortgage credit legislation does only contain a similar cap on the APR for
mortgage credit agreements with a movable purpose (e.g. a credit agreement con-
cluded in order to buy a car, secured by a mortgage). For mortgage credit agreements
with an immovable purpose (e.g. credit agreements concluded for buying or building
a house) the Code of Economic Law leaves the contract parties entirely free to
determine the APR. Taking into account the high competition on the market for
mortgage credits with an immovable purpose, this does not create any specific
problems. However, this does not mean that there are no restrictions at all: (1) the
file costs that can be charged for mortgage credits with an immovable purpose, have
been capped recently at 500 euro (in case file costs are due in the context of an
anticipated reimbursement of the capital due, the maximum cost is further reduced to
250 euro)71 and (2) it is clearly determined how the APR must be calculated.
5.4.2 Possibility to Change the Borrowing Rate
As for the possibility to adapt the borrowing rate, similar rules apply to consumer
credits and mortgage credits. Article VII.86 (consumer credit) and VII.143 CEL
(mortgage credit) basically prohibit contract terms which allow for the possibility to
change the credit agreement (either unilaterally, either in common consent). How-
ever, an exception to this basic principle is made with regard to the borrowing rate, as
the credit agreement may determine that the borrowing rate can be changed during
the duration of the agreement (Art. VII. 86 §3 and VII. 143 §3 CEL).
However, with the exception of overdrafts in the context of consumer credits, the
credit agreement can only allow for such possibility to change the borrowing rate
during the credit agreement, when certain requirements, which aim at protecting the
consumer, are met. Most important are (see Article VII.86 and Article VII.143 CEL,
to which Article VII.86 §3 refers):
– The new borrowing rate must be calculated on the basis of a reference rate,
determined in the credit agreement (the reference rate must be chosen form a list
of reference rates in function of the duration of the period after which the
borrowing rate can be changed (e.g. 1 year, 3 years, 5 years)).
70
Cantonal court Antwerp (26 December 2007), Nieuw Juridisch Weekblad (2008), p. 271, note
Steennot. Usury refers to the situation where the lender abuses the weakness or the needs of the
other party to agree on an interest rate that is clearly higher than the normal interest rate, taking into
account the risk the loan creates for the lender (Art. 1907ter CC). Article 1907ter CC can only be
applied to loans and is not applicable to overdrafts.
71
Royal Decree of 24 February 2017 determining the maximum file costs in the case of mortgage
credits with an immovable purpose.
– Adaptations of the borrowing rate must be possible in min and in plus, and the
agreement must clearly indicate to what extent the borrowing rate can increase
and decrease (caps). The difference between the original borrowing rate and the
new borrowing rate in the case of an increase of the reference rate may not be
higher than the difference in a decrease of the reference rate.
– Changes to the borrowing rate are only possible after periods of at least one year
(therefore, it is not possible to agree that the borrowing rate will be changed every
6 months).
In the case of an overdraft (consumer credit), the above-mentioned requirements
do not apply. However, if the new borrowing rate is more than 25% higher than the
original borrowing rate, or the last one applied and the agreement is concluded for a
period exceeding one year, the consumer is entitled to terminate the credit agreement
unilaterally and without any cost (Art. VII.86 §5 CEL).
When a change is made to the borrowing rate, the consumer has to be informed by
means of a durable medium (e.g. a letter or an e-mail).72 The information must relate
to the new borrowing rate as well as to the amount to be paid in the future. Where
applicable, a new amortization plan has to be added. In principle, the consumer has
to be informed beforehand, before the new borrowing rate applies. However, the
parties can agree in the credit agreement that the information is given to the
consumer periodically in cases where the change in the borrowing rate is caused
by a change in a reference rate, the new reference rate is made publicly available by
appropriate means and the information concerning the new reference rate is also
available in the premises of the creditor.
5.5 Payment Services
5.5.1 Basic Banking Services
In Belgium (as in other EU countries), consumers are entitled to a basic bank service.
Basically, this means that every consumer has the right to open one payment account
and to use certain payment services, such as credit transfers and a payment card
(without the possibility to obtain credit) (Art. VII.57 §1 CEL). In the context of this
paper, it is interesting to mention that the Belgian legislator chose to restrict the cost
that a bank can charge for the basic banking service. More specifically, in 2018 the
cost is limited to 15.44 euro (Art. VII.57 §3 CEL).
See also on the concept of “durable medium”: CJEU Judgment of 5 July 2012, Content Services,
72
C-49/11, EU:C:2012:419; CJEU Judgment of 25 January 2017, BAWAG, C-375/15, EU:C:2017:38.

176 R. Steennot
5.5.2 Payment Services
Article VII.24 CEL contains some specific rules in the context of changes made to
the framework contract relating to payment services, interests and exchange rates.
Changes in the interest or exchange rates may be applied immediately and
without notice, provided that such a right is agreed upon in the framework contract
and that the changes are based on the reference interest or exchange rates agreed
on. The payment service user must be informed of any change in the interest rate at
the earliest opportunity on paper or on a durable medium, unless the parties have
agreed on a specific frequency or manner in which the information is to be provided
or made available. However, changes in interest or exchange rates, which are more
favourable to the payment service users, may be applied without notice (Art. VII.24
§2 CEL). Changes in the interest or exchange rate used in payment transactions shall
be implemented and calculated in a neutral manner that does not discriminate against
payment service users (Art. VII. 24 §3 CEL).
5.6 Telecommunication Contracts
Given the media coverage, everyone is aware that when mobile phones are used
while travelling outside the users’ home country in any other EU country, the user
does not have to pay any additional roaming charges. Therefore, I will not elaborate
on this.
More interesting to mention is article 108 §2 of the Belgian Telecommunications
Act (Act on electronic communication). It determines that, in case of a price
increase, the user of telecommunication services (not necessarily a consumer in
the meaning of the Code of Economic Law) can cancel the contract. Such termina-
tion has to take place at the latest on the last day of the month following the receipt of
the first invoice charging the new price. It is important to emphasise that this rule
applies without prejudice to the general rules on unfair contract terms incorporated in
Book VI CEL, implying that the telecom operator cannot insert a term into a contract
of definite nature that enables him to increase the price unilaterally on the basis of
elements which depend solely on his will. Equally important, the Belgian legislator
has recently (2017) clarified that if the price increase is due to the application of an
indexation clause, the user does not have the possibility to terminate the contract.
Taking all this into account, it immediately becomes clear that the added value of
article 108 of the Belgian Telecommunications Act is limited to contracts that are
concluded with clients that cannot be considered consumers in the meaning of the
Code of Economic Law.
5.7 Travel Contracts
As far as package contracts are concerned, the Belgian Act on Package Travel,
Linked Travel Arrangements and Travel Services (2017) contains several provisions
on price alterations. These should protect travellers (not necessarily consumers in the
traditional meaning of the Code of Economic Law). A distinction must be made
between price alterations at the time of conclusion of the contract (with regard to the
price that has been mentioned in the pre-contractual phase) and price alterations
following the conclusion of the contract.
5.7.1 Binding Character of Pre-contractual Information
The information provided to the traveller on the total price of the contract forms an
integral part of the package travel contract and cannot be altered unless the
contracting parties expressly agree otherwise (Art. 8). The organizer and, where
applicable, the retailer must communicate all changes to the pre-contractual infor-
mation (on the total price) to the traveller in a clear, comprehensible, and prominent
manner before the conclusion of the package travel contract.
If travellers are not informed about additional fees, charges or other costs before
the conclusion of the package travel contract, the traveller does not have to bear these
fees, charges or other costs (Art. 9).
5.7.2 Alteration of the Price After the Conclusion of the Contract
Once the contract has been concluded, prices can be increased (contrary to what is
the case for consumer contracts of definite nature in general, supra no. 20), but only
if the contract expressly reserves that option for the organizer (Art. 19). The package
travel contract must clearly state how price revisions are to be calculated.
Moreover, price increases are possible exclusively as a direct consequence of
changes in: (a) the price of the carriage of passengers resulting from the cost of fuel
or other power sources; (b) the level of taxes or fees on the travel services included in
the contract imposed by third parties not directly involved in the performance of the
package, including tourist taxes, landing taxes or embarkation or disembarkation
fees at ports and airports; or (c) the exchange rates relevant to the package.
Irrespective of its extent, a price increase is possible only if the organizer notifies
the traveller clearly and comprehensibly of it with a justification for that increase and
a calculation, on a durable medium at the latest 20 days before the start of the
package (Art. 21). If the price increase exceeds 8% of the total price of the package,
the traveller can terminate the contract without paying a termination fee (Art. 20).
The organizer must refund all payments made by or on behalf of the traveller without
undue delay and in any event no later than 14 days after the contract has been
terminated.
178 R. Steennot
If the package travel contract stipulates the possibility of price increases, the
traveller must also have the right to a price reduction corresponding with any
decrease in the costs mentioned above that occurs after the conclusion of the contract
and before the start of the package (Art. 22). However, in the event of a price
decrease, the organizer has the right to deduct actual administrative expenses from
the refund owed to the traveller (Art. 23). At the traveller’s request, the organizer
must provide proof of those administrative expenses.
5.8 Price Bundling
In general, price bundling is not prohibited, as long as the information given to the
consumer is not misleading (Art. VI.80 CEL). However, in some cases, specific rules
apply. Article VI.81 CEL prohibits the joint offering of products and financial
services.73 Specific rules also apply to consumer and mortgage credits. As for the
latter, a distinction is made between tying practices and bundling practices. Whereas
the first are prohibited, the second are permitted (Art. VII.147 CEL). The difference
between the two consists in the fact that in the case of a tying practice a credit
agreement is offered or sold in a package with other distinct financial products or
services and the credit agreement is not made available to the consumer separately.
In the case of bundling practice, a credit agreement is offered or sold in a package
with other distinct financial products or services but the credit agreement is also
made available to the consumer separately (but not necessarily on the same terms or
conditions as when offered bundled with the ancillary services). Further, it can be
stressed that when consumers are obliged to conclude an insurance in order to
guarantee repayment of the credit or insure the value of the security, they should
remain free to decide on the party with whom the insurance contract is concluded
(Art. VII.146 CEL).
Price bundling is extensively used when offering telecommunication services.
Consumers taking out a subscription for a minimum period, which can by law not
exceed 24 months,74 are given a device for free or at a reduced price. Once a period
of 6 months has elapsed consumers are by law entitled to cancel their subscription
without any cost, at least with regard to the subscription as such.75 However, if at the
time of subscription, a device was given for free or at a reduced price, the consumer
will have to pay a compensation for the device. The amount of this compensation,
equalling the residual value of the device, has to be determined beforehand in the
contract.76 This should avoid misleading consumers at the time of subscription or
surprising them at the time of termination of the contract.
73
There are however a few exceptions to this prohibition (Art. VI.81 §2 CEL).
74
Article 108 §3 Act on Electronic Communications.
75
Article 111/3 Act on Electronic Communications.
76
Article 111/3 Act on Electronic Communications.

6.1 General Information Requirements on Prices
According to Article VI.2 CEL the undertaking needs to inform the consumer on the
total price to be paid before the conclusion of the contract. Moreover, the price of
goods and homogeneous services needs to be displayed in a clear and unambiguous
way (Art. VI.3 CEL).77 The price displayed must be the total price; i.e., the price
including taxes and including all costs that the consumer has to pay (all costs the
consumer cannot avoid), such as reservation costs that must be paid irrespective of
the way the reservation is made and cleaning costs the consumer must pay anyway
(Art VI.4 CEL).78
These requirements also apply to advertising in which a price is mentioned, but
do not prevent the use of prices that indicate that a good or service can be obtained as
from a certain price in advertising.79 Specific rules (determined by Royal Decree)
apply when certain types of goods or services are offered (e.g. jewellery, petrol
products, and financial services).
If these rules are violated, there is no specific civil remedy available. Private
enforcement can only take place on the basis of general civil law provisions
(compensation for the damages suffered, Art 1382 Civil Code) or on the basis of
the general remedy for unfair commercial practices (Art. VI.38 CEL), which deter-
mines that consumers who have concluded a contract following an unfair commer-
cial practice can be exempted from paying the price (but can keep the good delivered
or the service rendered).80 In practice, public enforcement plays an important role in
this regard. More specifically, the Economic Inspection within the Ministry of
economic affairs enforces these rules quite actively by issuing warnings and pro-
posing transactions to undertakings violating these rules.
In the past, Book VI CEL also contained some specific provisions on the
announcement of price reductions. The Belgian legislator had to abandon these
rules because the CJEU decided that these rules were contrary to Directive 2005/
29/EC on unfair commercial practices,81 taking into account the maximum
77
See for example: Ghent (7 January 2008), Jaarboek Handelspraktijken (2008), p. 263, where the
court decided that it was unclear for the consumer whether a price reduction was already included in
the price that was mentioned.
78
See for example: Court of Cassation (5 December 2013), AR C.12.0497.N http://jure.juridat.just.
fgov.be/view_decision.html?justel¼N-20131205-4&idxc_id¼278348&lang¼NL; Brussels
(15 February 2011), Jaarboek Handelspraktijken (2011), p. 60 Ghent (7 January 2008), Jaarboek
Handelspraktijken (2008), 264; President commercial court Brussels (17 September 2008),
Jaarboek Handelspraktijken (2008), p. 72.
79
CJEU Judgment of 12 May 2011, Ving Sverige, C-122/10, EU:C:2011:299.
80
See: Steennot (2015).
81
Directive 2005/29/EC of the European Parliament and of the Council of 11 may 2005 concerning
unfair business-to-consumer commercial practices in the internal market and amending Council
180 R. Steennot
harmonization character of this Directive.82 In this context, reference can be made to

the guidelines that were elaborated in the meantime within the Council of Consump-
tion83 and that are used by the Economic Inspection when assessing whether
announcements of price reductions are misleading.
6.2 Sector Specific Legislation
Specific sector legislation is present, amongst others, in the financial sector. When
offering a consumer credit or a mortgage credit, a standard information sheet (SECCI
in the case of a consumer credit, and ESIS in the case of a mortgage credit),
containing personalized information, needs to be communicated to the consumer
on a durable medium, and before the conclusion of the contract (Art. VII. 70 and
VII.127 CEL). This should enable the consumer to compare the prices of different
creditors. As indicated before, the cost of consumer and mortgage credit needs to be
represented by the APR and the calculation formula has been harmonized within
the EU.
In consumer credit legislation, price transparency does not only play a role before
the conclusion of the contract, but also during the execution of the contract. Article
VII.99 §1 CEL determines that consumers enjoying overdraft facilities must be
informed regularly on the cost of the credit. If a consumer is not entitled to an
overdraft, but nevertheless an overdraft facility of at least 1250 euro is created (and
this overdraft is not reimbursed within a period of one month), the consumer must be
informed on the penalties which will apply (Art. VII. 101 CEL).
Outside the context of credit agreements, we can mention the following example:
the obligation to provide retail investors with a key information document for
package retail and insurance based investment products (KID),84 and the obligation
to provide consumers before entering into a payments account contract with a fee
information document and to provide them, at least annually and free of charge, with
Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament
and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the
Council, OJ 2005, L149/22.
82
CJEU Judgment of 10 July 2014, Commission/Belgium, C-421/12, EU:C:2014:2064.
83
Conseil de Consommation, 25 June 2015, Avis nr. 484 sur les pratiques commerciales déloyales
et les annonces de réduction de prix http://economie.fgov.be/fr/binaries/484_tcm326-270345.pdf.
84
Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November
2014 on key information documents for packaged retail and insurance-based investment products,
OJ 2014, L 352/1, Commission Delegated Regulation (EU) 2017/653 of 8 March 2017
supplementing Regulation (EU) No 1286/2014 by laying down regulatory technical standards
with regard to the presentation, content, review and revision of key information documents for
packaged retail and insurance-based investment products (PRIIPs) by laying down regulatory
technical standards with regard to the presentation, content, review and revision of key information
documents and the conditions for fulfilling the requirement to provide such documents, OJ 2017, L
100/1.
a statement of all fees incurred that year relating to the payment account (Art. VII.
4/1 and 4/2 CEL).
Other examples of sector-specific legislation relate to the pricing of airline
tickets85 and telecommunication services. With regard to the latter, it is particularly
interesting to mention that every invoice must mention: “Consult the website of the
government www.bestetarief.be (besttariff.be) to find the tariff plan which suits best
your needs.” (Art. 110 §4 Act on Electronic Communication). Similar rules exist for
invoices regarding gas and electricity (Art. 5 §2/1 of the Act on the organization of
the electricity market and Art. 15/5bis §11/1 of the Act on the Transport of Gas
through Pipelines).
6.3 Price Comparison by Independent Entities
In some cases, price transparency is enhanced by independent entities providing

information on the prices of several operators. For example, the Belgian Institute for
Post and Telecommunication Services makes a tariff simulator available to con-
sumers on its website. On this website, consumers must enter specific user profile
information in order to find which provider offers the best formula for a certain
service. Another example can be found in the energy sector where the regional
Regulators of the Electricity and Gas Market allow consumers to compare the prices
of different energy companies.86 The Financial Services Market Authority, through
its website Wikifin.be (which aims at educating financial consumers), launched a
simulator which allows consumers to compare which savings accounts offer the
highest interests.87 Since recently, the FSMA must also ensure that consumers have
access to a website comparing fees charged by payment service providers (Art.
VII.4/4 CEL).
Finally, price comparison tools, providing independent listings of pricing are
widely available on the Internet.88 For example, the website “Spaargids.be”/“Guide-
épargne.be” allows for comparisons with regard to the price of financial services.
85
Article 23 Regulation (EC) No 1008/2008 of the European Parliament and of the Council of
24 September 2008 on common rules for the operation of air services in the Community, OJ 2008, L
293/3.
86
https://vtest.vreg.be/; http://www.creg.be/fr/consommateurs/prix-et-tarifs/sites-de-comparaison-
des-prix-labellises-par-la-creg.
87
https://www.wikifin.be/nl/spaarsimulator.
88
E.g.: https://www.kieskeurig.be.
182 R. Steennot
7 Conclusion
In Belgium, prices are in principle determined by the market mechanism. The

principles of freedom of contract and the autonomy of the will imply that parties
can also agree freely on price related terms (in standard form contracts). However,
consumer legislation and sector-specific rules have a substantial impact on the
parties’ freedom. Most drastic are without doubt rules determining the maximum
price that can be charged (e.g. consumer credits) and the limitations of the possibility
to insert price alteration clauses in (consumer) contracts. Both aim at protecting the
weaker party.
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Privaatrecht 51:989–1054
Form Contracts in Brazil
Ana Frazão
Abstract Freedom of contract lies among the fundamental principles of the eco-
nomic order established by the 1988 Brazilian Constitution. Even though the
Brazilian legal system protects free-market institutions, there are important hypoth-
eses of legislative, regulatory and judicial price controls, which should be taken into
account in order to understand the dynamics of freedom of contract. The Brazilian
legal system contains multiple and disperse hypotheses of direct price control,
whether on primary price terms or ancillary price terms, and this diversity makes
the complete coverage of these cases an almost impossible task. However, this report
shall try to systematize the most common or most important price control of standard
contract terms in Brazilian Law.
1 Introduction
Freedom of contract is one of the fundamental principles of the economic order

found in the 1988 Brazilian Constitution, being an important consequence and acting
as instrument of the freedom of initiative and entrepreneurship. However, as the
Constitution grounds the Brazilian Republic on democracy, the rule of law, and the
dignity of human person, freedom of contract should be harmonized with other
equally important constitutional principles, which derive from that evaluative basis,
such as consumer protection, freedom of competition and social function of prop-
erty, contracts, and enterprise. Such principles should be introduced into private
A. Frazão (*)
University of Brasília, Faculty of Law, Brasília, Brazil
e-mail: frazao@unb.br

https://doi.org/10.1007/978-3-030-23057-9_6
186 A. Frazão
relations, influencing the way legislators and judges understand, apply, and enforce
Private Law in Brazil and, therefore, Contract Law.1
In the specific case of contracts, all assumptions and features must comply with
the constitutional and legal limitations to the parties’ freedom and with special
commitments imposed in favor of public interest. Although the notion of contractual
dirigisme is somehow currently overcome, the prevailing idea is that lawmakers are
entitled to intervene in private contracts, especially when the contractual object is
considered essential for one party’s dignity or when there is asymmetry between the
parties.2
The legislative intervention may occur both through specific rules and through
‘general clauses’, which are open norms, whose values should be densified by the
judge in concrete cases, such as the social function of contracts and good faith.
Both have interpretative and integrative effects, and can also be used by judges in
order to constrain the powers of the contractors and to demand the observance of
some duties, such as loyalty, transparency, cooperation, and protection, among
others.
The described framework has a significant importance in relation to standard form
contracts, which are normally great examples of asymmetrical transactions and are
frequently used to hire goods or services crucial for a dignified life. In such
situations, there is no doubt that freedom of contract should be limited in order to
guarantee certain degrees of balance and fairness in contractual relations, especially
regarding vulnerable individuals such as consumers.
That is the reason why, even though the Brazilian legal system protects free-
market institutions, there are important hypotheses of legislative, regulatory and
judicial price controls, which should be taken into account in order to understand the
dynamics of freedom of contract.
It is within this context that the current report shall address the issue of price
control in Brazilian law, through an overview that begins with the recent Brazilian
history regarding price control under high inflation rates to the regulatory framework
sustained by the 1988 Constitution. After that, this report will describe the general
constitutional and legal rules and standards regarding contracts, the positions held by
the doctrine, the Brazilian high courts and the Brazilian antitrust authority in recent
times. Afterwards, special attention will be dedicated to specific regulatory pro-
visions from key sectors concerning price control. Finally, the report will address the
issue of price transparency and comparability.
1
See Tepedino (2012), pp. 15–21.
2
The highly sensitive matter regarding worker’s protection will not be addressed in this report, since
this issue has many peculiarities and also because of a recent reform on Labor Law that deeply
hampered principles regarding the protection of vulnerable parties.
Control of Price Related Terms in Standard Form Contracts in Brazil 187

of Contracts in Brazil: Constitutional Background
2.1 The 1988 Constitution and Its Principles in the Economy
The Brazilian economic order is centered on the promotion of human labor and
freedom of initiative, intending to guarantee human dignity according to social
justice and the principles of national sovereignty, private property, social function
of property, free competition, consumer protection, environmental protection, reduc-
ing social and regional inequalities, achievement of full employment and preferential
treatment for small enterprises.3 Some of these principles are highly correlated to the
fundamental rights disciplined by the Article Five of the Constitution.
Therefore, in spite of recognizing the freedom of contract as a rule, the Brazilian
Constitution presupposes its harmonization with the other important principles
which comprised the whole body of Brazilian economic order. If it’s true that the
Constitution does not impose direct constraints on freedom of contract, it requires
contractors to take into account these public order norms protecting constitutionally
regulated interests.4
Even though the Constitution does not explicitly refer to the social function of
contracts (which shall be commented in the next section), it protects the social
function of property in many of its norms, introducing values that surely can be
applied to contracts. That is to say, whereas property represents economic activity in
its static dimension, contracts represent its dynamic dimension and, therefore, are
directly affected by the social function of property, since contracts are the instru-
ments whereby property may be transferred.5
Surely, it’s not easy to conciliate all of these constitutional principles, a situation
that gives room to severe interpretative controversies about the precise economic
regime adopted by the Constitution, the degree of market liberalism allowed, and the
requirements for balancing a market economy with the constitutional social
concerns.
Lastly, one should be aware that federalism may also be an important issue
regarding freedom of contract in Brazil, since municipalities, states, the Federal
District and the Federal Government have different competencies for regulation and
legislation. For example, only the Federal Government will legislate on Civil and
Commercial Law.6 However, other fields, like public transportation, may be regu-
lated—with impact on standard form contracts, as shown below—by states or
municipalities. For this reason, constraints to contractors—and thus to freedom of
3
Art 170 of the Constitution.
4
Grau (1998), pp. 56–57.
5
Lôbo (2002), p. 16.
6
Art 22 of the Constitution.
188 A. Frazão
contract—may be found not only in federal legislation, but also on the statutes and
regulation enacted by the federated entities.
2.2 Freedom of Contract, Standard Form Contracts

and the General Contractual Clauses in Brazilian
Legislation
Under a legislative perspective, the general regulation of freedom of contract in

Brazil may be found in statutes such as the Civil Code (CC), which regulates civil
(C2C) and commercial (B2B) contracts, and the Consumer Protection Code (CDC),
which regulates consumer contracts (B2C).7 Both statutes try to achieve the consti-
tutional objectives together with the guarantee of freedom of contracts and also by
means of legal principles or “general clauses”, the latter being open norms providing
broad values which should be densified by the judges.
Regarding B2B and C2C relations, one important contractual general clause is the
social function of contracts, provided by Article 421 of the CC, which introduces
social concerns and third-party interests as vectors for interpreting contracts,
delimiting contractual rights or faculties and imposing some duties to the contrac-
tors. The last aspect highlights the social function of contracts as an instrument for
production of extracontractual obligations, which find their basic ground in the
Constitution.8 That means, basically, that the parties of every contract have to
observe the socially relevant constitutional interests during all the contractual
phases.
The social function of contracts is valid even in symmetric contracts, between
equal parties, despite its logical application for the protection of vulnerable parties,
especially in standard form contracts. However, the general clause has been mostly
enforced in Brazilian context in order to break the principle of relativity of contracts
and thus, take into account the relations between contractors and third parties,
instead of widening the scope of the protection to vulnerable parties in Civil Contract
Law. This tendency may be explained by the apprehensiveness of courts with the
7
That’s why the hereby adopted reference to B2B contracts does not necessarily show the com-
plexity of the Brazilian Contract Law, since beyond contracts between firms and contracts involving
consumers, there may be contracts celebrated between ‘civil’ parties, none of which consisting of a
firm. This distinction still exists because, in spite of the 2002 Civil Code’s effort to unify
commercial and civil obligations, commercial obligations actually did not receive the needed
attention. Essential peculiarities of commercial obligations were ignored to a great extent, such as
the application of the notion of lesion due to a party’s inexperience, may make sense if the case
involves civil obligations, but may be a complete disaster on commercial relations, whereby
experience is a competitive factor to be incentivized.
8
Tepedino (2006), p. 251.
admission of a broader scope of enforcement for the social function of contracts, thus
sustaining that it should only be applied to exceptional situations.9
Good faith is another important general clause of contracts in Brazil,10 providing
operational and interpretative criteria in order to preserve the reliance and trust
between parties and add important duties, such as cooperation, loyalty, protection,
information and disclosure.
Since its main goal is the reliance protection along the whole contractual rela-
tionship, it is questionable to attribute to good faith a role in the reestablishment of
contractual balance, even when the transactions involve vulnerable parties.11 There-
fore, Brazilian courts have been using good faith merely rhetorically in the
reestablishment of contractual balance, rendering it concrete effects only in specific
hypotheses, such as lesion and excessive onerousness.12
In this scenario, it is important to emphasize that the existence of the principle of
contractual balance is controversial. That is why the CC, which is applied to B2B
contractual relations, restrains the possibility of controlling the contractual content
only in cases of extreme disadvantages caused by the asymmetry of the parties, such
as lesion, a topic that will be developed later.
It should also be noted that the CC recognizes the prohibition of abuse of rights,
considering abusive any exercise of legal rights, which exceeds its social or eco-
nomic ends, good faith, and good social practices.13 Even though it involves the
apparently lawful exercise of rights, the abuse of rights is an illicit act and thus may
evoke judicial intervention, a reasoning that may be extended to the freedom of
contracts.
That is why the abuse of contractual freedom or contractual faculties is an issue
connected to the social function of contracts and good faith. However, the CC does
not directly allow the judicial review of abusive clauses in this case, but only
generically establishes liability for damages arising from those illicit acts.14
Besides the general clauses mentioned above, the CC provides two important
rules in relation to standard form contracts. According to Article 423, when standard
form contracts contain ambiguous or contradictory clauses, one should adopt the
most beneficial interpretation for the adhering party. According to Article 424, the
contractual clauses that determined the anticipated waiver of the adherent party of a
right, which normally results from the agreement, should not be deemed valid.
After explaining the normative framework of B2B relations in Brazil, it is
important to note that the situation is quite different in B2C relations, since the
9
Konder (2017), pp. 43–47.
10
See Martins-Costa (2015).
11
Frazão (2013), pp. 289–292.
12
Konder (2017), pp. 41–42. By excessive onerousness, we describe the situation in which the
original balance of the contract is altered substantially by a future fact which was unpredictable or
very hard to be predicted at the time of the agreement.
13
Frazão (2011), pp. 105–109.
14
Art 927 of the CC.
190 A. Frazão
CDC adopted the consumer vulnerability as a basic assumption, containing protec-

tive rules against abuses perpetrated by the stronger party in consumption agree-
ments. What is more, it tries to implement a fair negotiation, considering void all the
contractual clauses that put the consumers in an exaggerated disadvantage.
It is also within consumption relations in which standard form contracts take
place more frequently, and that is why the Code contains the definition of this kind of
agreement as the one whose clauses are unilaterally defined by the supplier of goods
or services, without the possibility of substantial modification by the consumer
(Article 54). Specific provisions regarding the control of price terms within the
aforementioned statutes will be described below.
For now, it is important to emphasize that all general clauses mentioned above,
such as the social function of contracts, good faith, and the prohibition of abuse of
rights, have a strict application in B2C relations, especially in standard form
contracts, in order to protect the consumer. Regarding the CDC, it is also possible
to talk about a principle of contractual balance, since it forbids any excessive
disadvantage for the consumer.
What can be concluded from the description above is that, according to Brazilian
Contractual Law, in spite of several ways to curb the freedom of contract, there is no
provision that directly authorizes price control as a rule. Even the CDC, which gives
more room for intervention, attempts to assure the liberty of the contractors as long
as it does not lead to a considerable disadvantage for the consumer.
Hence, we can say that price terms in B2B relations will generally be fixed
according to the market while price terms in B2C relations will generally be
submitted to more rigid regulation, since abusive clauses in these agreements are
considered public order matters and cannot be negotiated by the parties.
3 Overview on the Control of Standard Contract Terms

in Brazil
3.1 The Possibility and the Effects of Judicial Review
of Standard Contract Terms Under the Civil Code
and the Consumer Protection Code
As noted above, despite the prevalence of freedom of contracts in Brazil, abusive

clauses, especially if provided in standard contracts, may be judicially scrutinized
both in B2B and B2C contracts. Besides the general clauses and the rules, which
were mentioned above, there are still other important specific provisions, which will
be analyzed below.
It is also important to note that, while annulment of unfair terms is clearly

lawful,15 the hypothesis for judicial review of those terms are greatly controversial,
especially the extension of the judge’s power to do so. Regarding the judicial ruling
annulling abusive standard terms, this kind of decision normally sends the parties
back to the status quo ante.16 However, suppressing an abusive clause through
judicial review shall not nullify the whole contract if it is possible to separate the
invalid part from the valid part of the contract, or if it is just an ancillary clause such
as those related to interest rates or contractual penalties.17
The CC does not describe a list of specific unfair terms that may lead to the
contract’s annulment, especially those related to price, but there are general pro-
visions that may be applied in such cases. The most important are lesion and
excessive onerousness.
Lesion (laesio enormis) occurs when someone under pressing necessity or with-
out the due experience submits themselves to unproportional obligations before the
other.18 The verification of lesion normally leads to the invalidity of a given contract,
unless the parties agree with a readjustment. The controversy about the possibility of
the contract review by the judge’s own initiative will be mentioned in the following
section. In this sense, Statement 149 from the III Civil Law Journey19 provides that
lesion must lead to the review of contractual terms whenever possible.
The excessive onerousness admits the termination of long-term contracts due to
extraordinary and unpredictable events that created an excessive burden to one of the
parties, with extreme advantages to the other.20 In this case, the Code also admits the
modification of the contractual relation, in order to make it fairer and avoid termi-
nation.21 Significant number of commentators understand that judicial review should
prevail over the contract termination.22
All these concepts are also applied to B2C relations, albeit the CDC contains
more protective provisions. Beyond including among the consumers’ rights the
15
Schreiber (2016), pp. 21–31 sustains, however, that the right to renegociate should be observed
before the annulment of the contract in some circumstances, such as the excessive onerousness.
16
Art 182 of the CC.
17
Art 184 of the CC.
18
Art 157 of the CC.
19
See note 36 below.
20
Art 478 of the CC.
21
Art 479 of the CC.
22
Regarding Civil Law, which does not presume the vulnerability of one of the parties, the Brazilian
Council of Federal Justice (CJF) periodically organizes events known as ‘Civil Law Journeys’
(Jornadas de Direito Civil), when legal scholars and members of the Judiciary assemble for the
formulation of doctrinal statements of legal interpretation in order to enlighten the application of the
law. Statement 176 from the Third Journey provides that, taking into account the principle of the
contract preservation, excessive burden arising from unpredictable events should, if it is possible,
lead to judicial review of contract terms, instead of contract termination, as established by the CC
Art 478 of the CC.
192 A. Frazão
modification of excessively burdensome contracts.23 the Code contains a list of

peremptorily abusive and, therefore, invalid clauses, which may be inserted in
B2C contracts, such as the ones that impose abusive obligations and those which
allow the supplier to unilaterally modify price terms.24
Among the clauses deemed null by the CDC, the following stand out: clauses
which provide obligations considered inniquous or abusive, clauses which bring an
exaggerated disadvantage for the consumer, clauses which are incompatible with
good-faith or fairness, clauses that allow the provider the unilateral alteration of the
contract, especially in relation to price terms. The CDC also defines what should be
considered an exaggerated disadvantage: clauses which offend the fundamental
principles of the legal order, clauses which restrict rights or duties that derive
inherently from the contract nature, in order to menace its object or its balance,
and clauses which are excessively onerous for the consumer. Even in these cases, the
CDC, similar to the CC, provides that the nullity of an abusive clause does not
invalidate the whole contract unless its absence, in spite of all the integration efforts,
leads to excessive burden to the consumer.
Under these circumstances, it is easy to understand why, in relation to B2C
relations, the tools to invalidate the price terms are considerably broader in compar-
ison with B2B relations, the reason by which some solutions of the CC are not even
necessary to be applied to protect consumers, such as lesion or excessive onerous-
ness, since the CDC has more direct means to solve the problem.
Regarding standard form contracts, all the solutions mentioned above will have a
strict application, since this circumstance normally emphasizes the vulnerability of
the adherent part, so as to attract a deeper protection.
3.2 The Control of Price Terms According to Brazilian

Antitrust Law
There is still another important means of price control in Brazil: the one implemented
by the Antitrust Law, albeit restricted to big economic agents, holders of economic
power, or dominant position.
Under the merger control, the Brazilian Competition Authority (CADE) has the
power to approve operations with restrictions, or, more specifically, with remedies
designed to control the anticompetitive effects. Among these remedies, lie structural
solutions, such as divestiture, and also non-structural ones, such as service level
agreements and supply commitments, aiming to avoid any harm to consumers and,
even more, to share the operation benefits between the parties and the consumers.
Even though there is no exhaustive list of remedies in the Brazilian Antitrust Act,
CADE tends to observe the directives established by International Competition
23
Art 6 of the CDC.
24
Art 51 of the CDC.
Network’s Merger Remedies Guide, according to which there are some risks asso-
ciated with the adoption of price controls as merger remedies.25 Therefore, CADE
favors a more cautious stance regarding price controls, although it may do so.26
Regarding anticompetitive conduct, an important issue in the Brazilian Antitrust
policy involves excessive pricing, which was envisaged as an anticompetitive
behavior according to the previous Antitrust Act. Even though the new Antitrust
Act does not contain an equivalent norm, the list of antitrust infractions provided by
the new statute is merely explanatory. Therefore, even if a rule from CADE does not
directly address consumer rights or even price controls, the effects of a ruling aim
fundamentally to produce consumer welfare, especially through the reasonability of
prices, thus providing indirect protection to consumers.27
4 Judicial Control of Price Terms in Brazil
4.1 Means of Individual and Collective Action Against Unfair

Terms in Standard Form Contracts
Unfair terms in standard contract forms may be judicially reviewed both by indi-
vidual and collective actions in Brazil. As for the former, which is the rule in relation
to B2B contracts, there are essentially two different procedures through which
parties may ask for the review of unfair terms: the ordinary procedure, regulated
by the Civil Procedure Code, and the expedite procedure regulated by Statute 9.099/
1995. The expedite procedure may be applied when the value of the case spans until
40 times the country’s minimum monthly salary. In both procedures, once a single
judge, whose rulings will have effects only between parties, analyzes the cases,
unhappy parties may appeal to state courts.
Under the ordinary procedure, unsatisfied parties may, after that, issue a Special
Appeal to the Superior Court of Justice (STJ), which is competent to harmonize
infra-constitutional federal legislation. STJ’s decisions may both exclusively bind
the parties involved of the whole country, considering the power the court has to
enact general binding precedents under determined circumstances.28 Constitutional
25
International Competition Network (2016), p. 33.
26
CADE AC 08700.004860/2016-11 (2016), CADE AC 08700.001020/2014-26 (2017). In a recent
case involving a merger between the Brazilian stock market and futures operator
(BM&FBOVESPA) and the entity responsible for the custody and liquidation of securities
(CETIP), Commissioner Gilvandro Araújo stated that ‘direct price interference may be costly for
the State, since this measure demands much information in order to mimic a mechanism capable of
representing people’s freedom in determining its desires, at the same time taking into account
subjective remarks about socially fair exchange levels’. See CADE AC 08700.004860/2016-11
(2017).
27
Frazão (2011), p. 55.
28
Art 927 of the Brazilian Civil Procedure Code.
194 A. Frazão
matters may also be taken to the Supreme Court (STF), which also has the power to
enact such binding precedents in noteworthy cases.
In B2C relations, the CDC allows collective actions pursuing liability for dam-
ages to consumers and annulment or review of abusive clauses. The collective
actions may be presented by the Public Ministry, the Federation members (munic-
ipalities, States, the Federal District and the Federal Government), public agencies
for the protection of consumers, or private organizations for the protection of
consumers. The judicial rulings arising from collective actions may have erga
omnes effect when the case involves an undetermined collectivity or when referring
to a specific group, just ultra partes.
4.2 Brazilian Case Law on the Control of Price Terms
The Brazilian Courts provide plentiful case law regarding price terms, aiming to find
a balance between freedom of contract and other important constitutional principles,
such as the social justice and dignity of humans.
Even though Brazilian case law has already amplified the notion of vulnerability
in order to encompass many kinds of factual hindrances, such as economic, legal,
technical, and other kinds of vulnerabilities,29 B2B contracts are governed by a
stronger conception of the pacta sunt servanda principle. Hence, in order to prevent
opportunistic behavior and other difficulties for commerce, government intervention
steps aside to guarantee the foreseeability and strength of these contractual ties. In
this sense, the STJ has stated that, except for the duties arising from the social
function of contract, honesty and good faith, pacta sunt servanda should prevail over
direct government controls on B2B contracts.30
Lesion due to inexperience, for example, shall not be applied to B2B contracts,
since companies operating in markets are presumed to have a higher-level expertise
and experience is an important competitive characteristic. Therefore, courts have
already refused to recognize lesion situations on B2B contracts.31 However, these
standards may not be applied in cases in which, even though the contractual relation
is established between companies, one of them acquires a given good or service as its
final user on the production chain, hence being considered a ‘consumer’.32
In a similar way, the STJ has already stated that B2B contracts must not be subject
to the dirigisme that governs B2C contracts. Thus, unfortunate events such as rising
market prices on long time contracts (the ones related to agribusiness, for example)
shall not be considered excessively burdensome in order to allow the judicial review
of contractual terms, since market fluctuations are part of the risks in these
29
STJ REsp 1195642/RJ (2012), STJ REsp 1010834/GO (2010).
30
STJ REsp 1413818/DF (2014), STJ REsp 1158815/RJ (2012).
31
STJ REsp 1117137/RS (2010).
32
STJ REsp 1352419/SP (2014).
transactions.33 In sum, B2B contracts, even when they are standard form contracts,
cannot be reviewed exclusively because of excessively burdensome clauses, but
only because of events considered unpredictable according to the regular
businessman’s rationale, therefore creating an excessive burden.34
The working logics for B2B contracts, however, cannot be fully applied to
contracts between individuals that lack entrepreneurial expertise, such as C2C
contracts, in relation to which lesion and excessive onerousness may be applied in
a broader sense. Lesion, for example, may be verified in C2C contracts in which one
party leverages the other to accept manifestly disadvantageous clauses due to
illiteracy, lack of instruction, desperation or other kinds of vulnerability.35 The
same is valid for excessive onerousness, which is also treated by the CC.36 If these
circumstances are present in standard form contracts, their annulment—or their
rebalance—is considered even more imperative, in order to protect the weaker
party (the adherent party).
Protective norms—and a more proactive position from the courts pertaining
judicial control of price terms—may be more easily observed in B2C contracts,
regulated by the CDC. According to the STJ, ‘contemporary law aims to guarantee
the efficacy of the contract celebrated by the parties, as long as it is possible’37; thus
stating that even expired contracts—whether by payment or novation—may be
reviewed in order to correct invalid clauses.
Even though this statement applies to all contracts, noteworthy examples of
judicial review of expired contracts may be found among banking contracts38
involving abusive interest rates and among real estate purchase agreements, mostly
because of illegal indexation of price terms.39 This first example represents the range
of price term review cases in Brazilian law, but there are other important hypotheses,
such as rental agreements.40
33
STJ AgRg REsp 975954/GO, STJ REsp 936741/GO (2011).
34
STJ REsp 1321614/SP (2015), TJSP 91048650920098260000 (2013).
35
STJ REsp 1155200/DF (2011), TJSP Ap cív. 00725304520138260002 (2017), TJDFT Ap cív.
20160110608154 (2016), TJMS Ap cív. 00134830920088120002 (2014).
36
TJSC Ap cív. 20120876028 (2015).
37
TJSP Ap. cív. 10052936620168260100 (2017), STJ REsp 1046418/RJ (2013).
38
See STJ, p. 286, which states that the renegotiation of banking contracts does not block the
possibility of review of invalid clauses.
39
STJ AgInt REsp 1224012/SP (2016), STJ AgRg Ag 1329173/SP (2011), STJ AgRg REsp
761275/DF (2009), STJ AgRg AgRg Ag 941737/MG (2007), STJ AgRg REsp 850739/RS
(2007), AgRg EDcl REsp 789354/MT (2006), STJ REsp 455855/RS (2006).
40
Rental agreements may represent the most common hypothesis for the judicial review of price
terms in Brazilian Law, since the national ‘Rental Act’ (Lei 8245/1991) contains a special procedure
for the rental price review, to be filed by either party, through which the price may be set according
to current market standards. Nevertheless, it is not possible to generalize rental agreements as
standard form contracts (even though they may be so), hence Brazilian case law on this subject will
not be hereby commented.
196 A. Frazão
It is important to note that both banking contracts41 and the hereby mentioned real
estate purchase agreements are regulated by the CDC, since they involve consumers
and, hence, contain special rights regarding their vulnerability. These real estate
contracts are especially meaningful because they are mostly concluded between a
real estate developer or construction company and an individual, hence presenting
itself as standard form contracts.
Brazilian courts, including the STJ, offer a large set of distinct cases for the
so-called theories of ‘unpredictability’ and ‘excessive onerousness or burdens’. The
Brazilian history with inflation motivated a stable and recurrent STJ position that has
remained until today. Considering the high possibility of currency devaluation (even
during price freeze times) due to inflation, even contracts that did not have specific
causes for the updating of prices should be updated anyway, as a measure for the fair
maintenance of contracted prices on any contract.42
This hypothesis of judicial review of contracts terms is especially relevant
because it is applied not only to B2C contracts, but also to C2C and B2B contracts,
circumstance which emphasizes the necessity of maintaining a minimum balance in
any kind of contract, even the symmetrical ones.43 The argument for price updating
in any kind of contract (be it B2B, C2C or B2C), therefore, is not the correction of
unbalanced relations, but the prevention of unjust enrichment by one of the parties,
taking profit from the inflation-caused currency devaluation through contracts
lacking price-correction clauses.
Judicial review, due to excessive onerousness, is also a common issue in health
insurance contracts, especially because they are B2C contracts. However, the STJ
sustains that price increase is not invalid per se, but only if the parameters for
escalation are random or unreasonable.44 One important question is related to the
price increase due to the old age of the contractor. In such contexts, the STJ
understands that, even though firms may freely increase their prices, they should
always take into account the principles of fairness, good faith, transparency, infor-
mation and the special protection of elders, since large escalations may put these
vulnerable subjects under discriminatory and unbearable circumstances. Hence,
escalation for elders should be proportional to the naturally riskier condition of
elders, but it shall not be random or unreasonable in comparison with previous
escalation and legal standards.45
Judicial review may also happen in the case of lesion in B2C contracts, although
this alternative—the review instead of the annulment—remains controversial among
scholars.46 The CC admits the possibility of maintaining the contract if the benefited
41
STF ADI 2591 (2006).
42
STJ REsp 135151/RJ (1997), STJ REsp 25801/SP (1995), STJ REsp 55539/RJ (1995).
43
STJ REsp 318351/SP (2002), STJ REsp 62434/SP (1997), STJ REsp 38190/SP (1994), STJ REsp
23741/SP (1992), STJ REsp 8549/SP (1991), STJ REsp 8141/SP (1991).
44
STJ AgInt EDcl AREsp 1073880/SP (2017), STJ REsp 1280211/SP (2014).
45
STJ REsp 1280211/SP (2014), STJ REsp 866840/SP (2011).
46
See Pereira (1999).
party agrees with a supplement offer or a benefit reduction; however, some scholars
argue that, since the damaged party may invalidate the contract, it is also possible to
demand rebates in order to remove lesion.47 Despite the CC norms regarding lesion,
courts may apply the CDC48 directly to excessively burdensome standard form
contracts, mostly to modify interest rate clauses,49 because of a contractual balance
concern, in relation to B2C contracts, which are not restricted to lesion or excessive
onerousness.
Another interesting example related to B2C contracts may be found in one of the
first cases decided by the STF on this subject, in 1993, which involved statutes
establishing criteria for price escalation in private school contracts. The court
considered these provisions constitutional, highlighting that the freedom of initiative
and contracts should be harmonized with the protection of consumers and social
justice, in order to promote the social function of the firm and avoid abusive and
arbitrary profits.50 After that, several other decisions from the STF and the STJ have
maintained the same understanding.
Finally, judicial review of price terms may be obtained through collective actions,
which are regulated by the CDC and the Public Civil Action Statute.51 A highly
common group of examples for collective actions is the one regarding abusive fuel
and gas prices, when representative parties such as consumer protection agencies or
public prosecution, attempts to reduce prices on claims such as ‘arbitrary profits’,
‘excessive prices’ or ‘escalation without a just cause’.52
In spite of the protective CDC norms, however, these claims are hardly success-
ful, since proof of this ‘arbitrariness’ or ‘excessiveness’ may be very difficult.53 The
criteria for such collective suits are commonly clearer in cases regarding unfair price
escalation in health insurance plans54 and telecommunications,55 whereby lawsuits
may be more successful, since price escalation in these sectors is regulated by the
government, which provides objective criteria and monitors price changes, as shown
in the section to come.
Collective actions such as the above mentioned may be applied not only to
regulated sectors—which contain, of course, more objective criteria to verify abu-
siveness—, but also may be filed in order to nullify or review standard contract terms
47
Theodoro Junior (2008), p. 237; Tepedino et al. (2007), p. 300.
48
Art 51 of the CDC.
49
STJ REsp 1061530/RS (2008).
50
STF ADI-QO 319 (1993).
51
Lei 7.347/85.
52
STJ REsp 1296281/RS (2013), TJES Ap. cív. 00156192120088080024 (2015).
53
TJRS Ap. cív. 70066918426 (2016), TJRS Ap. cív. 70060906674 (2015), TJPR Ap. cív.
11867099 (2014).
54
TJSP Ap. cív. 21344808520178260000 (2017), TJSP Ap. cív. 21345189720178260000 (2017),
TJSP Ap. cív. 21091404220178260000 (2017), TJSP Ap. cív. 2111252-81.2017.8.26.0000 (2017).
55
TJMG Ap. cív. 200000045751570001 (2005), TRF5 A.I. 542743520004050000 (2005), TRF5
A.I. 200005000542741 (2004).
198 A. Frazão
in non-regulated areas. In this sense, there may be mentioned collective actions that
nullified abusive brokerage clauses inserted in real state purchase agreements, which
charged for the exercise of a legal preemption right56 and that nullified abusive
escalation in gym fees57; all of which are B2C contracts whereby the Judiciary
considered this solution an adequate measure to mitigate freedom of contract in order
to protect consumer rights.
4.3 Case Law Regarding Ancillary Price Terms: The Cases

of Interest Rates and Contractual Penalty Fees
Judicial control over ancillary price terms may be more common among Brazilian
courts than over primary clauses, since cases of excessive burdens, abuse of rights,
and lesion, frequently arise from interest rates and penalty clauses. As a matter of
fact, these ancillary clauses get even harder legal controls, whereas interest rates are
legally limited to 12% per year58 (except for financial institutions59) and penalty
clauses regarding loan agreements are legally limited to 10% of the debt.60
As aforementioned, interest rates on consumption contracts may be reviewed
when the consumer is put at an avowedly disadvantageous situation, thus constitut-
ing an abuse of rights.61 Since financial institutions are not subject to the limits
mentioned above, the mechanism of abuse of rights may be applied in order to
correct eventual excessive rates. Furthermore, in a recent ruling regarding interest
rates on banking contracts, the STJ stated that capitalized interest may only be
inserted in loan agreements if both parties explicitly agree.62 Prior to this ruling,
the STJ used to understand that yearly capitalization could be admitted even if the
parties did not explicitly consent.63 However, nowadays any form of capitalization,
whether monthly or yearly, must be explicitly consented by the parties.
Regarding penalty clauses, the Brazilian courts should reduce fines to the legal
maximum ceiling, thus complying with federal legislation stating that ‘The penalty
should be fairly reduced by the judge if the main obligation has been performed
partially, or if the penalty is manifestly excessive, considering the transaction’s
56
TJDFT Ap.civ. 410239619968070000 (2010).
57
TJDFT Ap.civ. 20140110086830 (2016).
58
STJ REsp 1348081/RS (2016).
59
STF p. 596.
60
Art 9 of Dec 22626/1933 (1933 ‘Usury Act’).
61
STJ AgInt AREsp 835556/MS (2017), STJ AgInt AREsp 737820/MS (2017), STJ REsp
1061530/RS (2008).
62
STJ REsp 1388972/SC (2017).
63
STJ REsp 1095852/PR (2012).
nature and goal’.64 Additionally, both parties may enforce contractual penalty
clauses, even if the agreement limits its use to either.65
5 Special Regulatory Provisions Regarding the Control

of Price Terms in Standard Form Contracts
5.1 Insurance Contracts
Two administrative bodies generically regulate private insurances: the National

Private Insurance Council (CNSP) and the Superintendence for Private Insurances
(SUSEP).
Market agents freely set the insurance premium or, in other words, the price to be
paid monthly by the insured party. The only obligation required from insurance
companies is to inform SUSEP its methods for calculating the premium.
SUSEP also provides the criteria to be observed by insurance companies on the
escalation of its prices, which must be determined by one of the price indexes
determined by a SUSEP norm.66 The insurance companies should, then, choose
one, among the many indexes, to be included in the contract and hence, bind both
parties. Those indexes are established by prominent economic research institutions
according to changes on prices of given products or services, and may cover more or
fewer items in line with its ends and, therefore, may be chosen by the contracting
parties in accordance with sectorial idiosyncrasies.
Health insurance contracts are subject to different norms and should be treated
separately. These contracts are regulated by the National Supplementary Health
Agency (ANS) especially concerning price escalation, since health insurance com-
panies freely define price terms. Escalation rules depend on the kind of health
insurance provided by the company (individual or collective plans, for example),
but companies must always notify ANS if they wish to raise their health insurance
monthly charges.67 On individual plans, price escalation shall obey the maximum
rate periodically established by ANS. Collective plans are not subject to ANS
indexes but only to its monitoring. Hence, health insurance firms may freely set
rates.68
64
Art 413 of the CC, STJ AgInt no AREsp 578006/SC (2016).
65
STJ REsp 1536354/DF (2017), STJ AgInt AREsp 985690/AM (2017), STJ REsp 955134/SC
(2012).
66
SUSEP Circular 255/2004.
67
ANS Normative Resolution 171/2008.
68
ANS Normative Resolution 100/2005.
200 A. Frazão
5.2 Banking Contracts
The National Monetary Council (CMN) has the power to ‘limit, when necessary,
interest rates, discount rates, commissions and any other form of remuneration for
banking or financial operations’.69 Through its regulatory competence, CMN has
issued a normative resolution regulating banking service charges,70 according to
which financial institutions71 may not charge natural persons (although they may
charge companies) for the ‘essential services’ therein described.
Furthermore, the same CMN resolution limits the possibility of price escalation
on banking services. According to the norm, any escalation on charges may be
disclosed previously to its starting point, observing a 30-day period to services in
general and 45 days to credit card services.72
5.3 Telecommunications
The power to regulate and commercially exploit telecommunication services

belongs to the Federal Government, which can directly operate the sector or indi-
rectly operate through government concessions to private parties.73 In the Brazilian
Telecommunications Act, one of the important government’s duties is to assure
universalization with reasonable prices under adequate conditions.74 Telecommuni-
cations in Brazil may be operated through government concessions (as in landlines)
or directly by private parties through the authorization regime (as in mobile phone
services), in which the price is defined directly by the provider or is found in the
public contract.
Price escalation is also controlled by the National Telecommunication Agency,
ANATEL, requiring mechanisms, which shall be written in the contract. Prices for
landline and mobile phone services may be increased once every 12 months by the
private party or by ANATEL itself. To this end, ANATEL also provides criteria to
define how much prices may be escalated in a given period through a mathematical
method.75
69
Art 4 of Lei 4595/1964.
70
CMN Resolution 3919/2010.
71
The regulation on banking contracts applies not only to banks, but also to every financial
institution. According to the Statute regarding the banking system (Art 17 of Lei 4595/1964),
natural or moral persons who have as its main activities the collection, intermediation or investment
of financial assets owned by themselves or by third-parties shall be considered financial institutions.
72
Art 18 of CMN Resolution 3919/2010.
73
Art 21, XI of the Brazilian Constitution.
74
Art 2 of Lei 9472/1997.
75
ANATEL Resolution 576/2011.
5.4 Transportation
Price term regulation in Brazil regarding the transportation sector presents some
interesting peculiarities, since public transportation is not directly explored by the
State, but by private parties through government contracts. Transportation is also
thoroughly regulated, especially concerning special prices or free fares pertaining
some special group of people such as elders or low-income citizens. It is important to
highlight that transportation is a constitutionally granted social right76 that should be
guaranteed by the State.77
Public transportation price regulation in Brazil shall always be dealt with in
accordance to the constitutional legislative competencies, since the 1988 Constitu-
tion provides an intricate web of legislative and executive prerogatives for the
distinct Federation members. The following belong to the competence of the
Union: (i) the direct or indirect (through authorization, concession or permission)
operation of railway and waterway services between seaports and national borders or
crossing the boundaries of a state or territory78; (ii) the direct or indirect operation of
interstate and international highway passenger transportation services79; (iii) the
establishment of directives for the development of urban transportation80;
(iv) legislation on national transportation policy81; (v) legislation on traffic and
transportation.82
The Constitution also states that municipalities have the power to organize and
render, directly, by concession or by permission, the public services of local interest,
including mass-transportation, which is considered essential.83 Although the Con-
stitution does not provide any special power to the federated states, it confers to them
all powers that were not prohibited by itself, until the enactment of federal legislation
on the subject.84 Hence, states may legislate on intermunicipal transportation if there
is no federal act in the same sense.85
The corporations that provide these services, as they work under government
concessions, do not freely determine transportation fares. National transportation
regulation is provided by the National Terrestrial Transportation Agency, which sets
a maximum coefficient for the calculation of fares, to be considered along with
operational costs and inflation rates in order to define transportation fares.86 An
76
Art 6 of the Brazilian Constitution.
77
Merlin Clève (2006), p. 28.
78
Art 21, XII, d, of the Brazilian Constitution.
79
Art 21, XII, e, of the Brazilian Constitution.
80
Art 21, XX, d, of the Brazilian Constitution.
81
Art 22, IX, of the Brazilian Constitution.
82
Art 22, XI, of the Brazilian Constitution.
83
Art 30, V, of the Brazilian Constitution.
84
Art 24, Paragraph 3, of the Brazilian Constitution.
85
See STF ADI 903 (2013).
86
ANTT Resolution 4770/2015.
202 A. Frazão
ANTT authorization for price escalation is mandatory. This rationale is applied to

interstate and international terrestrial transportation and may be reduced by the
operating companies through special offers, according the ANTT requirements.87
There are few federal statutes establishing free or discount fares on transportation
for some special groups of people. The Brazilian Elderly Act states that every
interstate travel line shall freely provide two seats per vehicle to elders with an
income lower than twice the national minimum wage. The other seats are also
offered to low-income elders with a 50% discount.88 Elderly people, according to
the act, are those older than 65, but people older than 80 should have preference over
younger elders.89 Elders also have the right to pay no fares on public urban and semi-
urban transportation, as long as they present personal identification proving their
age.90
Interstate transportation also mandatorily provides two free seats and two 50%
discount seats to low income ‘young people’ or, in other words, people between
15 and 29 years old with an income lower than twice the national minimum wage.91
People with disabilities are likewise entitled to two free seats per vehicle on interstate
transportation.92 It is noteworthy that the mentioned regulation regarding free seats
applies not only to road transportation, but also to railway and water transportation,
since they arise from federal statutes.
Transportation prices on services pertaining to states or municipalities are regu-
lated by local regulatory agencies, which set their own methods for calculating fares,
limiting prices and creating new instances of free service.
Private parties under government concessions also provide air transportation, but
this sector is quite different from terrestrial transportation. According to the Statute
that created the National Civil Aviation Agency (ANAC), the private firms operating
in the sector should freely fix aerial services’ prices.93 ANAC’s role is only to
monitor and provide publicity rules for those charges. However, even though
ANAC’s Statute was enacted in 2005, freedom of prices has been effective only
since 2009, when ANAC ended the need for previous registration of prices.94
ANAC still exercises a prominent role regarding price formation in its sector.
Even though it may not interfere directly on the price, it radically affects its
components. Recently, ANAC stated that the loading of luggage on airplanes is an
ancillary contract, which means that transporters may charge for the luggage that
exceeds the regulatory limit for carry-on items (10 kg).95
87
ANTT Resolution 1928/2007.
88
Art 40 of Lei 10741/2003.
89
Lei 13466/2017.
90
Art 39 of Lei 10741/2003.
91
Art 32 of Lei 12852/2013.
92
Lei 8899/1994.
93
Art 49 of Lei 11182/2005.
94
ANAC Resolution 118/2009.
95
Art 13 of ANAC Resolution 400/2016.
5.5 Energy and Water Supply Contracts
Energy and water supply are also disciplined by the constitutional structure of
federative distribution of competences. According to the Brazilian Supreme Court,
basic sanitation—which includes sewage disposal, urban cleaning, rainwater drain-
age and, finally, water supply—shall be regulated by the municipalities, except for
metropolitan areas, where both municipalities and federated states have the power to
do so,96 all through state owned companies. Energy supply, on the other hand, is
regulated by the Federal Government through the National Electrical Power Agency
(ANEEL) and is provided to the federated states by state owned companies.97
The Federal Basic Sanitation Act states that regulatory agencies shall set the
financial and economic norms for the definition of price terms regarding water
supply services.98 Since water supply is regulated by municipalities, or, exception-
ally, by the states, the definition of prices will be made locally, usually adopting
different tiers according to the nature of the supply (residential, commercial, etc.).99
Energy supply may be studied in a more detailed way, since its regulation arises
mainly from the federal sphere. Each company operating the energy supply system
will set its price accordingly to ANEEL’s complex method, which involves many
aggregate costs to be considered on the formation of the price to consumers. Energy
supply is divided into two groups: low tension (for residential consumers) and high-
tension (for commercial and industrial buildings). Both low-tension and high tension
are subject to the ‘flag’ system explained below, but high-tension consumers have
more flexible options of contract terms than residential consumers, especially
regarding discounts and special tiers of consumption in which charges are condi-
tioned to certain times of the day.100 However, despite these special conditions,
high-tension consumers are also subject to standard contract terms, only with more
options.
One of the central aspects of energy supply price terms is related to the cost of
producing energy, which is expressed through the system of ‘price flags’, valid since
2015.101 The system is based on four different levels of power-generating condi-
tions. Once applied, energy supply prices all over the country are raised. The first—
the green flag—stands for favorable conditions of power generation and its issuance
by ANEEL does not alter energy supply prices at all. The yellow flag, however,
stands for less auspicious power generating conditions, hence each kilowatt-hour
spent will be BRL 0.020 more expensive. The red flag—tier 1—stands for more
costly conditions, thus each kilowatt-hour spent will be BRL 0.030 more expensive.
96
STF ADI 1842 (2013).
97
Art 21, XII, b, of the Brazilian Constitution.
98
Lei 1145/2007.
99
See the Brazilian Finance Ministry Informative Note 10089/2016/COGAS/SPE/MF, regarding
price terms for sanitation services.
100
ANEEL Normative Resolution 414/2010.
101
ANEEL Normative Resolution 547/2013.
204 A. Frazão
The red flag—tier 2—represents even more costly power-generating conditions,

therefore each kilowatt-hour spent will be BRL 0.035 more expensive.
6 Regulation Promoting Price Transparency

and Comparability
6.1 Price Transparency According to the Civil Code

and the Consumer Protection Code
Information is also among the consumers’ rights provided by the CDC, establishing
a general obligation for suppliers to offer adequate and clear data on every distinct
product or service, correctly specifying its quantity, features, composition, quality,
due taxes, risks and, finally, its price. The Code also refers to price when regulating
public offers of products or services, which must present clear, ostensive, precise and
correct information in Portuguese.102
Consumer protection bodies have the power to issue fines in order to enforce
those general provisions, as happened in a case involving a supermarket chain which
did not clearly disclose the prices of its merchandise. According to STJ’s ruling on
the matter, if there is no transparency regarding prices, freedom of contract is put at
high risk, since consumers have no way to compare similar products and services.103
Furthermore, prices must not simply be “shown”, but they have to be clear and
ostensive and, therefore, shall be visible in reasonably large letters.104
The CDC provides several rules about the transparency in standard form con-
tracts, especially when they involve financing or credit concession, requiring abso-
lute transparency about the price, the interests, the rates and the total sum. It also
determines that moratory penalties for breach of duties cannot be superior to 2% of
the principal obligation.
The CC also provides a considerably wide norm regarding transparency when it
establishes a general parameter of behavior to every agent through the concept of
good faith.105 As previously demonstrated, one of the most important duties which
can be derived from the general good faith norm is the duty of full disclosure, thus
requiring transparency also on B2B and C2C contracts and, moreover, strengthening
the duties to be observed in B2C contracts.
This duty may be judicially enforced in all kinds of contractual relations
concerning price terms in standard form contracts, as may be seen in STJ’s case
law. According to it, a real estate brokerage contract clause aiming to transfer to the
acquiring party the obligation to pay the broking fees may be considered valid only if
102
Arts 6 and 31 of the CDC.
103
STJ REsp 1419557/SP (2014).
104
STJ REsp 1057828/SP (2010).
105
See Martins-Costa (2015).
the consumer acknowledges the realty’s value separately from the value of the
fee.106
As a matter of fact, STJ established, in a general way, that suppliers cannot
transfer its costs to consumers without clearly disclosing this practice.107 Further-
more, the supplier must disclose not only the main price terms, but also ancillary
clauses such as the ones related to freight costs.108 In another case, the STJ
considered a private bank liable for not providing its consumers with contracts
written in Braille, arguing that the absence of contracts in that writing method
would harm the consumers’ right to adequate information.109
In sum, in spite of the absence of an obligation for the creation and maintenance
of charts or databases for previous price disclosure and comparison, the CC and the
CDC contain general provisions addressing the need for transparency on market
transactions within the obligations of disclosure and plainness of information.
6.2 Special Provisions Regarding Price Transparency
In addition to the norms established by the CDC, there are other norms concerning
consumer protection law and even norms regarding specific sectors which set
narrower standards for price disclosure. An important example may be found in a
2004 Statute regulating price display on retail business, obligating suppliers to make
information on price terms available in a clear, transparent and easily accessible
way.110 However, since the end of direct price freezing in Brazil and of SUNAB’s
price chart, there is no general legal provision determining the creation of instru-
ments for price comparison.
Besides the absence of direct price controls through huge spreadsheets with
maximum prices and even of a general rule for the creation of charts intending to
compare prices, there are a few examples of initiatives for the promotion of price
comparability in Brazil. The most common hypothesis for spreadsheets destined to
compare prices is derived from the banking sector. The already cited CMN resolu-
tion regarding standardization of banking services also established a pattern for
naming these services.111 Since the services are uniformly named, the Brazilian
Central Bank is capable of displaying the fees from every bank in the country in a
general spreadsheet on its website.112
106
STJ Ag Int AREsp 780054/DF (2017), STJ REsp 1599511/SP (2016).
107
STJ REsp 901548/RS (2012).
108
STJ AgRg AgRg REsp 1261824/SP (2012).
109
REsp 1349188/RJ (2016).
110
Lei 10962/2004.
111
Art 6 of the CMN Resolution 3919/2010.
112
See http://www.bcb.gov.br/fis/tarifas/htms/SegmentoServicos.asp.
206 A. Frazão
Beyond the highly regulated banking sector, there are no further initiatives
promoting price transparency through the compilation of charges in general charts
as thorough as the one commented above. Another important example is the one
obtained from the regulation of interstate transportation, provided by the National
Terrestrial Transportation Agency (ANTT). Even though ANTT does not supply
consumers with a chart as complete as the one provided for banking services, it has
an online platform where consumers may compare fares from all the companies
working the desired route.113
Regulation on price transparency will always be subject to sectorial peculiarities,
hence it is not possible, and neither necessary, to describe the idiosyncrasies of every
sector. All in all, initiatives like the two examples described in this section are rare in
Brazil, since usually price transparency is regulated through general directives such
as the ones mentioned before. An example from another sector is the General Norm
on Consumer’s Rights on Telecommunications Services, which does not provide a
rule for price comparison, but it does set special directives regarding price transpar-
ency in the flyers distributed to consumers.114
6.3 Price Transparency and Antitrust Law in Brazil
The section regarding price controls in Brazilian Antitrust Law has already stated
that the national competition authority (CADE) refrains from applying direct price
controls when judging anticompetitive behavior, since price is only one of the
variables to be considered in antitrust analysis and, hence, its control may have
undesired results. However, transparency on price definition policy may be a
strongly desirable measure for stimulating competition and producing efficiency
and welfare, especially in highly concentrated markets.115
CADE’s case law regarding price transparency consists mostly of rulings on
mergers and acquisitions of companies that settled ‘concentration agreements’ with
the competition authority, in which the firms accepted a set of terms as a requirement
for the merger approval. In a 2015 case, for example, CADE accepted a vertical
merger involving logistics companies with the condition that the parties should
stipulate objective parameters of pricing in services provided to its competitors.116
The transparency clause in the previous case intended to prevent anticompetitive
behavior by the merging firms and, hence, had a narrow scope. At another merger
case, now concerning the banking sector, CADE’s settlement agreement contained a
set of obligations destined to increase price transparency for consumers and
113
Available at https://appweb.antt.gov.br/sgp/src.br.gov.antt/apresentacao/consultas/LinhasFazem
SecaoDuasLocalidade.aspx.
114
ANATEL Resolution 632/2014.
115
See Motta (2004), pp. 151–152, Granados et al. (2010), pp. 207–226.
116
CADE AC 08700.005719/2014-65 (2015).
competitors, in order to decrease information asymmetry within the sector.117 Price

disclosure was also inserted in the settlement agreement that was celebrated because
of a joint venture between credit card operators, which accepted the obligation to
disclose their service fees to the whole market.118 These significant cases are useful
to illustrate CADE’s position regarding price terms, since direct price controls are
rarely applied, while agreement terms regarding price transparency are common
overall.
7 Final Remarks
The Brazilian legal system contains multiple and disperse hypotheses of direct price
control, whether on primary price terms or ancillary price terms, and this diversity
makes the complete coverage of these cases an almost impossible task. However,
this report has tried to systematize the most common or most important price control
of standard contract terms in Brazilian Law. Despite the long list of price control
cases, freedom of contract is still the general rule on the pricing of standard form
contracts, since price controls are put to action only in order to guarantee compliance
with the constitutional principles that also modify private law.
These statements are true either to regulators and courts, since even the higher
courts in the country refrain from intervening on price terms, which happens only on
exceptional situations. Price controls are even rarer in Antitrust. Hence, price control
is not a generalized reality as it was during the high inflation era, but it is still an
important issue in the understanding of the meaning of freedom of contract in the
Brazilian Law.
References
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controladores e administradores de S/As. Renovar, Rio de Janeiro, pp 105–109
Frazão A (2013) A boa-fé objetiva e o contrato de trabalho. As funções hermenêutico-integrativa e
reequilibradora. In: Tepedino G et al (eds) Diálogos entre o direito do trabalho e o direito civil.
Revista dos Tribunais, Sao Paulo, pp 289–292
Granados N et al (2010) Information transparency in business-to-consumer markets: concepts,
framework, and research agenda. ISR pp 207–226
Grau E (1998) A ordem econômica constitucional na Constituição de 1988. Revista dos tribunais,
São Paulo
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função social do contrato à luz do CPC/2015. ROJ 19:43–47
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CADE AC 08700.010790/2015-41 (2016).
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CADE AC 08700.009363/2015-10 (2016).
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Control of Price Related Terms in Common
Law Canada: Piecemeal Solutions
to Demonstrated Problems of Unfairness
Joshua Karton
Abstract Common law Canada displays a marked disjunction between ex ante and
ex post price control strategies. The federal government and provinces are avid price
regulators, imposing explicit price controls and transparency mandates applicable to
many consumer contracts. However, their legislative and regulatory strategy has
been a piecemeal one, with most regulations applying to individual industry sectors,
in particular those where popular pressure to crack down on deceptive practices or
high prices generates political momentum. By contrast, the courts have assigned
themselves a strictly limited role in regulating price terms ex post. They continue to
hew to traditional notions of freedom of contract, and to invalidate price terms in
exceedingly narrow circumstances derived from historically-recognized categories
of unfairness—piecemeal solutions of a different kind. Neither the courts nor the
legislatures have developed a general theory or policy of contractual unfairness, in
standard contracts or otherwise. The overall effect is that ex ante regulation of price
terms is stringent where it exists but uneven in application, while ex post control of
price terms by the courts is widely available in principle but rarely if ever occurs in
practice.
1 Introduction
This chapter considers the role of price terms in the regulation of standard form
contracts in the common law jurisdictions of Canada. Canada is a federal state,
with powers divided between the federal government and the provinces. For matters
governed by federal law (including criminal law and competition law), a single
legislative and regulatory regime exists, with relatively uniform application
J. Karton (*)
Queen’s University, Faculty of Law, Kingston, ON, Canada
e-mail: joshua.karton@queensu.ca

https://doi.org/10.1007/978-3-030-23057-9_7
210 J. Karton
throughout the provinces.1 By contrast, matters within provincial jurisdiction (which

includes private law) are governed by civil law in Québec but by common law in the
other nine provinces and three territories. The Supreme Court of Canada (SCC) hears
appeals from both kinds of cases, applying civil or common law as appropriate. This
report deals with federal law and that of the nine common law provinces, and is
intended to be read together with the chapter detailing the law of Québec.2
In discussing matters under provincial jurisdiction, this report provides examples
from Ontario, British Columbia, and Alberta. These are the three most populous
common law provinces, accounting for more than 80% of the Canadian population
residing outside Québec. Despite diverse politics, they take a harmonious approach
to the matters discussed in this report, and therefore adequately represent the
remainder of the common law provinces and territories.
The federal government and common law provinces have engaged in widespread
and explicit ex ante regulation of prices in the name of consumer protection.
However, such interventions have generally been enacted with respect to individual
industry sectors, in particular those like payday loans or mobile telecommunications
that either have a record of deceptive practices or are subject to significant political
pressure to keep prices low. The regulatory approach has therefore been a piecemeal
one, with some industries singled out for regulation and others largely left to their
own devices. The courts, too, have followed their own kind of piecemeal approach.
Instead of treating different industry sectors differently, the courts have restricted
their interventions to situations where the formation of the contract is tainted by
abuse of a dominating position; they rarely if ever invalidate or adjust price terms on
their own. Accounting for this apparently contradictory phenomenon—heavy if
uneven ex ante price regulation in individual sectors but little-to-no ex post price
regulation by the courts except in certain narrow and well-recognized circum-
stances—is one of this main goals of this chapter.
2 Judicial Control of Price Terms
The context for judicial interventions against unfair contract terms is an ideological
commitment to freedom of contract, which Canada’s common law provinces
inherited from English common law. Historically, they recognized only three narrow
limitations on freedom of contract, invalidating contracts in restraint of trade,
1
All federal statutes and regulations have equally-authoritative English-language and French-
language versions; only the English-language versions are quoted here.
2
See in this volume Marie-Claude Desjardins and Nathalie Vézina, ‘Le prix dans les contrats de
consommation, les contrats d’adhésion et les contrats réglementés: pouvoir d’intervention des
tribunaux et autres modes de contrôle des prix en droit Québécois’.
Control of Price Related Terms in Common Law Canada: Piecemeal. . . 211
penalties and forfeitures, and discriminatory treatment by persons pursuing ‘com-

mon callings’ (shopkeepers and common carriers, principally).3
In general, Canadian courts at common law did not—and still today do not—
intervene systematically to redress unfair contracts or contract terms. Instead, they
have reacted with ‘piecemeal solutions in response to demonstrated problems of
unfairness’.4 For the most part, they have not seen high prices as unfair in them-
selves, but have instead applied their common law powers primarily to restrict the
application of limitation of liability clauses, or to void contracts altogether in cases of
undue influence, duress, or general unconscionability. Ex post regulation of prices is
close to nil in common law Canada.
2.1 The Ideological Baseline: Freedom of Contract and Court

Control
Since the 1960s, exceptions to the freedom of contract principle have increasingly
been recognized, and the SCC has repeatedly emphasized the limits on it. For
example, in one of its most recent decisions dealing with contract law, Douez v
Facebook, the SCC refused to enforce a forum selection clause in a consumer
contract; specifically observing that, ‘There are generally strong public policy
reasons to hold parties to their bargain. . .. But freedom of contract is not unfet-
tered.’5 One leading commentator concludes that, ‘The law of contracts, when
examined for what judges do, as well as what they say, shows that relief from
contractual obligations is in fact widely and frequently given on the ground of
unfairness.’6
Nevertheless, freedom of contract continues to exert a gravitational pull as a kind
of talisman or slogan. For example, in 2014s Bhasin v Hrynew, the SCC held for the
first time that good faith constitutes an ‘organizing principle’ of the common law of
contracts, and that, in particular, an implied duty of honest performance may be
derived from that organizing principle.7 The court justified its innovation, in part, on
the basis that the duty of honest performance ‘interferes very little with freedom of
3
Swan and Adamski (2012), p. 838.
4
This is the much-quoted phrase of Bingham LJ (as he then was) in Interfoto Picture Library Ltd v
Stiletto Visual Programmes Ltd [1989] 1 QB 433, 439, CA.
5
Douez v Facebook, 2017 SCC 33, para 52 (refusing to enforce a forum selection clause in a
consumer contract).
6
Waddams (2017), p. 303.
7
This decision, while ground-breaking, is quite narrow from a civil law perspective. The only
implied obligation that the SCC recognized is a duty not to deceive the other party in the course of
contract performance. It recognized none of the other duties associated with good faith in the civil
law, such as a duty of disclosure, a duty to consider the interests of the other party (beyond the
interest of not being lied to), or a duty to act in good faith during contract formation/negotiation.
212 J. Karton
contract, since parties will rarely expect that their contracts permit dishonest perfor-
mance of their obligations’.8
While diminished, freedom of contract remains intact as the ideological baseline
for judicial behaviour at common law. Judicial interventions continue to be restricted
to a few well-defined exceptions and to cases of egregious advantage-taking. As the
SCC observed in Tercon Contractors, ‘. . . freedom of contract will often, but not
always, trump other societal values. The residual power of a court to decline
enforcement exists but, in the interest of certainty and stability of contractual
relations, it will rarely be exercised.’9
By contrast, legislatures and regulators have extensively regulated contract terms,
so limitations on freedom of contract have been instituted primarily through statutes
and regulations.10 When applying these statutes and regulations, courts have
interpreted their provisions expansively, in line with their consumer protection
objectives. Courts thus appear to have no principled objection to interference with
freedom of contract in the name of protecting weaker parties. It’s just that they seem
to believe that the judicial role prevents them from engaging in such interference
themselves.
2.2 Court Intervention on Price Terms at Common Law
This section surveys the techniques Canadian common law courts employ to control
the content of parties’ bargains. As will be evident, none of these techniques applies
specifically to price terms, and in practice they are not applied to price terms.
Accordingly, this section provides only a brief and broad overview, and should
not be taken as comprehensive.
Canada’s common law courts, like their sisters in other common law jurisdic-
tions, never developed a universal doctrine of contractual unfairness. Indeed, gen-
erations of Canadian lawyers were educated believing that courts had no power to
give relief from unfair contract terms.11 Despite this, ‘it was never the case that
courts were indifferent to unfairness or over-reaching; it was just that relief would
only be given in particular categories.’12 Even today, courts will only exercise
control over contract terms or nullify contracts altogether when a specific doctrine
of known provenance applies. In particular, Canadian common law courts are
concerned not to appear to be rewriting the parties’ bargains, partly out of a devotion
8
Bhasin v Hrynew, 2014 SCC 71, para 71.
9
Tercon Contractors v British Columbia (Minister of Transportation & Highways), 2010 SCC
4, para 117.
10
11
Waddams (2017), p. 303.
12
Swan and Adamski (2012), pp. 842–843.
to freedom of contract and partly out of awareness of their imperfect knowledge of

the parties’ motivations and economic circumstances.13
Generally, judicial techniques of control fall into two categories.14 The first
category involve no explicit invocation of a control power. These include strict or
contra proferentem interpretation of contractual terms or invalidation of onerous
terms that were not adequately notified to the party affected by them. These
techniques are preferred, in part because they derive from legal (as opposed to
equitable) doctrines, and in part because they conform to courts’ modest conception
of their role.
The second category includes doctrines explicitly based on unfairness or abuse of
a dominant position. These derive mainly from equity, and include breach of
fiduciary duty, penalties and forfeitures, and vitiation of consent (duress, undue
influence, lack of capacity, and the like). They are seldom invoked by courts, and
only in cases where the disparity between the parties is stark and the first category of
techniques does not yield a just result.
The doctrines in both categories share three notable features. First, they all focus
on the circumstances surrounding the formation of the contract, rather than its
substantive terms. Under the first category, courts emphasize the weaker party’s
lack of notice of particular onerous terms—the more onerous the term, the more
efforts the party relying upon it must expend to bring the clause to the attention of the
other party.15 Under the second category of techniques, courts focus more on an
imbalance of bargaining power between the parties yielding lack of true consent
(‘procedural unconscionability’) and less on any imbalance in the terms of the
contract itself (‘substantive unconscionability’).
Second, with one exception that will be discussed below, courts avoid categorical
distinctions: between standard and non-standard contracts, between adhesive and
non-adhesive contracts, or between consumer and business-to-business contracts.
Instead, they consider each contract individually in terms of the parties’ relative
bargaining power.
Third, none of the various common law techniques of judicial control depends
directly on the price charged. For example, when considering whether a contract is
voidable for having been formed under duress, the price cannot itself be grounds for
invalidation. Rather, relief is granted only where the evidence shows that the weaker
party did not freely consent to the contract, as evidenced by factors such as whether
the allegedly coerced party protested, whether they had a realistic alternative,
whether they were independently advised, and whether they took steps to avoid
the contract once the pressure was removed.16 The price may render a bargain
13
Vipond v Furness Withy and Co (1916), 54 SCR 521, 524–25.
14
This rubric is taken from Swan and Adamski (2012), pp. 845–846.
15
See, e.g., HW Liebig & Co v Leading Investments [1986] 1 SCR 70; Tilden Rent-A-Car v
Clendenning (1978), 18 OR(2d) 601, Ont CA.
16
[1980] AC 614, 635, relied upon in Gordon v Roebuck (1992), 92 DLR (4th) 670, Ont CA; Burin
Peninsula Community Business Development Corp v Grandy (2010), 327 DLR (4th) 852, NLCA.
214 J. Karton
suspicious but is not in itself evidence of lack of consent, much less an autonomous
ground for voiding the contract.
When dealing with general unconscionability, the courts’ approach similarly
emphasizes lack of true consent over unfairness of terms. Some decisions require
both to be proven. For example in Morrison v Coast Finance, the elderly plaintiff
had been induced to mortgage her house to secure a loan given by the defendant
(a non-bank lender) to two men she barely knew. The trial judge found that there was
no undue influence, but the BC Court of Appeal nevertheless set aside the mortgage.
The key passage reads:
A plea that bargain is unconscionable invokes relief against an unfair advantage gained by an
unconscientious use of power by a stronger party against a weaker. On such a claim, the
material ingredients are proof of inequality in the position of the parties arising out of the
ignorance, need, or distress of the weaker, which left him in the power of the stronger, and
proof of substantial unfairness of the bargain obtained by the stronger.17
Morrison has never been explicitly overturned, but the SCC has stated at least
twice in obiter dictum that exploitation of unequal bargaining power is the only
touchstone of unconscionability. In Hunter Engineering, the court observed, ‘Only
where the contract is unconscionable, as might arise from situations of unequal
bargaining power between the parties, should the courts interfere with agreements
the parties have freely concluded.’18 In Tercon Contractors, the SCC struck down
the doctrine of ‘fundamental breach’, developed in England19 and previously
adopted by the SCC,20 under which a limitation clause will not be enforced if the
consequences of the breach were particularly severe. The Tercon court held that
unconscionability is a question solely of contract formation, and not of the substan-
tive imbalance of the contract terms per se, nor of the parties’ conduct, nor of the
consequences of a breach.21
Generally, judicial attention is restricted to limitation or exclusion of liability
clauses; price terms simply do not attract scrutiny, except to the extent that terms that
change the price following a contractual default may be struck down as penalties
(in which case the clause is treated as stipulated damages rather than as a price term).
The reason for this is not self-evident, but it may derive from the focus on notice and
consent. It is hard for a party to argue that they did not have adequate notice of the
price, when it is typically the first (and often only) term that the parties actually pay
close attention to, especially in consumer contracts.
When an onerous term was adequately notified to the weaker party—and there-
fore was incorporated into the contract—courts are apt to pursue consumer
17
(1965) 55 DLR (2d) 710, 713 BCCA. See also Harry v Kreutziger, another decision of the BCCA.
(1978), 95 DLR (3d) 231 at 241.
18
Syncrude Canada Ltd v Hunter Engineering Co [1989] 1 SCR 426, 462 (emphasis added).
19
Karsales (Harrow) Ltd v Wallis [1956] 1 WLR 936, CA.
20
Guarantee Co of North America v Gordon Capital Corp [1999] 3 SCR 423.
21
Tercon Contractors Ltd v British Columbia (Transportation and Highways) 2010 SCC 4, para
122.
protection objectives through their power to interpret the contract, rather than by
refusing to enforce some or all of its terms. In particular, Canadian courts are apt to
construe insurance and other adhesive contracts contra proferentem, most often to
find that a limitation clause in the contract does not apply to the breach actually com-
mitted by the merchant.22 As one of the leading Canadian treatises puts it, contra
proferentem is best seen ‘as an aspect of a general concern that parties to contracts
not be caught by unfair surprise that finds expression in a number of different
approaches to contracts.’23 Indeed, contractual interpretation is, in practice, Cana-
dian common law courts’ most-used tool of control of unfair terms.24
Contractual interpretation is also the only area in which Canadian common law
explicitly distinguishes between standard and non-standard contracts: in the standard
of review on appeal. The standard of review for appeals of contractual interpretations
does not directly impact price terms, but is a crucial part of the way interpretation
disputes are litigated in Canada; it is also, to the author’s knowledge, unique in the
common law world.
The story begins with Sattva Capital v Creston Moly.25 Traditionally, in Canada
as in other common law jurisdictions, contractual interpretation had been considered
a pure question of law. This meant that a trial court’s interpretation of a contract was
reviewable de novo upon appeal. In 2014, in Sattva, the SCC overturned this
longstanding characterization, holding that contractual interpretation is a mixed
question of law and fact.26 Before Sattva, all appellate review of trial court interpre-
tations of contracts applied a ‘correctness standard’, such that the appeal court could
overturn any interpretation it considered incorrect. Sattva applied to contractual
interpretation the ‘reasonableness standard’ for mixed issues of fact and law, under
which, in recognition of the trial court’s preeminent role in establishing the facts of a
dispute, courts of appeal will overturn a trial court’s interpretation only if it is
‘unreasonable’.
Sattva raised questions about the treatment of standard versus non-standard
contracts, between which the judgment made no distinction. For example, in Mac-
Donald v Chicago Title Insurance of Canada, the Ontario Court of Appeal observed
that ‘[t]he importance of the factual matrix [evidence of the circumstances surround-
ing conclusion of the contract] is far less significant, if at all, in the context of a
standard form contract or a contract of adhesion, in which the parties do not negotiate
22
Although contra proferentem is ostensibly a neutral rule for choosing among equally plausible
meanings of an ambiguous contractual term, the SCC has acknowledged explicitly that contracts
may be construed contra proferentem due to ‘an imbalance in negotiating power’. Jesuit Fathers of
Upper Canada v Guardian Insurance Co of Canada [2006] 1 SCR 744, para 28.
23
24
Cf. Mitchell (2007), p. i.
25
2014 SCC 53.
26
2014 SCC 53, para 50.
216 J. Karton
the terms and the contract is presented to the receiving party as a take-it-or-leave-it
proposition.’27
In Ledcor v Northbridge,28 which, like McDonald, involved a dispute over
interpretation of an exclusion of liability clause in a standard form insurance
contract, the SCC took up this issue. Writing for the court, Justice Wagner held:
I would recognize an exception to this Court’s holding in Sattva that contractual interpre-
tation is a question of mixed fact and law subject to a deferential review on appeal. In my
view, where an appeal involves the interpretation of a standard form contract, the interpre-
tation at issue is of precedential value, and there is no meaningful factual matrix that is
specific to the parties to assist the interpretation process, this interpretation is better charac-
terized as a question of law.29
Four months later, in Sabean v Portage La Prairie, yet another interpretive

dispute over a standard insurance policy’s exclusion clause, the SCC reaffirmed
Ledcor.30 Taken together, these decisions establish a threshold determination when a
contractual interpretation dispute is appealed to a higher court. Before considering
the meaning of the contract, the appellate court must first determine whether the
contract at issue is a standard one. If so, it will review the trial court’s interpretation
under the deferential reasonableness standard; if not, it will review the trial court’s
interpretation under the stricter correctness standard. Ledcor and Sabean offered no
guidance to the lower courts as to how to distinguish standard and non-standard
contracts, nor did it distinguish between adhesive standard forms used in consumer
contracting and those adopted by consensus of participants in an industry sector.
These issues have already arisen in cases following Ledcor and Sabean,31 and will
no doubt continue to generate uncertainty until the SCC returns to the issue.
In sum, judicial control of price terms is next to nil, except where courts are called
upon to review determinations by regulatory bodies or otherwise to implement
statutes and regulations. None of the traditional common law constraints on freedom
of contract described above relates specifically to price terms, except to the extent
that contracts imposing above-market prices could be invalidated at common law if
they were contracts in restraint of trade.32 More generally, while a high price may be
evidence that some form of impermissible advantage-taking occurred in the
27
MacDonald v Chicago Title Insurance Co of Canada, 2015 ONCA 842, para 33.
28
2016 SCC 37.
29
2017 SCC 7, para 24.
30
2017 SCC 7.
31
JEKE Enterprises Ltd v Northmont Resort Properties Ltd, 2017 BCCA 38; Students’ Association
of Saskatchewan Polytechnic Regina Inc v Saskatchewan Polytechnic, 2017 SKCA 13; Corydon
Village Mall Ltd v TEL Management Inc, 2017 MBCA 8.
32
Common law restraint of trade has largely been overtaken by the Competition Act and associated
regulations.
formation of the contract, it will never in itself be grounds for voiding a contract
under any of the common law doctrines relating to unfairness.33
In addition, except when acting under specific statutory or regulatory authority,
courts will not adjust a price term in a contract. As will be discussed below, under
general consumer protection legislation and sector-specific laws and regulations,
excessively high prices may render a contract unenforceable against consumers or
their guarantors. However, courts’ role is limited to determining whether the price
was in fact impermissibly high according to the statutory definition, awarding
damages, and reviewing the findings of administrative agencies and tribunals
according to their enabling legislation.
3 Legislative and Regulatory Control of Price Terms
Over the last five decades, Canadian legislatures at both the provincial and federal
levels have adopted hundreds of statutes and regulations on consumer protection,
which have had far more impact than common law doctrines relating to unfairness.
The majority deal with health and safety, but many impact price terms. The general
division of responsibility is that the federal government oversees the quality and
security of products at the manufacturing and importation stages and sanctions
certain anti-social business behaviours (such as price-fixing and misleading adver-
tising), while the provinces have primary responsibility for the contractual dimen-
sion of consumer transactions.
In 1967, the Federal government created the Department of Consumer and
Corporation Affairs to regulate consumer interests and to administer federal policies
regarding the marketplace.34 Around the same time, it adopted several laws inspired
by the Charter of Consumer Rights promulgated by the Canadian Consumer Coun-
cil, an NGO. Between the late 1960s and the early 1970s, all ten provinces adopted
statutes regulating consumer transactions.35 These have been amended frequently,
often in response to a political outcry over deceptive practices or high prices in an
economic sector. Today, consumer protection is highly consistent across the com-
mon law provinces.
With few exceptions, both the federal and provincial statutes and regulations that
affect price terms are sector-specific, dealing with particular areas of the consumer
marketplace where the political branches have been moved to intervene. There exist
only a small number of statutes—the federal Competition Act and the provincial
33
If the contract provides for a higher ‘price’ upon a breach by the purchaser, courts may treat the
price adjustment provision as a stipulated remedy for breach and regulate it as penalty clauses have
traditionally been regulated.
34
In 1993, this department was later merged into what is now called Industry Canada. Ziegel
(1995), p. 420.
35
Belobaba (1986), p. 6.
218 J. Karton
consumer protection acts, along with their associated regulations—that apply across
sectors.
Like the courts, therefore, the legislative and executive branches have followed a
piecemeal approach, adopting specific responses to specific instances of unfairness.
However, unlike the courts, the legislative and executive branches tend to locate
those instances of unfairness in particular industries, rather than in particular cate-
gories of behaviour. It is no insult to the democratically-responsive branches to
observe that the industries that have attracted regulation are areas where govern-
ments are particularly exposed to political backlash: lending and consumer credit,
mobile telephone services, residential utilities, and health care.
This section first describes the regulations that apply across industry sectors: the
provincial consumer protection laws and federal Competition Act. Next, it reviews
the major sector-specific sets of regulations. Throughout, regulations that directly
control prices terms are considered together with those that empower consumers to
make informed decisions by mandating transparency about prices.
3.1 Control of Prices in Provincial Consumer Protection

Statutes and Regulations
Each of the common law provinces has enacted a general statute promoting the
protection of consumers. They go by different names but share many of the same
characteristics: they do not, with few exceptions, ban any particular substantive
contract terms or describe any categories of terms as presumptively unfair36; they do
not themselves provide for collective redress, although consumers may pursue class
actions in tort or under product liability or competition legislation; they do not
distinguish between standard and non-standard contracts and apply equally to
both; and they establish consumer protection agencies empowered to investigate
complaints about merchants and to commence actions on behalf of consumers or
maintain or appeal those actions.
The common law provinces’ consumer protection statutes all contain a provision
prohibiting merchants from charging a price that grossly exceeds the price at which
similar goods or services are readily obtainable by similar consumers. Charging such
a price constitutes an ‘unconscionable act’37 or ‘unfair practice’,38 as does entering
into a contract with a consumer while knowing that the consumer has no reasonable
probability of paying the full price.39 If the unconscionable act occurred during the
formation of the contract, it is not binding on a consumer or their guarantor.40
36
Some provinces prohibit negative option selling. See, e.g., s 23 AFTA.
37
The term used in British Columbia.
38
The term used in Alberta and Ontario.
39
s 8(3)(c–d) BC BPCPA; s 6 AFTA.
40
s 10(1) BC BPCPA.
In addition, merchants who engage in unconscionable acts may be held to have

committed an administrative offence, punishable by a fine, an order to make
restitution to the consumer, or even punitive damages41 (although in practice only
a small number of extreme cases are prosecuted).
For the most part, the consumer protection statutes focus on contract formation.
They mandate price disclosure only to the extent that they regularly require all terms
of the contract to be disclosed to consumers, along with the name, location, and
contact information of the seller. In some cases, they require pre-contract disclosure
of an itemized list of all fees and prices to be charged for the products or services to
be supplied (including taxes, shipping charges, customs duties, and brokerage fees),
information on instalment payments (including the applicable interest rate and total
cost of credit), and the currency in which the price is to be paid if it is not Canadian
dollars.42 There appears to be widespread noncompliance with the disclosure
requirements, especially by online sellers, and little organized effort to enforce
them.43
3.2 Price Terms Within Canada’s Competition Regime
Competition law is within federal jurisdiction. The Competition Act deals with a
range of anti-competitive behaviours, and places a variety of restrictions on price
terms, which apply equally to standard and non-standard contracts. The Competition
Bureau is responsible for investigations and the Competition Tribunal, an adminis-
trative rather than judicial body, has first-instance jurisdiction over lawsuits arising
under the Competition Act, which may involve both criminal and civil prosecutions.
Consumers affected by violations of the Competition Act also have private rights
of action,44 which are often pursued in class litigation.45 There is no class action
regime specific to competition claims; rather, the applicable requirements are set out
in the rules of the court where the class action is launched. Canada does not have a
system for consolidation of multi-district litigation, so for areas under provincial
jurisdiction, there may be multiple class actions in different provinces arising from
41
S 7.2(1) AFTA.
42
ss 46(1)(a), 19(f)(g)(h); ss 4(1)(a)(v–vi) BC BPCPA; ss 4(1)(a)(v–vi) Alberta Internet Sales
Contract Regulation; s 32(4) OR 17/05.
43
Montplaisir M (2018).
44
s 36.
45
If the contract at issue contains an arbitration agreement that is otherwise valid, that agreement
will bar a class action. Murphy v Amway Canada Corp, 2013 FCA 38. However, the statutory
context matters. In Seidel v Telus Communications Inc, 2011 SCC 15, the SCC held that s 172 of the
BC BPCPA, which provides for consumers to bring actions in BCSC, reflects the legislature’s
intention to prohibit class action waivers in consumer contracts and to preserve consumer class
actions as a public interest remedy.
220 J. Karton
the same conduct. Competition Act claims must, however, be launched in the Federal
Court, so there is no possibility of parallel class actions.
Under Section 45 of the Competition Act, conspiracies, agreements, or arrange-
ments between competitors to ‘fix, maintain, increase or control the price for the
supply of the product’ are indictable criminal offences (i.e., felonies), subject to
punishment including imprisonment for up to 14 years, and/or a fine of up to $25
million.46
Section 74 provides that certain deceptive marketing practices, including misrep-
resentation of the ordinary price for a product, bait-and-switch selling, and sale
above an advertised price, are civil wrongs. The Competition Bureau may investi-
gate such practices and bring an application to the Competition Tribunal. The
Tribunal may order cessation of the deceptive practice, assess administrative mon-
etary fines, and disseminate to consumers a notice of violation.
Section 74.011—added to the Competition Act in 2014 by Canada’s Anti-Spam
Legislation—applies to false or deceptive marketing practices in the electronic
marketplace.47 Under Section 74.011, false or misleading representations in emails
or other electronic messages, including their subject lines and URLs or metadata,
constitute violations of the Act. Two prosecutions have already concluded under
74.011 against major brands, leading to consent decrees between the Commissioner
of Competition and Avis/Budget Rental Car48 and Amazon,49 respectively. Both
cases involved price misrepresentations, in Avis/Budget’s case a failure to disclose
certain optional and non-optional fees and in Amazon’s case misrepresentation of
the amount of savings versus a hypothetical ‘list price’. Both prosecutions ended in
consent agreements.
As of 1 July 2017, there also exists a private right of action for violations of
Section 74.011, including by way of class action. Plaintiffs ‘affected’ by an act or
omission under Section 74.011 may recover compensation equal to any actual loss or
damage suffered, plus $200 for each occurrence of the conduct, not to exceed
$1,000,000 per day. Crucially, ‘occurrence’ is not defined, and will surely be the
subject of litigation. The first class action involving claims under Section 74.01 was
launched on 21 December 2017, following an admission by George Weston Ltd and
Loblaw Companies Ltd (the largest bakery and retail grocery companies in Canada,
respectively, which are owned by the same parent company) that they had partici-
pated in an industry-wide arrangement to fix the price of bread, dating back at least
46
s 45(2).
47
Formally, An Act to promote the efficiency and adaptability of the Canadian economy by
regulating certain activities that discourage reliance on electronic means of carrying out commer-
cial activities, and to amend the Canadian Radio-television and Telecommunications Commission
Act, the Competition Act, the Personal Information Protection and Electronic Documents Act and
the Telecommunications Act.
48
http://www.ct-tc.gc.ca/CMFiles/CT-2015-001_Registered%20Consent%20Agreement_82_66_
6-2-2016_6072.pdf.
49
http://www.ct-tc.gc.ca/CMFiles/CT-2017-001_Registered%20Consent%20Agreement%20(pub
lic%20version)_2_66_1-11-2017_2952.pdf.
14 years. The plaintiffs are claiming damages, inter alia, for misrepresentations in
various electronic advertisements over the years.50
Section 76 of the Competition Act regulates price maintenance. Price maintenance
encompasses any act, whether accomplished through agreement, threat, promise, or
otherwise, to influence upward prices or discourage reduction of prices charged.51 If
these practices have an adverse effect on the market, the Competition Tribunal may
enjoin further price maintenance, or otherwise require the subject of the order to do
business on usual trade terms.52
Sections 78 makes predatory pricing—selling at a price below acquisition cost for
the purpose of eliminating or disciplining a competitor—an anticompetitive act.53
The Competition Tribunal may, on application by the Commissioner of Competi-
tion, make an order prohibiting the persons from further engaging in the practice, or
other orders necessary to overcome the adverse effect on competition.54 Price
maintenance also attracts fines of up to $10 million for a first offense and $15
million for subsequent offenses.55
In practice, most prosecutions by the Competition Bureau lead to consent agree-
ments—plea bargains, essentially. These typically involve an agreement to discon-
tinue the anticompetitive behaviour, a monetary fine (which may be distributed to
affected consumers), and a sum of money to reimburse the investigation expenses of
the Competition Bureau. The decrees require the approval of the Competition
Tribunal, but this appears to be routinely given.
3.3 Sector-Specific Legislation and Regulation on Price

Terms
The bulk of the legislation and regulation that controls price terms deals with specific
sectors of commercial activity. The federal and provincial legislatures often inter-
vene in this way, at least where public outcry over deceptive practices or high prices
rouses them to action. These laws typically combine direct and explicit ex ante
regulation of prices with extensive mandates respecting price transparency. In this
section, the most important examples of sector-specific regulation are discussed
in turn.
50
http://www.cbc.ca/news/canada/sudbury/bread-price-fixing-class-action-1.4462416/.
51
s 76(1).
52
ss 76(2), 76(8).
53
s 78(1)(i).
54
s 79(1)–(2).
55
s 79(3.1).
222 J. Karton
3.3.1 Credit and Financial Services
Both provincial and federal legislation and regulations target the financial services
sector, focusing in particular on the interest chargeable on various forms of loans.
Provincial legislation and regulations also impose disclosure requirements, either
through general consumer protection legislation (as in British Columbia) or under a
dedicated legislative framework (as in Alberta and Ontario).
At the federal level, there are separate federal regulations for Canadian-registered
banks, foreign banks authorized to do business in Canada, credit unions, and
insurance companies. These mirror each other; all federally-regulated financial
institutions are subject to substantively similar obligations. Federal intervention is
overseen by the Financial Consumer Agency of Canada (FCAC), which is respon-
sible for implementing federal consumer protection legislation.56 The regulations in
this area are vast in number and complexity, so only the most important or
commonly-invoked are mentioned here.
Discussion of interest rate regulation starts with the Criminal Code, which makes
it a criminal offense to enter into an agreement to receive interest to or receive
payment of interest at a criminal rate. Section 347 sets the criminal rate at an
‘effective annual rate . . . that exceeds sixty per cent’. Criminal law is within federal
jurisdiction, and the same rate applies across Canada.57
Courts have interpreted section 347 in a borrower-friendly manner. The statute
does not define ‘agreement to receive interest’, and courts have held that any
transaction that has the effect of causing the payment of interest at a criminal rate
falls within section 347. For example, in Re DC Properties, two related lenders
required a commercial borrower to borrow 75% of the total loan from one lender and
25% from the other, and to secure the loan with separate mortgages to each. One of
the two mortgages imposed a criminal rate of interest. The BC Court of Appeal held
that, because all three parties had treated the two mortgages as a single agreement,
the whole transaction should be treated as an agreement to receive a criminal rate of
interest.58 Similarly, in William E Thompson Associates v Carpenter, the Ontario
Court of Appeal held that ‘interest’ must be defined expansively in line with section
347’s legislative purpose of protecting the public interest59; a ‘facility fee’ charged
by the lender in that case violated section 347 because it pushed the total money
owed to the lender above 160% of the principal.60 If the parties want a lender to
receive a return over 60%, it will have to be by means other than a flat or percentage
rate fee, such as through a true profit-sharing arrangement.
If the rate of interest in a loan agreement exceeds the criminal rate, courts must
determine whether the entire contract or merely the interest rate provision is void.
56
The FCAC is enabled by the Financial Consumer Agency of Canada Act.
57
An exception is carved out for payday loans, which will be discussed in Sect. 2, below.
58
(1990), 47 BCLR (2d) 72, 82–85, BCCA.
59
(1989), 34 OAC 365, Ont CA.
60
(1989), 34 OAC 365, Ont CA.
This turns on whether the primary purpose of the interest rate was to secure
repayment of the principal (a licit purpose) or to exact a usurious return on the
lender’s investment (an illicit purpose). If the latter, they will find entire the contract
void ab initio61 and if the former, they will sever the interest provision and enforce
the rest of the contract, including repayment of the principal and interest at the
default statutory rate.62
That default rate comes from the Interest Act, which regulates the assessment of
interest on loans more generally. It provides that parties to a contract may stipulate
any rate of interest,63 but sets the default rate in the absence of such agreement at 5%
per annum.64
The Interest Act also imposes disclosure requirements. Regardless of the period
on which interest is calculated or paid, loan contracts must state the annualized
interest rate, or else no rate higher than 5% per annum may be charged65; any
overpayments on such a contract may be recovered or deducted from the loan
principal.66 These provisions sometimes catch lenders unaware, since LIBOR and
the U.S. prime interest rate are both calculated on the basis of a 360-year day. If the
interest rate is set according to one of these benchmarks, it must be restated on an
annual basis or it will be capped at 5%.67
For loans secured by a mortgage on land or (under Québec civil law) a hypothec
on immovables, Section 8 of the Interest Act imposes additional restrictions that
prevent lenders from increasing the amounts payable on the loan following a
borrower default (regardless of whether the increase is characterized as a fee,
penalty, or higher interest rate).68 If a borrower makes such an improper payment,
the sum may be deducted or recovered from any other interest or charge payable
other than the principal.69 Judgments interpreting section 8 emphasize that its
purpose is to ‘protect the borrowing public from . . . abusive treatment by lenders’.70
Whether the provision increasing the amounts payable after a default has a legitimate
commercial purpose is irrelevant; ‘the only consideration is whether the enhanced
61
Croll v Kelly (1983), 48 BCLR 306, BCSC.
62
Mira Design Co v Seascape Holdings, 36 BCLR 355, BCSC; William E Thompson Associates Inc
v Carpenter (1989), 34 OAC 365, Ont CA.
63
s 2 Interest Act.
64
s 3.
65
s 4.
66
s 5.
67
Macmillan financial services bulletin, ‘Canadian Interest Rate Rules’ (April 2013), http://mcmil
lan.ca/Files/152355_Canadian%20interest%20rate%20rules.pdf.
68
s 8 Interest Act.
69
s 9.
70
Reliant Capital Ltd v Silverdale Development Corp. 2006 BCCA 226, para 89.
224 J. Karton
rate of interest has the effect of increasing the charge on money in arrears beyond the
rate of interest payable on money not in arrears.’71
Regulations on non-bank lenders (which are provincially chartered) are promul-
gated by the provinces.72 Generally, these impose the same substantive requirements
as the federal laws and regulations. However, some also impose remedies or
penalties against violating lenders that go well beyond a borrower’s right to refuse
to pay unpaid interest or recover interest already paid. For example, in Ontario, any
officer of a credit union who violates the disclosure and interest requirements of the
Credit Union and Caisse Populaire Regulations may be charged with an offence and
fined, and subsequently required to pay restitution to any person harmed as a result
of the offence.73 In Alberta, if a credit grantor violates the interest rate and disclosure
requirements of the Business Practices and Consumer Protection Act (BPCPA), the
borrower may recover statutory damages of up to $500,74 plus exemplary damages
for deliberate violations.75
Payday loans have been the subject of great political controversy in Canada, and
are governed by a distinct price regulation regime that recognizes their greater
potential for abuse. They are exempt from both the criminal rate of interest and
Section 2 of the Interest Act, which provides that borrowers and lenders may
otherwise freely agree to the interest rate. Payday loans are defined as those in
which the amount of the loan does not exceed $1500, the term of the loan is less than
62 days, the person making the loan is authorized to enter into the agreement under
the laws of the province, and the province where the loan is made has been
‘designated’ by the FCAC.76 Since all of the common law provinces have been so
‘designated’, payday loans are, in practice, regulated at the provincial level.
The common law provinces all impose both disclosure requirements and price
caps, either through dedicated regulations or general-application consumer protec-
tion statutes.77 British Columbia prohibits payday lenders from charging interest
rates higher than 17% of the principal, including all charges; it also caps default
fees78 and prohibits charging interest on anything other than the outstanding princi-
pal of a payday loan.79 The payday loan agreement must expressly state the amount
of the principal and the money actually advanced, the total cost of credit and annual
71
Equitable Trust Co v Lougheed Block Inc, 2014 ABCA 234, para 55. The court observed further
that the motivations and relative sophistication of the parties are irrelevant. Ibid at para 54.
72
See, e.g., s 197 Ontario Credit Unions and Caisses Populaires Act.
73
s 322.
74
s 98.
75
s 99.
76
Upon request by a provincial government, the FCAC must designate the province if the province
has enacted legislative measures that protect recipients of payday loans and limit the total cost of
borrowing under such agreements.
77
In Ontario, s 23 O Reg 98/09; in BC, Part 6.1 BC BPCPA and Payday Loans Regulation, BC Reg
57/2009; in Alberta Part 12.1 AFTA; Payday Loans Regulation, AB Reg 157/2009.
78
s 17 BC Payday Loans Regulation.
79
s 112.03.
percentage rate of the loan, any other charges, and a statement that the loan is a ‘high
cost loan’.80 No fees that have not been disclosed in the loan agreement may be
charged.81 Finally, unpaid portions of a payday loan may not be rolled over into a
new payday loan.82 The effect is to prohibit all fees except those that can be captured
in an overall annualized percentage rate, which must be disclosed to the borrower.
Alberta’s and Ontario’s payday loan regulations are similar, except that they set the
maximum interest rate at 18%.83
3.3.2 Telecommunications
Telecommunications are federally regulated. The Canadian Radio-Television and

Telecommunications Commission (CRTC) has a wide-ranging mandate to imple-
ment the Broadcasting Act, the Telecommunications Act, and Canada’s Anti-Spam
Legislation. Pursuant to the Telecommunications Act, the CRTC enacted a Wireless
Code, which regulates mobile phone services.84 It was recently amended after
extensive public consultation, the new provisions coming into force on December
1, 2017.85 The amendments were enthusiastically welcomed by Canadians, who are
all too aware that they pay some of the highest rates in the world for mobile phone
service.
The Wireless Code does not regulate the main prices that mobile phone providers
may charge for their services, but does expressly prohibit or cap certain types of fees,
in particular those for data roaming and data overages.86 It also regulates the fees that
service providers may charge when a customer cancels their contract before the
expiry of a commitment period.87 The effect of these provisions is that service
providers may not charge cancellation fees for cancellations 2 years or more after
the start of a post-paid contract, and must set cancellation fees for periods under
2 years according to the specified calculation methods. It also requires service
providers to unlock a phone upon request (i.e., render the phone usable on any
network), and prohibits them from charging a fee for this service.
The Wireless Code contains a range of price transparency requirements,
encompassing the main contract price and any other fees and charges that may
apply.88 Wireless customers must be given, before conclusion of the contract, a
‘clear and concise’ (two pages maximum) Critical Information Summary that
80
s 112.06.
81
s 112.04.
82
s 112.08.
83
s 124.61(1) AFTA; s 23 O Reg 98/09.
84
CRTC 2013-271.
85
http://crtc.gc.ca/eng/archive/2017/2017-200.htm.
86
ss E2, E3 Wireless Code.
87
ss G1–G3.
88
ss A2, B1, B2.
226 J. Karton
highlights all fees payable and potentially payable, in plain language and in a
readable font.
If a consumer feels that their mobile phone service provider has violated the
Wireless Code, they may raise a complaint with the Commissioner for Complaints to
Telecommunications Services (CCTS). The CCTS can make recommendations for
resolving such complaints, which become binding on service providers if the
consumer accepts them.
3.3.3 Utilities
In Canada, like most countries, electricity and water supply are important political
issues. Given how cold most of the country is for much of the year, the cost of
heating fuel is perhaps even more politically charged. Utilities serving both com-
mercial and residential properties are subject to energetic price regulation. Generally,
in each common law province, utilities (whether they are private or public entities)
must propose prices they intend to charge consumers to the provincial regulator for
pre-approval. If the regulator finds the price to be unreasonable, it may unilaterally
reduce the price.
For example, in Ontario, the Energy Consumer Protection Act provides that
electricity and gas suppliers must set their prices in accordance with the rates set
by the Ontario Energy Board (OEB).89 No utility may sell electricity or gas except in
accordance with an order of the OEB, which must pre-approve or fix rates that are
‘just and reasonable’.90 In carrying out its responsibilities, the OEB must be guided
by the objectives of protecting consumers, promoting consumer education, ensuring
cost-effectiveness, and facilitating competition.91
Consequences for noncompliance are severe. Wilfully evading or attempting to
evade orders of the OEB, for example by failing to provide necessary information
when ordered to do so, constitutes an offence punishable by a fine of $1000–10,000
and up to 2 years’ imprisonment.92 Noncompliance with or contravention of an order
of the OEB, or deliberate submission of false or misleading information to the OEB,
constitute an offense subject to administrative penalties of up to $2,000,000 for a
firm and up to $300,000 for an individual.93
With respect to price transparency, any contract for the sale of electricity or gas is
void unless a paper copy of the contract is provided to the consumer, and the
consumer signs and acknowledges it.94 The contract must be clearly legible, with
a font size of at least 12, and contain a variety of information, including the price or
89
s 9.
90
s 36.
91
s 1 Ontario Energy Board Act.
92
s 79.11(2) Ontario Energy Board Act.
93
s 126.
94
s 16(1).
method of calculating the price and any additional charges that may be payable.95
Consumers may cancel a utility contract without reason within 10 days of entering
into it, and the utility may not collect any fees due or assess any administration or
cancellation fees.96 After the 10-day period, consumers may still cancel the contract
without reason, and cancellation fees are capped at $50 regardless of the remaining
term of the contract.97
Similar regimes exist in all of the common law provinces. A few explicitly cap
electricity rates by statute. For example, in Alberta, where the left-wing New
Democratic Party took power in 2016 after many years of Conservative Party rule,
the 2017 Act to Cap Regulated Electricity Rates restricts electricity rates to a
maximum of 6.8 cents per kilowatt-hour.98
3.3.4 Pharmaceuticals and Health Services
In Canada, almost all health care services are provided privately but paid for through
a system of public insurance called Medicare. Medicare is funded by the federal
government but administered by the provinces, which set prices for health care
services and pay service providers directly. Since these services never enter a public
marketplace, they will not be discussed further here.
However, provincial health care plans generally do not cover medicines, except
for the elderly and (in Ontario) children; consumers must pay directly or purchase a
supplemental insurance plan. Medicine prices are regulated at the federal level, via a
mechanism established under the Patent Act. The Act creates a Patented Medicine
Price Review Board (‘PRB’), which may require a patentee of any ‘invention
pertaining to a medicine’ to provide the PRB with all information necessary to
enable it to investigate the price at which a medication ‘is being or has been sold in
any market in Canada’.99 If the PRB finds that the price charged is ‘excessive’, it can
order the patentee to reduce the price to a level that the Board ‘considers not to be
excessive and as is specified in the order.’100 The Act specifies a variety of factors
that the Board may and may not consider.101 Importantly, the PRB is prohibited from
considering the cost of research and development of the drug other than the Cana-
dian portion of any globally-incurred costs, calculated according to the proportion of
world sales of the drug that occur in Canada.102
95
s 7(1) O Reg 389/10.
96
s 22(1).
97
s 23(2).
98
s 2(1).
99
s 81(1)(a) Patent Act.
100
s 83(1).
101
s 85.
102
s 85(3).
228 J. Karton
Unsurprisingly, pharmaceutical patentees have sought to narrow the scope of the

PRB’s authority. In Celgene Corp v Canada,103 the SCC heard a petition relating to
the drug Thalomid, which is banned in Canada but made available on an emergency
basis through Health Canada’s ‘Special Access Program’ for dangerous products
with specific medical uses. Celgene, the holder of the patent on Thalomid, argued
that it should not be required to provide information on the price at which it was
selling Thalomid, on the basis that the PRB had no jurisdiction over a drug not freely
sold in Canada. The SCC disagreed, holding that the language, ‘sold in any market in
Canada’, encompassed any commercial sale of a medicine, regardless of whether
there was a ‘market’ for the medicine in the commercial sense of the word.104 In
doing so, it relied on legislative history of the Patent Act, which made clear that
Parliament intended the PRB to serve a consumer protection purpose through
explicit price controls.105
3.3.5 Other Sector-Specific Regulations on Prices
Several other sector-specific laws and regulations exist that cap prices or require
price disclosures. These all pertain to industries known for sharp dealing or high-
pressure sales tactics. For example, Ontario and Alberta both cap the fees debt
collection agencies may charge at $50.106 BC goes even farther, prohibiting the
collection of any fees beyond the amount owed by the debtor.107 Ontario and BC
regulate the funeral, burial, and cremation industry, capping fees for various services
and mandating disclosure of all fees108; Several provinces require written estimates
for motor vehicle repairs, which must set out the estimated number of hours, the
hourly rate, labour charges, and all other goods and services to be provided.109 They
also typically provide that the repairer ‘will not charge the consumer an amount that
exceeds the amount estimated [the total amount to be billed] . . . by more than 10 per
cent.’110 BC mandates certain price disclosures in direct sales and time-share
contracts.111 Ontario, which seems to have the most far-reaching system of con-
sumer protection regulations, caps initiation fees for ‘personal development ser-
vices’,112 establishes a series of formulae according to which various fees may be
103
2011 SCC 1.
104
para 30.
105
paras 26–29.
106
s 28(4) O Reg 90/74; s 12(1) Alberta Collection and Debt Repayment Practices Act.
107
s 128(4) BC BPCPA.
108
s 33 Funeral, Burial and Cremation Services Act; O Reg 184/12; BC Reg 298/2004.
109
s 56(1) OCPA; Alberta Automotive Business Regulation, AR 192/99; s 21 BC Motor Dealer Act
Regulation, BC Reg 447/78.
110
O Reg 184/12.
111
s 19.
112
s 33 OCPA.
charged to condominium occupants,113 and mandates price transparency for vehicle

tow and storage services.114
4 Conclusion
The federal government has largely declined to enact comprehensive or systematic

regulations of unfair practices (with the important but narrow exception of the
Competition Act and associated regulations), focusing instead on regulating specific
industries within federal jurisdiction, most notably banks. The provincial govern-
ments each adopted a comprehensive consumer protection statute, all during the
1960s–1970s as part of a broader consumer rights movement. Since then, however,
legislation and regulation at the provincial level has also followed a sector-specific
approach. Extensive legislation and regulations have been enacted, all of them aimed
at predatory pricing and other unfair practices in individual industry sectors, and
most of them combining price transparency requirements with explicit price
controls.
This might be called the whack-a-mole strategy: instances of unfair pricing or
other deceptive practices pop up, and governments knock them back down. It is ex
ante price regulation, but it is fundamentally reactive, with legislatures being moved
to act by public pressure to curb sectors notorious for not disclosing fees (such as
mobile telecommunications), or where prices significantly impact Canadians’ stan-
dard of living (such as utilities and pharmaceuticals). These regulations are effective
where enacted, but their overall scope of effect is uneven.
For their part, Canadian courts maintain and restrict themselves to the traditional
common law unfairness doctrines. The courts focus on power imbalances in contract
formation more than on substantive imbalances in contract terms, and tend to police
onerous contract terms largely by requiring that they be brought to the attention of
the party affected by them. These tendencies, together with a commonly-held belief
among the judiciary that courts should not rewrite parties’ agreements ex post, mean
that Canadian common law courts never adjust price terms and rarely
invalidate them.
One might therefore think that an ideological divide separates the judicial branch
on the one side from the legislative and executive branches on the other: that the
courts are ideologically committed to freedom of contract while legislators and
regulators feel free to limit private autonomy in order to achieve consumer protection
objectives. However, while courts continue to talismanically invoke freedom of
contract when applying common law doctrines, they have interpreted consumer
protection statutes and regulations aggressively and expansively in order to promote
their consumer protection purposes. Thus, the disjunction between judicial and
113
O Reg 48/01.
114
s 52.3(1); s 65.8 OCPA.
230 J. Karton
regulatory control of price terms in Canada can be explained by ideology, just not the
ideology of freedom of contract. Rather, it is an ideology of judicial minimalism and
separation of powers. In common law Canada, price regulation is seen as the domain
of the legislative and executive branches, which have pursued it eagerly. They have
enjoyed the support of the courts, even as the courts consistently refuse to engage in
price regulation themselves.
References
Belobaba EP (1986) L’évolution du droit de la consommation au Canada de 1945 à 1984. In:

Bernier I, Lajoie A (eds) La protection des consommateurs, le droit de l’environnement et le
pouvoir des societies. Commission royale sur l'union économique et les perspectives de
développement du Canada, Ottawa
Mitchell C (2007) Interpretation of contracts. Routledge, Abingdon
Montplaisir M (2018) The missing hyperlink – An empirical study: can Canadian laws effectively
protect consumers purchasing online? Can J Law & Technol 16(1)
Swan A, Adamski J (2012) Canadian contract law. LexisNexis Canada, Toronto
Waddams SM (2017) The law of contracts. Canada Law Book, Toronto
Ziegel JS (1995) Is Canadian consumer law dead? Can Bus Law J 24:417
Form Contracts in Canada (Civil Law): Le
prix dans les contrats de consommation, les
contrats d’adhésion et les contrats
réglementés – pouvoir d’intervention des
tribunaux et autres modes de contrôle des
prix en droit québécois
Marie-Claude Desjardins and Nathalie Vézina
Abstract Quebec civil law deals with issues relating to price control by various
means. Even though questions of lesion (or unconscionable contracts) play a very
limited role in the general rules of contracts, it is given particular attention in
consumer law. An extensive revision of the Civil Code, completed at the end of
the twentieth century, did not include significant changes which would allow the
contestation of contracts perceived as lesionary under the general rules of contract. It
does offer, however, greater relief to vulnerable contracting parties in relation to
contracts of adhesion in which clauses deemed abusive are subject to a sanction of
nullity or of reduction of the obligations included therein. Moreover, certain con-
tracts or stipulations may be subject to specific rules set out by federal or provincial
provisions relating to price control, or to expectations of transparency on the part of
economic actors for clauses having an impact on prices. Thus, the pertinent rules
vary considerably according to their source and their scope. The application of these
rules may present interesting variations from a procedural point of view since related
litigation is not necessarily limited to individual lawsuits but may, in certain circum-
stances, form the basis of a class action.
Résumé Le droit civil québécois appréhende le contrôle des prix au moyen de

différents mécanismes. Alors que la lésion entre majeurs joue un rôle très effacé dans
le droit commun des contrats, elle fait l’objet d’une attention particulière par le
législateur québécois dans le droit de la consommation. La réforme du Code civil,
adoptée à la fin du vingtième siècle, n’a pas élargi de façon significative les
exceptions qui permettent de contester un contrat en raison de son caractère
M.-C. Desjardins (*) · N. Vézina (*)

Université de Sherbrooke, Faculté de droit, Sherbrooke, QC, Canada
e-mail: marie-claude.desjardins4@usherbrooke.ca; nathalie.vezina@usherbrooke.ca

https://doi.org/10.1007/978-3-030-23057-9_8
232 M.-C. Desjardins and N. Vézina
lésionnaire dans le droit commun des contrats. Elle a néanmoins créé une brèche au
profit de contractants vulnérables dans le contexte de contrats d’adhésion, où une
clause abusive peut être annulée ou l’obligation qui en résulte, réduite. Par ailleurs,
divers types de contrats ou de clauses font l’objet d’une réglementation particulière,
à travers des dispositions de source fédérale ou provinciale, qu’il s’agisse du contrôle
du prix ou encore de la transparence attendue de la part des acteurs économiques
dans les rapports contractuels au regard de clauses qui présentent une incidence sur
le prix. Les règles applicables varient donc considérablement quant à leur source et à
leur portée. L’application de ces règles présente aussi des variations intéressantes du
point de vue procédural, puisque les litiges ne se limitent plus à des recours
individuels et peuvent aussi, dans plusieurs cas, emprunter la voie de l’action
collective.
1 Introduction
Comme ailleurs dans le monde, le Québec – à travers l’encadrement édicté à

l’échelle provinciale ou encore les règles d’origine fédérale – porte un intérêt marqué
pour la problématique du contrôle des prix.
Cette problématique a traversé différentes époques. Certaines formes
d’encadrement, plus limitées dans le temps, s’expliquaient par un contexte historique
donné – par exemple, le rationnement lié aux guerres mondiales. D’autres, au
contraire, se sont avérées plus pérennes. Notre étude se rapporte principalement à
cet encadrement dont le développement s’est accéléré à compter des années 1970,
principalement dans une perspective consumériste, même si d’autres motivations ont
également pu guider le législateur tel que nous le verrons plus loin.
Les sources qui encadrent la problématique du prix posent des défis
méthodologiques non négligeables dont il convient de parler brièvement.
Au Québec comme ailleurs, on trouve une abondance de règles issues du droit
commun ou qui se rapportent à certains contextes contractuels spécifiques. À cela
s’ajoutent des lois particulières et des textes réglementaires qui portent sur des
aspects précis en matière de protection des parties vulnérables, à travers l’imposition
de règles d’ordre public et l’implantation de mécanismes destinés à assurer une saine
concurrence, ou encore qui visent la gestion de l’offre et la mise en marché collective
dans certains secteurs d’activités.
Des précisions méritent également d’être apportées d’entrée de jeu afin de situer
le lecteur étranger moins familier avec le système juridique canadien, d’une part
quant au partage des compétences fédérales et provinciales au sein de la fédération
canadienne, et d’autre part quant au bijuridisme qui marque la particularité du
Québec par rapport aux autres provinces et territoires du Canada.
Control of Price Related Terms in Standard Form Contracts in Canada (Civ. . . 233
Le système fédéral énoncé à la Loi constitutionnelle de 18671 fait en sorte que

plusieurs problématiques liées au prix relèvent de la compétence législative des
provinces en vertu de l’article 92 par. 13 au titre de la propriété et des droits civils.
C’est ce qui explique que le Québec soit doté d’un code civil (le Code civil du Bas
Canada jusqu’à 1993 et le Code civil du Québec depuis 19942), mais aussi de lois
particulières et de textes réglementaires qui gèrent certains aspects particuliers – dont
la Loi sur la protection du consommateur3 constitue sans doute le meilleur exemple.
Le palier fédéral, quant à lui, dispose de compétences susceptibles de se rapporter
également à la problématique des prix, dans certains secteurs particuliers en vertu
principalement de l’article 91 de la Loi constitutionnelle de 1867. Tel est le cas
notamment pour le service postal (par. 5), les banques (par. 15), l’intérêt (par. 19), le
droit criminel (par. 27), ou encore les télécommunications (en vertu de son pouvoir
résiduaire attribué par l’article 91).
Par ailleurs, le Canada est un pays où cohabitent deux traditions en droit privé,
soit la tradition civiliste au Québec et celle de common law dans neuf autres
provinces et trois territoires. C’est pourquoi deux rapports nationaux sont soumis
pour le Canada. Les deux rapports abordent certaines règles fédérales qui trouvent
application à travers le Canada, mais la plupart des règles fédérales sont analysées
dans le rapport consacré aux autres provinces et aux territoires4. Seules certaines
règles fédérales qui ont un impact tout particulier et très proche du droit civil sont
mentionnées ou analysées dans le présent rapport consacré à l’état du droit au
Québec.
2 Remarques générales sur la portée de la liberté

contractuelle
Au Québec, le principe fondamental de la liberté contractuelle a été clairement

exprimé dès la codification, à travers le Code civil du Bas-Canada entré en vigueur
en 1866 et inspiré du Code civil français de 1804. Ce premier code était
intrinsèquement lié au libéralisme économique qui prévalait à l’époque.
Le principe de la liberté contractuelle – qu’il s’agisse de la forme ou du contenu –
a toutefois subi une érosion graduelle à travers différentes modifications législatives
apportées au Code civil (par ex. dispositions sur le louage résidentiel) ou l’adoption
de lois particulières axées sur la protection de parties vulnérables (par ex. la Loi sur
1
Loi constitutionnelle de 1867 (R.-U.), 30 & 31 Victoria, c. 3 (en ligne : http://canlii.ca/t/dfbw).
2
Code civil du Québec, version à jour et versions antérieures disponibles en ligne sur le site du
Gouvernement du Québec (en ligne : http://legisquebec.gouv.qc.ca/fr/showdoc/cs/CCQ-1991) et
CanLII (http://canlii.ca/t/1b6h) [ci-après « C.c.Q. »].
3
Loi sur la protection du consommateur, RLRQ c. P-40.1 (en ligne : http://canlii.ca/t/1b1j) [ci-après
« L.p.c. »].
4
Karton (2019).
la protection du consommateur). Les années 1970, fortement marquées par le

mouvement consumériste, auront été le point de départ de plusieurs interventions
législatives majeures qui produisent des effets aujourd’hui encore. Des interventions
davantage ciblées, à travers la modification de textes existants ou l’adoption de
nouveaux textes, ont permis d’aborder des réalités d’apparition plus récente (par
ex. les règles relatives à la câblodistribution, aux services Internet et aux services de
téléphonie mobile).
La protection des parties vulnérables a aussi profité d’un apport de la jurispru-
dence, notamment à travers le développement de la « nouvelle moralité
contractuelle » exemplifiée par différents arrêts de principe de la Cour suprême du
Canada et de la Cour d’appel du Québec faisant la promotion de principes tels que la
bonne foi et l’équité, quoique ce mouvement jurisprudentiel ait un impact beaucoup
plus limité dans le contrôle des prix qu’à l’égard d’autres aspects des rapports
contractuels.
Le Code civil du Québec, adopté en 1991 et entré en vigueur en 1994, accorde
une place plus importante à la protection des parties vulnérables. Le nouveau Code
se situe néanmoins dans la continuité du droit antérieur, en réservant une place
prépondérante à la liberté contractuelle. Le législateur québécois aurait pu choisir
une approche plus protectrice des parties exploitées, soit en reconnaissant la lésion
entre majeurs comme le proposait le Projet de Code civil de l’Office de révision du
Code civil5, ce qu’il s’est refusé à faire en énonçant que la sanction de la lésion dans
le droit commun (c’est-à-dire en dehors de la Loi sur la protection du
consommateur) est en principe limitée aux mineurs et aux majeurs sous régime de
protection (voir ci-dessous, section 4). Il aurait aussi pu intégrer dans le Code civil
l’essentiel des règles consacrées aux droits des consommateurs qui se trouvent
aujourd’hui encore dans la Loi sur la protection du consommateur et d’autres
législations particulières consacrées au même sujet, comme le suggérait l’Avant-
projet de loi sur les obligations6, mais a choisi de ne pas le faire pour préserver le
caractère général propre à un code. Cela dit, le droit nouveau ajoute certaines
hypothèses qui restreignent la liberté contractuelle eu égard aux contrats de
consommation et d’adhésion, en édictant des règles qui peuvent avoir un impact –
direct ou indirect – sur le contrôle des prix.
Soulignons enfin qu’un volet fondamental en matière de contrôle des prix
échappe à la compétence législative provinciale, soit la protection de la concurrence
entre les acteurs du libre marché à travers la Loi sur la concurrence7 et les initiatives
5
OFFICE DE RÉVISION DU CODE CIVIL, Rapport sur le Code civil du Québec, vol. I, Projet de
code civil, Québec, Éditeur officiel, 1978, livre V, art. 37. Voir aussi, à ce sujet, OFFICE DE
RÉVISION DU CODE CIVIL, Rapport sur le Code civil du Québec, vol. II, Commentaires, t. 2,
Québec, Éditeur officiel, 1978 à la p. 615 (commentaires sur l’article 37 du livre V) et p. 561
(présentation globale du livre V du projet) (archives de l’ORCC disponibles en ligne : http://digital.
library.mcgill.ca/ccro/index.php?language¼fr).
6
Québec, Assemblée nationale, Avant-projet de loi, Loi portant réforme au Code civil du Québec
du droit des obligations, 1re session, 33e législature, 1987, art. 2717 à 2878.
7
Loi sur la concurrence, L.R.C. (1985), c. C-34 (en ligne : http://canlii.ca/t/ckj6).
du Bureau de la concurrence du Canada8. Cet aspect relève de la compétence

législative fédérale et est traité principalement dans l’autre rapport national canadien.
La législation en matière de concurrence joue un rôle de premier plan dans la
protection des consommateurs. Elle est notamment invoquée, seule ou en parallèle
avec les règles propres au droit civil, au soutien de certains recours exercés – souvent
sous forme d’actions collectives – contre des acteurs de l’industrie dont les pratiques
entraînent une hausse injustifiée des prix9.
8
Pour un aperçu de la diversité des interventions du Bureau de la concurrence sur le fondement de la
législation et de la réglementation en vigueur en la matière, voir : http://www.
bureaudelaconcurrence.gc.ca/eic/site/cb-bc.nsf/fra/Accueil.
9
Plusieurs exemples illustrent l’utilité de l’action collective en matière de comportements
anticoncurrentiels.
En attente d’autorisation : Govan c. Loblaws, Weston, Metro Inc., Sobeys, Wal-Mart Canada et
Canada Bread, 500-06-000888-178, demande déposée le 1er novembre 2017 (cartel sur le prix du
pain emballé); Ouellet c. Bell Canada, 450-06-000001-176, demande déposée le 25 septembre
2017 (appels à frais virés traités par Bell Canada).
Demandes autorisées : Option consommateurs c. British Airways et Virgin Atlantic Airways,
2011 QCCS 7519 (en ligne : http://canlii.ca/t/frz8q) pour le jugement sur la demande d’autorisation
et Option consommateurs c. British Airways, 2017 QCCS 4941 (en ligne : http://canlii.ca/t/hmtkb)
pour la décision qui modifie le groupe visé (comportements anticoncurrentiels pour fixer le prix de
la surtaxe sur les carburants pour leurs vols réguliers long-courriers; voir à ce sujet : http://www.
recourscollectif.info/fr/dossiers/britishairways/); une entente entre Option consommateurs et Virgin
Atlantic Airways a été approuvée, 2012 QCCS 3213 (en ligne : http://canlii.ca/t/fs1c6), mais
l’action collective se poursuit contre British Airways; Option Consommateurs c. Minebea
Co. Ltd. et al., 2016 QCCS 3698 (en ligne : http://canlii.ca/t/gssvk) pour le jugement sur la demande
d’autorisation (complot par certains fabricants de roulements à billes de manière à restreindre
indûment la concurrence et à élever déraisonnablement leurs prix; voir à ce sujet : http://www.
recourscollectif.info/fr/dossiers/bearings/); Option Consommateurs c. LG Chem Ltd., 2017 QCCS
3569 pour le jugement sur la demande d’autorisation, 2017 QCCA 1442 (en ligne : http://canlii.ca/t/
h69hg) pour le rejet de la demande de permission d’appeler du jugement sur la demande
d’autorisation (complot de certains fabricants de piles rechargeables au lithium-ion de manière à
restreindre indûment la concurrence et à élever déraisonnablement leurs prix; voir à ce sujet : http://
www.recourscollectif.info/fr/dossiers/batteries/).
Dossiers complétés par voie de jugement ou d’entente à l’amiable : affaire Infineon et al. (Elpida,
Nanya, Micron, NEC, Hitachi, Samsung, Hynix, Toshiba, Mitsubishi, Winbond), règlements
approuvés par le tribunal (reproche aux fabricants de s’être entendus afin de fixer le prix auquel
ils vendaient la mémoire vive (DRAM); voir à ce sujet : http://www.recourscollectif.info/fr/dos
siers/dram/); affaire Option Consommateurs et al. c. Produits Vitafoam Canada Limitee et al.,
parmi d’autres recours intentés par différents regroupements (reproche à des producteurs de mousse
de polyuréthane quant à la fixation des prix de produits de rembourrage, règlement à l’amiable de
38 millions de dollars; voir à ce sujet : http://www.moussepayante.com/).
3 Remarques générales sur le cadre juridique des contrats

d’adhésion, des contrats de consommation et des contrats
réglementés
Pour bien saisir l’analyse consacrée au contrôle des prix au Québec, il faut d’abord
établir une correspondance entre la notion de « standard contract terms » ou celle de
« standard form contract » et des notions propres au droit québécois (3.1). La
classification des contrats permet de mieux situer le pouvoir d’intervention du
tribunal quant au contenu contractuel (3.2). Quelques remarques s’imposent
également au sujet du rôle joué par l’action collective à titre de véhicule procédural
permettant de sanctionner des pratiques illégales ou abusives en matière de prix
(3.3).
3.1 Traduction des notions de « standard contract terms » ou

de « standard form contract » en droit québécois : notions
de contrat d’adhésion, de contrat de consommation et de
contrat réglementé
La notion de « standard contract terms » ou encore celle de « standard form contracts »

ne se traduisent pas en une seule et même expression en droit civil québécois10. En
réalité, trois types de contrats (qui peuvent se recouper) font l’objet d’un
encadrement particulier, dans le Code civil ou au moyen de textes particuliers : le
contrat de consommation (3.1.1), le contrat d’adhésion (3.1.2) et le contrat
réglementé (3.1.3).
3.1.1 Contrat de consommation
Au cours des années 1970, le législateur québécois a choisi d’encadrer les rapports
de consommation (B2C) afin d’offrir aux consommateurs une protection accrue face
au principe général de la liberté contractuelle. Après une première loi à portée plus
limitée, la loi actuelle a été adoptée en 1978. Selon la définition énoncée à son article
2, cette loi s’applique à « tout contrat conclu entre un consommateur et un
commerçant dans le cours des activités de son commerce et ayant pour objet un
bien ou un service ». Comme le précise la disposition préliminaire du Code civil du
Québec, les lois particulières peuvent ajouter au droit commun ou y déroger. La Loi
sur la protection du consommateur constitue un bon exemple de ce principe général,
10
Voir le site Termium du Gouvernement du Canada sous l’expression « standard form contract » :
http://www.btb.termiumplus.gc.ca/tpv2alpha/alpha-eng.html?lang¼eng&i¼1&
srchtxt¼STANDARD+FORM+CONTRACT&index¼alt&codom2nd_wet¼1#resultrecs.
puisque cette loi impose des règles auxquelles le consommateur ne peut renoncer11,
tout en laissant subsister les règles du Code civil ou de toute autre loi qui pourrait lui
accorder une protection supérieure le cas échéant12.
Paradoxalement, lors de la réforme du Code civil, le législateur a inscrit dans le droit
commun une autre notion de contrat de consommation – notion qui sert à délimiter le
champ d’application des protections offertes au consommateur par le droit commun des
contrats : « Le contrat de consommation est le contrat dont le champ d’application est
délimité par les lois relatives à la protection du consommateur, par lequel l’une des
parties, étant une personne physique, le consommateur, acquiert, loue, emprunte ou se
procure de toute autre manière, à des fins personnelles, familiales ou domestiques, des
biens ou des services auprès de l’autre partie, laquelle offre de tels biens ou services
dans le cadre d’une entreprise qu’elle exploite. » Cette notion de contrat de
consommation n’est pas entièrement identique à celle définie par la Loi sur la protec-
tion du consommateur. Ainsi, elle ne se limite pas aux biens meubles mais peut aussi
viser les biens immeubles. Tout en conservant l’idée générale d’un rapport entre une
entreprise et un consommateur (B2C), elle évacue la notion de « commerçant » pour
viser plutôt la notion de personne qui exploite une entreprise13. Elle ajoute assez peu à
ce qui est déjà prévu dans la Loi sur la protection du consommateur. Elle permet
néanmoins de bénéficier de la protection de base offerte par le droit commun des
contrats (voir ci-dessous, section 4) dans des rapports entre consommateurs et
entreprises là où le contrat échappe au domaine d’application de la Loi sur la protection
du consommateur tout en correspondant à la notion, plus large à certains égards, de
contrat de consommation au sens de l’article 1384 C.c.Q.
3.1.2 Contrat d’adhésion
Bien qu’il s’agisse d’une réalité connue depuis fort longtemps, le contrat d’adhésion
ne fait l’objet d’un régime spécifique dans le droit commun des contrats que depuis
la réforme du Code civil. Cette notion est définie dans les termes suivants à l’article
1379 C.c.Q. : « Le contrat est d’adhésion lorsque les stipulations essentielles qu’il
comporte ont été imposées par l’une des parties ou rédigées par elle, pour son compte
ou suivant ses instructions, et qu’elles ne pouvaient être librement discutées. »
Il est vrai que dans plusieurs cas, l’adhérent est aussi un consommateur et profite de
la protection considérable accordée par la Loi sur la protection du consommateur. Cela
dit, certains adhérents ne correspondent pas à la notion de consommateur au sens de cette
11
L.p.c. (n 3), art. 262.
12
L.p.c. (n 3), art. 270.
13
La notion de personne qui exploite une entreprise est parfois plus large en ce qu’elle permet de
viser, outre le commerçant, les catégories suivantes : la personne qui exerce une profession libérale,
l’agriculteur et l’artisan. Sous la Loi sur la protection du consommateur, ces derniers sont plutôt
considérés comme des consommateurs et bénéficient des protections qui y sont offertes lorsqu’ils
contractent avec un commerçant. Cette notion de personne qui exploite une entreprise peut aussi
être plus étroite que celle de commerçant dans certaines circonstances.
loi, tout en se trouvant dans une situation de vulnérabilité dans leurs rapports contractuels
en raison d’une absence de faculté de négociation quant aux termes essentiels du contrat.
L’encadrement du contrat d’adhésion permet donc, dans le droit commun des contrats,
d’accorder une protection de base dans les rapports entre entreprises (B2B),
principalement à travers la sanction des clauses abusives (voir ci-dessous, section 4.2).
3.1.3 Contrat réglementé
La notion de « contrat réglementé » est plus complexe que celles de « contrat de

consommation » et de « contrat d’adhésion ». Elle recoupe une grande variété de
contrats qui sont assujettis à des règles particulières, dont certaines ont une incidence
directe sur le prix.
Dans certains cas, le contrat réglementé s’inscrit dans une visée clairement
protectrice de la partie vulnérable dans le rapport contractuel. Le meilleur exemple
est sans doute celui des dispositions du Code civil relatives au bail de logement (art.
1892 et s. C.c.Q.), lesquelles permettent notamment un contrôle du prix des loyers
(voir ci-dessous, section 4.3).
Il convient toutefois de souligner d’emblée que les finalités poursuivies par le
législateur eu égard aux contrats réglementés peuvent varier et que l’encadrement
offert ne s’inscrit pas toujours dans une perspective de protection des parties
vulnérables. Alors que le régime particulier qui encadre ces contrats permet parfois
une intervention du tribunal pour corriger le prix ou d’autres clauses qui ont une
incidence sur le coût de la prestation de la partie vulnérable, cette intervention n’est
pas toujours ouverte. De fait, dans certains cas, le contrat réglementé échappe aux
protections normalement offertes au consommateur ou à l’adhérent. Tel est le cas du
contrat de vente d’électricité ou de gaz. Écarté en partie du domaine d’application de
la Loi sur la protection du consommateur14, ce contrat ne bénéficie pas des pro-
tections normalement offertes en matière de contrat d’adhésion parce que, comme l’a
décrété la Cour suprême du Canada dans l’arrêt Glykis c. Hydro-Québec, le contenu
contractuel est alors comparable à un acte réglementaire que les tribunaux n’ont pas
le pouvoir de modifier15. Le paradoxe est patent, puisque la situation monopolistique
dans ce domaine peut donner lieu à des termes contractuels particulièrement
désavantageux pour l’abonné qui est pourtant, dans plusieurs cas, à la fois un
consommateur et un adhérent. La protection de la partie vulnérable relève alors
non pas de l’intervention judiciaire, mais plutôt de l’intervention législative de l’État,
lequel est souvent lui-même la partie qui profite des retombées économiques de ses
activités monopolistiques dans le domaine16.
14
L.p.c. (n 3), art. 5, par. b).
15
Glykis c. Hydro-Québec, 2004 CSC 60 (en ligne : https://scc-csc.lexum.com/scc-csc/scc-csc/fr/
item/2175/index.do).
16
Hydro-Québec, qui produit, transporte et distribue de l’électricité, est une société d’État dont le
Gouvernement du Québec est l’unique actionnaire : http://www.hydroquebec.com/a-propos/.
3.2 Pouvoir d’intervention du tribunal quant aux clauses

contenues au contrat
Lors de la réforme du Code civil, le législateur québécois a fait entrer certaines

protections de base eu égard aux contrats de consommation et aux contrats
d’adhésion dans le droit commun des contrats. Outre une règle d’interprétation en
faveur du consommateur ou de l’adhérent en cas d’ambiguïté des termes du contrat
(art. 1432 C.c.Q.), le législateur permet au tribunal d’exercer un contrôle quant à
trois catégories de clauses, soit la clause externe (art. 1435 C.c.Q.), la clause illisible
ou incompréhensible (art. 1436 C.c.Q.) et la clause abusive (art. 1437 C.c.Q.).
Les notions de clause externe et de clause illisible ou incompréhensible jouent un
rôle principalement du point de vue de la transparence des termes du contrat; c’est
donc dans cette perspective qu’elles seront analysées (voir ci-dessous, section 6).
La protection en matière de clause abusive s’avère plus directement pertinente
quant au contrôle du prix, dans la mesure où le tribunal qui considère qu’une clause
est abusive peut la déclarer nulle ou réduire les obligations qui en résultent (art.
1437, al. 1 C.c.Q.). Pour déterminer si une clause est abusive, le tribunal doit s’en
remettre à la définition qu’en donne le législateur : « Est abusive toute clause qui
désavantage le consommateur ou l’adhérent d’une manière excessive et
déraisonnable, allant ainsi à l’encontre de ce qu’exige la bonne foi; est abusive,
notamment, la clause si éloignée des obligations essentielles qui découlent des règles
gouvernant habituellement le contrat qu’elle dénature celui-ci. ». Quoique les
clauses à l’égard desquelles la jurisprudence est intervenue sur la base de l’article
1437 C.c.Q. soient variées, certaines formes d’intervention ont touché de façon
directe ou indirecte la question du prix. Ceci soulève d’ailleurs, en doctrine, la
délicate question de la frontière entre le contrôle des clauses abusives, admis en
vertu de l’article 1437 C.c.Q. pour les contrats de consommation et d’adhésion,
d’une part, et la sanction générale de la lésion entre majeurs à laquelle le législateur
se refuse selon l’article 1405 C.c.Q., d’autre part (voir ci-dessous, section 4.1).
Contrairement à d’autres systèmes juridiques, le droit québécois n’établit pas de
liste centralisée de clauses systématiquement considérées comme abusives. Cela dit,
des dispositions particulières, ailleurs dans le Code civil et applicables à certains
contextes contractuels particuliers, permettent d’invalider des clauses qui ont une
incidence sur le prix même en dehors d’un contrat de consommation ou d’adhésion
(voir ci-dessous, section 5.2).
La protection offerte au consommateur est plus étendue en vertu de la Loi sur la
protection du consommateur. Certaines clauses qui ont une incidence sur le prix y
sont spécifiquement prohibées ou assujetties à un contrôle par le tribunal (voir
ci-dessous, section 5.2). De façon plus générale, cette loi permet aussi la sanction
de la lésion objective ou subjective (voir ci-dessous, section 4.1.3).
Il existe dans certains contrats réglementés des mécanismes spécifiques de
contrôle des prix, soit à travers une fixation déterminée par le tribunal comme en
matière de bail de logement (voir ci-dessous, section 4.3), soit encore à travers
l’établissement de prix fixes, de prix plancher ( floor price) ou de prix plafond (price
cap) pour certains biens ou services (voir ci-dessous, section 5).
3.3 Rôle et limites de l’action collective au soutien de

l’intervention du tribunal quant aux clauses contenues au
contrat
L’action collective (auparavant appelée « recours collectif ») a été introduite en droit

québécois en 1979, dans la foulée des réformes à saveur consumériste et visant à
améliorer l’accès à la justice qui ont marqué les années 1970.
Cette forme de procédure s’avère particulièrement utile dans le contexte de
contrats mettant au jour des pratiques contractuelles illégales ou abusives, alors
que l’enjeu économique individuel ne permettrait pas utilement aux contractants
concernés de faire valoir leurs droits devant les tribunaux. L’action collective se
détaille en deux étapes, soit celle de l’autorisation et celle du fond. À l’étape de
l’autorisation, le tribunal est chargé de s’assurer que certains critères de base sont
réunis en fonction des exigences de l’article 575 du Code de procédure civile (C.p.c.) :
575. Le tribunal autorise l’exercice de l’action collective et attribue le statut de représentant
au membre qu’il désigne s’il est d’avis que :
1 les demandes des membres soulèvent des questions de droit ou de fait identiques,
similaires ou connexes;
2 les faits allégués paraissent justifier les conclusions recherchées;
3 la composition du groupe rend difficile ou peu pratique l’application des règles sur le
mandat d’ester en justice pour le compte d’autrui ou sur la jonction d’instance;
4 le membre auquel il entend attribuer le statut de représentant est en mesure d’assurer une
représentation adéquate des membres.
Dans l’affaire Vivendi Canada inc. c. Dell’Aniello17, la Cour suprême explique

bien le rôle qui incombe au tribunal à l’étape de l’autorisation eu égard à l’article
1003 C.p.c. (ancien) qui correspond aujourd’hui à l’article 575 C.p.c. :
[37] L’étape de l’autorisation permet l’exercice d’une fonction de filtrage des requêtes, pour
éviter que les parties défenderesses doivent se défendre au fond contre des réclamations
insoutenables : Infineon Technologies AG c. Option consommateurs, 2013 CSC 59, [2013]
3 R.C.S. 600, par. 59 et 61. Par contre, la loi n’impose pas au requérant un fardeau onéreux
au stade de l’autorisation; il doit uniquement démontrer l’existence d’une « apparence
sérieuse de droit », d’une « cause défendable » : Infineon, par. 61-67; Marcotte
c. Longueuil (Ville), 2009 CSC 43, [2009] 3 R.C.S. 65, par. 23. En conséquence, le juge
17
Vivendi Canada inc. c. Dell’Aniello, [2014] 1 R.C.S. 3, 2014 CSC 1 (en ligne : https://scc-csc.
lexum.com/scc-csc/scc-csc/fr/item/13409/index.do). Cette affaire portait sur une problématique
distincte de celle du contrôle des prix mais les enseignements généraux qui ressortent de l’analyse
de la Cour s’avèrent tout aussi pertinents dans ce contexte.
doit simplement déterminer si le requérant a démontré que les quatre critères énoncés à l’art.
1003 C.p.c. sont respectés. Dans l’affirmative, le recours collectif est autorisé. La Cour
supérieure procède ensuite à l’examen du fond du litige. Ainsi, lorsqu’il vérifie si les critères
de l’art. 1003 sont respectés au stade de l’autorisation, le juge tranche une question
procédurale. Il ne doit pas se pencher sur le fond du litige, étape qui s’ouvre seulement
après l’octroi de la requête en autorisation : Infineon, par. 68; Marcotte, par. 22.
Tel que le mentionne la Cour suprême, une fois l’action collective autorisée, la
cause est entendue sur le fond en fonction de la preuve présentée au regard de la
demande en justice soumise par le membre auquel a été attribué le statut de
représentant du groupe. Elle mène normalement à un jugement qui accueille ou
rejette la demande, mais nombre de recours institués sur la base de l’action collective
donnent lieu à des ententes à l’amiable.
Nous avons déjà souligné précédemment certaines causes qui ont été portées
devant les tribunaux relativement à des manquements à la Loi sur la concurrence
(voir ci-dessus, section 2). Les développements plus bas (voir ci-dessous, sections 4
à 6) permettent d’élaborer sur la possibilité et les limites de l’action collective
comme véhicule procédural permettant de favoriser l’accès à la justice eu égard à
différents aspects en matière de prix, puisque le contexte d’utilisation de cette
procédure dépend en bonne partie du fondement de la demande soumise au tribunal,
notamment si l’on tient compte de la nécessité de « questions de droit ou de fait
identiques, similaires ou connexes ».
4 Contrôle judiciaire du contenu contractuel eu égard au

prix dans le droit commun des contrats, les contrats
d’adhésion, les contrats de consommation et les contrats
réglementés
Il serait difficile d’établir une nomenclature précise et exhaustive des fondements

juridiques qui permettent à un tribunal judiciaire (ou dans certains cas un tribunal
administratif) d’intervenir dans la fixation du prix proprement dit ou de clauses qui
ont une incidence indirecte sur le prix. En droit civil québécois, trois fondements
s’avèrent particulièrement importants à cet égard, d’un point de vue théorique autant
que pratique. Il convient d’aborder avant tout le contrôle du prix sur le fondement de
la lésion, lequel occupe une place limitée dans le droit commun des contrats mais
beaucoup plus importante à l’intérieur du champ d’application de la Loi sur la
protection du consommateur (4.1). Face au domaine restreint de la lésion comme
fondement du contrôle des prix, la sanction des clauses abusives dans les contrats de
consommation et d’adhésion est apparue comme une solution de rechange possible
pour la partie désavantagée (4.2). Enfin, le contrôle du prix des loyers dans le louage
résidentiel constitue une illustration intéressante d’une intervention de type
administratif quant à un contrat étroitement réglementé dans le Code civil (4.3).
4.1 Contrôle judiciaire du contenu contractuel sur le

fondement de la lésion
Pour bien saisir le rôle attribué à la lésion comme mode de contrôle du prix dans un
contrat, il faut d’abord rappeler la distinction entre les notions de lésion objective et
de lésion subjective (4.1.1). Dans l’approche classique qui s’est perpétuée lors de la
réforme du Code civil, le législateur québécois a choisi de limiter la sanction de la
lésion dans le droit commun des contrats à certaines hypothèses nommément pré-
vues par la loi (4.1.2). Contrastant avec les hypothèses peu nombreuses et
relativement restrictives énoncées dans le Code civil, le régime applicable au contrat
de consommation en vertu de la Loi sur la protection du consommateur facilite la
sanction de la lésion tant objective que subjective (4.1.3).
4.1.1 Distinction entre lésion objective et lésion subjective
Le droit québécois, comme d’autres systèmes juridiques civilistes, connaît deux

formes de lésion, soit la lésion objective et la lésion subjective.
Pour reprendre les termes du premier alinéa de l’article 1406 C.c.Q., la lésion
objective « résulte de l’exploitation de l’une des parties par l’autre, qui entraîne une
disproportion importante entre les prestations des parties; le fait même qu’il y ait
disproportion importante fait présumer l’exploitation ». L’accent est donc mis, pour
les fins de cette forme de lésion, sur le déséquilibre entre les prestations, même si ce
déséquilibre peut évidemment avoir un impact sur la situation patrimoniale de la
partie qui en est victime. Le déséquilibre et l’exploitation qui s’y rattachent sont au
cœur de l’analyse et la contestation du contrat par la partie désavantagée ne peut être
couronnée de succès s’il s’avère impossible d’en faire la preuve.
La lésion subjective, quant à elle, ne nécessite pas un déséquilibre entre les
prestations. L’attention est alors portée sur l’impact du contrat face à la situation
patrimoniale de la partie qui s’en dit victime. Il convient alors de considérer les
obligations qui incombent à la partie victime, des avantages qu’elle tire du contrat,
mais aussi de toutes les circonstances pertinentes pour mesurer l’impact du contrat
en vertu duquel le contractant s’est engagé.
4.1.2 Sanction de la lésion dans le droit commun des contrats
Sous le Code civil du Bas Canada, en vigueur au Québec de 1866 à 1993, la lésion était
sanctionnée de façon générale – soit en cas de lésion objective ou subjective – pour les
mineurs et les majeurs protégés uniquement. Dans les autres cas, la sanction ne pouvait
servir comme motif de contestation qu’en cas de lésion objective et uniquement dans
les cas spécifiquement prévus par le législateur. Lors des travaux qui ont précédé la
réforme du Code civil, l’Office de révision du Code civil avait recommandé de codifier
la sanction générale de la lésion objective dans le droit commun des contrats (voir
ci-dessus, section 2). Devant le tollé provoqué par cette perspective parmi les
représentants de l’industrie et de la pratique, le législateur a fait marche arrière. Le Code

civil du Québec, en vigueur depuis 1994, se cantonne à une position comparable à celle
du droit antérieur, comme l’énonce l’article 1405 C.c.Q. : « Outre les cas expressément
prévus par la loi, la lésion ne vicie le consentement qu’à l’égard des mineurs et des
majeurs protégés. » La lésion subjective ne peut être invoquée que par les personnes
protégées (art. 1406, al. 2 C.c.Q.) et, dans les cas où la loi permet la sanction de la lésion
entre majeurs capables de contracter, il est permis d’invoquer uniquement la lésion
objective (art. 1406, al. 1 C.c.Q.).
Même s’il existe quelques cas où le législateur permet explicitement la sanction
de la lésion dans le droit commun des contrats, la disposition la plus pertinente eu
égard au contrôle du prix est sans doute l’article 2332 C.c.Q. en matière de prêt
d’argent. Si le contrat comporte un déséquilibre qui permet de présumer un cas
d’exploitation, l’emprunteur peut s’adresser au tribunal qui dispose d’un large
éventail de mesures pour sanctionner le déséquilibre entre les parties :
2332. Lorsque le prêt porte sur une somme d’argent, le tribunal peut prononcer la nullité du
contrat, ordonner la réduction des obligations qui en découlent ou, encore, réviser les
modalités de leur exécution dans la mesure où il juge, eu égard au risque et à toutes les
circonstances, qu’il y a eu lésion à l’égard de l’une des parties.
Malgré le caractère très intéressant de cette forme de protection, notamment en ce

qu’elle trouve application sans égard à l’existence d’un contrat de consommation ou
d’adhésion, force est de constater qu’elle n’a pas eu de retombées majeures. D’une part,
elle est limitée aux contrats qui correspondent à la notion de prêt d’argent, ce qui réduit
son champ d’application. D’autre part, il convient de souligner que les tribunaux se sont
montrés particulièrement exigeants quant à la portée du déséquilibre requis pour
permettre d’intervenir eu égard au contrat conclu par l’emprunteur et son prêteur, en
accueillant la demande de révision de taux spectaculairement élevés18, mais en refusant
la demande face à d’autres taux d’intérêt qui n’étaient pas jugés exorbitants tout en étant
particulièrement élevés par rapport au taux de base19.
18
eg Kingston c. Godwin, J.E. 95-1753, EYB 1995-95688 (C.Q.) (prêts d'argent portant intérêt à des
taux respectifs de 173,80 % et 405,56 % par année, réduits par le tribunal à 20 %); Frohar c. Seif, 2007
QCCQ 12599 (en ligne : http://canlii.ca/t/1v0ts) (taux annuel de 30 % sur un premier prêt d'argent et de
100 % sur un second, obiter dictum sur l’existence d’une lésion au sens de l’art. 2332 C.c.Q. parce que
le taux est réduit sur le fondement de l’art. 4 de la Loi sur l’intérêt); Kolb c. Lebovics, J.E. 2004-308,
[2004] R.J.Q. 725, REJB 2003-51635 (C.Q.) (taux annuel caché de 337,66 % et pénalité de 100 $ par
jour, nullité du contrat); Corp. de crédit Trans-Canada inc. c. Descoteaux, J.E. 2003-242, REJB 2002-
37480 (C.Q.) (taux de 40,04% réduit au taux légal); Crédit Trans Canada ltée c. Paradis, [1992]
R.J.Q. 1410, EYB 1992-74937 (C.Q.) (taux de 39,97% réduit au taux légal). Un « taux d’intérêt
criminel » est également passible de sanctions pénales (art. 347 C. cr.).
19
eg Robert c. Polynice, J.E. 2004-1246, REJB 2004-61279 (C.Q.) (taux d'intérêt de 30 % qui n'est
pas excessif ou injustifié dans le cas d’un prêt consenti sans aucune garantie ou assurance à un
emprunteur ayant un problème de liquidité et où le risque était passablement élevé pour le prêteur);
Gosselin c. Carruthers, 2006 QCCA 1489 (en ligne : http://canlii.ca/t/1qf7b), inf. 2004 CanLII
25808 (QCCS) (en ligne : http://canlii.ca/t/1g76m) (taux d’intérêt de 30% lésionnaire et réduit à
13% en première instance mais rétabli par la Cour d’appel qui considère qu’il aurait fallu comparer
le taux avec celui qu’imposent les institutions pour des prêts à risque dans la même région pour
constater qu’il n’y avait pas exploitation en l’espèce).
La sanction de la lésion s’est avérée plus fructueuse en application de la Loi sur la

protection du consommateur.
4.1.3 Sanction de la lésion dans les contrats assujettis à la Loi sur la

protection du consommateur
La Loi sur la protection du consommateur20 comporte deux dispositions qui se

rapportent à la définition de la lésion susceptible d’être invoquée par le
consommateur :
8. Le consommateur peut demander la nullité du contrat ou la réduction des obligations qui
en découlent lorsque la disproportion entre les prestations respectives des parties est
tellement considérable qu’elle équivaut à de l’exploitation du consommateur, ou que
l’obligation du consommateur est excessive, abusive ou exorbitante.
9. Lorsqu’un tribunal doit apprécier le consentement donné par un consommateur à un
contrat, il tient compte de la condition des parties, des circonstances dans lesquelles le
contrat a été conclu et des avantages qui résultent du contrat pour le consommateur.
Les tribunaux ont été appelés à expliquer la portée de la protection ainsi offerte,
notamment pour déterminer s’il s’agit de lésion objective ou de lésion subjective, en
parallèle avec la classification existant déjà dans le droit commun21.
L’arrêt majeur en la matière est sans aucun doute celui rendu par la Cour d’appel
dans Gareau auto inc. c. Banque canadienne impériale de commerce22. Dans cette
affaire, le consommateur se plaignait d’un contrat conclu avec un commerçant pour
l’achat d’une embarcation et en demandait la nullité sur le fondement de la lésion.
Cet arrêt de la Cour d’appel s’avère utile notamment en ce qu’il exprime bien que
les deux formes de lésion sont susceptibles d’être sanctionnées sur la base des
articles 8 et 9. La première partie de l’article 8 renvoie aux notions de déséquilibre
des prestations et d’exploitation, ce qui est le propre de la lésion objective. La fin de
l’article 8 se rapporte à la lésion subjective en annonçant la notion d’obligation
excessive, abusive ou exorbitante, laquelle est ensuite détaillée à l’article 9 en
fonction de différents critères : 1) la condition des parties; 2) les circonstances
dans lesquelles le contrat a été́ conclu; et 3) les avantages qui résultent du contrat
pour le consommateur.
Dans l’affaire Gareau auto inc., la Cour a conclu qu’il n’existait pas de motif de
lésion objective compte tenu de la valeur de ce qui était offert au consommateur en
contrepartie de son engagement. En revanche, elle a considéré que le contrat avait un
impact considérable pour le consommateur du point de vue de sa situation
patrimoniale, ce qui était indicatif d’une lésion subjective. En l’espèce, la Cour a
20
L.p.c. (n 3).
21
Pour une analyse plus détaillée de la question et d’autres illustrations jurisprudentielles quant au
traitement de la lésion en fonction des articles 8 et 9, voir Lafond (2015), nos 362 à 383, p. 147 à 157.
22
Gareau auto inc. c. Banque canadienne impériale de commerce, 1989 CanLII 594 (QCCA)
(en ligne : http://canlii.ca/t/1plcr).
conclu que la situation correspondait clairement au premier et au troisième des

critères énoncés à l’article 9 en matière de lésion subjective : le commerçant
disposait de suffisamment d’indices qui auraient dû l’inciter à mener une enquête
sur la capacité de payer de son acheteur; par ailleurs, le bateau n’était d’aucune utilité
pour ce dernier alors que l’achat avait eu un effet majeur quant à l’état de son
patrimoine.
Parfois, contrairement à ce qui existait dans l’affaire Gareau Auto inc., les faits
mis en preuve correspondent à la fois aux notions de lésion objective et de lésion
subjective23.
Il est notable que tout en existant depuis 1978 dans le contexte de la Loi sur la
protection du consommateur, la possibilité de contester un engagement contractuel
sur le fondement de la lésion est utilisée de façon plus régulière depuis quelques
années. Des exemples permettent de saisir l’utilité de la lésion pour sanctionner les
abus dans les contrats de consommation :
– Condamnation d’un organisme pour le montant perçu en retour de services
(mandat et contrat de service) pour représenter le consommateur devant une
instance administrative aux fins de récupérer des sommes dues en vertu de la
législation relative aux accidents du travail; contrat qui permettait à l’organisme
de percevoir un pourcentage sur la perception d’une créance à caractère
alimentaire (contraire à la loi) représentant une somme largement supérieure à
la valeur des services offerts et qui prohibait la révocation du mandat confié; cas
de lésion objective et subjective, en plus de sanctionner des clauses particulières
du contrat jugées abusives24.
– Annulation d’un contrat de vente (sans obligation de restitution du bien) et d’un
contrat de crédit relativement à une thermopompe acquise par un consommateur
dont la situation financière était précaire et dont l’aptitude à consentir était
douteuse en raison de la diminution de ses facultés cognitives, ce dont avait
connaissance le commerçant; cas de lésion subjective25.
– Réduction des obligations d’une consommatrice quant au prix versé pour l’achat
à distance de livres et de disques; situation financière précaire de la
consommatrice qui était une personne âgée peu scolarisée et aux revenus
modestes; cas de lésion subjective26.
– Remboursement de la différence entre le prix payé pour l’achat d’un système de
biénergie de récupération thermique (13 222 $) et la valeur du système à l’époque
(9 622 $); cas de lésion objective en raison de la disproportion entre les
23
eg 9065-5382 Québec inc. c. Kouddar, 2017 QCCS 1279 (en ligne : http://lpc.quebec/decisions/
9065-5382-quebec-inc-c-kouddar-2017-qccs-1279/), par. 77.
24
Marcoux c. 9069-6949 Québec inc., EYB 2005-98336 (C.Q.).
25
J.P. c. 9211-3364 Québec inc. (Fraîch-Air/Service Thermo), 2017 QCCQ 3256 (en ligne : http://
lpc.quebec/decisions/j-p-c-9211-3364-quebec-inc-fraich-airservice-thermo-2017-qccq-3256/).
26
Lavoie c. Sélection du Reader's Digest, 2012 QCCQ 970 (en ligne : http://lpc.quebec/decisions/
lavoie-c-selection-du-readers-digest-2012-qccq-970/).
prestations respectives des parties et de l’exploitation exercée sciemment par le

commerçant27.
– Réduction de 58,7 % à 10 % par an d’un taux de crédit sur un prêt garanti par une
deuxième hypothèque sur le fondement de la lésion objective et subjective en
raison de la disproportion qui démontre l’exploitation du consommateur et de la
situation financière précaire de ce dernier28.
Les demandes ne sont toutefois pas toujours couronnées de succès. Certaines ont
été rejetées faute de preuve suffisante quant à l’existence de faits correspondant à la
notion de lésion objective ou subjective :
– Rejet sur le fond d’un recours collectif destiné à sanctionner les frais de retard
pour des locations de club vidéo; la Cour d’appel considère qu’il n’existait pas
une disproportion suffisante pour y voir un cas de lésion objective29.
– Rejet sur le fond d’un recours collectif qui s’attaquait au taux d’intérêt annuel de
28,8 % sur le solde impayé d’une carte de crédit de grand magasin; la Cour
supérieure, confirmée par la Cour d’appel, conclut que le taux n’était pas exorbitant
considérant que le risque moyen assumé par la compagnie pour la perception des
comptes est plus élevé que pour les cartes de crédit d’institutions financières30.
– Rejet de la demande présentée par une personne âgée à la suite de l’achat d’un
véhicule neuf sur le fondement de la lésion objective et subjective; le prix d’achat
n’était pas disproportionné et la preuve ne permettait pas de conclure que
l’obligation financière assumée représentait une charge excessive considérant la
situation patrimoniale de la consommatrice31.
– Rejet au stade de la demande d’autorisation d’une action collective qui attaquait
la politique de prix globale de la Société des alcools du Québec (SAQ), laquelle
exerce un monopole d’État sur la vente et la distribution d’alcool sur le territoire
québécois, au motif qu’il n’y avait pas de disproportion typique d’une lésion
objective au regard de la marge bénéficiaire globale de la SAQ32.
27
Cyr c. Acon Construction inc., 2017 QCCQ 947 (en ligne : http://lpc.quebec/decisions/cyr-c-
acon-construction-inc-2017-qccq-947/).
28
9065-5382 Québec inc. c. Kouddar (n 23).
29
Buonamici c. Blockbuster Canada Co., 2007 QCCA 468 (en ligne: http://canlii.ca/t/1r1w8).
30
Riendeau c. Compagnie de la Baie d'Hudson, [2004] R.J.Q. 3013 (C.S.) (en ligne : http://lpc.
quebec/decisions/riendeau-c-compagnie-de-la-baie-dhudson-2004-r-j-q-3013/), conf. par 2006
QCCA 1379 (en ligne : http://canlii.ca/t/1pxvg).
31
Auger c. Paquet Nissan inc., 2015 QCCQ 6177 (en ligne : http://canlii.ca/t/gkc4g).
32
Jasmin c. Société des alcools du Québec, 2015 QCCA 36 (en ligne : http://lpc.quebec/decisions/
jasmin-c-societe-des-alcools-du-quebec-2015-qcca-36/).
– Rejet de la défense d’un consommateur fondée sur la lésion face à la réclamation

d’une institution financière en paiement de mensualités échues relativement à la
vente à tempérament d’un véhicule; le consommateur ne pouvait se prévaloir de
la lésion objective ou subjective parce qu’il n’y avait pas de disproportion entre
les prestations respectives équivalant à de l’exploitation; l’institution financière
avait joué correctement son rôle d’investigation quant à la capacité de payer du
consommateur qui avait lui-même fait des déclarations mensongères quant à sa
situation financière33.
La question s’est posée quant à savoir si le recours de consommateurs en cas de
lésion peut s’exercer au moyen d’une action collective. L’utilisation de cette forme
de procédure pour sanctionner un cas de lésion objective qui se rapporte à un nombre
important de consommateurs, pour un contrat identique conclu par chacun d’entre
eux avec le même défendeur, est possible en autant que les conditions posées par
l’article 575 C.p.c. pour l’autorisation du recours sont réunies (voir ci-dessus, section
3.3), comme en témoignent certains des exemples mentionnés précédemment. En
revanche, l’utilisation de l’action collective pour sanctionner la lésion subjective est
écartée par la jurisprudence, puisque cette forme de lésion s’évalue normalement en
fonction de facteurs susceptibles de varier considérablement d’un consommateur à
l’autre, ce qui est contraire à l’exigence que « les demandes des membres soulèvent
des questions de droit ou de fait identiques, similaires ou connexes »34.
4.2 Contrôle judiciaire du contenu contractuel à travers la

sanction des clauses abusives
Face au refus du législateur d’admettre la sanction générale de la lésion entre

personnes majeures capables de contracter, d’autres mécanismes ont été mis à profit
pour assurer la protection de parties vulnérables en cas de conditions
désavantageuses du point de vue du prix ou d’autres aspects accessoires du contrat
qui ont une incidence sur le coût total.
La réforme du Code civil, tel que mentionné précédemment, a permis de codifier
les notions de contrat de consommation et de contrat d’adhésion pour les assortir
notamment d’un contrôle des clauses abusives.
Aux lendemains de l’adoption du Code civil du Québec, la doctrine s’est posé la
question à savoir si la clause abusive pouvait constituer une façon de sanctionner
33
Banque de Montréal c. Bujold, 2009 QCCQ 5530 (en ligne : http://lpc.quebec/decisions/banque-
de-montreal-c-bujold-2009-qccq-5530/).
34
Riendeau c. Compagnie de la Baie d’Hudson (n 30); Trudel c. Bell Canada, 2011 QCCS 6750,
(en ligne : http://lpc.quebec/decisions/trudel-c-bell-canada-2011-qccs-6750/), par. 26 à
31 (jugement ayant rejeté un moyen déclinatoire), appel rejeté, 2018 QCCA 829 (en ligne :
http://canlii.ca/t/hs4d4) (sub nom. Bell Canada c. Aka-Trudel), requête pour autorisation de pourvoi
à la Cour suprême rejetée (C.S. Can., 2019-02-21), no 38205.
indirectement la lésion entre majeurs en cas de conditions exorbitantes du point de

vue du prix ou d’autres clauses ayant une incidence sur le prix. La question demeure
ouverte encore aujourd’hui35, même s’il est de plus en plus admis que la sanction
de clauses abusives n’est pas confinée aux clauses sans incidence sur le prix36.
Cela dit, la question s’avère largement théorique et ne se traduit pas clairement en
jurisprudence. Cela tient notamment au fait que les champs propres au contrat
d’adhésion et au contrat de consommation, tels que définis dans le Code civil du
Québec (art. 1379 et 1384 C.c.Q.), correspondent souvent dans les faits à des contrats
qui sont aussi assujettis à la Loi sur la protection du consommateur37 où existe déjà une
protection en matière de lésion, tel que mentionné plus haut. L’article 1437 C.c.Q. est
d’ailleurs souvent invoqué en conjonction avec les articles 8 et 9 chaque fois que le
contrat de consommation ou d’adhésion entre à l’intérieur du domaine d’application de
la Loi sur la protection du consommateur38. Les seules relations contractuelles où
l’article 1437 C.c.Q. apporterait un gain réel à la partie vulnérable seraient le contrat de
consommation au sens du Code civil (art. 1384 C.c.Q.) qui n’entre pas dans le champ
d’application de la Loi sur la protection du consommateur39, ou encore le contrat
d’adhésion où l’adhérent serait lui aussi un commerçant et donc exclu par le fait même
du domaine de cette loi40. De telles situations se présentent rarement dans le
contentieux puisque la vaste majorité des dossiers où la clause abusive est plaidée
relativement au prix ou à d’autres conditions du contrat se rapportant au prix concernent
des contrats assujettis à la Loi sur la protection du consommateur.
4.3 Contrôle du prix des loyers par la Régie du logement
Le bail de logement constitue, tel que mentionné précédemment (voir ci-dessus,

section 3.1.3), un exemple de contrat réglementé dans une perspective consumériste.
35
Sur cette question, voir Baudouin, Jobin et Vézina (2013), no 141, p. 232 et s.; Lluelles et Moore
(2018), no 1817 et s., p. 1024 et s.
36
eg Masson c. Telus Mobilité, 2019 QCCA 1106 (en ligne: http://canlii.ca/t/j16j2).
37
L.p.c. (n 3).
38
eg Riendeau c. Compagnie de la Baie d’Hudson (n 30); Marcoux c. 9069-6949 Québec inc.
(n 24). Voir aussi Dumlao c. Fido Solutions Inc., Rogers, Bell Mobilty, Telus et Videotron, 755-06-
000005-179, demande déposée le 14 août 2017 (frais de « déblocage » de téléphones mobiles);
Sibiga c. Fido Solutions inc., 2016 QCCA 1299 (en ligne : http://canlii.ca/t/gsvxm), jugement
d’autorisation de la Cour d’appel (frais d’itinérance internationale abusifs pour l’utilisation
d’Internet sur un appareil sans-fil lors de séjours à l’extérieur du Canada); suspension de l’instance
jusqu’à l’arrêt final de la Cour suprême du Canada dans le dossier Aka-Trudel (n 34) sur la question
de la compétence, 2018 QCCS 3231 (en ligne : http://canlii.ca/t/ht5vx).
39
Par exemple, un contrat qui porte sur un immeuble, puisque la Loi sur la protection du
consommateur se limite, sauf quelques rares exceptions, aux contrats portant sur un bien meuble
ou un service : L.p.c. (n 3), art. 1, par. d) et 2.
40
Le consommateur est défini comme « une personne physique, sauf un commerçant qui se procure
un bien ou un service pour les fins de son commerce » : L.p.c. (n 3), art. 1, par. e).
Le loyer représente, pour nombre de ménages québécois, l’un des principaux postes
de dépenses. Le contrôle des loyers se présente donc comme une mesure sociale
destinée à faciliter l’accès au logement.
Le Code civil du Québec comporte deux mesures qui sont interreliées à cet égard :
le droit au maintien dans les lieux (art. 1936 et s. C.c.Q.), d’une part, et la fixation du
loyer (art. 1947 et s. C.c.Q.), d’autre part. Ces deux mesures sont complémentaires,
dans la mesure où le locataire doit être mis à l’abri d’un refus de renouvellement par
un locateur qui serait insatisfait de la contestation de la contestation de l’avis
d’augmentation de loyer ou encore du loyer fixé par le tribunal à la suite d’une
telle contestation. En principe, la demande est entendue par un tribunal administratif
appelé la Régie du logement. Selon le premier alinéa de l’article 1953, « Le tribunal
saisi d’une demande de fixation ou de réajustement de loyer détermine le loyer
exigible, en tenant compte des normes fixées par les règlements »41.
5 Réglementation particulière en matière de contrôle

des prix
La réglementation particulière en matière de prix est extrêmement abondante et

poursuit différentes finalités. Il serait dès lors illusoire de tenter d’en faire une
recension complète ou encore de les classer de façon hermétique en fonction d’une
finalité plutôt qu’une autre. La présente section vise donc simplement à donner un
aperçu de certaines formes de réglementation à l’égard de différents biens et
services, en tentant d’esquisser certaines des finalités poursuivies.
Notre propos se divise ici en deux temps. Il s’agit d’abord de déterminer les
situations où une forme de réglementation joue un rôle direct sur la fixation du prix
(5.1), pour ensuite jeter un regard sur les clauses qui ont une incidence sur le prix (5.2).
5.1 Réglementation particulière sur la fixation du prix : prix

plancher, prix plafond et prix fixe
Même si l’idée de réglementer le prix peut sembler à première vue comme ayant une
finalité essentiellement consumériste, un regard sur l’état du droit positif envoie une
image beaucoup plus complexe. En effet, d’autres finalités que la protection d’une
partie vulnérable tel que le consommateur peuvent entrer en ligne de compte.
Ainsi, la réglementation peut prendre la forme d’interventions quant au prix dans
le but de soutenir ou de protéger des acteurs économiques dans la production ou la
distribution de certains biens.
41
Règlement sur les critères de fixation de loyer, RLRQ c. R-8.1, r. 2 (en ligne : http://canlii.ca/t/
cgr6).
Dans cette veine, on trouve au Québec, dans le domaine agroalimentaire42, un

régime qui intègre une idée proche de la notion de « prix plancher » – parfois assorti de
quotas – visant à assurer aux producteurs des revenus permettant de couvrir leurs coûts
de production. Ce système, dont certaines composantes intègrent des règles
pancanadiennes, est administré au Québec par la Régie des marchés agricoles
et alimentaires du Québec (RMAAQ), dont la mission consiste à « favoriser une mise
en marché efficace et ordonnée des produits agricoles, alimentaires, de la pêche et de la
forêt privée, le développement de relations harmonieuses entre les différents
intervenants et la résolution des difficultés qui surviennent dans le cadre de la produc-
tion et de la mise en marché de ces produits en tenant compte des intérêts des
consommateurs et de la protection de l’intérêt public »43. Le rôle de la Régie s’exerce
alors à travers des plans conjoints de mise en marché. « Le plan conjoint est
essentiellement un outil à la disposition des producteurs agricoles et des pêcheurs; il
leur donne la possibilité de négocier collectivement toutes les conditions de mise en
marché de leur produit ou de leur pêche et d’en réglementer des modalités. Mécanisme
d’action collective, un plan conjoint modifie les rapports de force entre les partenaires
du secteur agroalimentaire44. » Les produits visés par de tels plans sont variés et
couvrent, à titre d’exemples, les pommes, la volaille, le sirop d’érable, les œufs, le
crabe des neiges, le homard, ainsi que d’autres produits45. Le contrôle des prix, dans ce
contexte, vise essentiellement le prix payé aux producteurs, lesquels se dotent d’un tel
plan conjoint pour établir un prix minimum. Si la protection des consommateurs n’est
pas entièrement étrangère à ce système – l’intérêt des consommateurs figurant à
l’énoncé de la mission de la Régie –, il s’agit d’une finalité tout au plus complémentaire
en évitant l’élimination de certains acteurs économiques face à une concurrence trop
féroce. Il demeure que l’établissement d’un prix minimum à travers ce type de plan se
traduit concrètement, dans bien des cas, par des prix plus élevés pour les
consommateurs – derniers maillons de la chaîne de production et de distribution du
produit concerné – que si la détermination du prix était laissée à la libre concurrence.
Le domaine laitier fait, en outre, l’objet d’un système de gestion de l’offre et
présente ainsi des particularités46. La vente par les producteurs aux intermédiaires
42
Le 30 septembre 2018, un nouvel accord a été conclu (Accord États-Unis-Mexique-Canada
(AEUMC)), lequel remplace l’Accord de libre-échange nord-américain (ALENA). Dans cet accord,
le Canada a accepté d’ouvrir une partie du marché du lait et des produits laitiers canadiens aux
produits américains, ce qui constitue, pour plusieurs commentateurs, une brèche dans la gestion de
l’offre. Voir notamment https://ici.radio-canada.ca/nouvelle/1127171/accord-lait-colere-
producteurs-quebec-canada et https://www.ledevoir.com/economie/538129/trudeau-demande-l-
indulgence-des-agriculteurs.
43
À ce sujet, voir notamment le site de la RMAAQ: http://www.rmaaq.gouv.qc.ca/index.php?
id¼16.
44
Les finalités de ces plans de mise en marché sont décrites sur le site de la Régie : http://www.
rmaaq.gouv.qc.ca/index.php?id¼21.
45
Le site de la Régie fournit une liste des produits concernés : http://www.rmaaq.gouv.qc.ca/index.
php?id¼56.
46
Voir la Loi sur la mise en marché des produits agricoles, alimentaires et de la pêche, RLRQ
c. M-35.1, art. 40.5, qui donne à la Régie le pouvoir de fixer, après consultation des intéressés, un
prix minimum, un prix maximum ou les deux à la fois.
intègre un prix minimum, suivant des modalités semblables à celles mentionnées

précédemment à l’égard d’autres produits du secteur agroalimentaire. La professeure
Geneviève Parent explique la logique inhérente à ce système dans les termes
suivants : « Lorsque des agriculteurs cèdent à des organismes provinciaux et
nationaux l’administration de leur droit de mettre en marché leur production, ils
renoncent par le fait même à la libre concurrence. Cette cession ne peut toutefois
rationnellement être faite sans la garantie que tous les producteurs recevront leur
juste part des revenus du marché. Pour atteindre cet autre objectif, le système
canadien de gestion des approvisionnements en lait devait prévoir un mécanisme
pour pallier l’établissement des prix du lait et des produits laitiers traditionnellement
effectué par chaque producteur47. » La réglementation dans le domaine des produits
laitiers au Québec présente une particularité en ce qu’elle ne se limite pas au contrat
conclu entre le producteur et l’intermédiaire qui acquiert sa production pour la
transformer ou la distribuer. Elle encadre aussi d’autres contrats dans la chaîne de
production et de distribution. Ainsi, un prix minimum est imposé pour protéger les
petits transformateurs et détaillants contre une concurrence débridée à laquelle ils ne
pourraient souvent pas résister. Enfin, la vente du lait de vache aux consommateurs
par les détaillants est assujettie à un prix maximum48, un aspect qui présente une
finalité plus clairement consumériste, en protégeant les consommateurs contre des
prix trop élevés eu égard à cet aliment de base.
Dans le même esprit de protection d’acteurs économiques qui jouent un rôle
névralgique dans la distribution de certains produits, cette fois en dehors du secteur
agroalimentaire, il convient de signaler la réglementation relative aux détaillants de
produits pétroliers. Cette réglementation vise à écarter les « guerres de prix » qui sont
susceptibles, à terme, de réduire la concurrence en éliminant certains détaillants
victimes de ces stratégies de mise en marché. Une entreprise qui vend au détail à un
prix inférieur à ce qu’il en coûte à un détaillant de la même zone pour acquérir les
mêmes produits « est présumée exercer ses droits de manière excessive et
déraisonnable, contrairement aux exigences de la bonne foi, et commettre une
faute envers ce détaillant », s’exposant du même coup à des sanctions qui peuvent
inclure des dommages-intérêts punitifs49. La loi prévoit aussi la possibilité
d’adoption d’un décret pour établir, au besoin, un prix maximum, avec comme
finalité la protection des consommateurs50. Cet encadrement n’empêche toutefois
pas le secteur de la distribution des produits pétroliers d’être sensible à différentes
manœuvres portant atteinte aux droits des consommateurs, comme en témoignent
des sanctions pénales et des actions collectives visant des cartels de l’essence qui ont
47
Parent (2000), p. 546.
48
À ce sujet, voir notamment Loi sur la mise en marché des produits agricoles, alimentaires et de la
pêche, RLRQ c. M-35.1, art. 40.5; Règlement sur les prix du lait de consommation, RLRQ
c. M-35.1, r. 206.
49
Loi sur les produits pétroliers, RLRQ c. P-30.01, art. 67. Voir aussi la Loi sur la Régie de
l’énergie, RLRQ c. R-6.01, art. 55 à 59, qui permet à la Régie de l’énergie d’exercer des pouvoirs
relatifs à la surveillance des prix pétroliers dans les diverses régions du Québec.
50
Loi sur les produits pétroliers (n 49), art. 68 et 69.
été relevés dans différentes villes du Québec en contravention des règles applicables
en vertu de la Loi sur la concurrence51.
Dans l’industrie du taxi, le prix est fixé conformément aux tarifs établis par la
réglementation applicable au transport par taxi privé52. Cet encadrement soulève
néanmoins des difficultés lorsque des acteurs qui échappent à la réglementation font
leur apparition sur le marché. C’est dans ce contexte que le Gouvernement du
Québec a été amené à développer un projet-pilote pour assujettir des acteurs
comme Uber à certaines règles – notamment le prélèvement des taxes – sans pour
autant les contraindre à s’intégrer au système de l’industrie du taxi, lequel requiert
l’acquisition d’un permis de taxi dont le nombre est restreint en fonction d’un
système de quotas.
Certaines interventions législatives ou réglementaires ont plutôt pour but de
prévenir l’incitation à consommer certains produits dans un esprit de protection de
la santé publique. Ainsi, il existe un contrôle quant aux rabais susceptibles d’être
consentis dans la vente de l’alcool aux consommateurs, afin de promouvoir une
consommation responsable53.
Il existe aussi des règles qui ont une finalité plus clairement consumériste, même
si elle vise également à protéger les producteurs. À titre d’exemple, l’article 236.1 de
la Loi sur la protection du consommateur54 interdit la vente d’un billet de spectacle à
un prix supérieur à celui annoncé par le vendeur autorisé par le producteur du
spectacle, sous réserve de certaines exceptions.
Force est néanmoins de constater que plusieurs des interventions eu égard à la
fixation du prix – qu’il s’agisse d’un prix fixe, d’un prix minimum (prix plancher) ou
d’un prix maximum (prix plafond) – s’attardent surtout à soutenir l’offre de façon à
protéger certains acteurs économiques. Les préoccupations de protection des
consommateurs ne sont pas entièrement absentes, puisqu’en soutenant l’offre de
produits, on évite l’élimination massive de producteurs plus vulnérables et
l’implantation de monopoles ou d’oligopoles qui favoriseraient des prix exorbitants.
Il reste néanmoins que les règles plus directement animées par une finalité
consumériste s’expriment principalement à travers l’encadrement relatif aux clauses
contractuelles qui ont une incidence sur le prix.
51
À ce sujet, voir : https://www.protegez-vous.ca/Nouvelles/Automobile/Cartel-de-l-essence-17-
millions-de-dollars-acquis-et-peut-etre-plus-a-venir.
52
Recueil des tarifs du transport privé par taxi, RLRQ c. S-6.01, r. 6, art. 3 (en ligne : http://canlii.
ca/t/dgkv).
53
Loi sur les permis d’alcool, RLRQ c. P-9.1 (en ligne : http://canlii.ca/t/19gn), art. 114; Règlement
sur la promotion, la publicité et les programmes éducatifs en matière de boissons alcooliques,
RLRQ c. P-9.1, r. 6 (en ligne : http://canlii.ca/t/chs3), art. 9 et 18. Pour une illustration de
l’intervention des autorités face à l’établissement de prix trop bas dans la vente d’alcool, en
contravention de la réglementation applicable, voir Groupe d’investissement bar BIG inc (Re),
2012 CanLII 35192 (QC RACJ).
54
L.p.c. (n 3).
5.2 Réglementation particulière sur les clauses qui ont une

incidence sur le prix : faculté de modifier unilatéralement
le prix convenu, frais supplémentaires et pénalités
En droit québécois, le contrôle le plus spécifique – et sans doute le plus efficace

également – eu égard au prix, dans la perspective de protéger les consommateurs ou
autres parties vulnérables, prend la forme de règles qui visent à encadrer les clauses
donnant ouverture à une modification unilatérale du prix, à des frais supplémentaires
ou à des pénalités.
La Loi sur la protection du consommateur est très certainement le véhicule
privilégié pour cette forme d’encadrement. Les règles sont nombreuses et quelques
exemples suffisent pour apprécier la portée très large de la protection offerte à un
consommateur qui a conclu un contrat assujetti à cette loi :
– Le commerçant ne peut modifier unilatéralement le prix d'un contrat, sauf s’il
s’agit d’un contrat de service à durée indéterminée et dans ce cas, moyennant le
respect de certaines conditions55.
– Il est interdit au commerçant d’imposer au consommateur, dans le cas de
l’inexécution de son obligation, le paiement de frais, de pénalités ou de
dommages, dont le montant ou le pourcentage est fixé à l’avance dans le contrat,
autres que l’intérêt couru56.
– La responsabilité du consommateur dont la carte de crédit a été perdue ou volée
est limitée à la somme de 50 $57.
– Sous réserve de ce qui peut être prévu par règlement, aucuns frais ne peuvent être
réclamés du consommateur pour la délivrance ou l'utilisation d’une carte
prépayée58.
– Dans certains types de contrats, le commerçant ne peut imposer de frais de
résiliation ou est assujetti à des limites quant aux frais qui peuvent être imposés
au consommateur, selon le moment où le consommateur exerce son droit à la
résiliation unilatérale59.
– Il est interdit au commerçant d’imposer des frais pour l'échange ou l'encaissement
d'un chèque ou d'un autre ordre de paiement émis par le gouvernement du
Québec, par celui du Canada ou par une municipalité60.
Certaines formes de contrôle existent aussi, quoique de façon plus limitée, à
l’extérieur du champ d’application de la Loi sur la protection du consommateur.
55
L.p.c. (n 3), art. 11.2.
56
L.p.c. (n 3), art. 13, al. 1. Cette interdiction ne s’applique pas au contrat de vente ou de louage à
long terme d’une automobile, où le législateur permet et encadre certaines formes de frais (art.
13, al. 2). Elle ne s’applique pas à un contrat de crédit (art. 13, al. 3).
57
L.p.c. (n 3), art. 124.
58
L.p.c. (n 3), art. 187.4.
59
L.p.c. (n 3), art. 194, 195, 202, 203, 214.6 à 214.8.
60
L.p.c. (n 3), art. 251.
Ainsi, dans le louage résidentiel, le Code civil considère abusive la clause « qui
stipule une peine dont le montant excède la valeur du préjudice réellement subi par le
locateur » (art. 1901, al. 1 C.c.Q.).
Dans la vente d’un immeuble à usage d’habitation par un constructeur, le contrat
de vente doit obligatoirement être précédé d’un contrat préliminaire à l’égard duquel
l’acheteur peut exercer une faculté de dédit suivant certaines formalités. Le Code
civil précise que « Lorsque le contrat préliminaire prescrit une indemnité en cas
d’exercice de la faculté de dédit, celle-ci ne peut excéder 0,5 % du prix de vente
convenu. » (art. 1786 C.c.Q.).
La protection offerte au deuxième alinéa de l’article 1623 C.c.Q. compte parmi
les modifications les plus importantes dans le droit commun des contrats à l’issue de
la réforme du Code civil. Par cette disposition, le législateur mettait fin au principe
d’immutabilité des clauses pénales : « le montant de la peine stipulée peut être réduit
si l’exécution partielle de l’obligation a profité au créancier ou si la clause est abusive ».
Le caractère le plus remarquable de cette protection nouvelle offerte au débiteur de la
clause pénale est que, contrairement à la disposition générale énoncée à l’article
1437 C.c.Q. en matière de clause abusive, le domaine d’application n’est pas limité
aux contrats de consommation et d’adhésion. La réduction de la clause pénale
abusive peut donc être invoquée dans le cadre de contrats conclus entre des
entreprises (B2B), même lorsqu’il s’agit de contrats de gré à gré. Une autre
différence digne de mention, qui limite cette fois la portée de la protection accordée
par l’article 1623 C.c.Q., résulte du fait que le deuxième alinéa de cet article permet
uniquement de réduire la pénalité, alors que l’article 1437 C.c.Q. permet aussi de
l’annuler lorsque les circonstances le justifient.
6 Règles particulières pour promouvoir la transparence de

l’information eu égard au prix et la concurrence
Les questions de transparence eu égard au prix s’expriment dans différents contextes

dans le but de protéger une partie – souvent vulnérable d’un point de vue
informationnel – afin qu’elle s’engage de façon éclairée et qu’elle soit en mesure
de contester des frais qui dépassent ce qui était annoncé ou convenu par contrat.
6.1 Protection en matière de clause externe et de clause

illisible ou incompréhensible dans le contrat de
consommation et le contrat d’adhésion
Tel que mentionné précédemment (voir ci-dessus, section 3), la réforme du Code
civil a amené l’ajout de certaines formes de protection en matière de contrat de
consommation et de contrat d’adhésion. Certaines d’entre elles sont susceptibles de
sanctionner un manque de transparence quant aux termes du contrat, notamment eu

égard au prix.
D’abord, le législateur a pris position quant à la clause externe, soit celle qui
renvoie à un contenu exprimé à l’extérieur du corps du contrat. Alors que cette clause
est normalement valide (art. 1435, al. 1 C.c.Q.), le législateur ajoute que dans le cas
d’un contrat de consommation ou d’adhésion, « cette clause est nulle si, au moment
de la formation du contrat, elle n’a pas été expressément portée à la connaissance du
consommateur ou de la partie qui y adhère, à moins que l’autre partie ne prouve que
le consommateur ou l’adhérent en avait par ailleurs connaissance » (art. 1435,
al. 2 C.c.Q.).
Toujours dans le contexte d’un contrat de consommation ou d’adhésion, « la
clause illisible ou incompréhensible pour une personne raisonnable est nulle si le
consommateur ou la partie qui y adhère en souffre préjudice, à moins que l’autre
partie ne prouve que des explications adéquates sur la nature et l’étendue de la clause
ont été données au consommateur ou à l’adhérent » (art. 1436 C.c.Q.).
Les articles 1435 et 1436 C.c.Q. n’ont été que très peu utilisés par les tribunaux
québécois dans les affaires portant sur le prix. La jurisprudence démontre un recours
plus important aux dispositions de la Loi sur la protection du consommateur,
lesquelles imposent des obligations davantage précises quant à la divulgation de
renseignements. Cela s’explique probablement du fait que les dispositions de cette
loi offrent une protection plus adaptée ou plus complète que le droit commun sur ces
aspects, tel que nous le verrons plus loin (ci-dessous, sous-section 6.4).
6.2 Divulgation du prix dans la vente d’un immeuble à usage

d’habitation et le bail de logement
Les contrats relatifs à l’habitation bénéficient, dans le Code civil du Québec, d’un
encadrement spécifique afin de s’assurer que l’acheteur ou le locataire soit
adéquatement informé du prix qu’il sera appelé à payer en vertu du contrat de
vente ou du bail de logement.
Ainsi, lorsque la vente d’un immeuble à usage d’habitation, bâti ou à bâtir, est
faite par le constructeur de l’immeuble ou par un promoteur à une personne physique
qui l’acquiert pour l’occuper elle-même (art. 1785 C.c.Q.), cette vente doit être
précédée d’un contrat préliminaire qui divulgue une série d’éléments pertinents du
contrat à venir, incluant le prix (art. 1786 C.c.Q.) et un budget prévisionnel établi sur
une base annuelle d’occupation complète de l’immeuble (art. 1791 C.c.Q.).
Dans le bail de logement, le contrat doit évidemment énoncer le prix du loyer (art.
1895 et 1903 C.c.Q.), mais certains renseignements additionnels doivent également
être divulgués. Lorsque le logement comporte des services qui se rapportent à la
personne même du locataire – comme c’est le cas notamment en cas d’hébergement
de locataires qui requièrent des soins de santé ou d’hygiène par le personnel de la
résidence –, le bail doit préciser la partie du loyer afférente au coût de chacun de ces
services (art. 1895.1 C.c.Q.). Par ailleurs, afin de permettre à un locataire de

déterminer si le loyer convenu est susceptible de contestation devant la Régie du
logement (voir ci-dessus, section 4.3) au regard de l’augmentation par rapport au
loyer payé par le locataire précédent, le bail doit préciser « le loyer le plus bas payé
au cours des 12 mois précédant le début du bail ou, le cas échéant, le loyer fixé par le
tribunal au cours de la même période » (art. 1896 C.c.Q.).
6.3 Mention du taux d’intérêt sur une base de calcul

inférieure à une période d’un an et traduction sur une
base annuelle en vertu de la Loi sur l’intérêt
La Loi sur l’intérêt est un texte législatif adopté par le palier fédéral en vertu de la
compétence législative attribuée au Parlement canadien en vertu de l’article 91 par.
19 de la Loi constitutionnelle de 1867. Ce texte de loi ne se limite pas aux contrats de
consommation ou d’adhésion et trouve donc application dans toute situation qui
suppose le paiement d’intérêts. En vertu de l’article 4 de cette loi, « Sauf à l’égard
des hypothèques sur immeubles ou biens réels, lorsque, aux termes d’un contrat écrit
ou imprimé [. . .], quelque intérêt est payable à un taux ou pourcentage par jour,
semaine ou mois, ou à un taux ou pourcentage pour une période de moins d’un an,
aucun intérêt supérieur au taux ou pourcentage de cinq pour cent par an n’est
exigible, payable ou recouvrable sur une partie quelconque du principal, à moins
que le contrat n’énonce expressément le taux d’intérêt ou pourcentage par an auquel
équivaut cet autre taux ou pourcentage. » Cette disposition a été appliquée à
certaines occasions par les tribunaux québécois pour corriger le taux d’intérêt qui
n’avait pas été exprimé sur une base annuelle61.
6.4 Encadrement eu égard à la transparence en matière de

prix dans le contrat assujetti à la Loi sur la protection du
consommateur
Bien que les efforts du législateur québécois dans le Code civil et ceux du législateur
fédéral dans la Loi sur l’intérêt soient dignes de mention, le texte le plus important eu
égard à la transparence en matière de prix demeure tout de même la Loi sur la
protection du consommateur. En effet, le consommateur qui a conclu un contrat
61
Par ex. Sécurité (La), Cie d'assurances générales du Canada c. Industries Super-métal Inc.,
J.E. 88-478, EYB 1988-63055 (C.A.); Béton Laurier inc. c. Circuit Québec Ste-Croix (1985) inc.,
J.E. 2005-1798, EYB 2005-93989 (C.Q.); Domaine Mont-Orford Terrains et chalets 106-115 inc.
c. Desfossés, B.E. 97BE-544, [1997] R.L. 512 (C.Q.); Mayer c. Leyva, J.E. 2000-1640, REJB 2000-
18791 (C.S.); Investissements Rodi inc. c. Armstrong, B.E. 2003BE-472 (C.Q.); Frohar c. Seif (n 18).
assujetti à cette loi bénéficie de plusieurs mesures protectrices se rapportant à la

divulgation du prix du bien ou du service qui fait l’objet du contrat.
L’article 12 de la Loi sur la protection du consommateur62 énonce une règle de
portée générale qui s’applique à tout contrat assujetti à cette loi : « Aucuns frais ne
peuvent être réclamés d’un consommateur, à moins que le contrat n’en mentionne de
façon précise le montant. » Cette disposition a donné lieu à un litige majeur
impliquant plusieurs institutions financières et qui s’est rendu jusqu’en Cour
suprême du Canada. Les institutions financières se faisaient reprocher de n’avoir
pas divulgué correctement les frais de conversion dans le contexte de transactions
effectuées en monnaies étrangères dans leurs conventions respectives avec les
détenteurs de cartes. Dans Marcotte c. Banque de Montréal, un arrêt historique qui
a mené à la condamnation des différentes institutions financières à plusieurs
centaines de millions de dollars, la Cour suprême discutait de la position exprimée
au sujet de faits en litige par le juge Gascon, qui siégeait alors en première instance
mais devenu depuis lors juge au sein du plus haut tribunal :
[85] Le juge Gascon a tiré des conclusions de fait détaillées au sujet de l'absence des frais de
conversion dans les conventions des banques du groupe A régissant l'utilisation de la carte.
À la lumière des conventions de chacune de ces banques, il a conclu que le « taux de
conversion », le « taux de change » ou les « frais d'administration » qui y figurent ne
pouvaient englober les frais de conversion ou que ces mentions n'étaient pas assez précises
pour être conformes à l'art. 12 L.p.c.
[86] Les banques n'ont pas démontré que le juge Gascon avait commis une erreur manifeste
et dominante en tirant la conclusion de fait que les banques du groupe A avaient contrevenu à
l'art. 12 L.p.c. en ne mentionnant pas les frais de conversion. Cette conclusion doit donc être
maintenue63.
Les règles énoncées aux articles 223 et 224, en matière de pratiques de commerce,
se rapportent à tout type de contrat assujetti à la Loi sur la protection du
consommateur et, de façon plus large encore, aux rapports entre le commerçant et
les consommateurs potentiels qui pourraient être tentés de contracter avec lui sur la
base de ces pratiques conformément à l’article 217.
En vertu de l’article 223, « Un commerçant doit indiquer clairement et lisiblement
sur chaque bien offert en vente dans son établissement ou, dans le cas d’un bien
emballé, sur son emballage, le prix de vente de ce bien, sous réserve de ce qui est
prévu par règlement ».
L’article 224, quant à lui, réprime certaines pratiques publicitaires trompeuses :
« accorder, dans un message publicitaire, moins d'importance au prix d'un ensemble
de biens ou de services, qu'au prix de l'un des biens ou des services composant cet
ensemble » (par. 1), « divulguer, dans un message publicitaire, le montant des
paiements périodiques à faire pour l'acquisition d'un bien ou l'obtention d'un service
sans divulguer également le prix total du bien ou du service ni le faire ressortir d’une
62
L.p.c. (n 3).
63
Banque de Montréal c. Marcotte, [2014] 2 R.C.S. 725, 2014 CSC 55 (en ligne : https://scc-csc.
lexum.com/scc-csc/scc-csc/fr/item/14352/index.do).
façon plus évidente » (par. 2), et « exiger pour un bien ou un service un prix
supérieur à celui qui est annoncé » (par. 3).
Le Règlement d’application de la Loi sur la protection du consommateur apporte
des précisions quant à l’étiquetage requis et aux cas d’exemption eu égard aux
obligations imposées par les articles 223 et 224 de la Loi64. Il convient de noter
que la question de l’affichage en lieu et place de l’étiquetage dans le contexte de
l’utilisation des lecteurs optiques fait l’objet de développements particuliers en vertu
d’une politique adoptée par voie de décret en vertu de la Loi.
Les contrats de crédit font également l’objet d’un encadrement particulier, afin
d’assurer une information complète des consommateurs quant au calcul du coût de
crédit. Les articles 67 à 72 de la Loi – applicables au contrat de prêt d’argent, au
contrat à crédit variable ou au contrat assorti d’un crédit – imposent la divulgation de
ce qui compose le coût du crédit, alors que l’article 91 renvoie à la méthode de calcul
actuariel des frais de crédit prescrite par règlement65.
Par ailleurs, dans le cas de certains types de réparations, la Loi sur la protection
du consommateur vise à enrayer les abus en imposant une divulgation claire du coût
de la réparation, en pièces et main-d’œuvre. Pour ce faire, le législateur impose une
évaluation écrite préalable à la réparation et une facture finale – dont le contenu est
dans chaque cas très détaillé. Il édicte en outre que l’acceptation de l’évaluation ou le
paiement de la facture n’entraîne pas renonciation par le consommateur à ses recours
en cas de dépassement du prix annoncé dans l’évaluation. Ce type d’encadrement
s’impose au commerçant (pour ses propres services ou ceux offerts par un sous-
traitant) relativement à la réparation d’automobile ou de motocyclette (art. 167 à
174 et 178) et la réparation d’appareil domestique (art. 182 à 184 et 187). Dans le cas
de la réparation d’automobile ou de motocyclette, le souci de transparence va jusqu’à
imposer au commerçant d’afficher sur une pancarte bien en vue les principales
dispositions applicables (art. 180).
Au fil des ans, les contestations fondées sur les dispositions de la Loi sur la
protection du consommateur en cas de manquements aux pratiques de commerce
sont devenues de plus en plus nombreuses. Si ces contestations peuvent évidemment
prendre la forme de recours intentés sur une base individuelle66, le montant parfois
peu considérable pour chaque consommateur victime amène le plus souvent à se
tourner vers l’action collective pour sanctionner le comportement du commerçant et
assurer une indemnisation du plus grand nombre possible de victimes. Outre l’arrêt
Marcotte de la Cour suprême, mentionné précédemment au sujet de l’article
12, quelques exemples permettent d’illustrer l’utilité de l’action collective dans la
64
Règlement d’application de la Loi sur la protection du consommateur, RLRQ c. P-40.1, r. 3
(en ligne : http://canlii.ca/t/cj0r), art. 91.1 à 91.8.
65
Règlement d’application de la Loi sur la protection du consommateur (n 64), art. 51 à 61 (calcul
du taux et des frais de crédit) et 61.1 à 64 (divulgation du taux de crédit). La divulgation du coût de
crédit est abordée plus spécifiquement aux art. 61 à 64.
66
Par ex. Stratos Pizzeria (1992) inc. c. Galarneau, 2015 QCCS 2353 (en ligne : http://lpc.quebec/
decisions/stratos-pizzeria-1992-inc-c-galarneau-2015-qccs-2353/) (frais imposés pour le paiement
par débit).
sanction de manquements aux règles de la Loi sur la protection du consommateur

applicables en matière de pratiques de commerce :
– Une demande a été autorisée dans un litige qui se rapporte au prix de billets
achetés en ligne. La défenderesse n'aurait pas informé les membres du groupe que
le prix était exprimé en dollars américains et donnait l’impression que le prix était
en dollars canadiens lors de la transaction d'achat, en contravention des articles
54.4 par. h), 219, 224, par. c) et 22867.
– Une demande en attente d'autorisation porte sur la pratique de la plateforme de
location Airbnb. Les prix exigés seraient plus élevés que ceux initialement affichés
sur les pages web ou applications mobiles des compagnies défenderesses,
contrairement à ce que prévoit l’article 224, par. c) qui interdit la « fragmentation
» du prix68.
– Une autre demande d’autorisation a été accordée quant à un recours se rapportant
aux pratiques de commerce d’une compagnie aérienne. Selon la demande, Air
Canada aurait contrevenu à l’article 224, par. c) de la Loi et à l’article 91.8 du
Règlement d’application, car elle exigeait de ses clients un prix supérieur à celui
qu'elle annonçait dans ses publicités et sur son site web, les prix annoncés
n'incluant pas les « suppléments » et les « taxes, frais et suppléments »69.
– Une action collective a été autorisée au sujet de frais de surcharge imposés lors de
l'achat de jetons de casino par carte de débit; le prix annoncé de ces jetons ne
comprenait pas ces frais de surcharge et le consommateur n’était informé de ces
frais qu’au moment du paiement70.
– Un jugement sur le fond a été rendu à l’encontre d’une entreprise de
câblodistribution pour avoir contrevenu aux articles 12 et 224, par. c) de la Loi
en ne divulguant pas les frais de 1,5% sous la rubrique « Contribution au Fonds
d’amélioration de la programmation locale » (ou « FAPL ») pour les locations
d’une vidéo sur demande71.
67
Nicolas c. Vivid Seats LLC, 2018 QCCS 3938 (en ligne: http://canlii.ca/t/hv1b2), jugement
d’autorisation.
68
Preisler-Banoon c. Airbnb Ireland UC, Airbnb Inc. et Airbnb Payments UK Ltd, 500-06-000884-
177, demande d’autorisation déposée le 22 août 2017.
69
Union des consommateurs c. Air Canada, 2014 QCCA 523 (en ligne : http://lpc.quebec/deci
sions/union-des-consommateurs-c-air-canada-2014-qcca-523/). Voir aussi à ce sujet : http://
uniondesconsommateurs.ca/actions/union-des-consommateurs-et-silas-c-air-canada/.
70
Paquin-Charbonneau c. Société des casinos du Québec inc., 2016 QCCS 4703 (en ligne : http://
lpc.quebec/decisions/paquin-charbonneau-c-societe-des-casinos-du-quebec-inc-2016-qccs-4703/),
jugement d’autorisation.
71
Girard c. Vidéotron, 2018 QCCA 767 (en ligne : https://lpc.quebec/decisions/videotron-c-girard-
2018-qcca-767/), requête pour autorisation de pourvoi à la Cour suprême rejetée (C.S. Can., 2019-
02-21), no 38225.
7 Conclusion
Un survol du droit applicable au Québec fait ressortir la complexité de la

problématique de l’encadrement juridique du prix dans les contrats de
consommation, les contrats d’adhésion ou les contrats réglementés. La finalité de
protéger une partie vulnérable demeure au cœur de l’intervention du législateur ou
du pouvoir attribué aux tribunaux à cet égard. La partie vulnérable qui bénéficie
d’une protection est souvent le consommateur, dans le cadre d’un contrat de
consommation tel que défini au Code civil ou dans la Loi sur la protection du
consommateur. Il peut aussi s’agir, dans certains cas, de l’adhérent qui s’est
vu imposer les stipulations essentielles d’un contrat, même lorsqu’il ne s’agit pas
d’un consommateur. Cela dit, il arrive que le législateur considère que d’autres
acteurs en situation de vulnérabilité dans leurs rapports de négociation s’avèrent
dignes de protection – tels que des producteurs ou des détaillants – en raison de leur
rôle névralgique dans l’économie et ce, même si cette protection peut entraîner des
conditions plus onéreuses pour le consommateur ou l’adhérent qui se procurera
ensuite le bien ou le service concerné. La réglementation du prix traduit donc, dans
cette perspective, des finalités multiples où les rouages de l’économie sont envisagés
dans leur globalité afin de déterminer les situations où cette réglementation s’impose
et les parties qu’elle vise à protéger.
Annexe: Version bilingue des principales dispositions

citées Annex: Bilingual Version of the Main Provisions Cited
Code civil du Québec Civil Code of Québec

1379. Le contrat est d’adhésion lorsque les 1379. A contract of adhesion is a contract in
stipulations essentielles qu’il comporte ont été which the essential stipulations were imposed
imposées par l’une des parties ou rédigées par or drawn up by one of the parties, on his behalf
elle, pour son compte ou suivant ses instruc- or upon his instructions, and were not nego-
tions, et qu’elles ne pouvaient être librement tiable.
discutées. Any contract that is not a contract of adhesion
Tout contrat qui n’est pas d’adhésion est de gré is a contract by mutual agreement.
à gré.
1384. Le contrat de consommation est le contrat 1384. A consumer contract is a contract whose
dont le champ d’application est délimité par les field of application is delimited by legislation
lois relatives à la protection du consommateur, respecting consumer protection whereby one
par lequel l’une des parties, étant une personne of the parties, being a natural person, the con-
physique, le consommateur, acquiert, loue, sumer, acquires, leases, borrows or obtains in
emprunte ou se procure de toute autre manière, any other manner, for personal, family or
à des fins personnelles, familiales ou domestic purposes, property or services from
domestiques, des biens ou des services auprès the other party, who offers such property or
de l’autre partie, laquelle offre de tels biens ou services as part of an enterprise which he
services dans le cadre d’une entreprise qu’elle carries on.
exploite.
(continued)
1405. Outre les cas expressément prévus par la 1405. Except in the cases expressly provided
loi, la lésion ne vicie le consentement qu’à by law, lesion vitiates consent only with
l’égard des mineurs et des majeurs protégés. respect to minors and protected persons of full
age.
1406. La lésion résulte de l’exploitation de 1406. Lesion results from the exploitation of
l’une des parties par l’autre, qui entraîne une one of the parties by the other, which creates a
disproportion importante entre les prestations serious disproportion between the prestations
des parties; le fait même qu’il y ait dispropor- of the parties; the fact that there is a serious
tion importante fait présumer l’exploitation. disproportion creates a presumption of exploi-
Elle peut aussi résulter, lorsqu’un mineur ou un tation.
majeur protégé est en cause, d’une obligation In cases involving a minor or a protected per-
estimée excessive eu égard à la situation son of full age, lesion may also result from an
patrimoniale de la personne, aux avantages obligation that is considered to be excessive in
qu’elle retire du contrat et à l’ensemble des view of the patrimonial situation of the person,
circonstances. the advantages he gains from the contract and
the circumstances as a whole.
1432. Dans le doute, le contrat s’interprète en 1432. In case of doubt, a contract is interpreted
faveur de celui qui a contracté l’obligation et in favour of the person who contracted the
contre celui qui l’a stipulée. Dans tous les cas, il obligation and against the person who stipu-
s’interprète en faveur de l’adhérent ou du lated it. In all cases, it is interpreted in favour of
consommateur. the adhering party or the consumer.
1435. La clause externe à laquelle renvoie le 1435. An external clause referred to in a con-
contrat lie les parties. tract is binding on the parties.
Toutefois, dans un contrat de consommation ou In a consumer contract or a contract of adhe-
d’adhésion, cette clause est nulle si, au moment sion, however, an external clause is null if, at
de la formation du contrat, elle n’a pas été the time of formation of the contract, it was not
expressément portée à la connaissance du expressly brought to the attention of the con-
consommateur ou de la partie qui y adhère, à sumer or adhering party, unless the other party
moins que l’autre partie ne prouve que le proves that the consumer or adhering party
consommateur ou l’adhérent en avait par otherwise knew of it.
ailleurs connaissance.
1436. Dans un contrat de consommation ou 1436. In a consumer contract or a contract of
d’adhésion, la clause illisible ou incompréhen- adhesion, a clause which is illegible or incom-
sible pour une personne raisonnable est nulle si prehensible to a reasonable person is null if the
le consommateur ou la partie qui y adhère en consumer or the adhering party suffers injury
souffre préjudice, à moins que l’autre partie ne therefrom, unless the other party proves that an
prouve que des explications adéquates sur la adequate explanation of the nature and scope
nature et l’étendue de la clause ont été données of the clause was given to the consumer or
au consommateur ou à l’adhérent. adhering party.
1437. La clause abusive d’un contrat de 1437. An abusive clause in a consumer con-
consommation ou d’adhésion est nulle ou tract or contract of adhesion is null, or the
l’obligation qui en découle, réductible. obligation arising from it may be reduced.
Est abusive toute clause qui désavantage le An abusive clause is a clause which is exces-
consommateur ou l’adhérent d’une manière sively and unreasonably detrimental to the
excessive et déraisonnable, allant ainsi à consumer or the adhering party and is therefore
l’encontre de ce qu’exige la bonne foi; est abu- contrary to the requirements of good faith; in
sive, notamment, la clause si éloignée des obli- particular, a clause which so departs from the
gations essentielles qui découlent des règles fundamental obligations arising from the rules
gouvernant habituellement le contrat qu’elle normally governing the contract that it changes
dénature celui-ci. the nature of the contract is an abusive clause.
(continued)
1623. Le créancier qui se prévaut de la clause 1623. A creditor who avails himself of a penal
pénale a droit au montant de la peine stipulée clause is entitled to the amount of the stipulated
sans avoir à prouver le préjudice qu’il a subi. penalty without having to prove the injury he
Cependant, le montant de la peine stipulée peut has suffered.
être réduit si l’exécution partielle de l’obligation However, the amount of the stipulated penalty
a profité au créancier ou si la clause est abusive. may be reduced if the creditor has benefited
from partial performance of the obligation or if
the clause is abusive.
1785. Dès lors que la vente d’un immeuble à 1785. The sale of an existing or planned resi-
usage d’habitation, bâti ou à bâtir, est faite par dential immovable by the builder or a devel-
le constructeur de l’immeuble ou par un oper to a natural person who acquires it to
promoteur à une personne physique qui occupy it shall be preceded by a preliminary
l’acquiert pour l’occuper elle-même, elle doit, contract by which a person promises to buy the
que cette vente comporte ou non le transfert à immovable, whether or not the sale includes
l’acquéreur des droits du vendeur sur le sol, être the transfer to him of the seller’s rights over
précédée d’un contrat préliminaire par lequel the land.
une personne promet d’acheter l’immeuble. A stipulation that the promisor may withdraw
Le contrat préliminaire doit contenir une stipu- his promise within 10 days after signing it shall
lation par laquelle le promettant acheteur peut, be included in the preliminary contract.
dans les 10 jours de l’acte, se dédire de la
promesse.
1786. Outre qu’il doit indiquer les nom et 1786. In addition to the name and address of
adresse du vendeur et du promettant acheteur, the seller and of the promisor, the work to be
les ouvrages à réaliser, le prix de vente, la date performed, the sale price, the date of delivery
de délivrance et les droits réels qui grèvent and the real rights charging the immovable, the
l’immeuble, le contrat préliminaire doit contenir preliminary contract shall contain any useful
les informations utiles relatives aux information pertaining to the characteristics of
caractéristiques de l’immeuble et mentionner, si the immovable and, where the sale price is
le prix est révisable, les modalités de la révision. subject to review, the terms and conditions of
Lorsque le contrat préliminaire prescrit une review.
indemnité en cas d’exercice de la faculté de Where the preliminary contract provides for an
dédit, celle-ci ne peut excéder 0,5% du prix de indemnity in case of exercise of the right of
vente convenu. withdrawal, the indemnity may not exceed
0.5% of the agreed sale price.
1895. Le locateur est tenu, dans les 10 jours de 1895. Within 10 days after entering into the
la conclusion du bail, de remettre un exemplaire lease, the lessor is bound to give the lessee a
du bail au locataire ou, dans le cas d’un bail copy of the lease or, in the case of an oral lease,
verbal, de lui remettre un écrit indiquant le nom a writing setting forth the name and address of
et l’adresse du locateur, le nom du locataire, le the lessor, the name of the lessee, the rent and
loyer et l’adresse du logement loué [. . .]. the address of the leased property, [. . .].
1895.1. Lorsque le bail comprend des services 1895.1. If the lease includes services of a per-
qui se rattachent à la personne même du sonal nature to be provided to the lessee, the
locataire, le locateur doit indiquer, dans lessor must specify, in the relevant schedule to
l’annexe appropriée du formulaire obligatoire, the mandatory form, the part of the rent that
la partie du loyer afférente au coût de chacun de relates to the cost of each of those services.
ces services.
1896. Le locateur doit, lors de la conclusion du 1896. At the time of entering into a lease, the
bail, remettre au nouveau locataire un avis lessor shall give a notice to the new lessee,
indiquant le loyer le plus bas payé au cours des indicating the lowest rent paid in the 12 months
12 mois précédant le début du bail ou, le cas preceding the beginning of the lease or the rent
(continued)
échéant, le loyer fixé par le tribunal au cours de fixed by the court during the same period, as
la même période, ainsi que toute autre mention the case may be, and containing any other
prescrite par les règlements pris par le particular prescribed by the regulations of the
gouvernement. Government.
[. . .] [. . .]
1901. Est abusive la clause qui stipule une peine 1901. A clause stipulating a penalty of an
dont le montant excède la valeur du préjudice amount exceeding the value of the injury
réellement subi par le locateur, ainsi que celle actually suffered by the lessor, or imposing an
qui impose au locataire une obligation qui est, obligation on the lessee which is unreasonable
en tenant compte des circonstances, in the circumstances, is an abusive clause.
déraisonnable. Such a clause is null or any obligation arising
Cette clause est nulle ou l’obligation qui en from it may be reduced.
découle, réductible.
1903. Le loyer convenu doit être indiqué dans 1903. The rent agreed upon shall be indicated
le bail. in the lease.
Il est payable par versements égaux, sauf le It is payable in equal instalments, except for
dernier qui peut être moindre; il est aussi pay- the last, which may be less; it is payable on the
able le premier jour de chaque terme, à moins first day of each payment period, unless oth-
qu’il n’en soit convenu autrement. erwise agreed.
1953. Le tribunal saisi d’une demande de fixa- 1953. Where the court has an application
tion ou de réajustement de loyer détermine le before it for the fixing or adjustment of rent, it
loyer exigible, en tenant compte des normes takes into consideration the standards pre-
fixées par les règlements. scribed by regulation.
Le loyer qu’il fixe est en vigueur pour la même The rent fixed by the court is in force for the
durée que le bail reconduit ou pour celle qu’il term of the renewed lease or for such term, not
détermine, mais qui ne peut excéder 12 mois. in excess of 12 months, as it determines.
S’il accorde une augmentation de loyer, il peut If the court grants an increase of rent, it may
échelonner le paiement des arriérés sur une spread the payment of the arrears over a period
période qui n’excède pas le terme du bail not exceeding the term of the renewed lease.
reconduit.
2332. Lorsque le prêt porte sur une somme 2332. In the case of a loan of a sum of money,
d’argent, le tribunal peut prononcer la nullité du the court may pronounce the nullity of the
contrat, ordonner la réduction des obligations contract, order the reduction of the obligations
qui en découlent ou, encore, réviser les arising from the contract or revise the terms
modalités de leur exécution dans la mesure où il and conditions of the performance of the obli-
juge, eu égard au risque et à toutes les gations to the extent that it finds that, having
circonstances, qu’il y a eu lésion à l’égard de regard to the risk and to all the circumstances,
l’une des parties. one of the parties has suffered lesion.
Lois québécoises Québec Statutes
Code de procédure civile, RLRQ c. C-25.01 Code of Civil Procedure, CQLR c. C-25.01
575. Le tribunal autorise l’exercice de l’action 575. The court authorizes the class action and
collective et attribue le statut de représentant au appoints the class member it designates as
membre qu’il désigne s’il est d’avis que: representative plaintiff if it is of the opinion
1 les demandes des membres soulèvent des that
questions de droit ou de fait identiques, (1) the claims of the members of the class raise
similaires ou connexes; identical, similar or related issues of law or
2 les faits allégués paraissent justifier les con- fact;
clusions recherchées; (2) the facts alleged appear to justify the con-
3 la composition du groupe rend difficile ou clusions sought;
(continued)
peu pratique l’application des règles sur le (3) the composition of the class makes it diffi-
mandat d’ester en justice pour le compte cult or impracticable to apply the rules for
d’autrui ou sur la jonction d’instance; mandates to take part in judicial proceedings
4 le membre auquel il entend attribuer le statut on behalf of others or for consolidation of
de représentant est en mesure d’assurer une proceedings; and
représentation adéquate des membres. (4) the class member appointed as representa-
tive plaintiff is in a position to properly repre-
sent the class members.
Loi sur la protection du consommateur, Consumer Protection Act, CQLR c. P-40.1
RLRQ c. P-40.1
1. Dans la présente loi, à moins que le contexte 1. In this Act, unless the context indicates
n’indique un sens différent, on entend par: otherwise,
[. . .] [. . .]
d) «bien» : un bien meuble et, dans la mesure (d) “goods” means any movable property and,
requise pour l’application de l’article 6.1, un to the extent required for the application of
immeuble; section 6.1, any immovable property;
[. . .] [. . .]
e) «consommateur» : une personne physique, (e) “consumer” means a natural person, except
sauf un commerçant qui se procure un bien ou a merchant who obtains goods or services for
un service pour les fins de son commerce; the purposes of his business;
[. . .] [. . .]
2. La présente loi s’applique à tout contrat 2. This Act applies to every contract for goods
conclu entre un consommateur et un or services entered into between a consumer
commerçant dans le cours des activités de son and a merchant in the course of his business.
commerce et ayant pour objet un bien ou un
service.
8. Le consommateur peut demander la nullité 8. The consumer may demand the nullity of a
du contrat ou la réduction des obligations qui en contract or a reduction in his obligations
découlent lorsque la disproportion entre les thereunder where the disproportion between
prestations respectives des parties est tellement the respective obligations of the parties is so
considérable qu’elle équivaut à de l’exploitation great as to amount to exploitation of the con-
du consommateur, ou que l’obligation du sumer or where the obligation of the consumer
consommateur est excessive, abusive ou is excessive, harsh or unconscionable.
exorbitante.
9. Lorsqu’un tribunal doit apprécier le 9. Where the court must determine whether a
consentement donné par un consommateur à un consumer consented to a contract, it shall con-
contrat, il tient compte de la condition des sider the condition of the parties, the circum-
parties, des circonstances dans lesquelles le stances in which the contract was entered into
contrat a été conclu et des avantages qui and the benefits arising from the contract for
résultent du contrat pour le consommateur. the consumer.
11.2. Est interdite la stipulation prévoyant que 11.2. Any stipulation under which a merchant
le commerçant peut unilatéralement modifier le may amend a contract unilaterally is prohibited
contrat à moins que cette stipulation ne prévoie unless the stipulation also
également:
a) les éléments du contrat pouvant faire l’objet (a) specifies the elements of the contract that
d’une modification unilatérale; may be amended unilaterally;
b) que le commerçant doit, au moins 30 jours (b) provides that the merchant must send to the
avant l’entrée en vigueur de la modification, consumer, at least 30 days before the amend-
transmettre au consommateur un avis écrit, ment comes into force, a written notice drawn
(continued)
rédigé clairement et lisiblement, contenant up clearly and legibly, setting out exclusively
exclusivement la nouvelle clause ou la clause the new clause, or the amended clause and the
modifiée ainsi que la version antérieure, la date clause as it read formerly, the date of the
d’entrée en vigueur de la modification et les coming into force of the amendment and the
droits du consommateur énoncés au paragraphe rights of the consumer set forth in
c; subparagraph c; and
c) que le consommateur pourra refuser cette (c) provides that the consumer may refuse the
modification et résoudre ou, s’il s’agit d’un amendment and rescind or, in the case of a
contrat à exécution successive, résilier le contrat contract involving sequential performance,
sans frais, pénalité ou indemnité de résiliation, cancel the contract without cost, penalty or
en transmettant un avis à cet effet au cancellation indemnity by sending the mer-
commerçant au plus tard 30 jours suivant chant a notice to that effect no later than
l’entrée en vigueur de la modification, si la 30 days after the amendment comes into force,
modification entraîne l’augmentation de son if the amendment entails an increase in the
obligation ou la réduction de l’obligation du consumer’s obligations or a reduction in the
commerçant. merchant’s obligations.
Toutefois, à moins qu’il ne s’agisse d’un contrat However, except in the case of an
de service à durée indéterminée, une telle indeterminate-term service contract, such a
stipulation est interdite à l’égard d’un élément stipulation is prohibited if it applies to an
essentiel du contrat, notamment la nature du essential element of the contract, particularly
bien ou du service faisant l’objet du contrat, le the nature of the goods or services that are the
prix de ce bien ou de ce service et, le cas object of the contract, the price of the goods or
échéant, la durée du contrat. services or, if applicable, the term of the con-
La modification d’un contrat faite en contra- tract.
vention des dispositions du présent article est Any amendment of a contract in contravention
inopposable au consommateur. of this section cannot be invoked against the
Le présent article ne s’applique pas à une consumer.
modification d’un contrat de crédit variable This section does not apply to the amendment
visée à l’article 129. of a contract extending variable credit as pro-
vided for in section 129.
12. Aucuns frais ne peuvent être réclamés d’un 12. No costs may be claimed from a consumer
consommateur, à moins que le contrat n’en unless the amount thereof is precisely indicated
mentionne de façon précise le montant. in the contract.
13. Est interdite la stipulation qui impose au 13. Any stipulation requiring the consumer,
consommateur, dans le cas de l’inexécution de upon the non-performance of his obligation, to
son obligation, le paiement de frais, de pénalités pay a stipulated fixed amount or percentage of
ou de dommages, dont le montant ou le charges, penalties or damages, other than the
pourcentage est fixé à l’avance dans le contrat, interest accrued, is prohibited.
autres que l’intérêt couru. The prohibition under the first paragraph does
L’interdiction prévue au premier alinéa ne not apply to contracts of sale or long-term
s’applique pas, sauf à l’égard des frais et sous contracts of lease of automobiles, except with
réserve des conditions prévues au règlement, au respect to charges and subject to the conditions
contrat de vente ou de louage à long terme set out in the regulation.
d’une automobile. This section does not apply to a contract of
Le présent article ne s’applique pas à un contrat credit.
de crédit.
123. En cas de perte ou de vol d’une carte de 123. In case of loss or theft of a credit card, the
crédit, le consommateur ne peut être tenu consumer incurs no liability for a debt resulting
responsable d’une dette découlant de l’usage de from the use of such card by a third person
cette carte par un tiers après que l’émetteur a été after the issuer is notified of the loss or theft by
(continued)
avisé de la perte ou du vol par téléphone, telephone, telegraph, written notice or any
télégraphe, avis écrit ou tout autre moyen. other means.
124. Même en l’absence d’un tel avis, la 124. Even where such notice is not given, the
responsabilité du consommateur dont la carte de liability of the consumer whose credit card is
crédit a été perdue ou volée est limitée à la lost or stolen is limited to the sum of $50.
somme de 50 $.
219. Aucun commerçant, fabricant ou 219. No merchant, manufacturer or advertiser
publicitaire ne peut, par quelque moyen que ce may, by any means whatever, make false or
soit, faire une représentation fausse ou misleading representations to a consumer.
trompeuse à un consommateur.
223. Un commerçant doit indiquer clairement et 223. A merchant must indicate the sale price
lisiblement sur chaque bien offert en vente dans clearly and legibly on all the goods or, if the
son établissement ou, dans le cas d’un bien goods are wrapped, on the wrapping of all the
emballé, sur son emballage, le prix de vente de goods offered for sale in his establishment,
ce bien, sous réserve de ce qui est prévu par subject to the regulations.
règlement.
publicitaire ne peut, par quelque moyen que ce may, by any means whatever,
soit: (a) lay lesser stress, in an advertisement, on the
a) accorder, dans un message publicitaire, price of a set of goods or services than on the
moins d’importance au prix d’un ensemble de price of any goods or services forming part of
biens ou de services, qu’au prix de l’un des the set;
biens ou des services composant cet ensemble;
a.1) utiliser l’expression «prix coûtant» ou toute (a.1) use the expression “cost price” or any
autre expression laissant croire qu’un bien est other expression suggesting that goods are for
offert à la vente ou à la location à un prix ou à sale or for lease at a price or retail value based
une valeur au détail basé sur son coût pour le on their cost to the merchant, unless the
commerçant, sauf si cette expression fait expression refers to the price or retail value
référence à un prix ou à une valeur au détail actually paid by the merchant to purchase the
représentant réellement le prix payé par le goods;
commerçant pour acquérir le bien;
b) divulguer, dans un message publicitaire, le (b) disclose, in an advertisement, the amount of
montant des versements périodiques à faire the instalments to be paid for the purchase or
pour l’achat ou le louage à long terme d’un bien long-term lease of goods or for a service with-
ou l’obtention d’un service sans divulguer out also disclosing, and laying greater empha-
également le prix total du bien ou du service ou, sis on, the total price of the goods or service or,
dans le cas du louage à long terme d’un bien, la in the case of a long-term lease, the retail value
valeur au détail du bien et sans faire ressortir ce of the goods; or
prix ou cette valeur d’une façon plus évidente;
c) exiger pour un bien ou un service un prix (c) charge, for goods or services, a higher price
supérieur à celui qui est annoncé. than that advertised.
Aux fins du paragraphe a.1 du premier alinéa, le For the purposes of subparagraph a.1 of the
prix réellement payé par le commerçant est first paragraph, the price actually paid by the
celui qu’il a payé, déduction faite de tous les merchant is the price the merchant paid
frais qu’il a payés mais qui lui sont remboursés. reduced by all the charges the merchant paid
but that have been or will be reimbursed.
Aux fins du paragraphe c du premier alinéa, le For the purposes of subparagraph c of the first
prix annoncé doit comprendre le total des paragraph, the price advertised must include
sommes que le consommateur devra débourser the total amount the consumer must pay for the
pour l’obtention du bien ou du service. goods or services. However, the price
(continued)
Toutefois, ce prix peut ne pas comprendre la advertised need not include the Québec sales
taxe de vente du Québec, ni la taxe sur les tax or the Goods and Services Tax. More
produits et services du Canada. Le prix annoncé emphasis must be put on the price advertised
doit ressortir de façon plus évidente que les than on the amounts of which the price is made
sommes dont il est composé. up.
publicitaire ne peut, dans une représentation may fail to mention an important fact in any
qu’il fait à un consommateur, passer sous representation made to a consumer.
silence un fait important.
236.1. Aucun commerçant ne peut exiger d’un 236.1. No merchant may sell a ticket to a
consommateur, pour la vente d’un billet de consumer at a price above that announced by
spectacle, un prix supérieur à celui annoncé par the vendor authorized to sell the tickets by the
le vendeur autorisé par le producteur du producer of the event.
spectacle.
L’interdiction prévue au premier alinéa ne The prohibition set out in the first paragraph
s’applique pas à un commerçant qui satisfait does not apply to a merchant who
aux conditions suivantes:
a) il a obtenu, au préalable, le consentement du (a) has the prior authorization of the producer
producteur du spectacle pour revendre le billet of the event to resell a ticket at a higher price;
de spectacle à un prix supérieur;
b) il effectue la revente dans le respect de (b) resells the ticket in a manner that is com-
l’entente qu’il a conclue avec le producteur du pliant with the agreement the merchant entered
spectacle; into with the producer of the event;
c) il informe clairement le consommateur avant (c) clearly informs the consumer before
la revente: reselling the ticket
i. de l’identité du vendeur autorisé visé au pre- i. of the identity of the authorized vendor
mier alinéa, du fait que des billets pourraient referred to in the first paragraph, of the fact that
être disponibles auprès de ce dernier et du prix tickets may be available from the latter and of
annoncé pour ces billets; the advertised price of the tickets;
ii. du fait que le billet fait l’objet d’une revente ii. that the ticket is being resold and, where
et, le cas échéant, du prix de revente maximal applicable, of the maximum resale price agreed
auquel a consenti le producteur du spectacle; to by the producer of the event;
iii. de la place ou du siège que le billet permet iii. of the place or seat the ticket authorizes the
d’occuper, sauf lorsqu’aucune place ou aucun ticket holder to occupy, unless no specific
siège spécifique n’est accordé par le billet. place or seat is assigned by the ticket.
262. À moins qu’il n’en soit prévu autrement 262. No consumer may waive the rights
dans la présente loi, le consommateur ne peut granted to him by this Act unless otherwise
renoncer à un droit que lui confère la présente provided herein.
loi.
270. Les dispositions de la présente loi 270. The provisions of this Act are in addition
s’ajoutent à toute disposition d’une autre loi qui to any provision of another Act granting a right
accorde un droit ou un recours au or a recourse to a consumer.
consommateur.
Lois fédérales Federal Statutes
Loi sur l'intérêt, LRC 1985, c I-15 Interest Act, RSC 1985, c I-15
4. Sauf à l’égard des hypothèques sur 4. Except as to mortgages on real property or
immeubles ou biens réels, lorsque, aux termes hypothecs on immovables, whenever any
d’un contrat écrit ou imprimé, scellé ou non, interest is, by the terms of any written or
quelque intérêt est payable à un taux ou printed contract, whether under seal or not,
(continued)
pourcentage par jour, semaine ou mois, ou à un made payable at a rate or percentage per day,
taux ou pourcentage pour une période de moins week, month, or at any rate or percentage for
d’un an, aucun intérêt supérieur au taux ou any period less than a year, no interest
pourcentage de cinq pour cent par an n’est exceeding the rate or percentage of five per
exigible, payable ou recouvrable sur une partie cent per annum shall be chargeable, payable or
quelconque du principal, à moins que le contrat recoverable on any part of the principal money
n’énonce expressément le taux d’intérêt ou unless the contract contains an express state-
pourcentage par an auquel équivaut cet autre ment of the yearly rate or percentage of interest
taux ou pourcentage. to which the other rate or percentage is
equivalent.
Références
Baudouin J-L, Jobin P-G (2013) Les obligations, 7e édition, par Jobin P-G et Vézina N. Éditions
Yvon Blais, Cowansville.
Karton J (2019) Control of price related terms in standard form contract in Canada (common law).
Piecemeal solutions to demonstrated problems of unfairness (see in this volume).
Lafond P-C (2015) Droit de la protection du consommateur. Théorie et pratique. Éditions Yvon
Blais, Cowansville.
Lluelles D, Moore B (2018) Droit des obligations, 3e édition. Éditions Thémis, Montréal.
Parent G (2000) L’industrie laitière canadienne devant les contraintes de la réglementation de
l’Organisation mondiale du commerce. 41 Les Cahiers de droit 513 (en ligne : https://www.
erudit.org/fr/revues/cd1/2000-v41-n3-cd3823/043614ar).
Form Contracts in Chile: Price Control
and the External Intervention of Contracts
in Chilean Law
Jaime Alcalde Silva and Juan Luis Goldenberg Serrano
Abstract In this chapter we analyse the evolution and current status of the price
control regulation in Chile. It should be noted that Chilean law does not provide for
general rules for an external price control, so neither the Civil nor the Commercial
Code regulate mechanisms granting powers to any judicial or administrative author-
ity to review the economic terms of a contract. Exceptionally, the Civil Code
provides rules for the invalidation of certain contract due to laesio enormis, but, in
the context of a sales agreement, it is limited only to those referred to real estates.
Special rules have been incorporated to the Chilean legal system since the last
decades of the twentieth century, once disregarded the model of a public regime of
price fixing, mainly focussed in the need for a stronger consumer protection.
However, such amendments do not include a regulation of “standard term contracts”,
but only to abusive clauses in “contracts of adherence”, which do not expressly
incorporate the possibility that judge may intervene in the economic terms of the
contract.
1 Introduction
One of the subjects where it is possible to observe a change of paradigm is the one
concerning the control of the contractual content and the admissibility of an external
revision of contracts’ clauses, especially in those areas where public protection
orders have surged to safeguard the weakest parties.1 Despite its historical origin,
the justification of the law of contracts during the nineteenth century codification
ended up being the Kantian philosophy so that the binding force that was given to
1
Tapia (2005), pp. 235–259.
J. Alcalde Silva (*) · J. L. Goldenberg Serrano (*)

Pontificial Catholic University of Chile, Faculty of Law, Santiago, Chile
e-mail: jcalcald@uc.cl; jgoldenb@uc.cl

https://doi.org/10.1007/978-3-030-23057-9_9
270 J. Alcalde Silva and J. L. Goldenberg Serrano
them is justified as a consequence of private autonomy.2 Because of this, it is

unsurprising that the fairness of the rule of contract is founded on the fact that it is
agreed upon the fulfilment of the requirements provided by the legislator that
guarantee an exchange that is formally fair.
The analysis of the economic content of the contract is, therefore, only of
procedural nature. This explains the use of the phrase “qui dit contractuel, dit
juste” by Alfred Fouillée (1838–1912) to justify that it is not necessary to investigate
further than the proper exchange of consents of legally capable individuals regarding
an object and licit cause at the time to determine the validity of a contract.3 First, due
to the dirigiste tendencies that created a new contractual category (the “directed
contract” or “contratos dirigidos”4), and, then, as a result of the search for a more
substantial control over contractual fairness, the law of contracts has evolved
towards allowing that, in certain exceptional circumstances, the judge may review
the clauses that have been agreed upon when they present an evident lack of balance
between the obligations of the contracting parties. In the past, such clauses were
found to be abusive through the listing of a more or less open typology being
sanctioned by the judicial declaration of their absolute nullity, even though their
scope stays reserved for pre-formulated adhesion contracts entered into between a
supplier and a consumer (“contracts of adherence” or “contratos de adhesion”).
Small and medium companies, which lack the negotiating power of larger compa-
nies, have also been added to this last category of vulnerable parties.
It should be noted that Chilean law does not include specific rules for “standard
contract terms” (“condiciones generales de la contratación”), i.e., for the clauses
drafted by a commercial entity to include them in all the contracts that may be
concluded with their clients, consumers or users, regulating all the terms and
conditions of their contractual relationship without the possibility for the latter to
negotiate or modify them. The Chilean consumer regulation only provides rules for
the “contract of adherence” (“contratos de adhesion”) in the context of a contractual
relationship among a supplier and a consumer, regulating which kind of clauses shall
be deemed as abusive.5 This explains why it is not possible to conduct a comparative
analysis that is fully in line with the approach taken by other jurisdictions, which
usually regulate standard contract terms. Therefore, the review of the remedies
created to amend contractual imbalances, especially price control, requires an
analysis of the traditional rules contained in the Civil Code and those that have
been incorporated into the Chilean legal system by means of special regulation.6
In order to review the evolution of price control and the intervention of contracts
under Chilean law, it is convenient to start by examining the principle of freedom of
contract (Sect. 2), followed by a historical analysis of the control of contractual
2
Ghestin (1993), pp. 27–42.
3
Fouillée (1880), p. 410.
4
See early Alessandri (1941), pp. 5–14.
5
Morales (2018).
6
Momberg (2017) explains this situation from a comparative perspective.
Control of Price Related Terms in Standard Form Contracts in Chile:. . . 271
clauses since the enactment of the Civil Code in 1855 until the current regulation of
consumer law (Sect. 3). Then, we will present a number of different areas where
control of the contractual content exists to ensure the balance between the parties’
obligations and where an external intervention is needed to re-establish it (Sect. 4).
Finally, we will present some conclusions (Sect. 5).
Therefore, the cases of contract revision that depend on the parties’ will (for
example, the recognition of the possibility to unilaterally terminate a long-term
contract, even though the contract itself does not mention anything about it) and
the immunity that a valid contract has against subsequent legislative modifications
are beyond the scope of the present analysis.7 The latter issue paved the way for the
introduction of the “law-contract” (“contratos-leyes”), under which the State
guaranteed that it would not subsequently modify nor abrogate the franchises that
were contractually established in favour of the other contracting party.8 After 1981,
the intangibility of contracts in the face of legal reforms has been constructed on the
basis of the guarantee of the right to property (Article 19, number 24 of the Chilean
Constitution) and the impossibility to affect the essence of rights that have been
constitutionally recognised (Article 19, number 26 of the Chilean Constitution).9
2 Freedom of Contract and Judicial Intervention

of the Contract
In Chile, freedom of contract is traditionally recognised as one of the foundational

principles of the law of contracts.10 It entails that the parties are free to decide with
whom they shall contract, to enter into a contract that satisfies their interests and give
such contract the internal configuration that results most convenient for them, with
the only limits that are imposed by the nature of the contract that has been entered
into, the law, public order and public morals (Articles 1444, 1460 and 1466 of the
Civil Code). From a constitutional perspective, this freedom has the character of an
innominate guarantee, linking it to the general declaration of freedom that opens the
bases of the institutional framework (Article 1 first paragraph of the Chilean
Constitution)11 and, more specifically, with the guarantee related to economic
freedom (Article 19, number 21 of the Chilean Constitution), integrated in the
so-called “economic public order” as recognised by the Chilean Constitution.12
7
Peñailillo (2000), pp. 210–212.
8
López (2004), pp. 13–25.
9
See, for example, Fernández (2002), pp. 17–46; Baraona (2002), pp. 47–68.
10
López (2010), pp. 213–221.
11
Guzmán (2001), pp. 265–266.
12
The most common definition of this term, inspired in Ripert’s ideas, was proposed by Cea (1988),
p. 158, even though it was coined in 1978. A further analysis in the subject may be found in
Fermandois (2006, 2011).
Likewise, this led to the premise that, once a contract is concluded, the legal position
of each of the contracting parties is protected under the right to property (guaranteed
by Article 19, number 24 of the Chilean Constitution), which extends to all classes of
tangible and intangible objects (both defined in Article 565 of the Civil Code), which
means that both are covered by the action of protection of constitutional guarantees
when, due to arbitrary or illegal acts or omissions, they suffer a deprivation,
disturbance or threat in the legitimate exercise of the rights derived from the contract
(Article 20 of the Chilean Constitution).13 Such action aims to restore the rule of law
regarding the position of the affected party, without excluding that the latter may
initiate any other actions in accordance to the general provisions of the
applicable law.
The recognition of this freedom of contract implies that the parties are free to
decide the concrete terms to which they bind themselves, including the essential
elements of the contracts and even the proper contractual type. In this way, the
parties can set the price without additional parameters other than those that allow the
control of legality of the contractual content. Nevertheless, when a contract violates
the minimum requirements established by the law, reflected in an illicit object or
cause (Article 1445, numbers 3 and 4 of the Civil Code), the judge has the power
to intervene and declare the nullity of the contract, as long as the legal defect is
evident (Article 1683 of the Civil Code).14 In such cases, however, there is no proper
revision of the contractual rule that governs the parties, as such only exists when
there is a relevant modification of the content of the contract, not when the judge
alters its nature or makes it disappear.15
Nevertheless, the inexistence of a mechanism for a judicial revision of the
contract does not mean that, since the enactment of the Civil Code (1855) and,
especially, since the process of socialisation of the law that was initiated at the
beginning of the twentieth century, we may not find certain ways to control con-
tractual fairness, first, in a merely procedural fashion and, later, with a substantial
reach. This control has been construed in reference to the initial equilibrium of the
obligations of contractual parties through the classic figure of the laesio enormis, the
fixing of prices in the context of high inflation periods, the limitation of the interest
rate that can be agreed upon and, finally, the recognition of abusive clauses in
pre-formulated adhesion contracts between a supplier and a consumer.
Another legal structure traditionally associated with the judicial intervention of
contracts is the so-called “teoría de la imprevisión”, arising when there is an
13
Barros (1996), pp. 322–336; Domínguez (1996), pp. 107–137; Jana et al. (1996).
14
A well-known case, where such power was used by the courts was the one related to
EUROLATINA, a financial institution, where the loan agreements and the promissory notes were
declared void ex officio because they hid usury. This was the case as the renegotiations of the loans
included the interest of all of its installments, and not only those where the client was actually late in
his payments. The first case was solved by the Supreme Court in 7 August 2006, while other
identical judgments were delivered during the next years.
15
Peñailillo (2000), p. 219.
excessive supervening charge of the obligations.16 Due to the time of its drafting, it
was not contemplated in the Chilean Civil Code as a general rule, but we may find it
in some of its Articles, allowing for contractual obligations to be adjusted if
unforeseen circumstances occur during the performance of the contract that distort
the economic balance that should exist between the contracting parties. Such is the
case, for example, in the second rule of Article 2003 and Articles 2180 and 2227 of
the Civil Code, related to construction contracts, loans and deposits, respectively.17
For a long time, the majority of legal scholars believed that Article 1545 of the Civil
Code, which recognises the principle of the binding force of contracts, only allows
for the adaptation of a contract by the consent of both parties or due to a legal cause,
without conferring to the judge the power to intervene and modify the terms of the
contract.18 Hence, it only grants the courts the power to decide the matter that has
been submitted to them, applying the contract with the terms as agreed by the parties
and without any further possibility of intromission than those expressly permitted by
the law, such as the interpretation of time period clauses conceived in vague or
obscure terms on whose interpretation and application the parties disagree (Article
1494 of the Civil Code).
The same criterion has prevailed in the jurisprudence as well. In this sense, we
may repeat the classic quote of the Supreme Court’s judgement of January 10th,
1925, deciding “the courts lack powers to derogate or leave without compliance the
law of the contract, either due to reasons of equity or of customs or administrative
regulations”.19 Although there have been subsequent judgments that have accepted
the revision of the contract due to excessive supervening change of the obligations,
especially in arbitration and in administrative courts,20 mainly based on the appli-
cation of the principle of good faith regarding the performance of a contract (Article
1546 of the Civil Code) and the reading of the aforementioned Article 1545 of the
Civil Code in light of its historical and dogmatic foundations, the reaffirmation of the
binding force of the contract over any extrinsic consideration to the parties’ agree-
ment remains dominant.21
Nevertheless, in certain exceptional cases the courts have reviewed the terms of a
contract and modified them accordingly, even though the judgments do not
expressly admit this revision and thus a general principle cannot be extracted from
these judgments. Among these cases, reference should be made to partial nullity, the
16
Peñailillo (2000), pp. 221–235. The denomination “teoría de la imprevisión” appears for the first
time in de la Maza (1933), pp. 73–117 and 119–158. Other references may be found in González
(2018), pp. 309–312.
17
On the contrary, other dispositions of the Civil Code expressly reject the possibility of the revision
of a contract. This occurs in articles 1983 and 2003, rule 1 , for the contracts of leasing of rustic
properties and of construction, respectively.
18
Abeliuk (2001), pp. 119–120.
19
Galtier con Fisco, Corte Suprema, Cass civ 10 January 1925, Revista de Derecho y
Jurisprudencia 23, section 1st, pp. 423–441.
20
Valenzuela (2018).
21
Momberg (2013), p. 11.
introduction of indexation formulas in contracts that originally did not include them,
the suppression of other contract terms expressly agreed by the parties whose
application leads to unfair or unjust results, and the adjustment of work remuneration
based on a percentage of the utilities of the employer to correct the currency’s
devaluation.22
3 Historical Evolution of Price Control in Chilean Law
Considering the inexistence of an organic regulation of the “standard contract

terms”, and notwithstanding the possibility to control abusive clauses in the context
of contracts of adherence, it is necessary to follow the path of an historical review of
the price control phenomenon. This brief historical review will allow us to illustrate
the current regime provided for pre-formulated adhesion contracts in a better fash-
ion, where the economic imbalance of the obligations is described as a residual
figure within the typology of abusive clauses [Article 16, letter g) of Act N 19,496].
3.1 Laesio Enormis in the Civil Code (1855)
Unlike the previous versions of the Civil Code, where the laesio was one of the
defects of consent admitted together with error, duress and fraud (Article 4 of Title II
of the Project of 1842, Article 14 of the Project of 1847 and Article 1629 of the
Project of 1853), the Chilean Civil Code did not establish a general case for the
control of the economic balance of contractual obligations. This means that the
laesio does not involve a generic cause of rescission of commutative contracts that
evidence a disproportion between the parties’ obligations. On the contrary, the Civil
Code limits itself to establishing certain cases that admit concrete solutions to
remedy the lack of equivalence between what the affected individual ideally has a
right to receive and what he actually receives.
The analysis of these cases and the way in which the imbalance is corrected
shows that the Code has chosen a strictly objective system, adopting a method that
does not take into consideration the consent of the affected party, the intentions of
the contracting parties, nor the goals that the contract pursues, accepting that there is
an arithmetic difference between the price abstractly considered by the law as fair
and the one effectively agreed by the parties. The reason behind this is the adoption
of an idea of purely procedural fairness.23 It supposes that the control of the contract
should stay circumscribed to reviewing the conditions under which the parties
reached an agreement, reviewing whether the discussion over its terms was in line
22
Momberg (2013), pp. 11–12.
23
De la Maza (2007), pp. 572–573; Tapia et al. (2002), pp. 18–21.
with the parameters considered as acceptable by the law. As such, the Civil Code
assumes that the observance of certain minimum requirements (legal capacity,
consent exempt from defects, licit object and licit cause) gives rise to a contractual
obligation, which is binding for the parties (Articles 1445 and 1545 of the Civil
Code). Then, it follows that the commutative character of the exchange is assured by
the fact that the reciprocal obligations are regarded as equivalent by the parties
(Article 1441 of the Civil Code), even though they are not truly so, since the
determination of the price corresponds to both parties or to a third party, but never
to one of them alone (Articles 1808 and 1809 of the Civil Code). Thus, in principle,
the judge may not intervene in the contract and challenge what the contracting
parties have agreed upon (Articles 1545 and 1567 of the Civil Code), under the
maxim of volenti non fit iniuria.24
Once the codifying mechanism aiming at expanding the scope of the laesio was
abandoned during the discussion of the Project of 1853, in contrast with what
occurred with the defects of consent (Article 1451), the Civil Code only contem-
plated the possibility to invocate the laesio enormis in certain expressly determined
cases. The relevant provisions allow for the review of the contract depending on the
type of goods involved (sale and barter of real estate), the nature of the act (loan
contract and partitioning of goods) or their dependence on other referential obliga-
tions (liquidated damages clauses and anticresis). It must be added that in one of the
specific cases where the Code admits the laesio, its content is blurred. This is the case
of the acceptance of an inheritance or a legacy (Article 1234 of the Civil Code)
where there is no laesio, but only a lesser economic advantage based on the
expectation of the assignee.25
Whichever the case, the remedy foresaw by the Civil Code to re-establish the
economic balance between the parties through the concept of the laesio enormis is
not identical in all cases, and depends on the contract concerned:
(a) Sales contract of real property This kind of contract can be rescinded by laesio
enormis, except when the sale has been made by judicial order (Articles 1888 and
1891 of the Civil Code). The laesio enormis exists in those cases in which the seller
receives a price that is lower than half of the fair price of the object that is being sold,
or when the fair price of the object bought is lower than half the price paid by the
buyer (Article 1889 of the Civil Code). The contracting party against whom rescis-
sion of the contract is required can consent in its rescission or restore the balance to
the fair price with addition or deduction of a 10%. This means that the buyer may
complete the fair price with a deduction of a 10%, and the seller may return the
excess of the sum received over the fair price with an addition of a 10% (article 1890
of the Civil Code).
The formulation of the laesio regarding the purposes of a sales contract varied in
the different projects of the Civil Code, but in all of them the common denominator
24
The aphorism comes from Decio (1588), p. 631, even though its origin can be tracked back to
Dig. 47, 10, 1, 5.
25
Domínguez (2012), p. 106.
is a remoteness from the model of the French Civil Code, its most relevant source in
the subject of obligations (Message of the Chilean Civil Code, § 36).26 The most
marked difference, in addition to the formula used to calculate the imbalance of
obligations, is that the latter only contemplated the possibility of rescission for the
seller (Article 1674), while the Chilean Code also provides it for the buyer (Article
1889). Again, this arrangement is justified by the objective qualification of the
laesio, not being necessary to refer to the concrete reasons behind the imbalance,
that in the French Code were explained as a hypothetical underlying situation of
necessity of the sellers, consequently determining an under-priced value.
In subsequent sector-specific regulations, and in spite of the real estate nature of
the object of sale, the doctrine of the laesio provided in the Civil Code was excluded.
For example, there is no possibility of rescission due to this cause in sales contracts
and in the barter of a mining concession or a share or a material part of it (Article
170 of the Mining Code). In this case, the reason for this exception can be found in
the random character of mining exploration and exploitation, making unsuitable a
solution, justified by the imbalance of the obligations of a commutative contract.27
(b) Barter of real property A barter exists when the parties mutually bind them-
selves to give a specific thing to another (Article 1897 of the Civil Code), and when
the price paid for one thing consists partly of money and partly of some other object
which is worth more than the money (article 1794 of the Civil Code). The Civil Code
makes the provisions of sales contracts applicable to this contract in all that is not
opposed to its own nature, considering that each of the parties is a seller and that the
fair price is what is paid for what is received in return (article 1900). Therefore, a
barter of real property can also be rescinded due to laesio enormis (Articles 1888 and
1891 of the Civil Code), following the same rules indicated for the sales contract of
real property.
(c) The liquidated damages clause Article 1544 of the Civil Code contemplates
three cases where an enormous liquidated damages clause exists. The first case refers
to contracts where one of the parties has bound itself to pay a determined sum as an
equivalent to what the other party must render, and the penalty has also the form of
the payment of a determined amount. In this case, the affected party can request the
reduction of the liquidated damages in all that they exceed the double of the main
obligation, including the latter in such calculation. The second case refers to loan
agreements, where the liquidated damages cannot surpass the maximum conven-
tional interest rate, being the borrower able to request its reduction to this measure.
The last hypothesis relates to obligations of priceless or undetermined values, where
the judge can moderate the convened liquidated damages when, in specific circum-
stances, it seems unreasonable (enormis)
26
Guzmán (2005), pp. 207–251.
27
Lira (2015), p. 246.
(d) The acceptance of an inheritance Once made, the acceptance of an inheritance

cannot be rescinded if not by the individual proving duress, fraud or laesio enormis.
For this purpose, it is understood that a severe laesio exists when the heir has
experienced a decrease in the total value of its assignment in more than a half by
means of a testamentary disposition of which he did not have knowledge at the time
of his acceptance (Article 1234 of the Civil Code).
(e) The partition of goods The general rule is that partitions may be annulled or
rescinded in the same way and in conformity with the same rules as contracts.
Regarding the laesio enormis, it exists when an assignee has been prejudiced in
more than a half of its share (Article 1348 of the Civil Code).
(f) Loan with interests In principle, the restitution of borrowed money is made by
giving the creditor an identical amount to the one indicated in the contract (Article
2209 of the Civil Code). At the same time, the interest rate that the parties could
agree upon does not have more limitations than those established by the law or, when
the law omits a specific rule, that the interest exceeded half of what has been proven
to be the legal interest rate at the time of the agreement, because then the borrower
may ask the judge for a reduction to that legal interest rate (Article 2206 of the
Civil Code).
(g) Antichresis In this contract the parties can agree that the fruits of a thing that is
given to a creditor in antichresis may compensate the interests owed to him due to
any kind of debt, either entirely or until the concurrence of determined values. When
this happens, the stipulated interests are subject to the same reduction as in a loan
agreement (Article 2443 of the Civil Code), that is, the legal interest rate.
Scholars have recently argued that to be in a state of danger and necessity, as
recognised by other legal systems (for example, Article 1447 of the Italian Civil
Code or Article 1143 of the French Civil Code, after its amendment in 2016), cannot
be included in the rescissory effect of duress as a defect of consent (Article 1682 of
the Civil Code), mainly due to the wording of the relevant provisions (Articles 1456
and 1457 of the Civil Code) and because a general provision of laesio does not exist
under Chilean law.28 For some authors, however, these provisions could be accom-
modated, provided that the assimilation of violence to the force of the pressure
exerted on one of the contracting parties due to the economic circumstances is done
cautiously, without excluding that there may be a reasonable imbalance between the
contracting parties in their economic capacities.29 This means that the acceptance of
these cases must be based on the conduct of the counterparty, that is the party who
benefits from the contract, because its interests must also be taken into consideration.
If this party has taken advantage of external circumstances to enter into business, and
was aware of the situation of constraint in which the other party found itself, one
cannot see any problems in resorting to the concept of duress to control the economic
28
León (1952), pp. 229–230; Vial (2003), pp. 113–115; Vodanovic (1991), vol II, pp. 220–222.
29
Ducci (2002), pp. 273–274; Domínguez (2012), pp. 102–104; Tocornal (1981).
balance of the contract, especially when the laesio is impossible to apply. The
condition for this annulment will depend on the severity of the state of necessity
or external situations that lead the other party to consent to bind himself in terms that,
under normal circumstances, he would not have agreed upon. Certainly, this would
be even more evident if the other contracting party takes advantage of this state or
these circumstances to force him to contract.30
3.2 The Commercial Code (1865)
The principles of procedural fairness that exist in the Civil Code were confirmed a
decade later by the Commercial Code, which provides, as a general rule, that a
rescission due to laesio enormis does not exist in commercial contracts (Article 126).
The main reason for this is that real property was excluded from the scope of “acts of
commerce” (Article 3 ).31 In the case of a loan agreement, its commercial regulation
provides that gratuity is not presumed and, therefore, it is necessary to agree
expressly and in writing that the loan did not accrue interests (Articles 798 and
799 of the Commercial Code). Then, by default, the principal accrued legal interests
in favour of the creditor, without it being possible to agree on a higher rate (Article
798 of the Commercial Code). Only in the case of delay in the fulfilment of the
obligations that the contract imposed on the borrower, whether or not interests were
agreed upon, the latter is obliged to pay the legal interest from the day when the
payment was requested in virtue of a judicial order (Article 801 of the
Commercial Code).
3.3 The Criminal Code (1874)
In the section dedicated to frauds and other deceits, the Criminal Code incorporated
the crime of usury (Book II, Title IX, § 7). It aimed to punish, with minor prison in its
minimum to medium degrees (between 61 days and 3 years of prison) and with a fine
of one hundred Chilean pesos, those that habitually provided values, in any way, at
an interest rate that exceeded the maximum that the law allowed to agree upon,
abusing the weakness of the one who took them (Article 472). Since then, the loan
with an interest that surpasses half of the current interest rate (Article 2206 of the
Civil Code) has been sanctioned as a crime.32 The description of the criminal type
30
Domínguez (2012), p. 104.
31
Such Article was amended by the Decree-Law 1953/1977, that included a new case of “com-
mercial act”: number 20 of the Article 3 , referred to the enterprises dedicated to building
constructions.
32
The crime already existed in the Partidas (1, 13, 9).
was modified in 1946 by Act N 8,713, which eliminated the requirement of a

habitual conduct. The subjective requirement, regarding the abuse of the position on
the part of the individual that commits usury, substituted the penalty of the crime
(since then, prison in any of its degrees), added that the assessment of the evidence in
the proceedings instructed for its investigation would be in conscience, and provided
for a different situation for cases in which the commission of usury had been done by
a foreigner, whether or not he has been nationalised Chilean.
3.4 The Establishment of a Public Regime of Price Fixing

(1932–1982)
The economic crisis resulting from the fall of the New York Stock Exchange in 1929
severely affected the Chilean economy. In fact, according to a report by the League
of Nations (World Economic Survey), Chile was the most devastated country by the
Great Depression.33 Exports of nitrate and copper collapsed, causing serious conse-
quences on the domestic economy due to falling tax revenues and declining public
funds. In mid-1931, the domestic economic situation reached its lowest point,
forcing the payment of foreign debt to be suspended for the first time in history.
The unemployment, the shortage of product and the social discontent ended with the
resignation of President Carlos Ibáñez del Campo, giving way to a succession of
unstable governments and the birth of the brief Socialist Republic of Chile (from
June 4th to September 13th, 1932).
One of the measures adopted to face these problems was the creation of the
“General Commissariat of Subsistence and Prices” (“Comisariato General de
Subsistencia y Precios”) by the brief government of Carlos Dávila. Established by
Decree-Law N 520/1932 and directly dependent on the President of the Republic,
the Commissariat was intended “to ensure to all the inhabitants of the Republic the
most convenient economic life conditions” (Article 1 ). This translated into broad
powers, such as expropriating agricultural land, industrial companies and commer-
cial establishments, adopting measures to avoid hoarding, resolving claims, setting
production rules and quality standards, importing goods that were found in insuffi-
cient quantities within the country, establishing bands of prices for first necessity
goods and even fixing their prices when the Commissariat considered it convenient
to do so.
Three decades later, during the second government of President Carlos Ibáñez del
Campo, through the Decree with Force of Law N 173/1953, the Commissariat was
replaced by the “Superintendence of Supply and Prices” (“Superintendencia de
Abastecimiento y Precios” or “SAP”), subordinated to the Ministry of Economy,
Promotion and Reconstruction. In turn, the new authority was replaced 7 years later
by the “Directorate of Industry and Commerce” (“Dirección de Industria y
33
League of Nations (1933), p. 214.
Comercio” or “DIRINCO”), created by the Decree with Force of Law N 242/1960,

also overseen by the same Ministry. The latter focused its functions on the oversight
and control of abusive practices, setting prices, receiving complaints from con-
sumers, verifying their veracity and, if appropriate, sanctioning the offender. For
such purposes, the DIRINCO had the corresponding powers and a staff composed by
experts in making judgments and delivering technical opinions on the characteristics
of a wide range of products and services.
After the coup d’état of September 11th, 1973, the new government restructured
the economy adopting a free market model inspired in the ideas of the Chicago
School of Economics, limiting the State’s influence over it. For what is now of
interest, on January 22nd, 1974, Decree-Law N 280 was issued, aiming at the
systematisation into a single legal body of the different criminal figures that consti-
tuted the so-called “economic crime” (“delito económico”) and whose main foun-
dation was “safeguarding the normality of commercial and productive activities,
allowing a healthy market competition that leads the country to true economic well-
being” (Explanatory Memorandum, No. 6). However, this was not a law that offered
protection to the consumers and it was based on the establishment of criminal
offences related to speculation, false or misleading advertising, free competition, etc.
Under the new economic circumstances, price control was pointless and, gradu-
ally, the relevant regulations started to disappear.34 Then, through Decree-Law N
3511/1980, the DIRINCO was declared in a “state of restructuring” and 2 years later
it lost its status as a control agency, becoming a service aimed to “provide guidance
destined to implement actions that will allow market transparency through informa-
tion and education of consumers”.35 In practice, these new guidelines led the
DIRINCO to divest itself of its oversight function, so that there was not a clearly
defined procedure or a fully functional mechanism for dealing with claims made by
consumers, leaving public officers with the arbitrary power to offer answers to the
arising issues. With this insufficient system, the agency continued its work through-
out the rest of the 1980s.
During this same period, Act N 16,253 of 1965 was enacted, authorising the
creation of development banks, following the recommendation of the International
Bank for Reconstruction and Development. The aim of these banks was to imple-
ment medium and long-term loans granted for capitalisation purposes, obtaining
resources for their financing from abroad in good market conditions. The Act
fulfilled its purpose partially, because only six development banks were incorpo-
rated; the first of them, by means of a public deed of October 22nd, 1974.36 Act N
16,253 was repealed by Decree-Law N 3345/1980, which ordered, in turn, to
34
These bases were described in the founding document presented early to the military Junta (Junta
de Gobierno) by a group of economists linked to the Chicago School. See El Ladrillo: bases de la
política económica del gobierno militar chileno (1992).
35
Servicio Nacional del Consumidor (2012), p. 6.
36
It was the Banco de Fomento Regional del Bío-Bío, whose operation was authorized by
Resolution no. 2, of January 15th, 1975, of the Superintendency of Banks and Financial Institutions.
include a Title XIII, dedicated to the development banks, in the General Banking Act
contained in the Decree with Force of Law N 252/1960 (Articles 107–109).
This regime was almost identical to the one existing for commercial banks and
meant a denaturalisation of these institutions, which began to operate in the short
term. This new economic landscape, added to the precariousness of the sources from
which they could obtain resources to finance medium and long-term loans (origi-
nally also to be captured in the long-term by international financial organisations),
meant that the development banks were unable to overcome the economic crisis of
1982, which led to their disappearance. The current General Banking Act, sanc-
tioned by the Decree with Force of Law N 3/1997, does not include any separate
reference to this class of entities. However, this framework served to implement an
organic system of indexed loans through the Bank of the State of Chile and the
mortgage banks, so that an updated value unit was born being adjusted according to
inflation: the so-called “Unidad de Fomento” (Decree Supreme N 40/1967, of the
Ministry of Finance).37 Since then, most long-term operations express their price in
this measure of indexation, as it is the case with the purchase and sale of real estate
and mortgage loans.
3.5 The Creation of a Framework for Consumer Protection

(1983–1997)
Decree-Law N 280/1974 was repealed by Act N 18,223 of June 10th, 1983, which
provided for consumer protection regulations. It included different offences to the
detriment of consumers that were sanctioned with a fine, being compatible with the
respective compensation for damages. However, the protection technique was still
external or procedural: certain previously described behaviours were sanctioned,
without offering an analysis of the real economic equilibrium that the contract
implied.
In 1990, the return to democracy took place and, with it, some changes started
being introduced aimed at moderating certain aspects of the market economy
imposed by the previous government. That same year, Act N 18,959 was enacted,
which created the National Consumer Service (“Servicio Nacional del Consumidor”
or “SERNAC”), under the Ministry of Economy, Promotion and Reconstruction.
However, the new authority simply assumed the functions that the different Acts that
remained in force had assigned to the DIRINCO, without contemplating major
innovations in terms of consumer protection.
37
For October 31st of 2017, the value of the Unidad de Fomento was US$39.7.
3.6 The Recognition of a Public Order of Protection

for Consumers (1997)
The recognition of a public order of protection for consumers occurred in 1997 due
to Act N 19,496, inspired by the Spanish General Act for the defence of consumers
and users (Act N 26/1984, of July 19th). It delimits the objective and subjective
scope of its provisions, defining the concepts of consumer or user and supplier
(Article 1 , No. 1 and 2), and characterising the basic consumer relationship as one
that is of a civil nature for the consumer and of a commercial nature for the supplier
(Article 2 ), recognising that it is agreed in the form of a pre-formulated adhesion
contract (Article 1 , No. 6).38 The main innovation of this Act was to change the
approach to the analysis of contractual fairness, considering the problem now from a
substantive point of view.39 This implies that the judge should review the terms of
the contract and ask himself, regardless of how they were agreed, whether or not they
are fair. This is achieved through the qualification of the consumer relationship as a
contract, in which the clauses have been proposed unilaterally by the supplier
without the consumer being able to alter its content before it was entered into (Article
1 No. 6), and the establishment of certain rules of equity in the stipulations and in
the fulfilment of said type of contracts (Title II, § 4), especially by providing a
typology of abusive clauses that ends with a general rule that describes them from
the perspective of an imbalance affecting the consumer (Article 16).
Between 1999 and 2004, the Consumers’ Rights Protection Act was modified to
incorporate new rights, such as the regulation of extrajudicial collection procedures
(Act N 19,659, of 1999, and Act N 19,761, of 2001), the establishment of
withdrawal rights in certain types of contracts, the elimination of a differentiated
typography in the drafting of consumer contracts, the facilitation of the incorporation
of consumer associations, the recognition of class actions and the introduction of a
generic hypothesis of an abusive clause based on the economic equilibrium of the
contract (Act N 19,955, of 2004). In 2011, due to Act N 20,543, the procedure of
collective or diffuse interests was regulated. As from Act N 20,555, of March 22nd,
2012, a set of attributions came to strengthen the rights of consumers of financial
products and services and granted more powers to SERNAC. Subsequently, the
protection for consumer credit and extrajudicial collection procedures (Act N
20,715, of 2013) and the sale and rental of video games (Act N 20,756, of 2014)
have been improved. The last amendment to the Consumer’s Right Protection Act
was introduced in 2018 by means of Act N 21,081, which strengthened the powers
of the National Consumer Service (SERNAC) and increased the fines and other
penalties in case of breach of the applicable consumer protection regulation.
38
Tapia et al. (2002), pp. 49–58.
39
De la Maza (2007), pp. 572–573.
3.7 The Extension of Part of the Public Order of Consumer

Protection to Small and Medium Companies (2010)
In 2010, Act N 20,416 was enacted, with the view to facilitate the development of
smaller companies (micro, small and medium companies) by adapting and creating
regulatory rules that govern their incorporation, operation and termination, consid-
ering their size and degree of development (Article 1 ). Thus, the scope of this Act
extends to all those companies whose annual revenues from sales and services and
other activities of the line of business have not exceeded 100,000 unidades de
fomento in the last calendar year (article 2 ). Part of the regulatory adaptation
proposed by this special statute includes assigning the character of consumers to
micro or small companies, which means that the rules established in favour of them
by Act N 19,946 in paragraphs 1, 3, 4 and 5 of Title II, and in paragraphs 1–4 of
Title III are applicable to the acts and contracts concluded between them and their
suppliers, or, at the option of the former, the other applicable provisions between
parties (Article 9). The only exception is that the rules relating to the function
assigned by that Act to SERNAC are never applicable to this kind of companies.
Finally, micro and small companies cannot renounce the application of these pro-
visions in advance.
3.8 A New Regulation of the Maximum Conventional Interest

(1974, 1981 and 2013)
Decree-Law N 455/1974 established a regime for money loans. It was a new

category, closer to economic science than to the nomenclature of the Civil Code
and the Commercial Code, which the Act itself defined in its Article 1 . The purpose
was to deal with the inflation-related issues that Chile experienced during the
previous years, sharpened in the 1972–1973 period, recognising the indexation of
monetary obligations to ensure the conservation of its purchasing power. However,
the maximum conventional interest continued to be the one that the said decree-law
or other laws established as such [Article 5, letter e)], with any contrary stipulation of
the parties being deemed as not written (Article 6). In that case, the interest due was
reduced to the legal interest rate (Article 6 ), which was 6% [Article 5, letter a)], just
as it was established in the Civil Code (Article 2207).
The aforementioned Decree-Law N 455/1974 was repealed in 1981 by Act N
18,010, which established a revised discipline for money loans. Such are those for
which one of the parties delivers or promises to deliver an amount of money and the
other to pay it at a different moment than that in which the agreement is concluded,
including the discount of documents representing money (Article 1 ). Unlike the
general regulation of the Civil Code, in these transactions there is not always a limit
to the interest rate that the parties can agree on. Expressly exempted from any limit
are (1) the money loans to banking or financial institutions, either foreign or
international; (2) those that are settled in foreign currency for foreign trade trans-
actions; (3) those that the Central Bank of Chile carries out with financial institu-
tions; and (4) those that have as a debtor a bank or financial company (Article 5 of
Act N 18,010).
For the remaining transactions, a limit was set for the interest rate that the parties
could conventionally agree upon, preventing the inclusion of interests that exceeded
the current interest rate at the time of the agreement by more than 50%, whether a
fixed or a variable rate had been agreed upon, being deemed as not written any
stipulation that exceeded this conventional maximum rate (articles 6 and 8 of Act
N 18,010). This means that the interest due is reduced to the legal interest, which is
set periodically by the Superintendency of Banks and Financial Institutions
distinguishing between indexed transactions in national currency, in one or more
foreign currencies or expressed in said currencies or indexed according to their
value, as well as the amount of the credits (article 6 of Act N 18,010). Act N
20,715, of 13 December 2013, modified the base for calculating the maximum
conventional interest, preserving the sanction for the case in which this is agreed
upon. Thereafter, the determination of the maximum conventional interest rate
requires distinguishing several cases.
It should be noted that Act N 20,715, together with establishing a new general
calculation mechanism, makes certain additional distinctions depending on the type
of transaction in question and the applicable payment mechanism. It also established
a sanctioning regime for the collection of excessive interest that accumulates to the
other applicable civil, criminal and administrative sanctions, which has the character
of an infringement of the rights of consumers guaranteed by Act N 19,496.
Thus, the new fourth paragraph of Article 6 of Act N 18,010 provides that “[a]n
interest that exceeds the product of the respective capital and the higher figure
between: 1) 1.5 times the legal interest rate at the time of the convention, as
determined by the Superintendency for each type of credit operation, and 2) the
current interest rate of the time of the convention, increased by 2 percentage points
in an annual basis, may not be stipulated”. The first limit corresponds to the
calculation formula foreseen in the original wording of the rule, while the second
limit will only be applicable as long as the current interest rate for a given money
loan is less than 4% per year.
On the other hand, in the case of those money loans denominated in non-indexed
domestic currency, for amounts equal to or less than 200 unidades de fomento, for
periods longer than or equal to 90 days, new Article 6 bis of Act N 18,010
establishes that no interest may be stipulated that exceeds the current interest rate
applicable at the time of the convention for money loans denominated in
non-indexed domestic currency for amounts greater than 200 and less than 5000
unidades de fomento and for longer periods or equal to 90 days, increased by an
additive term whose value shall be (1) 14 percentage points over an annual basis, in
transactions exceeding 50 unidades de fomento; or (2) 21 percentage points over an
annual basis, in those transactions for amounts equal to or less than 50 unidades de
fomento.
This special limitation was the main concern expressed in the framework of the
discussion of Act N 20,715.40 In this type of transactions, usual in consumer loans,
it was identified that interest rates rose significantly above those that corresponded to
other money loans. Hence, the calculation model of this new conventional maximum
interest rate is made in relation to another tranche, such as the one corresponding to
money loans denominated in non-indexed domestic currency for amounts greater
than 200 and less than 5000 unidades de fomento and for periods longer than or
equal to 90 days. This is a section in which the interest rate has historically been
more competitive, especially considering that it is the one usually applied for loans
related to automotive and housing financing. But it should also be noted that, in order
not to provoke a sharp fall in interest rates in these smaller loans, the transitional
provisions of Act N 20,715 contemplated a stabilisation mechanism through com-
plex rules for determining the maximum conventional interest rate for this type of
loans.
For those cases in which the payment mechanism consists of the deduction of the
instalments or of the principal directly from a pension that the debtor is entitled to
receive, the maximum conventional interest that can be stipulated will be the legal
interest rate for non-indexed transactions in national currency for amounts greater
than 200 and less than 5000 unidades de fomento and for periods equal to or greater
than 90 days, increased by 7 percentage points over an annual basis (Article 6 bis,
fourth paragraph, of Act N 18,010). The rationale behind this maximum rate (less
than the one explained in the previous paragraph) comes from the lower risk of
breach that the payroll discount implies. With this, it is intended that the interest rate
reflects what its traditional financial formulation actually means, i.e., the risk implicit
in a credit relationship.
Finally, Article 6 ter of Act N 18,010 refers to the maximum interest rate
applicable to credits that originate in the use of credit cards through a line of credit
previously agreed upon and credit lines that access a current bank account. In this
case, Act N 20,715 did not establish a particular interest rate but raised to a legal
rank the calculation formula provided until then by regulations of the Superinten-
dency of Banks and Financial Institutions.41 It is based on the maximum amount
authorised for the aforementioned operations, whether by a rotating or a merged line
of credit, corresponding to the maximum interest in force at the moment in which
they accrue. Something similar happens with respect to credit transactions that are
divided in instalments, in which the maximum conventional rate will be established
according to the amount and the term of the respective transaction, and in effect will
correspond to that at the time of such transaction.
40
This was pointed out in this way in the Presidential Message of the Bill of Law (No. 184-359,
of 2011).
41
In this regard, the discussion on this point can be reviewed in the second report of the Finance
Committee of the Senate (October 1st, 2012), and the provisions contemplated in Chapter 7-1 of the
Updated Compilation of Rules of the Superintendency of Banks and Financial Institutions.
3.9 The Revision of the Price (and Other Contractual

Conditions) in Bankruptcy Procedures
One of the many novelties contained in Act N 20,720, of January 9th, 2014, of
reorganisation and liquidation of assets of companies and individuals, refers to a new
bankruptcy revocation system, contained in its Chapter VI. Under the idea that
“without prejudice there is no revocation”,42 this element is established as the
pivot on which the entire regime of revocation is articulated, since it is only possible
through it to identify its purpose within the framework of insolvency proceedings, as
a dependent tool for the fulfilment of its essential objective: the best protection of the
credit by increasing the possibilities of satisfaction. In this sense, it is the verification
of the damage that will model the effects of the revocation, which, in the Chilean
system, is articulated as a reintegration mechanism or patrimonial depuration, as the
case may be.
Although the new insolvency law makes a series of distinctions for the revocation
of acts, differentiating the statute applicable to procedures of companies and indi-
vidual debtors (Article 2 , numbers 13 and 25), for the meantime we only pay
attention to the ones dealt with by Act N 20,720 under the title of “subjective
revocation” (Article 288). In this case, the issue lies within the scope of the
insolvency proceedings only applicable to the debtor company (reorganisation and
liquidation) in which, within a suspicious period of 2 years counted backwards from
the date of its initiation, an act has been carried out causing damage to the bank-
ruptcy estate, that is, directly to the insolvent debtor’s assets. So, the point to be
considered refers exclusively to a mathematical calculation that, due to the effects of
the act or contract, which is intended to be challenged, implies a reduction in the
mentioned estate. This means that the harm is suffered by the estate itself, which will
normally result in a lower possibility of satisfaction of the creditors in the context of
the insolvency procedure, but this last point seems to be implicit in the figure so that
its verification will not be necessary.
For these purposes, Article 288, number 2, of Act N 20,720, together with
requiring that the act or contract took place during the suspicious period and the
accreditation of the subjective element (given by the contractor’s knowledge of the
poor state of the business of the debtor company), the revocation is particularly
subject to causing damage to the estate. At this point, however, it is not clear whether
the rule refers to the estate or to the group of creditors in a bankruptcy procedure, but
we believe that this is easily resolved in favour of the first one due to the concept of
damage that the rules grants further. As such, the aforementioned Article 288, num-
ber 2, understands the existence of such damage in light of the fact that the
stipulations contained in the act or contract depart from the conditions and prices
42
Puga (2014), p. 439.
that normally prevail in the market for similar operations at the time of the act or
contract.43
This reference may lead to several observations. In the first place, the wording
that indicates that the damage will be understood to exist in the terms provided in
Article 288, number 2 of Act N 20,720, should not be taken as a mere example or as
a way in which the existence of the damage to the estate is presumed. This is because
what the legislator intended was to define the concept in order to avoid a judicial
discussion on the point, as it was the case in the case law relating to the former
bankruptcy law (first contained in Act N 18,175 and, then, in Book IV of the
Commercial Code), which could lead to uncertainties and less security in commer-
cial exchanges ( favor concursus). This is evident if we pay special attention to the
fact that Article 292, first paragraph, of Act N 20,720 requires the court to indicate,
in the text of the judgement, that accepts the revocation of the act, the difference in
value between the act or contract revoked and the value that it considers prevailing in
the market under conditions similar to those existing at the date of said act, and in the
event that is granted to the third party to preserve the goods after payment of said
difference, duly adjusted and including the interest fixed by the judge from the date
of the act or contract until the effective payment date (Article 292, second para-
graph). This alternative clearly reminds us of the power to impair the rescission of a
sales contract due to the laesio enormis (Article 1890 of the Civil Code).
Secondly, the rule refers to the fact that the difference in values must be observed
in relation to the moment when the act or contract was concluded, and it is in this
sense that the comparative criterion is given by the conditions and prices that
normally prevail in the market for similar operations at the time of the act or contract.
This means that the comparison does not extend to the value that the thing would
have had at the time of the action for revocation, since these variations are not
necessarily appreciated by the parties, and may even be totally alien to their will, so
that it did not seem convenient to include them without seriously undermining a
basic requirement of legal certainty. On the other hand, the comparative method
admits an extension that must be adjusted in virtue of the precise conditions in which
the debtor company was at the time of conclude the act or contract, especially
considering if the bad state of its business was of knowledge at least to the third
contracting party. In this way, the reference to “similar transactions” that the rule
makes should not be simply assimilated to an average of the market conditions, but
should consider the particular features of the business carried out by the parties.
Finally, the rule does not seem to be subject only to the value that is assigned to
the objects that are the part of the exchange. In this sense, the reference is also given
to all other contractual stipulations that depart from normal market conditions. This
43
Such parameter of verification of the content of a contract already existed in the article of the Act
18,046 on corporations after the reform of Act 19,705. It was established that the transactions of a
company with a related person (concept defined in article 100 of Act 18,045) could be carried out as
long as it was known and approved by the board of directors and adjusted to conditions of equity
similar to those that currently prevail in the market. The current wording of article 44 of Act 18,046
comes from Act 20,382 and limits its scope of application only to closed corporations.
is an open rule that can be the subject of an expansive interpretation by the court,
even though this issue must also be observed from the perspective of the damage to
the estate, and following the reasoning that identifies this case with the value
assigned to the objects of the obligations assumed by the parties, resulting in the
consideration of those stipulations that establish an economic sacrifice that exceeds
market conditions. Thus, for example, money loans in which the interest rate exceeds
those that prevail in the market, even for those who are in a bad state of business, or
when a rental income does not conform to comparable conditions in the leasing
market. On this point, it is especially warned that, in the event that the contested
business is a sale of assets, only the amounts actually received by the debtor
company at the date of the filing of the action for revocation are considered, as
well as the value assigned by the court will be considered in respect of bartered
assets.
Based on the foregoing, it is noted that the insolvency regulation offers a much
more robust system in terms of controlling the economic conditions of the contracts
entered into by the debtors prior to the start of the insolvency procedure. So, even
though the structure is quite close to the operation of the laesio enormis (contractual
imbalance and the possibility of avoiding the revocation of the act), the bankruptcy
context produces an expansion of its scope of application, allowing its activation in
all acts not provided for in the type of objective revocation (essentially, the onerous
acts and others like them). In turn, and, although the applicable regulations do not
make limitations in this regard, the framework seems focused on the price of the
purchase and sale of assets, as is deduced from the final sentence of Article 288 and
the possibility of avoiding revocation under the terms of Article 292, functioning as a
rule that seeks to avoid the harmful effects of what in comparative law has been
called “transaction at an undervalue”.
4 The Control of Prices in Consumer Law
Beyond the general parameters indicated in the previous sections, the current vision
of consumer law, although subject to criticism,44 is based on the enhancement of the
information duties of the supplier as the main protection technique. An equalisation
of the negotiation powers with the consumer is sought, by strengthening their right of
decision and choice in the context of the consumer act. Thus, in the construction of
Act N 19,496 and its successive reforms, such duties have been progressively
deepened through the consecration of a broad content of the aspects that must be
communicated to the consumer in order to offer a logical foundation to the figure of
pre-formulated adhesion contracts.
Accordingly, consumer law offers certain general rules aimed at the creation of
standards of transparency, where the information must be given in clear, truthful,
44
De la Maza (2010), pp. 21–52.
expeditious and timely terms (Article 1 , number 3, and Article 3 , first paragraph,
letter b), and these must be expressed in the pre-formulated adhesion contracts by
means of formally legible and understandable written clauses (Article 17); where
advertising content of an objective nature—including, of course, the reference to the
price—is understood to be incorporated into the contract and, therefore, is binding
for the supplier (Article 1 , number 4); and where “sales” are described as commer-
cial practices in which prices are temporarily reduced (Article 1 , number 8) and, as
such, are subject to more specific information requirements (Article 35).
Especially in relation to the price, Article 30 of Act N 19,496 provides that
suppliers must inform the public of the prices of the goods they sell or of the services
they offer, except for those that, due to their characteristics, must be regulated
conventionally. Hence, the price must be clearly indicated to allow the consumer,
in an effective way, to exercise his right to choose, before formalising or perfecting
the consumer act. The rule also refers to the content of the information regarding
prices and tariffs, referring to the total value of the goods or services, including the
relevant taxes, and its exhibition in display cases, racks, shelves and internet sites, or,
at least, in lists available to the public, permanently and visibly.
On the other hand, and in relation to the so-called “financial products and
services”, according to the modification introduced by Act N 20,555, the standards
of clarity and simplification are established around the notion of the “equivalent
annual charge” [Article 3 , second paragraph, letter a); and Article 17 G]. This must
be transmitted to the consumer in any advertisement in which instalments or
reference interest rates are reported, made in any mass or individual media. In this
case, the whole system is structured on the basis of the realisation that this type of
products and services have a greater complexity than other contracts, so the estab-
lishment of the informational duties are deepened and detailed through the require-
ment of the breakdown of all charging items [Article 17 B, letter a)], the
identification of the terms of the annexed services [Article 17 B, letter d)], the
indication of the amounts, periodicity and adjustments of charges, commissions,
costs and fees (Article 17 B, final subparagraph), the preparation and delivery of
summaries of the most relevant financial terms (Article 17 C), the regulation of
quotes and the information provided therein (Article 17 G), among others.
Additionally, there are other rules that complete the normative treatment of the
price in terms of consumer law. Some refer to the stability of prices throughout the
duration of the contract, so that unilateral changes and increases due to
non-contracted accessory goods or services are prevented [Article 16, letters a)
and b)]; others mention the possibility that the consumer may verify the supplier’s
compliance with the economic terms of the contract (Article 17 A), also
particularised in the field of financial products and services through the possibility
that the consumer can obtain periodic settlements that account for the total price
charged, the cost of early termination, the total value of the service and the equiv-
alent annual charge (Article 17 D).
Given the marked sanctioning profile of Act N 19,496, the consequences of the
breach of such rules is articulated on the basis of the imposition of fines (Article 24).
The question, then, is based on determining if it is possible that the courts, in
attention to their annulment powers of abusive clauses, may change the price of the
goods or services offered or provided. For such effects, the challenge is to determine
if the essential terms of the contract, especially in regard to the price, are also subject
to judicial scrutiny if they consider them contrary to the requirement of good faith,
attending for these effects to objective parameters, causing, to the detriment of the
consumer, a significant imbalance in the rights and obligations that derive from the
contract for the parties [Article 16, letter g)]. Although, in general terms, the Chilean
courts have prevented judicial review of the contract using the arguments derived
from the pacta sunt servanda (Article 1545 of the Civil Code), the formulation of
consumer law around the configuration of a public order of protection has allowed a
greater involvement of the courts in the analysis of this point. This has allowed, for
example, the revision of the amount of the penalty stipulated in penalty clauses,
membership fees in timeshare vacation systems and tariffs for communication
services, even though this trend is still residual.
5 Conclusion
Chilean law does not provide for general mechanisms for an external control of
contractual clauses. The existing principle considers that an agreement is fair if it has
been concluded by the parties without vice (error, duress or fraud). Laesio enormis is
only recognised in the Civil Code for certain contracts and only if the lack of
equivalence is relevant. On the contrary, the Chilean Commercial Code makes no
reference to it. Special rules incorporated to the legal system during the twentieth
century have contributed to a partial correction of this situation, protecting the
weakest party in a contractual relation. In such context, the Consumer’s Rights
Protection Act has been especially important, including a general regulation (even if
applicable only to consumer contracts) for contracts of adherence and the control of
abusive clauses. Such regime was then extended by the Act N 20,416 to contracts
concluded with smaller companies (micro, small and medium companies).
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Form Contracts in China
Shiyuan Han and Teng Wu
Abstract The freedom of contract has been acknowledged as one of the underlying
principles in Chinese contract law. In some cases the courts avoid price terms in
standard contracts by employing rules on controlling standard contract terms. In
more cases, the courts are reluctant to review price terms and rule against the
standard contracts provider insofar as the price terms are consistent with
government-guided prices. The Price Law and relevant administrative regulations
are in dominance in price controlling system. Nevertheless, competition in market is
expected to play a more fundamental role in generating fair prices, while the
administrative control of price terms in the area of, for example, financial services
and telecommunication services should be more restricted.
1 Introduction
Standard contract terms have driven great attention on their social and legal effects,
mainly because exempt clauses in standard contract are often used to prejudice the
counterparty’s interests.1 Regarding the way of controlling exempt clauses in stan-
dard contract, there are four approaches that can be considered: legislative control;
This chapter is one of intermediate results of National Social Science Fund Project “Contract Law
Issues involved Data Transaction against the Background of National Big Data Strategy”
(Guojia Sheke Jijin Xiangmu “Guojia Dashuju Zhanlve xia Shuju Jiaoyi de Hetongfa Wenti
Yanjiu” Jieduanxing Chengguo)[18CFX050].
1
Han (2018), pp. 918–919.
S. Han (*)
Tsinghua University, School of Law, Beijing, China
e-mail: lawhsy@mail.tsinghua.edu.cn
T. Wu (*)
Central University of Finance and Economics, School of Law, Beijing, China
e-mail: wuteng@cufe.edu.cn

https://doi.org/10.1007/978-3-030-23057-9_10
294 S. Han and T. Wu
administrative control; judicial control; and social control.2 With regard to control of
price terms in standard contract, the four-approach idea may also be referred to. In
the Chinese legal system, either administrative control or judicial control should be
according to statutes passed by the National People’s Congress and its Standing
Committee of the People’s Republic of China (PRC). Regarding judicial control of
price terms, except the provision on unconscionability, there is no general provision
in Chinese civil law that allows courts or arbitral tribunals to adjust price or avoid a
price term in standard contract. By contrast, regarding contracts for financial service,
telecommunication service, public transportation, energy, or for estate management,
in which standard terms have been widely used and contracting parties of which
have unequal bargaining powers in normal cases, Chinese administrative laws and
supervisory regulations provide general guidance or a specific limit on price terms
and give administrative authorities considerable power to regulate commercial
behaviors related to price. The significance of administrative control on price in
those transactions is largely contributed to the fact that they are mostly monopolized
by state-owned companies, or are heavily regulated.3
This report does not aim to make an argument on what kind of price control
system is preferable, rather it aims to describe in what way administrative bodies and
courts control prices in standard contract in Chinese legal system, and to provide a
few comments on this system. Although the administrative control of price terms in
standard contract mentioned above is in dominance, the freedom of contract has been
confirmed as one of the underlying principles in Chinese law. First, we will intro-
duce Chinese concept of freedom of contract—the principle of voluntariness, and a
concept accompanying it—the state intervention.
2 The Principle of Voluntariness and the State Intervention
Freedom of contract is not expressed or defined in any Chinese statute. The explicitly
expressed notion in Chinese civil law is voluntariness of civil activities, which may
be treated as an equivalent concept of freedom of contract. Art. 4 of the General
Principles of Chinese Civil Law issued in 1986 provides that, with regard to civil
activities, the principles of voluntariness, fairness, exchange on equal value, good
faith, shall be abided. Art. 4 of the Chinese Contract Law issued in 1999 (hereafter
CCL) provides that contractual parties are entitled to lawfully enter into a contract on
their own free will, and any organization or individual may not illegally interfere
therewith. As the latest and most important civil law, the General Provisions of
Chinese Civil Code (hereafter GPCCC), which was issued on March 15th, 2017 and
came into force on October 1st, 2017, provides in Article 5 that each party may enter
2
Han (2018), p. 921.
3
Wang (1996), pp. 331–332.
Control of Price Related Terms in Standard Form Contracts in China 295
into civil relationships on the principle of voluntariness, and create, modify, or

terminate civil relationships on his or her own will.
Although not expressed in any statute, the principle of freedom of contract has
been recognized as one of the streamlines in Chinese civil law in academia. It is
argued that this principle reflects the idea of individual-centered (Geren Benwei).4
Advocating freedom of contract may awaken the subjectivity of individual persons,
and provide more space for the development of individual’s potentiality.5 On the
other hand, the principle of good faith requires individuals to respect the counter
party’s interests and social interests and is considered to reflect the idea of society-
centered (Shehui Benwei).6 These two principles exist side by side.
It is worth mentioning that, the Chinese Law against Unfair Competition, which
came into force in 1993,7 and the Chinese Antitrust law, which came into force in
2008,8 both aim at protecting fair competition,9 yet the reorganization of free
competition may be read out from the purpose of those statutes.
Along with the voluntariness of civil activities, the state intervention in major
economic areas is another element of the so-called Chinese “socialist market econ-
omy”. The Constitution of the PRC confirms the socialist system as the fundamental
system of the PRC (Art. 1(2)) and declares that the state shall improve macroeco-
nomic control (Art. 15). Accordingly, economic laws, consisting of dozens of
statutes, play significant role in Chinese legal system. Among those statutes, the
Price Law of the PRC, which was issued in 1997 and came into force in 1998, has the
closest connection with the topic of price control in widely used standard contract.
The legislative purpose of the Price Law is to stabilize the general price level of the
market, to protect legal rights and interests of consumers and merchants, and to
promote the healthy development of the socialist market economy (Art. 1).10 Under
the Price Law, administrative bodies have been authorized powers both on macro-
control of the general level of price and on micro-intervention with price in specific
transaction.
4
Jiang et al. (1999), p. 2.
5
Jiang et al. (1999), p. 2.
6
Jiang et al. (1999), p. 2.
7
Administration departments for Industry & Commerce above county level are main administrative
bodies to enforce it. See art. 3(2) of the Chinese Law against Unfair Competition.
8
Administrative bodies for Antitrust Law are the National Development and Reform Commission,
the Ministry of Commerce, and the State Administration for Industry & Commerce. See art. 10 of
the Chinese Antitrust law.
9
See art. 1 of the Chinese Law against Unfair Competition, and art. 1 of the Chinese Antitrust law.
10
When translating the Price Law and other economic regulations or public notices, we refers to the
English version provided by Chinalawinfo Co., Ltd. (database@chinalawinfo.com), and the
English version provided by the Legislative Affairs Office of the State Council (Central Govern-
ment of China). Regarding the latter version, see the Legislative Affairs Office of the State Council
(2015), pp. 963–977.
3 General Rules on Standard Contract Terms
3.1 Rules on Control of Standard Contract Terms

in the Chinese Contract Law
The general rules, consisting of three provisions, on control of standard contract terms
(hereafter SCT) are provided in the CCL. Professor Hui-Xing Liang considered these
rules to be significantly important for consumer protection.11 Nevertheless, the
application scope of these rules is not limited to business-to-consumer (B2C) con-
tracts, but also include business-to-business (B2B) contracts. Art. 39(2) of the CCL
defines standard terms as clauses that are prepared in advance for general and
repeated use by one party, and are not negotiated with the other party when the
contract is concluded. Under the mainstream theory, the element of “repeated use”
should not be an essential element for SCT, since some SCT has been used merely
once; on the other hand, “being not negotiated” is not a precise expression, while
“being not able to negotiate” is more suitable and essential for SCT.12
Art. 39(1) of the CCL lays out general duties of the party providing SCT in three
respects: first, the party providing SCT shall draft provisions on rights or obligations
of contractual parties in accordance with the principle of fairness; second, it shall
inform the other party, in a reasonable manner, to draw the latter’s attention to terms
that exclude or limit the latter’s liabilities; third, it shall explain such standard terms
upon request by the latter. Regarding what kind of manner constitutes “a reasonable
manner” and the legal effects for breach of those duties to inform or explain, the rules
in the CCL fail to make further clarification.
The Supreme People’s Court’s Interpretation on Issues on the Application of
Chinese Contract Law (II) (SPC Interpretation [2009] No.5) gave instructions to the
courts that if the party providing SCT used specific marks that were sufficient to
draw the counterparty’s attention, and explained those standard terms upon request
by the other party, it should be determined as “in a reasonable manner” (art. 6(1)).
The party providing SCT should prove it had fulfilled the duties to inform and to
explain in a reasonable manner (art. 6 (1)). Given the Supreme People’s Court’s
interpretations are de facto binding upon each and every level of courts, including
itself, Art. 6 of the SPC Interpretation [2009] No.5 should be considered as the
specific rule of art. 39(1) of the CCL. Furthermore, art. 9 of SPC Interpretation
[2009] No.5 provides that if the party providing SCT breaches the duty to inform and
to explain required under art. 39(1) of the CCL, causing the other party failing to
note the exclusion or limitation of the former’s liabilities, the other party is allowed
to require the court to avoid those standard terms. This rule meets with severe
criticism, because the legal effects provided in the SPC Interpretation [2009] No.5
11
Liang (1999), p. 22.
12
Wang (1999), p. 3.
depart from the common understanding that whoever fails to give notice of SCT fails
to incorporate those SCT.13
Given art. 39(1) of the CCL explicitly refers to the principle of fairness, SCT are
vulnerable to unconscionability review.14 Not only the price term, but also other
terms allocating risks or burdens may be determined to be unconscionable and,
therefore, be declared void through the court or arbitral tribunal. It should be noted
that according to art. 151 of the GPCCC, the constructive elements of unconsciona-
bility include both subjective and objective elements. Apart from significant imbal-
ance of interests between contracting parties, one party’s taking advantage of the
other party’s hardship or inability to make reasonable judgment is necessary for
determining a juristic act to be unconscionable.
Art. 41 of the CCL lays out the underlying rule for interpreting SCT. First, if a
dispute over the understanding of SCT occurs, it shall be interpreted in accordance
with the common understanding. Second, where there are two or more interpreta-
tions, the interpretation unfavorable to the party providing SCT prevails. Third,
where the standard terms are inconsistent with non-standard terms, the latter terms
prevails.
With regard to the control of the content of SCT, art. 40 of the CCL provides that,
whereas one of the circumstances provided in arts. 52 and 53 of the CCL, which set
forth general rules on voidness of a contract or an exemption clause, exits in SCT, or
the party providing SCT exempts itself from its liabilities, aggravates the other
party’s liabilities, or deprives the other party’s major rights, the whole or part of
the SCT is void.
3.2 Rules on Control of SCT in the Chinese Consumer

Protection Law
There are specific provisions on B2C contract in the Chinese Consumer Protection
Law (hereafter CCPL), which strictly prohibits merchants from, by means of SCT,
imposing unfair or unreasonable rules on consumers to exclude or restrict the
consumers’ rights, to limit or exclude the liabilities of themselves, or to aggravate
the consumers’ liabilities. Art. 26(1) of the CCPL provides the merchants’ duties to
inform and explain. It provides that merchants who adopt standard terms in business
activities shall, in a conspicuous manner (compared with “in a reasonable manner”
stipulated in art.39(1) of the CCL), draw the consumers’ attention to the quality,
quantity, prices or fees, duration for goods or services, manners of performance,
safety precautions, risk warnings, after-sales service, civil liability, and other terms
vital to the interests of consumers, and provide explanations as required by con-
sumers. Art. 26(2)-(3) of the CCPL strictly prohibit merchants from exploiting
13
Han (2017), p. 17.
14
Bing (2010), p. 112.
consumers by means of SCT. According to the rule provided in art. 26(2)-(3), the
merchants should not provide unfair or unreasonable provisions that lead to exclu-
sion or restriction of the consumers’ rights, or restriction or exclusion of the
merchants’ liabilities, or aggravation of the consumers’ liabilities, by means of
standard terms, notices, declarations, on-site posters, etc. Otherwise these terms
should be decided to be void.
In sum, there are three types of unfair standard contract terms under the CCL:
(1) the one to exempt SCT provider from its liabilities, (2) the one to aggravate the
other party’s liabilities, and (3) the one to deprive the other party of its major rights.
There are two types under the CCPL: (1) the one to exclude or limit the consumers’
rights, and (2) the one to exclude or limit the merchants’ liabilities. Yet neither black
list nor gray list of SCT exists under Chinese civil law. It has been suggested that the
black list and gray list of unfair terms should be established to provide guidance for
contractual parties, administrative bodies and relevant social organizations, to sup-
port self-discipline, administrative supervision and judicial review on SCT.15 On the
other hand, administrative bodies have provided model contractual texts for
contracting parties that involved consumer protection. When preparing model
texts, the interests of consumers have been, somehow, taken into account. Never-
theless, standard contracts that adopt model texts should also be treated as SCT and
be reviewed according to the rules provided in the CCL and the CCPL.16
Given the effect of unfair SCT is void under Chinese law, the unfair SCT never
binds the contracting parties. In case of a dispute, contracting parties may require
affirmation from the court or arbitral tribunal. The effect of a court decision on
contractual dispute is generally limited between the plaintiff and the defendant.
Nevertheless, class action is available according to art. 47 of the CCPL, which
allows the China Consumers’ Association and the consumer associations established
on the level of provinces to take action against the infringement upon the legal rights
and interests of vast consumers.

4.1 Leading Cases Published by the Supreme People’s Court
In Zheng Chuanxin v Lianyungang Branch of China Telecom Co., Ltd., which was
published on the Supreme People’s Court’s Communiquéthe in 2017 (Issue 5), the
plaintiff was a subscriber of the defendant and the owner of the telecom number
133XXXX6469. A salesperson of the defendant called 133XXXX6469 and
recommended service of household encyclopedia via mobile. During the promotion,
the salesperson inquired about whether the person answering the call was the owner
15
Fan (2014), p. 105.
16
Bing (2010), pp. 109–110.
of the aforesaid number and informed the latter that the free period for the service
was 3 months and the cost after that period was CNY 5 per month. At that time, the
person answering the call replied with “yes”.
The plaintiff alleged that, without his consent, the defendant provided services for
him and charged fees, which infringed upon his right to information. The defendant
argued that the plaintiff accepted the services and should pay for that. The People’s
Court of Haizhou District held that the salesperson of the defendant failed to
effectively verify the identity of the owner of the mobile phone number. Without
confirmation from the plaintiff, the defendant provided a new service and charged
fees. The court decided that the defendant should pay back corresponding fees.
On the People’s Supreme Court’s Communiqué, the abstract of this decision was
published as follows: “Consumers have the right to get the true information on the
goods they buy or the services they accept. For the purpose of promoting telecom-
munication services, [in this case] the mobile phone service supplier has determined
a free period in advance and the subscriber may accept services free of charge during
that period. When the free period expires, the telecommunication supplier requires a
specific acceptance from the subscriber to continue the service and to charge fees.
Otherwise, the telecommunication supplier will infringe upon the consumer’s right
to get the information on the services he or she accepts.”
Another leading case is Luo Rongrong v Price Bureau of Ji’an City, which was
published as the Guiding Case17 No. 77 by the Supreme People’s Court. In this case,
the plaintiff sent a complaint letter to the defendant by post, reporting that Ji’an
Telecommunication Company had charged CNY 20, as the UIM card fee, on the
plaintiff for his initial subscription. The plaintiff required that the defendant should
order Ji’an Telecommunication Company to pay back the charged fee, reward the
plaintiff, and give a written reply on the handling result. The plaintiff alleged that
although the defendant issued a written reply, there was no handling of the plaintiff’s
complaint. Thus, the act of the defendant violated the Price Law and related
administrative rules. The defendant contended that the replay made to the plaintiff
was not a specific administrative act and therefore was not actionable. The People’s
Court of Jizhou District, Ji’an City held that, with respect to the action of the
defendant’s reply on the complaint letter, art. 11(1)(e) of the Administrative Proce-
dure Law provided that where the administrative authority refused to perform its
statutory duty, the courts should accept the lawsuit brought by the related party. In
this case, the defendant merely listed the charging standards for the UIM card fee,
but failed to specify the handling result of the complaint. Thus, the defendant did not
perform its statutory duty and its reply was actionable.
The core of this case is whether or not the complaint is actionable where an
administrative authority merely made an informative reply on the complaint and
17
According to art. 7 of the Regulation on Guiding Case Work issued by the Supreme People’s
Court and art. 10 of the specific rules on enforcement of this regulation, guiding cases issued by the
Supreme People’s Court shall be referred to as “reasons” rather than “legal norms” by the people’s
courts of all levels when deciding “similar cases”.
failed to handle it by law. According to the effective decision, the reply made by the
defendant without handling results with respect to the complaint was illegal. This
case reveals that the administrative authority in charge of unfair price issues has the
legal duties to investigate and to handle illegal charges by means of standard contract
terms.
4.2 Other Typical Cases Involved Unfair Price
The two leading cases in the forepart are both related to telecommunication con-
tracts. The next two cases are respectively related to unfair price terms in estate
management contracts and in highway service contracts, both of which are standard
contracts in normal transactions.
Estate Management Contract In Zheng Yuhan v Siping Lebang Taihe Estate
Management ltd. Co.,18 the defendant had been authorized by the developer, before
the estate owners’ board was established, to purchase visual monitors and to charge
each estate owner ¥ 1200. The defendant also charged the plaintiff other fees,
including ¥ 1000 for facilities management, ¥ 233 for an elevator freight, ¥ 980 for
elevator maintenance, ¥ 100 per year for elevator maintenance insurance, ¥80
for check-in procedure, ¥ 500 for cleaning construction waste, ¥ 180 per year for
public lighting and relevant maintenance. The court decided that those charges did
not break the local government’s regulatory rules, and in case the plaintiff disagreed
with the charges in convention drawn up unilaterally by the defendant, he was free to
complain to the estate owners’ board.
Real estate management companies in China normally behave not as the agent of
estate owners, but as service suppliers and estate owners’ counterparty in estate
service contracts, thus there are direct conflict of interests between estate manage-
ment companies and estate owners. With regard to estate management fees there are
large amounts of disputes in judicial practice19 and high debates in academia.20 Most
courts, as the court mentioned above, are reluctant to review price or charge items
provided in estate management contracts or stipulated in estate management con-
vention, insofar as the price or charge item is not inconsistent with the local
government department’s guided price.
Highway Service Contract In Zhang Feng v Henan Pingzheng Highway Devel-
opment, Co.,21 it has been printed on the back of highway cards that “in case the card
is lost or damaged, besides ¥ 20 for cost, the service fee is counted on the farthest
18
See Siping Intermediate People’s Court (2017) Ji 03 Minzhong No. 149 decision.
19
With regard to unreasonable fees for gas source, see the People’s Court of Tongzhou District,
Beijing City (2007) Tongmin Chuzi No.05408 decision.
20
See e.g., Xiao (2006), p. 17; Xiong (2010), p. 169.
21
Henan Province Xincai People’s Court (2012) Xinmin Erchuzi No.037 decision.
distance.” The court decided that, according to the SCT, there was no exclusive
conclusion with regard to in what specific case the fee should be counted on the
farthest distance; under such a circumstance, the interpretation should not be favor-
ing the SCT supplier. In light of the nature of and the purpose of highway traffic
service contracts, it was the defendant’s primary contractual obligation to provide
services for vehicles in highway traffic. Insofar as the plaintiff’s actual traffic
mileage being confirmed, it was inconsistent with the primary contractual obligation
of the defendant to give no regard to the actual mileage and to insist on charging on
the farthest distance. Given the plaintiff’s actual mileage charge of ¥ 35, the cost of a
visa card was ¥ 30, and the defendant charged ¥ 315, the court decided that the
defendant should return ¥ 280 to the plaintiff.
In this case, the defendant argued that, the standard term printed on the back of
highway card is drafted according to a public notice issued by the transport authority
of Henan Province (Yu Jiao Zheng [2005] No. 41), according to which the charge on
the farthest distance is allowed where there is “no highway card”. On the other hand,
the company did not restrict in the case of “no highway card”, but also incorporates
the cases of “the highway card being lost” and “the highway card being damaged”.
The court did not uphold the defendant’s argument, according to which the meaning
of “no highway card” should be expanded to include the latter two cases.
In judicial practice, it is not easy for consumers to acquire price adjustment from
the court. By contrast, the government is the main power to promote consumer
welfare by cutting unfair or unreasonable fees. Cancellation of roaming fees men-
tioned in the next part is an example. Furthermore, there are regulations or public
notices issued by the central government’s departments to restrict fees in the area of
finance and telecommunication, as well as price guidance issued by local govern-
ment in the area of, for example, estate management. These administrative measures
for controlling unfair price terms are normally enforced effectively, while on the
other hand, those guided or fixed prices may become a protection of the unfair
charge in the long run, since the change of circumstance or the development of
technology may defeat the purpose of those regulations or public notices.
5 Administrative Control of Price Terms in Standard

Contracts
As mentioned above, administrative control of price terms in standard contracts for,

for example, financial service, telecommunication service, and estate management
service, is in dominance. All regulations or public notices related to control on price
in SCT might give rise to administrative liabilities, such as fines, or suspension of the
business. As the basis for most administrative measures for price control, the Price
Law of the PRC will be introduced first.
5.1 Underlying Rules in the Chinese Price Law
The Price Law provides in art. 2 that it is applicable to “all price acts that occur
within the territory of the People’s Republic of China”, and “price” refers to price of
all sorts of goods and services. Art. 13 of the Price Law presents a general rule on
disclosure of price of goods or services, according to which merchants are required
to disclose all material information in regards to goods or services, and may not
charge any fee not specified in advance.
Art. 14 of the Price Law prohibits merchants from affecting price improperly.
Some essential rules are now overlapped with and most of them, according to the
principle of priority of the new law, are inferior to the Antitrust Law of the PRC
(2007). Among those still in effect, art. 14(d) of the Price Law prohibits merchants
from, by deceitful or misleading means related to price, enticing consumers or other
merchants into trading. Accordingly, the National Development and Reform Com-
mission issued the Regulation on Prohibition on Fraudulent Act related to Price.
Art. 18 of the Price Law provides for the limited application of government-fixed
or -guided prices. According to this provision, the government “shall issue
government-fixed or -guided prices for the following goods and services if neces-
sary: (a) a few commodities that are of great importance to the development of
national economy or to people’s livelihood; (b) a few commodities that are in
shortage of resources; (c) commodities in natural monopoly industries;
(d) important public utilities; (e) important public services.” For example, Prices
of gas,22 electricity,23 and water,24 have always been government-guided or -fixed.25
5.2 The Regulation on Prohibition on Fraudulent Act Related

to Price
The Regulation on Prohibition on Fraudulent Act related to Price (Jinzhi Jiage Qizha
Xingwei de Guiding, hereafter PFAP)26 was issued according to the Price Law. The
National Development and Reform Commission issued an interpretation on the
PFAP in 2015 (Fagai Jiajian [2015] No. 1382, hereafter Interpretation on the
22
In regard to standard for gas price in Beijing, http://www.bj-ranqi.com/content/?65.html. Page
consulted on October 3, 2017.
23
In regard to price of electricity sold in East China, http://www.sgcc.com.cn/dlfw/djzc/images/
2014/08/08/C8F2A214388CE4DF726D2ACBABF6CAAE.pdf. Page consulted on October
3, 2017.
24
In regard to price of water in China, http://www.h2o-china.com/price. Page consulted on October
3, 2017.
25
These commodities are considered to have significant impact on the development of national
economy and people’s livelihood, or to be natural monopoly. Qi (2014), p. 340.
26
Order No. 15 of the former National Development and Planning Committee (NDPC), in effect.
PFAP). According to art. 3 of the PFAP, fraudulent act related to price is defined as
inducing consumers or other merchants for trading by means of false or misleading
information on price. According to art. 1 of the Interpretation on the PFAP, the
fraudulent act related to price is determined with no regard to whether or not a
contract has been concluded.
According to art. 6 of the PFAP, it constitutes a fraudulent act related to price in
the case that one of the following circumstances exists in the merchant’s price
marking acts, during the procedure of sale of goods, or providing paid services:
“(a) the name, origin, specification, grade, quality, unit, price, service items, charg-
ing standards or other contents of the subject matter marked on price tag or price list
is not in accordance with the fact, yet it has been used to entice consumers or other
merchants to buy; (b) using two price tags or price lists at the same time for the same
goods or services, to attract customers at the lower price and to settle accounts at the
higher price; (c) using fraudulent or misleading words, pictures, or units of mea-
surement to induce others to trade; (d) using lowest prices, ex-factory prices,
wholesale prices, special prices, best price with no basis or comparison; (e) the
discount of the goods or services indicated in the sale price does not conform to the
actual discount; (f) where the inferior goods are sold, the inferior quality and the
price is not expressed; (g) where the goods are sold or the services are provided with
a gift, the name, quantities of the gift has not been marked, or the gift is fake or
defective; (h) wherever additional condition for purchase, sale of goods or supplying
services exits, the condition is not marked or is unambiguously marked; (i) any other
deceptive statement related to price.”
Art. 7 of the PFAP is related to misleading price marking, which includes all
representations or statements made by merchants that may make the public misun-
derstand the price of the goods or services. It provides that, if a merchant who
purchases, sells goods, or provides paid services undertook one of the following acts,
it constitutes a fraudulent act related to price: “(a) making fictitious original price,
fictitious reason for reduction of price, fictitious discount, deceptive statement on
reduction of price or on intention of raising price, to deceive others to buy;
(b) wholly or partly failure to fulfill the promise of price made prior to the purchase,
sale of goods or supply of services; (c) falsely claiming that the price for purchase or
sale is higher or lower than what of the other merchants, inducing consumers or
merchants into trading; (d) by means of adulteration, fake, inferior quality or
insufficient quantity, causing the quantity or quality of goods or services to be
nonconforming with what ought to be on the charged price; (e) falsely claiming
that prices of goods and services that are subject to market regulation are prices fixed
or guided by the government; (f) any other fraudulent act related to price.”
According to art. 2(1) of the Interpretation on the PFAP, the term “fictitious
original price” means that the original price indicated by the merchants in the
promotion activity is false, fabricated, does not exist, or with no trading record.
The term “fake discount” refers to original price marked in the promotion activity, or
calculated by the strike price and discount range is higher than the actual original
price. According to art. 2(2) of the Interpretation on the PFAP, “original price” refers
to the lowest price among that of the transaction in the same trading place during a
7-day period before the promotion; in the absence of any transaction within that
period, it refers to the price of the last transaction before the promotion.
According to art. 3 of the Interpretation on the PFAP, if a merchant never sold the
goods before sales promotion, it must not use “original price” or other similar
statements, to mislead consumers to believe there have been trading records on the
transaction. Otherwise art. 7(a) of the PFAP applies. According to art. 4 of the
Interpretation on the PFAP, if a merchant promotes sales by comparison with other
merchants or other sales formats, it should make an explicit explanation on the
meaning of the compared price, and be able to prove that price. Otherwise art. 6(c) of
the PFAP applies. According to art. 5 of the Interpretation on the PFAP, “the
promise of price” in art. 7(b) of the PFAP is a specific promise made by a merchant
in the form of commercial advertisement, product description, sales promotion,
sample or notice, statement, shop sign, etc. According to art. 6 of the Interpretation
on the PFAP, if a merchant promotes sales by gift and the price or value of the gift
has been labeled, it must be real and clear, otherwise art. 6(9) of the PFAP applies.
According to art. 7 of the Interpretation on the PFAP, if a merchant promotes sales
by valuable coupons or bonus points and there are restrictive conditions that are not
explicitly labeled in prominent positions on the coupon or business places, art. 6(9)
of the PFAP applies.
Art. 10 of the Interpretation on the PFAP responds to the new trend of fraudulent
act related to price committed online. It provides for liabilities for the online trading
platform supplier. According to this provision, the online trading platform supplier
that does not directly sell goods to consumers or merchants should not be considered
as the merchant stipulated in art. 3 of the PFAP. However, in one of the following
circumstances it should be determined to have committed a fraudulent act related to
price: (a) the price labeled by the online trading platform supplier on the home page
or other prominent position is lower than what labeled by the goods or service
supplier on the product details page; (b) the online trading platform supplier claims
that all or part of the goods are for promotional sales, while the supplier does not
actually carry out promotional sales; (c) price labeling software or price marking
software provided by the online trading platform supplier compels the goods or
service supplier to make false or misleading price labeling. In addition, if the online
trading platform supplier and the goods or service supplier carry out promotional
sales jointly, including marking price jointly, advertising promotion jointly, and if
the price or advertisement is false or misleading, the online trading platform supplier
shall be jointly liable with the goods or service supplier for committing illegal acts,
i.e., fraudulent acts related to price.
It is worthy to note that not all fraudulent acts stipulated in the PFAP are related to
price. For instance, in the case of false information on the subject matter’s origin,
specifications, or grade, it is a fraudulent act related to quality, rather than price.
Some other act, such as failure to fulfill the promise of a price made prior to the sale
of goods or supply of services, should be considered as breach of contract, yet it is
not a fraudulent act necessarily.
Last but not least, some of the so called “fraudulent acts related to price” in the
PFAP should be determined as bluff rather than fraud. For instance, in the case that a
merchant uses “special prices” or “best price”, which has no basis or comparison, it
is likely to be a bluff rather than a fraud. According to the decisions in Li Yan v
Guangzhou Gedi Zhendehao Commerce Ltd. Co.,27 and Lixiao Dong v Haixin
Kelong Electronic Equipment Plc. Co.,28 when determining whether it constitutes
a fraudulent act related to price in transaction, although the PFAP and its interpre-
tation are important references, the standard for determining fraud in civil law should
be the decisive standard.
5.3 Administrative Control of Price Terms in Specific

Standard Contracts
5.3.1 Administrative Control of Price Terms in Financial Service

Contracts
There are two public notices that need to be introduced in the area of administrative
control of price terms in financial service contracts. The first one is the Measures for
Regulating the Prices for Service provided by Commercial Banks (Shangye Yinhang
Fuwu Jiage Guanli Banfa, hereafter RPSCB) issued on Aug. 1st 2014, which limits
service items that commercial banks may charge fees on, and deals with the issues on
disclosure of information on service prices. According to art. 5 of the RPSCB,
commercial banks are required to establish scientific and effective service price
management systems, strengthen internal control, sufficiently disclose information
on service prices, and protect clients’ rights to acquire information on service prices
and to independently choose services.
Art. 6 of the RPSCB provides that in light of the nature and characteristic of
services and market competition statutes, the price for services supplied by com-
mercial banks should be categorized into government-guided price, government-
fixed price and market-regulated price. Art. 8 of the RPSCB further provides that the
price of basic financial services that are heavily relied on by the public and have
significant impact on the development of the national economy and on people’s
livelihood shall be subject to government guidance or be fixed by the government.29
The catalogue in Table 1 issued in 2014 shows us financial service items with
government-guided or -fixed price.
27
Qingyang Minchuzi (2015) No. 1536 decision and Cheng Minzhongzi (2015) No.5070 decision.
28
Bin Minchuzi (2014) No. 0858 decision and Yan Minzhongzi (2015) No. 0480 decision.
29
With respect to the way for determining government-guided price or -fixed price, art. 9 of the
RPSCB provides that the price administrative department of the central government shall, together
with China Banking Regulatory Commission (CBRC), determine and adjust the government-
guided pricing and government-fixed pricing items and their rates for financial services, taking
into account the costs of those services, the impact of prices on both natural persons and legal
persons, and the market competition condition.
Table 1 Financial services with government-guided or -fixed pricea
306
No. Items Services Trans. Vol.: Price (CNY) Pricing form

1 Inter-bank transfer fee for natural Transfer natural person’s funds (not incl. the credit 0–2 k (incl. 2 k): 2 for each Government-guided
person card) into the accounts of other bank through the 2 k–5 k (incl. 5 k): 5 maximum
counter 5 k–10 k (incl. 10 k): 10 maximum
10 k–50 k (incl. 50 k): 15 maximum
More than 50 k: no more than 0.03%, and
50 maximum
2 Inter-bank transfer fee for legal Transfer legal person’s funds into the accounts of 0–10 k (incl. 10 k): no more than 5 Government-guided
person other bank through the counter 10 k–100 k (incl. 100 k): no more than 10
100 k–500 k (incl. 500 k): 15 maximum
500 k–1 mli. (incl. 1 mli.): 20 maximum
More than 1 mli.: no more than 0.002%,
and 200 maximum
3 Interprovincial or inter-bank Interprovincial transfer or inter-bank transfer of No more than 0.5% of the remittance, and Government-guided
remittance charge for natural person natural person’s cash 50 maximum
4 Management fee for natural person’s Interprovincial cash withdrawal business (not incl. No more than 0.5% of the remittance, and Government-guided
interprovincial withdrawal the credit card) for natural person 50 maximum
5 Management fee for check Check business for natural or legal person No more than 1 for each Government-guided
6 Fee for reporting loss and inquiring Reporting loss and inquiring check from natural or 0.1% of face amount (5 if less than 5) Government-fixed
check legal person
7 Cost for check Check vouchers for natural or legal person 0.4 for each Government-fixed
8 Management fee for promissory note Promissory note business for natural or legal person No more than 1 for each Government-guided
9 Fee for reporting loss and inquiring Reporting loss and inquiring promissory note from 0.1% of face amount (5 if less than 5) Government-fixed
promissory note natural or legal person
10 Cost for promissory note Promissory note vouchers for natural or legal person 0.48 for each Government-fixed
11 Management fee for bank draft Bank draft business for natural or legal person No more than 1 for each Government-guided
12 Fee for reporting loss and inquiring Reporting loss and inquiring bank draft from natural 0.1% of face amount (5 if less than 5) Government-fixed
back draft or legal person
13 Cost for back draft Back draft vouchers for natural or legal person 0.48 for each Government-fixed
a
See the Notice on issue of Commercial banking services government guided price catalogue (Fagai Jiage (2014) No.268), http://www.ndrc.gov.cn/zcfb/zcfbtz/
S. Han and T. Wu
201402/t20140214_579133.html. Page consulted on August 30, 2017

According to art. 11 of the RPSCB, prices for service provided by commercial

banks shall be market-regulated unless otherwise provided.
To deal with unreasonable or unnecessary fees charged by commercial banks on
behalf of other merchants who supply livelihood or other commodities, art. 16 of the
RPSCB provides that where a commercial bank is entrusted by any other entity
under the market-oriented principle with the collection of water, electricity, gas,
telecommunication, etc., it shall collect commission for the entrusted services under
the principle of “whoever entrusts pays”, and may not collect charges from any
entity or individual other than the entrusting party.
Given that financial service contracts are normally long-term contracts and may
be adjusted against the consumers’ interests by financial service supplier unilaterally,
art.17 of the RPSCB provides that where a client requests for terminating or altering
services provided by a commercial bank after the bank adjusts service prices or alters
the service contract, the commercial bank shall, upon the client’s request, according
to relevant service contract or any other legal document that has been concluded,
take reasonable and effective measures to promptly terminate the service contract or
alter relevant financial service terms.
In addition to the RPSCB, the specific administrative control on credit card
services should also be introduced. In 1990s, the charge of credit card services had
been highly regulated in almost all aspects. For instance, according to art. 19 of the
Measures for Regulating Credit Card Services (Yin Fa [1996] No. 27, hereafter
RCCS) issued in 1996,30 within 15 days since the signing day or bank account
record, the daily interest of credit card overdraft is 0.05%; in the case of more than
15 days and no more than 30 days, the daily interest is 0.10%; in the case of more
than 30 days, the daily interest is 0.15%; the overdraft calculation is not segmented
and shall be calculated according to the maximum interest rate of the final period or
the maximum overdraft. According to art. 24(1) of the RCCS, commercial banks
may charge a credit card trading fee in comply with the following standards: (1) in
the case of RMB credit cards, it shall not be less than 2% of the transaction amount;
(2) where the credit card is issued by foreign institutions and used in China, it shall
not be less than 4% of the transaction amount.
Nevertheless, credit card services have been growing rapidly during the last two
decades in China and the state is prepared to give a loose rein. The interest of credit
card overdraft has no longer been government-fixed, but has been government-
guided. According to art. 1 of the Notice of the People’s Bank of China (China
Central Bank) on matters related to credit card business (Yin Fa [2016] No. 111),31
the upper limit of the overdraft interest rate of the credit card is 0.5‰ per day, and the
lower limit of that is 0.7 times of 0.5‰ per day. According to art. 3 of this notice, the
general fine for delaying payment should be cancelled, the card issuer should make
an agreement with the cardholder on, in case the cardholder defaults, whether to
30
It was abolished and replaced by the Supervision on Banking Card Services in 1999.
31
http://www.pbc.gov.cn/zhifujiesuansi/128525/128535/128623/3301266/index.html. Page consulted
on Septembre 21, 2017.
collect the liquidated damages and on relevant collection methods and standards.
The card issuer may not charge interest for liquidated damages, annual fees, cash
withdrawal fees, currency exchange fees or other service fees.
5.3.2 Administrative Control on Estate Management Price
As mentioned in the part of judicial control of price terms in estate service contracts,
disputes involved estate service fees have been one of the most common causes of
action.32 Based on the Price Law and the Regulation on Estate Management, the
National Development and Reform Commission and the former Ministry of Con-
struction issued the Measures for Regulating the Charge of Property Services (Fagai
Jiage [2003] No. 1864, hereafter RCPS). According to art. 6 of the RCPS, prices for
estate management services should be distinguished into two categories, i.e.,
government-guided price and market-regulated price. The specific pricing forms
shall be determined by price administrative department, together with the real estate
administrative department, of each province, autonomous region and municipality
directly under the central government.33 According to art. 8 of the RCPS, estate
management companies are required to expressly mark prices, and disclose infor-
mation related to service content, service standards, corresponding fees, fee stan-
dards, and others to the public, in a notable position.
The RCPS also provides for two types of charge system for estate service, namely
“package type” and “remuneration type”. According to art. 9 of the RCPS, in the
case of the package type, a property management company may charge a fixed
service fee, and the surplus or loss should be borne by itself. In the case of the
remuneration type, the estate service funds should be paid in advance, according to
the prescribed proportion or the amount of extraction of remuneration, all the rest are
used according to the estate service contract, and the expenditure or insufficient are
borne by the owner. Most importantly, the RCPS provides charge items for each
type. According to art. 11 of the RCPS, in the case of the package type, expenses
include the cost of estate services, legal fees and profits of estate management
companies. In the case of remuneration type, the estate service funds include estate
service expenditure and the remuneration of the estate management company.
It needs to be noted that the cost of estate services or estate service expenditure,
which is different from the remuneration of the estate management company,
32
According to information provided in 2017 by the People’s High Court of Hubei Province,
disputes involved estate service is the third most important cause of action in disputes involved
contract. http://privatelaw.cn/Web_P/N_Show/?PID¼11949. Page consulted on October 3, 2018.
33
According to art. 7 of the RCPS, in the case that estate management service fees are government-
guided, the price administrative department of province shall, together with real estate administra-
tive department, formulate corresponding price benchmark and floating area and publish regularly.
Following the price benchmark and floating area, estate owners and estate management companies
may agree on a specific price for estate management service. If estate management service fees are
market-regulated, estate owners and estate management companies may agree on a specific price on
their own will in estate service contract.
consists of a series of charge items, including (a) the salary, social insurance and
welfares of the individual providing management service; (b) daily maintenance
expenses of property sharing sites and common facilities equipment; (c) cleaning
and sanitation in the estate management area; (d) greening maintenance in the estate
management area; (e) security service in the property management area; (f) office
expenses; (g) depreciation of fixed assets of estate management companies; (h) cost
of property sharing site, common facilities and public liability insurance; (i) other
expenses approved by the owners.
Nevertheless, some of these items above, such as item (a) should not be charged
separately from the remuneration of estate management and it seems that there are
latent overlaps between some of those items. The remuneration system is compli-
cated and in practice it lacks transparency, leading to disputes between estate owners
and estate management companies.
5.3.3 Administrative Control on Telecommunication Service Price
Until recently, the price of telecommunication services for many fixed-line telephone
services and some mobile services has been government fixed or guided. In 1994, the
former Ministry of Post issued a notice in respect to strengthening regulation on
mobile phones and adjusting mobile phone fees’ rates, the mobile phone owner was
required to pay ¥ 0.6 per minute for automatic roaming service (government-fixed
price). In 2008, the Ministry of Industry and Information Technology issued a notice
on lowering the upper limit of mobile phone domestic roaming charges, according to
which the main call upper limit is ¥ 0.6 per minute, and the called upper limit is ¥ 0.4
per minute (government-guided price).34
In 2014, the National Development and Reform Commission and the Ministry
of Industry and Information Technology issued a notice on the Market-Regulated
Price of Telecommunication Business (Gongxinbu Liantong [2014] No. 182).35
According to this notice, all telecommunication services are subject to market
regulation. Nevertheless, the government still has substantial influence on the charge
of telecommunication services. The report on the work of government in 2017 made
by Chinese Prime Minister required the domestic toll and roaming charges to be
cancelled. Against this background, those fees have been cancelled by all of the three
major mobile merchants (China Mobile, China Unicom, and China Telecom) since
September 1st 2017.36
34
See the Notice on Lowering the Limit of Roaming Charges for Mobile Phone (Xinbu Lianqing
(2008) No. 75), http://www.gov.cn/gzdt/2008-02/14/content_889358.htm. Page consulted on
September 21, 2017.
35
http://www.ndrc.gov.cn/zcfb/zcfbtz/201405/t20140519_611988.html. Page consulted on
September 21, 2017.
36
http://news.xinhuanet.com/fortune/2017-09/01/c_1121585415.htm. Page consulted on
September 21, 2017.
6 Disclosure Requirement on Promoting Price

Transparency
6.1 Disclosure Requirement on Price in the Chinese

Price Law
As mentioned above, art. 13 of the Price Law lays out a general rule on disclosure of
the information on price of goods or services, which states: “(1) In the process of
marketing and sale of goods, or supplying services, merchants shall clearly tap the
prices, specify names, places of origin, specifications, grades, price units, prices or
items, fee collection standards and other related information according to the
government’s regulations. (2) Merchants must not sell goods at prices above the
marked prices or collect fees not specified.” According to this provision, merchants
are required to disclose all material information related to goods or services, and may
not charge any fee not specified in advance.
6.2 Disclosure Requirement on Financial Service Prices
Chapter IV of the RPSCB lays out the rules on disclosure of financial service price.
Art. 19(1) of the RPSCB provides that a commercial bank shall disclose service price
information as required. According to art. 19(2) of the RPSCB, a commercial bank
shall timely and accurately disclose, at a conspicuous place of its business premise
and on the home page of its website, the following information: government-guided
service items; government-fixed service items; market-regulated service items; ser-
vice contents; service prices; applicable targets; number and effective date of the
documents relating to government-guided price or government-fixed price; contact
information for client’s inquiry (complaint).
Art. 20 of the RPSCB provides that a commercial bank shall take the following
steps to protect the relevant rights and interests of its clients: (a) at a conspicuous
place of its business premise, providing a service price catalogue or manual for its
clients to consult for free and, if possible, further disclosing service prices via
electronic display screen, multi-media terminal, computer, and other methods;
(b) if it has a website, disclosing a service price catalogue or manual for its clients
to consult for free at a conspicuous place of the website; (c) if it supplies services
through electronic banking or other self-service channels, disclosing the price of the
relevant services before charging service fees and ensuring that its clients have
options to the relevant services; and (d) clearly defining the area covered by the
inter-city services of each branch office, notifying its clients of the information by
announcement at its business premise, publicity brochures or on its website, and
making it available for inquiry round the clock.
Art. 21 of the RPSCB provides that a commercial bank is required to ask its
clients to provide contact information and to notify the bank in case of any change of
that information, so that the bank may timely notify its clients of any adjustment in
their service prices. Art. 22 of the RPSCB provides that where the service price
information disclosed by a commercial bank involves any discount, the commercial
bank shall clearly indicate the effective period of that discount.
Art. 23 of the RPSCB provides that, (1) to raise the price of a market-regulated
pricing item, a commercial bank shall announce it in a way prescribed by the RPSCB
at least 3 months beforehand and, if necessary, notify the relevant clients in writing,
via telephone, in text message, by e-mail or by any other way as stipulated in the
contract; (2) to add a new service item with a market-regulated price, a commercial
bank shall announce it in a way prescribed by the RPSCB at least 3 months
beforehand.
Art. 24 of the RPSCB provides that, to charge fees for services entrusted by
another entity, a commercial bank shall notify its clients of the name of the entrusting
party, the service item, the charging rates and the contact information for inquiry
(complaint), and clearly note down the aforesaid information in the receipt for
acknowledgement provided to clients.
Art. 25 of the RPSCB provides that a commercial bank shall behave strictly as the
requirements related to the disclosure of information on service price and, before
providing services for clients, notify clients of the relevant service items, service
prices and discounts (including the date of effectiveness and the deadline thereof),
and may provide the relevant services only after clients have confirmed to accept the
service prices. Where, before accepting services, clients have expressly indicated
their refusal to accept the prices of the relevant services, commercial banks may not
directly or indirectly force clients to accept the services.
Article 26 of the RPSCB provides that, in the case that an agreement must be
reached or an articles must be signed before the client can get financial service, a
commercial bank shall, in a lucid, clear and eye-catching way, disclose the following
information: service item, service content, service price, discount and the effective
period of that discount, price-related exceptions and restrictions, contact information
for inquiry (complaint), and other relevant information.
According to art. 37(1)(c) of the Measures for the Supervision and Administration
on the Credit Card Business of Commercial Banks (Order No. 2 in 2011),37
commercial banks’ application materials for credit card shall include information
on fees, main charge items and rates, the channel for search of charge information,
the way for notification of change of charge information, etc.
According to art. 2 of the Notice of the China Banking Regulatory Commission
on Further Regulating the Credit Card Business (Yinjian Fa [2009] No. 60),38
banking financial institutions shall set up a mechanism for regulating the issuance
of credit cards, and must make necessary information disclosure in the marketing
37
http://www.gov.cn/gongbao/content/2011/content_1893974.htm. Page consulted on September
25, 2017.
38
http://www.cbrc.gov.cn/govView_57673CBD37A849478CF1DE393A905B4A.html. Page
consulted on September 25, 2017.
process. The marketing personnel must sufficiently notify the applicants of the fees
charged and penalty interest calculation policies for credit cards, alert them to the
potential risks on the credit card products that they are applying for, and ask them to
confirm their acknowledgement and understanding of the aforesaid information.
According to art. 6 of the Notice of the People’s Bank of China (China Central
Bank) on matters related to credit card business (Yin Fa [2016] No. 111),39 the credit
card supplier shall fulfill the following duties to disclose information: (a) card issuers
should, through the agency’s web site and other channels, make full disclosure of
credit card application conditions, product function, charge items and standards,
safety knowledge, credit card standard agreement, the articles of association, etc.,
and update in time; (b) credit card issuers should, in a significant manner, notice the
cardholder of credit card interest rates, interest settlement, interest-free period and
minimum payment, as well as details related to liquidated damages and other issues
of major concern with the cardholder, to ensure the cardholder is fully aware of and
confirms the matters mentioned above. Among them, the daily interest rate and
annual interest rate of the credit card should both be indicated; (c) when the card
issuer adjusts the credit card rate standard, it shall notify the cardholder at least
45 days in advance. The cardholder is entitled to terminate the contract before the
new interest rate standard comes into effect.
6.3 Disclosure Requirement on Telecommunication Service

Price
According to art. 3 of the Notice issued by the National Development and Reform
Commission and the Ministry of Industry and Information Technology on the
market regulation price of telecommunication business (Gongxinbu Liantong
[2014] No. 182),40 telecommunication companies should further improve the trans-
parency of charge matters and establish a publicity system, to release all sales plans
to the public. During business promotion it should make a comprehensive and
accurate statement, and notify the clients of restrictive conditions and other matters
needed to get the attention of the client, and must not make misleading
advertisement.
According to art. 2 of the Notice issued by the Ministry of Industry and Infor-
mation Technology on strengthening the public administration of mobile telecom-
munications resale companies issued on May 16, 2014,41 telecommunication
39
http://www.pbc.gov.cn/zhifujiesuansi/128525/128535/128623/3301266/index.html. Page consulted
on September 21, 2017.
40
http://www.ndrc.gov.cn/zcfb/zcfbtz/201405/t20140519_611988.html. Page consulted on September
21, 2017.
41
http://www.miit.gov.cn/newweb/n1146285/n1146352/n3054355/n3057674/n3057693/
n3057696/n3057697/c3538202/content.html. Page consulted on September 21, 2017.
companies should set up a special zone for telecommunication charges in a prom-

inent position on the website and provide a concise and intuitive entrance. The basic
items that will be charged, the principle of charging, all sales plans prepared for the
public, and formalities and tips for applying telecommunication service should be
listed. This notice also requires that the information of telecommunication cost
should be clear, notable, with detailed content, with accurate and complete descrip-
tion, and prohibits misleading promotion.
7 Conclusion
This report shows that the administrative control of price terms in standard contracts
plays a more significant role in Chinese legal system, and the public notices on
government-fixed or -guided prices have de facto binding effect on judicial judg-
ments. Accompanying the “comprehensively deepening reforms” promoted by the
Central Committee of the Communist Party of China,42 competition in market is
expected to play a more fundamental role in generating fair prices, and administra-
tive control of price terms in the area of, for example, financial services and
telecommunication services should be more restricted. Nevertheless, administrative
regulations on promoting transparency of price are still necessary, especially for
B2C transactions. Under the GPCCC, if the disadvantaged party due to unfair price
terms pursues remedies based on unconscionability, the burden for him or her to
prove the subjective element of unconscionability may be an obstacle for the
remedy. There may be more room for the rules on control of standard contract
terms to be applied to deal with unfair terms related price.
References
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Han S-Y (2018) The law of contract. Law Press, Beijing
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new contract law. Tribune Polit Sci Law 1999(1):2–11
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China in English (Economic Law II). China Legal Publishing House, Beijing
Liang H-X (1999) The success and failure of the contract law. Peking Univ Law J 1999(6):13–27
42
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deepening reform was adopted at the third plenary session of the 18th Central Committee of the
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c64094-23559163.html. Page consulted on March 10, 2018.
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(3):169–175
Form Contracts in Croatia
Marko Baretić and Siniša Petrović
Abstract Party autonomy or freedom of contract represents one of the main princi-
ples of any national contract law and the Croatian law is no different. There are,
however, restrictions to this freedom, notably in the interest of consumers. One of
the means to ensure that the contractual provisions are not to the detriment of
consumers is the control of standard contract terms. General provisions on control
of standard contract terms are provided for in the general law on obligations and it is
applicable to all contracts, irrespective of the contracting parties. On the other hand,
legislation on consumer protection provides for control of standard contract terms in
consumer contracts and it is not surprising that the provisions therein are mirror
image of the relevant EU legislation. In addition, control of standard control terms is
afforded in special legislation on particular services.
Very generally, it may be stated that one of the principal mechanisms of consumer
protection is the price disclosure and, even in broader terms, that the price related
terms are clear and transparent. As to the control of these terms in standard contracts,
so far scarce case law points out that in the course of assessing the price-related terms
contained in the standard contract terms, the Croatian courts have not distinguished
between main and ancillary terms affecting the price and every term which has an
impact on a price is generally considered a price-related term. Thus, all the subject-
matter and price related contract terms are treated equally and they are subject to an
assessment against their unfairness only provided that these terms do not meet the
transparency requirements.
The courts are competent to control standard contract terms, including the price
related terms. However, besides them, the competence to control standard contract
terms (including price related terms) in some special consumer contracts (e.g. in the
sectors of energy, financial services and electronic communication) is given to the
relevant independent regulators. There are significant disparities in terms of various
aspects of this control (e.g. timing of control /ex ante or ex post/, personal scope of
protection provided, power of entities which control standard contract terms, legal
M. Baretić (*) · S. Petrović (*)

University of Zagreb, Faculty of Law, Zagreb, Croatia
e-mail: marko.baretic@pravo.hr; sinisa.petrovic@pravo.hr

https://doi.org/10.1007/978-3-030-23057-9_11
316 M. Baretić and S. Petrović
protection provided and legal effects of the decision of the competent body regarding
the unfairness of a standard contract term).
1 General Observations on Freedom of Contract
Party autonomy or freedom of contract represents one of the main principles of

Croatian contract law.1 Pursuant to Article 2 of the Croatian Obligations Act
(hereinafter: the OA),2 parties are free to regulate their obligations, unless this
would contravene the Constitution, mandatory laws and the morals of the society.
Party autonomy principle is further reinforced in Article 247 of the OA according to
which, a contract is entered into when the parties agree on essential elements
(essentialia negotii) of the contract. Generally speaking, freedom of contract com-
prises freedom to choose whether to enter into a contract or not, whom to conclude
the contract with, and with what substance.3
A contract is an agreement, a meeting of the parties’ wills, and absent such an
agreement, no contract shall emerge. Accordingly, as a matter of principle, no one
can be forced into a contract. This principle of freedom from contract (i.e. the
principle that no one can be forced into a contract), as a derivative of the broader
freedom of contract principle, has its exceptions. In particular instances, a party may
be legally bound to enter into a contract, either based on law,4 or on a previously
concluded pre-contract.5 However, even in those exceptional instances, in which a
party has an obligation to enter into contract, a contract shall not be formed if a party
obligated to enter into contract, refuses to do that and, as a matter of principle, a
refusing party cannot be forced into the contract. By way of an exception, the court
may, upon the request of the counterparty, order the obligated party to enter into the
contract, and should that party refuse to abide by the court order, the court judgment
shall replace the contract. However, this exception to the freedom of contract rule
applies only when a special law explicitly provides for the possibility that the court
1
Gorenc et al. (2006). p. 2.
2
The Obligations Act (Zakon o obveznim odnosima, National Gazette of the Republic of Croatia
(Narodne novine, hereinafter: NN) No 35/05, 41/08, 125/11, 75/15, 29/18).
3
Gorenc et al. (2006), p. 2.
4
For instance, in contracts for provision of public utilities, where providers are often bound by law
to enter into contract, if so requested by a customer or utility user.
5
Pursuant to Art. 268/1 OA, a preliminary contract is a contract under which the parties undertake
an obligation to enter into the contract at the later date.
Control of Price Related Terms in Standard Form Contracts in Croatia 317
orders the refusing party to enter into the contract,6 or when the obligation to enter
into the contract is based on the previously concluded pre-contract.7
Freedom of contract extends to the substance of contract as well. Generally
speaking, parties are free do decide what will be the substance of their contract.
Therefore, the rules of the OA which regulate the substance of a contract are
predominantly of dispositive, non-mandatory nature. Pursuant to Article 11 of the
OA, in regulating their obligations parties are entitled to deviate from the provisions
of this law, save as otherwise provided in a particular provision of this law or its
meaning. For this reason, dispositive rules of the OA regulating particular con-
tractual relationship are often described in Croatian contract law theory as natural
elements of the contract (naturalia negotii), i.e. elements which “naturally” stem
from a particular contract and the parties do not have to specifically include them in
their contract, but instead, the parties have to specifically exclude them from their
contract, should they wish for those natural elements not to apply to their contractual
relationship. Of course, freedom of contract allows contractual parties to specifically
include in their contract all other elements, colloquially called ancillary, collateral
elements (accidentalia negotii), which are not addressed by the dispositive rules of
the laws and by which parties accommodate their contract to their needs.
The above described legal rules reflect the basic philosophy of contract law in the
Croatian legal system; a contract is a private relationship by which the parties pursue
their own private interests. Freedom of contract is a reflection of a broader concept of
personal freedom; in a free and democratic society, based on open market, every
individual should be free to pursue his/her own interests and, generally speaking, the
state should refrain from interfering with this freedom. In order to allow private
parties to pursue their private interests through a contract, it is necessary to provide
them with the freedom of contract.
Of course, an absolute freedom is not attainable, neither in everyday life nor in
contractual relationships. A contractual relationship, as any other social relationship,
must be observed within a particular social context; a contractual relationship takes
place in a particular society and society is entitled to demand from every individual
engaged in a contractual relationship to respect some basic values of the society. For
this reason, as clearly stated in Article 2 of the OA, parties to the contract cannot
6
This position was taken by the Supreme Court of the Republic of Croatia (hereinafter: the SCRC) in
judgment No Rev. 1212/12-2 of 19 December 2012, available at: https://sudskapraksa.csp.vsrh.hr/
decisionPdf?id¼090216ba80510bc7, and by the Constitutional Court of the Republic of Croatia (here-
inafter: the CCRC) in decision No U-III-2935/2014 of 3 February 2016, available at: https://sljeme.usud.
hr/usud/praksaw.nsf/94b579567876f9fcc1256965002d1bf4/c12570d30061ce54c1257f4e0048815b/
$FILE/U-III-2935-2014.pdf. Page consulted on September 17, 2017.
7
The possibility that the court orders a party to the pre-contract to enter into the main contract is
specifically provided for in Art. 268/4 of the OA which reads: “If a party refuses to enter into the
main contract, the court shall, at the request of an interested party, order the refusing party to enter
into the main contract within a specified period of time.”
exercise their contractual freedom outside the boundaries of the Constitution, man-
datory laws, and the morals of the society.
The described liberal, marked oriented regulation of contractual relationships is
premised on the so-called concept of commutative justice, which suggests that
market forces are able to distribute or allocate rights and obligations in a contractual
relationship in an optimal manner and therefore, no external intervention,
i.e. intervention from the state, is needed nor desired in these relationships. In
other words, it is presumed that if parties are free to regulate their contractual
relationship, they will be able to agree optimal allocation of rights and obligations.8
Hence, market actors must be guaranteed a freedom of contract in order for the
market to properly function and to allow parties to attain their interests through the
functioning of such a market.
The commutative justice concept departs from an assumption that actors on the
market are equal since, liberal and open market economy can properly function only
provided that actors on that market act on an equal footing. For this reason, the OA’s
concept of contractual relationship is built upon the principle of equality of parties.
Pursuant to Article 3 of the OA, parties to obligations shall be equal.
The fact is, however, that actors on the market, although being formally equal
before the law, in reality are rarely truly, genuinely equal. Actors on the market
frequently use, sometimes even misuse, their skills, information, financial potential,
business experience, etc. to maximise their business performance. Inequality of
bargaining positions of actors on the market thus impedes optimal allocation of
resources. More powerful actors impose their contractual terms on the weaker ones,
thus misusing the freedom of contract rule for the purposes originally not intended
by the lawmaker. Due to the objective characteristics of the parties involved,
inequality between the parties is inherent in particular relationships like, for exam-
ple, in business-to-consumer relationships or employer-employee relationship,
although even in business-to-business relations, small and medium-sized entrepre-
neurs, when faced with large, multinational businesses, are frequently in an equally
inferior position as consumers. In these relationships, due to this inherent factual
inequality of the parties involved, unrestricted freedom of contract cannot bring
about just and economically viable distribution of rights and obligations in con-
tractual relationships. Such unbalanced contractual relationships generally permit
only the interests of the stronger party to be realised, whereas the weaker party is
often forced to settle with what the stronger party left on the table.
Such a state of affairs not only neglects individual interests of the weaker actors
but also impedes the proper functioning of the entire market. For this reason,
numerous national and supranational contract law systems gradually developed
from the concept of commutative justice to the concept of distributive justice,
which calls for intervention of the state in market affairs with the aim of
re-establishing a balance between factually uneven market players by imposing the
“rules of the game”, which should protect legitimate interests of the weaker parties
8
See in more detail: Baretić and Markovinović (2012), p. 58.
and other legitimate interests in the society.9 Croatian law is no exception in this
regard. In a number of instances, the freedom of contract principle in Croatia is
restricted by laws imposing mandatory, protective rules, designed to cater legitimate
interests of the weaker parties or of the society and thus, mitigate adverse conse-
quences of the inherent factual inequality of the parties.
A multitude of legislative techniques and different approaches are developed in
addressing the issue of restricting the freedom of contract principle. In some cases,
the law provides for the list of prohibited contractual clauses10; in others, the law
provides for general rules which contain an objective test for determining the
unfairness of contractual terms.11 In some cases, the law combines these two
techniques, providing for a general rule on unfairness of contract terms,
supplemented by either a grey or black list of unfair contact terms.12 In some
exceptional instances, the lawmaker unfortunately goes too far in restricting the
freedom of contract principle, providing for a paternalistic regulation, which does
not permit the parties to agree on anything outside of what is defined by law, thus
effectively excluding the freedom of contract principle.13
2 Control of Standard Contract Terms
The use of standard contract terms in everyday business has become almost a norm.
Today, it is hard to imagine a Croatian entrepreneur dealing with a multitude of
customers who would not use standard contract terms. Indeed, the use of standard
contract terms is today mandated by law in a number of industries and with respect to
a number of service providers. Providers of electronic communication services,
financial institutions, real estate agents, operators of natural gas transportation and
natural gas distribution systems, are all bound by law to create and use standard
contract terms in their commercial dealings.14 Moreover, in some cases, the regulator
9
See in more detail, Baretić and Markovinović (2012), pp. 58–60.
10
See, for example, Art. 14 of the Financial Activities and Pre-Bankruptcy Procedures Act (Zakon o
financijskom poslovanju i predstečajnoj nagodbi, NN 108/12, 144/12, 81/13, 112/13, 71/15, 78/15,
hereinafter: the FAPPA).
11
Art. 296 OA.
12
Arts. 49–50 of the Consumer Protection Act (Zakon o zaštiti potrošača, NN No 41/14, 110/15,
hereinafter: the CPA), and Art. 10 of the Bylaw on the Manner and Conditions for Conducting of
Electronic Communication Networks and Services Activities, issued by the Croatian Regulatory
Authority for Network Industries (hereinafter: HAKOM) (Pravilnik o načinu i uvjetima obavljanja
djelatnosti elektroničkih komunikacijskih mreža i usluga, NN No 154/11, 149/13, 82/14, 24/14,
42/16, hereinafter: the HAKOM Bylaw).
13
See, for example, Art. 15 of the Agency in Real Property Transactions Act (Zakon o posredovanju
u prometu nekretninama, NN No107/07, 144/12, 14/14, hereinafter: the ARPT).
14
Art. 42 of the Electronic Communications Act (Zakon o elektroničkim telekomunikacijama, NN
No 73/08, 90/11, 133/12, 80/13, 71/14, 72/17, hereinafter: the ECA), Art. 303 of the Credit
will issue standard contract terms which must be used by all service providers in their
dealings with the end-users, as is the case with natural gas market.15 The use of
standard contract terms makes everyday business easier, time-efficient, cost-effec-
tive and transparent. On the other hand, the use of such terms may easily disturb the
balance of bargaining powers by privileging the party who drafted them.
For this reason, it should not come as a surprise that a number of laws provide for
particular mechanisms aimed at controlling standard contract terms. These mecha-
nisms, provided for in different laws, show significant disparities, in terms of
techniques used in controlling standard contract terms, in terms of timing of control,
in terms of personal scope of protection provided, in terms of entities vested with
power to control standard contract terms, in terms of character of legal protection
provided, in terms of legal effects of the decision of the competent body regarding
the unfairness of a standard contract term.
As to the techniques used in controlling standard contract terms, whereas some
laws provide for a general, objective standard for assessing the unfairness of
standard contact terms,16 others either use a black or grey lists of unfair contract
terms,17 or supplement the general, objective standard with such lists.18
As a rule, the laws provide for an ex post control of standard contract terms.19
However, in some instances, like for example, in electronic communications sector,
both ex ante and ex post control of standard contract terms are provided for.20
Different laws provide for a different personal scope of protection against stan-
dard contract terms. Whereas, some laws provide protection to limited audience
only, others are of general application and provide protection to any person, regard-
less of their status. For instance, the CPA protects only consumers against unfair
standard contract terms. The FAPPA regulates only business-to-business relations,
and consequently, protects only businessmen from unpermitted contract terms. On
the other hand, the OA, the ARPT, and the ECA, including the HAKOM Bylaw,
protect every person, regardless of whether a business entity or a consumer.
Control of standard contract terms generally can be entrusted to judiciary,
administrative bodies or independent regulators. Croatia, which belongs to civil
law tradition, traditionally entrusts courts with power to decide on disputes relating
to contracts, which, of course, includes disputes relating to control of standard
contract terms. In some instances, however, independent regulators are competent
to control standard contract terms and to order particular market operator to remove
Institutions Act (Zakon o kreditnim institucijama, NN No 159/13, 19/15, 102/15, 15/18 hereinafter:
the CIA), Art. 18 of the ARPT.
15
Art. 95 of the Gas Market Act (Zakon o tržištu plina, NN No 18/18, hereinafter: the GMA).
16
Art. 296 OA.
17
Art. 14 FAPPA.
18
Arts. 49–50 CPA and Art. 10 HAKOM Bylaw.
19
Art. 296 OA and Arts. 49–50 CPA.
20
Art. 42 ECA.
particular terms from their standard contract terms, if considered impermissible, as is

the case in electronic communications sector.21
Even if the law provides for an ex ante control of standard contract terms to be
conducted by a competent administrative authority or an independent regulator, the
courts shall still be competent to assess the validity of a particular contract term.
Thus, for example, the OA provides that the courts are competent to assess the
validity of standard contract terms even if previously approved by an authority.22
And in reality, the courts frequently assess the validity of standard contract terms
previously approved by an independent regulator, as is the case with standard
contract terms in electronic communications sector.23
Protection afforded in court proceedings in civil-law matters is individual in
nature. A person dissatisfied with standard contract terms drafted by its counterparty
will normally initiate individual court proceedings against its counterparty,
requesting that a court declare a particular standard contact term null. A court’s
decision declaring particular standard contract term null has an inter partes effect,
meaning it has no effect to any other person but to the parties to these proceedings.
Since recently, alternative mechanisms of controlling standard contracts terms
providing for collective protection emerged in the Croatian legal system, predomi-
nantly under the influence of the EU law. Thus, for example, on the model of
Directive 93/13/EEC on unfair contract terms,24 the CPA provides for collective
protection against unfair contract terms in consumer contracts, which, as will be
latter explained in more detail,25 enables the use of particular unfair contract terms to
be entirely banned, with an effect on every trader on the market and vis-à-vis every
consumer. A comparable system of collective protection is provided for in the
FAPPA. This system is based on Directive 2011/07/EU on combating late pay-
ment,26 and it is intended to protect traders against unfair contract terms relating to
late payments. The same erga omnes effect will also have a HAKOM’s decision
banning the use of a standard contract term of electronic communications operators.
Regardless of whether protection against standard contract terms is afforded in
court proceedings or before an independent regulator, no system of registering
contract terms that are found to be unfair, is formed so far in Croatia.
21
Art. 42/2 ECA.
22
Art. 296/1 OA.
23
See, for example, judgments of the County Court in Varaždin No Gž-5087/12-2 of 21 August
2013 available at: http://www.iusinfo.hr/CaseLaws/Content.aspx?Doc¼ZUPSUD_HR&
SOPI¼ZSRH2012508B7A2 and No Gž-2671/13-2 of 14 April 2014 available at: http://www.
iusinfo.hr/CaseLaws/Content.aspx?SOPI¼ZSRH2013267B1A2&Doc¼ZUPSUD_HR. Page
24
95/29.
25
See infra Sect. 2.2.
26
Directive 2011/07/EU of the European Parliament and of the Council of 16 February 2011 on
combating late payment in commercial transactions, OJ 2011, L 48/1.
2.1 Regulation of Standard Contract Terms in the OA
Pursuant to Article 295/1 of the OA, standard contract terms are contract terms
formulated for larger number of contracts that one party (drafter) proposes to the
other party before or at the time of entering into the contract, whether they are
included in a standard contract or referred to in the contract. Any standard contract
term shall be null, pursuant to Article 296/1 of the OA, if it, contrary to the good faith
principle, causes significant imbalance in rights and obligations of the parties to the
detriment of the drafter’s counter-party or if it compromises the achievement of
purpose of the contract concluded, even if standard contract terms containing such a
provision are approved by an authority. This rule does not apply to provisions in the
standard contract terms, which were taken from applicable regulations, or which
were individually negotiated before a contract was concluded or to provisions, which
relate to the subject-matter of the contract and the price, provided that these pro-
visions are clear, intelligible and visible.27
The cited provisions of the OA clearly reveal an obvious influence of Directive
93/13/EEC on the OA’s drafters. The concept of general standard for assessing the
unfairness of a contract term, employed in the Directive, is almost ab verbatim taken
over in the OA. However, unlike in Directive 93/13/EEC and the CPA, by which the
Directive is transposed in the Croatian legal system, the general standard for
assessing the unfairness of a standard contract term in the OA is not supplemented
by an illustrative list of unfair contract terms.
Although the OA is a general regulation of obligation and, as such, equally
applies to all obligations regardless of the status of the parties, the fact is that, in
reality, the OA’s regulation of standard contract terms shall only apply to business-
to-business (B2B) relations, and possibly to government-to-business (G2B) rela-
tions, since control of unfair contract terms in business-to-consumer (B2C) relations
is specifically regulated in the CPA, which thus, effectively excludes the application
of the OA’s provisions on unfair contract terms to B2C relations.
Pursuant to the cited provisions of the OA, nullity is the remedy for contract terms
that do not meet defined standards of fairness. Nullity of a particular contract term
generally does not render the whole contract null, provided that the remaining of the
contract is capable of surviving without a null term and that such term was neither a
condition nor a decisive motive for the contract (the concept of partial nullity).28
The OA only regulates substantive law issues, and accordingly, this law is silent
as to the procedure in which validity of standard contract terms is to be assessed. The
Civil Procedure Act (hereinafter: the CPrA),29 foresees the action for protection of
collective interest. However, it seems that this action is only available if specifically
27
Art. 296/3 OA.
28
Art. 324/1 OA.
29
The Civil Procedure Act (Zakon o parničnom postupku, NN 53/91, 91/92, 58/93, 112/99, 88/01,
117/03, 88/05, 02/07, 84/08, 123/08, 57/11, 148/11, 25/13, 89/14.).
provided for in a special law.30 Accordingly, it seems that an individualistic protec-

tion is the only option available for protection against standard contract terms
according to the OA.
2.2 Regulation of Standard Contract Terms in the CPA
The CPA fully transposes Directive 93/13/EEC into the Croatian legal system and
accordingly, the CPA regulation of unfair contract terms is a mirror image of the one
provided for in this Directive. Since the CPA regulates only B2C transactions, the
system of controlling standard contract terms contained therein is aimed at protecting
consumers only. This system of controlling the unfair contract terms in B2C trans-
actions is designed as an ex post control.
The CPA provides for a general standard for assessing the unfairness of contract
terms, supplemented with an indicative and non-exhaustive grey list of potentially
unfair contract terms, which, in terms of substance, resembles to list of unfair
contract terms annexed to Directive 93/13/EEC.31 According to the general standard
for assessing the unfairness, a contract term shall be regarded as unfair if not
individually negotiated and if, contrary to the good faith principle, causes a signif-
icant imbalance in rights and obligations of the parties to the detriment of consumer.
If found to be unfair, a contract term shall be declared null, which does not
necessarily entail nullity of the whole contract.32 The CPA permits contract terms
on the subject-matter and price to be assessed against their unfairness only excep-
tionally, if not clearly written, intelligible and easily visible.33,34
A distinctive feature of the CPA’s system of controlling standard contract terms is
a possibility of initiating collective protection proceedings. These proceedings are
judicial in nature, and conducted before the Commercial Courts. The proceedings
can be initiated by qualified entities, having a legitimate interest in protecting
consumers, which are enumerated in the Government’s decree,35 against a particular
trader or a group of traders using unfair contract terms or against traders’ asso-
ciations promoting the use of unfair contract terms. If it finds the plaintiff’s claim
sustained, the court will declare particular contract terms null, and issue an injunc-
tion prohibiting the use of such contract term in the future. The court’s decision by
30
Art. 502a/1 CPrA.
31
Arts. 49 and 50 OA.
32
Art. 55 OA.
33
Art. 52 OA.
34
More on reasons prompting exclusion of price-related and subject-matter-related contract terms
from assessment against their unfairness in the European law, see in Cámara Lapuente (2019), p. 5.
35
See the Government’s Decree defining bodies and persons qualified to initiate proceedings for
protection of consumers’ collective interests (Odluka o određivanju tijela i osoba ovlaštenih za
pokretanje postupaka za zaštitu kolektivnih interesa potrošača, NN No 105/2014.).
which a contract term is found unfair has an effect vis-à-vis every consumer. In other
words, every consumer can expect and demand from the trader who was a party in
the collective proceedings to refrain from using such a contract term in its standard
contract terms. This collective action is an injunctive, and not compensatory relief.
For this reason, a consumer who sustained damage due to the use of an unfair
contract term shall be forced to initiate individual proceedings against the trader in
order to obtain compensation for the damage sustained therefrom. However, the
court conducting these individual proceedings will be bound by the court’s decision
reached in the collective proceedings with respect to unfair nature of the disputed
contract term.36
2.3 Regulation of Standard Contract Terms in the ECA
Control of unfair contract terms in electronic communications is simultaneously

regulated in the ECA and the HAKOM Bylaw. Pursuant to Article 42 of the ECA,
public communications operators are obligated to create and use standard contract
terms, and a contract between an operator an end-user must be based on such
standard contract terms. An operator is obligated to submit the standard contract
terms to HAKOM at least 8 days before their publication and HAKOM is entitled to
change, supplement or suspend particular contract terms by its decision if those
terms violate the ECA or other laws which regulate consumer protection.37 Article
10 of the HAKOM Bylaw, which regulates unfair terms in contracts between public
communications operators and end-users, defines unfair contract terms by using a
general standard for assessing unfairness of contract terms, supplemented by an
exhaustive black list, containing 5 contract terms which shall always be regarded
unfair. The general standard for assessing unfairness of contract terms is defined in
the HAKOM Bylaw pretty much along the same lines as in the OA and CPA, which
should not come as a surprise, bearing in mind that all three legal sources were
inspired by the same EU models.
However, the system of controlling unfair contract terms defined by the ECA and
the HAKOM Bylaw shows some unique features, which makes this system signif-
icantly different from the ones established by the OA and the CPA. Unlike the OA
and the CPA, which only provide for an ex post control, the ECA enables both ex
ante and ex post control of standard contract terms. The language in Article 42/2 of
the ECA leaves no doubt that HACOM is entitled to change, supplement, or suspend
particular contract term at any times, either before or after standard contract terms
were published. Furthermore, unlike the OA and the CPA, which both provide for
judicial control of unfair standard contract terms, the ECA introduces a controlling
mechanism conducted by an independent regulator. Whereas the OA and CPA
36
Arts. 106–118 CPA.
37
Art. 42/2 ECA.
exclude the possibility of extending control to contract terms relating to the subject-
matter and price, provided that they are clear, intelligible and visible, the ECA and
the HAKOM Bylaw contain no such exclusion, which might suggest that in the
telecommunications sector, contract terms relating to subject-matter and price could
be subjected to a control against their unfairness.
The ECA’s and the HAKOM Bylaw’s personal scope of application is signifi-
cantly wider than the CPA’s; whereas the CPA regulates only B2C transactions, the
ECA and the HAKOM Bylaw regulate every relationship between a public commu-
nications operator and an end-user, while an end-user is defined as any person who
uses public communications either for private or commercial purposes. Finally,
language of Article 10 of the HAKOM Bylaw seems to suggest that control of
unfairness, provided for in this Bylaw, is extended to any provision of a contract
between a public communications operator and an end-user, and not just to pro-
visions contained in standard contract terms. Accordingly, it seems that the HAKOM
Bylaw also permits individually negotiated terms to be assessed against their
unfairness.
2.4 Regulation of Standard Contract Terms in the FAPPA
The FAPPA’s regulation is limited to control of contract terms in B2B transactions

which relate to late payment, notably contract terms, which define the time for
executing the payment and contract terms which define the consequences of the
late payment. Contract terms relating to any other element of a contract are excluded
from the scope of application of this Act. The FAPPA provides for an ex post control
of contract terms and enable both individual and collective control. Individual
control can be initiated against any contract term relating to late payment, which
deviates from the mandatory provisions of this Act, regardless of whether indi-
vidually negotiated or not, whereas collective control can be initiated only against
terms incorporated into the standard contracts.
3 Control of Price Terms in Standard Contract Terms
Price is one of the essential elements of a contract, and in order for a contract to
emerge, price must be agreed upon. Croatian contract law, like many other national
laws, is based on the principle of equal value of performances, and the law prescribes
situations in which violation of this principle may result in legal consequences.38
Hence, in regulating reciprocal contracts, Croatian law departs from an ancient
Roman law rule quid pro quo, meaning that in terms of value, mutual performances
38
Art. 7 OA.
must resemble each other. Such principle is premised on an understanding that a

contract is a tool for value exchange.
With respect to price control, liberal civil law regulations, like Croatian, are
premised on two basic principles. Frist, in free market economy, prices should be
determined on the market, and not by courts or a legislator. Second, parties involved
in legal transactions freely enter into such transactions and everyone who gets
engaged in transactions of exchanging performances is expected to be well-informed
about the true value of their performances. For this reason, prices are extremely
rarely, if ever, determined by law and price-value ratio of a contract, and generally
price-related contract terms, can be challenged before the court only in very limited
situations.
Croatian law or the courts never determine the prices. Only exceptionally, mainly
for the reasons of protection of a weaker party or for protection of some socially
justified interests, the legislator may intervene in the price by imposing price caps, as
is the case with interest rates or prices of some utilities, or by vesting the Government
with right to set the pricing policy in exceptional circumstances, as is the case in the
energy sector.39
When it comes to challenging validity of a contract before the court for the
reasons related to price, the OA provides for only two instances in which a contract
may be challenged for violation of equal value of performances principle. One of
those is leasio enormis rule, according to which, a party may request the contract to
be voided if, at the time when the contract was concluded, an evident imbalance in
mutual performances existed and the aggrieved party did not know and had no
reason to know the true value of performances.40 However, this rule does not apply
to B2B relationships. The second instance in which violation of equal value of
performances may affect validity of a contract is a notion of usury contract, i.e. a
contract in which one party misuses ignorance, dependence, or other misfortune of
the other party in order to agree a benefit for itself or for someone else that is
manifestly disproportionate to what it has performed or agreed to perform, in which
case thus affected contract shall be null.41 Generally speaking, no other instance of
disturbance of balance of mutual performances will affect validity of a contract.
For the above stated reasons, even price-related terms incorporated into standard
contact terms are, in principle, excluded from control against their fairness.42 Only
exceptionally can these terms be challenged, if they do not meet the requirements of
transparency, i.e. if not written in a clear, intelligible and visible manner.43,44
39
See in more detail infra Sect. 4.
40
Art. 375 OA.
41
Art. 329 OA.
42
Art. 296/3 OA, Art. 52 CPA.
43
Art. 296/3 OA, Art. 52 CPA.
44
The same with respect to the EU law, Cámara Lapuente (2019), p. 5.
However, the main subject-matter and price/quality ratio may be taken into consider-
ation in the course of assessing the fairness of other contract terms.45
As already explained, the courts are vested with power to decide in civil law
matters, which includes the authority of the courts to decide on violation of the equal
value of performances principle and on fairness of price-related terms in standard
contract terms. For the time being, no administrative authority or independent
regulator is vested with such powers in Croatia.
From the relatively modest case-law on the issue, a conclusion can be drawn that,
in the course of assessing the price-related terms contained in the standard contract
terms, so far the Croatian courts have not distinguished between main and ancillary
terms affecting the price; every term which has an impact on a price is generally
considered a price-related term.
This conclusion stems from the well-known Franak case, the only case of
collective protection of consumers in Croatia so far, in which credits denominated
in Swiss franc were challenged. This case concerned two price-related contract
terms: a contract term by which banks denominated the credits in Swiss franc and
a contract term that enabled banks to unilaterally change the interest rate, without
clear, contractually stipulated, reasons. In this case, initiated by the consumer
protection association against eight banks, the court of first instance upheld the
claim for collective protection of consumers, and declared a contract term
denominating the credit in Swiss franc and a contract term enabling the banks to
unilaterally change the interest rate to be unfair, within the meaning of the CPA, for
the lack of transparency. The second instance court reversed the first instance
decision regarding the contract term denominating the credit in Swiss franc and
upheld the first instance decision regarding the contract term permitting a unilateral
change of the interest rate.
In the revision Rev-249/14-2 of 5 April 2015,46 the Supreme Court of the
Republic of Croatia (hereinafter: the SCRC) upheld the second instance decision
with respect to both, the contract term denominating the credit in Swiss franc and the
contract term permitting unilateral change of interest rate. The SCRC only reversed
the second instance decision regarding the contract term permitting unilateral change
of interest rate, by dismissing the second instance decision with respect to one bank,
which, according to the SCRC, sufficiently clearly, intelligibly and visibly informed
its consumers of the reasons for which interest rate can be changed. The SCRC
unequivocally confirmed that it considered both contract terms, the one
denominating the credit in Swiss franc and the one permitting a unilateral change
of the interest rate, to be related to the subject-matter-price ratio and therefore were
suitable of being challenged against their unfairness, only if not clear, intelligible and
visible. In this particular case, the SCRC opined that the contract term denominating
45
See Cámara Lapuente (2019), pp. 15–16.
46
Available at: http://www.iusinfo.hr/CaseLaws/Content.aspx?Doc¼VRHSUD_HR&SOPI¼
VSRH2014RevtB249A2. Consulted on September 30, 2017.
the credits in Swiss franc was sufficiently clear, intelligible, and visible, and there-
fore was not suitable of being challenged against its unfairness.
By its decision U-III-2521/2015 of 13 December 2016,47 the Constitutional Court
of the Republic of Croatia (hereinafter: the CCRC) revoked the SCRC’s decision
Rev-249/14-2 for its unconstitutionality, opining that the SCRC failed to sufficiently
explain why it held the disputed contract terms to be clear, intelligible and visible.
Hence, the CCRC did not challenge the SCRC’s general position that a contract term
denominating the credit in Swiss franc and a contract term permitting a unilateral
change of interest rate, represented contract terms relating to subject-matter-price
ratio, but it only challenged the way in which the SCRC gave reasons for holding
those terms to meet the requirements of transparency in this particular case.
The above explained general position of the SCRC regarding the nature of
contract terms relating to linking credits to Swiss franc and permitting a unilateral
change of the interest rate, was also shared by the lower courts.48
In 2017 the SCRC issued judgment Revt-575/16-5 of 3 October 2017,49 in
response to the CCRC decision U-III-2521/2015, enumerating questions and issues
which should be specifically addressed by the lower courts in the course of a
repeated proceedings. Somewhat unexpected turn in this case happened in 2018,
when the High Commercial Court issued judgment 43 PŽ-6632/2017-2 of 14 June
2018 in which this Court completely reversed its previous position in this case and
found a contract clause denominating credits in Swiss francs unfair for lack of
transparency. The reasoning of this decision was even more unaccepted and surpris-
ing than its operative part, as the High Commercial Court took the position that mere
non-transparency of a price-related contract term inevitably implies unfairness of
such term,50 which is in an obvious contradiction with Article 52 of the CPA. In this
way, the High Commercial Court added even more confusion and uncertainty to this
long-lasting Swiss franc saga, which—bearing in mind that respondents have
already petitioned to the SCRC for revision of this decision—is far from being
brought to a close.
Be it as it may, even with these latest developments in the Swiss franc case, the
position of Croatian courts regarding distinction between main and ancillary price-
related terms remains to be unaltered: Croatian courts do not distinguish between
main and ancillary terms relating to the subject-matter and/or price. They, instead,
treat all the subject-matter and price related contract terms equally, and subject them
47
http://www.iusinfo.hr/Appendix//USTSUD_HR//USRH2015B2521AIII_44_1.pdf. Page
48
Judgment of the County Court in Split No Gž-377/17 of 13 July 2017, Judgment of the
Municipality Court in Zagreb No 125 P-2651/15-21 of 29 September 2017, Judgment of the
Municipality Court in Zadar No 53 P-2343/2014 of 2 September 2015 (unpublished).
49
http://www.vsrh.hr/CustomPages/Static/HRV/Files/2017dok/VSRH-Priopcenje-Revt-575-2016-
5-an.pdf.
50
See judgment 43 PŽ-6632/2017-2 at p. 62.
to an assessment against their unfairness only provided that these terms do not meet
the transparency requirements.51
Special regulatory regimes may be classified and analysed primarily based on a

regulatory authority competent for the supervision of undertakings and other entities
engaged in a particular business activity. Besides the sectors which are specifically
subjected to surveillance of a particular regulatory authority, there are some business
activities which do not fall under supervision of any regulatory authority.
Croatian Financial Services Regulatory Agency (hereinafter: HANFA), notwith-
standing its wide role in supervising the relevant entities, does not have the authority
to intervene directly in price terms nor, more generally, in standard contract forms.
However, according to the Compulsory Insurance in Transport Sector Act,52 an
insurance undertaking is obligated to inform HANFA on insurance conditions and
technical basis used when calculating the insurance premium pricelist, at least
60 days before their application, exclusively for the purpose of checking whether
they are in accordance with law, actuarial principles, and practices of the trade,
which is in line with general requirements of transparency regarding contract terms,
imposed by the EU law.53 The law entitles HANFA to request an insurance
undertaking to provide it with the premium pricelist, technical bases and other
elements used for calculating the insurance premiums. Such regulation is aimed at
giving HANFA the opportunity to check if the mentioned elements are “in accor-
dance with the Croatian laws”. This very general authority of HANFA entitles it to
undertake various supervisory measures against an insurance undertaking. Never-
theless, HANFA is not permitted to modify any of the standard contract terms,
including the price. Thus, it can be concluded that the scope of control of standard
terms is limited to a general supervision of the activities of insurance undertakings
and does not extend to actual either preventive or ex post control thereof.54 This does
not mean that measures available to HANFA are not sufficient to execute the
necessary pressure on an insurance undertaking, since they include measures such
as warning, decision on the obligation of an insurance undertaking to exercise the
activities in accordance with the relevant legal obligations, to publicly announce
51
More about how the Court of Justice of the European Union distinguishes between main and
ancillary price-and-subject-matter-related terms, see Cámara Lapuente (2019), pp. 11–15.
52
The Compulsory Insurance in Transport Sector Act (Zakon o obveznim osiguranjima u prometu,
NN No 151/05, 26/09, 75/09, 76/13, 152/14).
53
See in more detail, Cámara Lapuente (2019), pp. 7–8.
54
Until 1 July 2013 (the day of accession of Croatia to the EU), HANFA was authorized to
undertake measures which would specifically obligate insurance undertakings to change their
standard contract terms, including, but not limited to, insurance premiums. Following the accession
to the EU and consequent liberalisation of the market, the regime has changed to a current situation.
information about the improper practices of the liable insurer at his expense, but also
includes the possibility to temporarily or permanently revoke the license for carrying
out transport liability insurance activities. From that perspective, one may conclude
that insurance undertakings shall be effectively forced to change their standard
terms, including the price policy, provided that they otherwise significantly violate
the principles of the industry and protection of consumers and other contracting
parties. However, it must be emphasized that HANFA, as a regulator, has no
competence to approve, modify, or generally control standard contract terms.
Standard contract terms of insurance undertakings in obligatory insurance con-
tracts in the transport sector are the only and exceptional example of HANFA having
authority of preventive control of standard contract terms, within the entire scope of
its competence of supervising various undertakings in designated activities. In all
other instances, HANFA is allowed to supervise the standard contract terms only
within the scope of its general authority to supervise the activities of the undertak-
ings and entities concerned. Consequently, only general provisions on standard
contract terms contained in the OA apply.
Croatian National Bank (hereinafter: HNB) does not have the authority to give
preliminary approval of standard contract terms of financial institutions nor does it
have any preliminary input on their content. However, standard contract terms of
financial institutions may be controlled within the framework of general supervision
of HNB over a particular financial institution. These controls are part of the overall
supervision, which is executed on a regular basis and depends on particular circum-
stances of every given case.
For financial institutions there are several provisions in various legal acts limiting
the price which a financial institution may charge to the clients.
The Credit Agreements for Consumers Act (hereinafter: CACA),55 provides that
the fees on the approved credits must be in relation to the actual cost of credit
approval and that no new fees are allowed following the conclusion of the credit
agreement. In addition, the CACA provides that a consumer has the right to fulfil his
obligations from the credit agreement at any time, in full or partially, while the
creditor is entitled to a fair and objective compensation for the possible cost arising
as a result of that situation, which cannot exceed 1% of the credit amount paid in
advance. Effectively, these provisions set the cap on the amount which the credit
institutions may charge. This fee cap is reiterated and further elaborated in the Bylaw
on Fees for Credit Agreements for Consumers,56 which provides that in case of
modification of the agreed variable interest rate, a creditor is obligated to inform a
consumer thereon and following that information, a consumer is entitled to reim-
burse the whole credit amount without the obligation to pay any fee.
The CACA prescribes maximum interest rate on credit agreements relating to
residential immovable property (depending on the currency in which the agreement
55
Art. 2/1/7 CACA (Zakon o potrošačkom kreditiranju, NN No 75/09, 112/12, 143/13, 147/13,
9/15, 78/15, 102/15, 52/16).
56
NN No 15/14.
is denominated) and also the maximum interest rate for other credit agreements for
consumers.57 These provisions are lex specialis in relation to general provisions
regarding the maximum interest rate, fixed by the OA. The same cap on default
interest rate is provided for in the FAPPA.58
The Payment System Act (hereinafter: the PSA),59 provides for several limi-
tations of fees chargeable to any service user, which consequently means that these
fee caps are applicable both to B2C and B2B contracts. For example, a payment
service provider is not allowed to charge the payment service user for the informa-
tion it is obligated to provide; the provider of the payment service may levy no
charge on the payment service user for the termination of a framework contract
concluded for a fixed period exceeding 12 months or for an indefinite period,
provided that the contract is terminated after the expiry of 12 months and the
payment service provider may charge the payment service user for the fulfilment
of its obligations only in limited, statutorily defined cases, and only if such charges
have been agreed and if they are appropriate and in line with the payment service
provider’s actual costs. In these cases, it is obvious that the price control actually
means that the service provider may not charge for some of the services provided,
which effectively sets the price to zero.60
According to the CIA, before entering into a contract regarding banking or
financial services, a credit institution must submit a draft contract to a consumer
free of charge, along with the copy or electronic version of the standard contract
terms, tariffs and interest rates applicable to the contract in question as well as all
other acts of the financial institution which directly or indirectly influence the
financial position of the consumer.61
With the aim of particularly safeguarding the position of sensitive social groups,
the Comparability of Fees Related to Payment Accounts, Payment Account
Switching and Access to Payment Accounts with Basic Features Act (hereinafter:
the CFRA),62 as well as the Credit Agreements for Consumers Relating to Resi-
dential Immovable Property Act (hereinafter: the CACRIPA),63 prescribe limits on
effective interest rates and amount of fees for providing particular information and
transfer of accounts.64
57
Art. 11.b and 11.c CACA.
58
Art. 12.a FAPPA.
59
The Payment System Act (Zakon o platnom prometu, NN No 133/09, 136/12).
60
Art. 9, 22/3, 27 of the PSA.
61
Art. 302/2, 3 CIA.
62
The Comparability of Fees Related to Payment Accounts, Payment Account Switching and
Access to Payment Accounts with Basic Features Act (Zakon o usporedivosti naknada,
prebacivanju računa za plaćanje i pristupu osnovnom računu, NN No70/17).
63
The Credit Agreements for Consumers Relating to Residential Immovable Property Act (Zakon o
stambenom potrošačkom kreditiranju, NN No 101/17).
64
Arts. 18, 24 CFRA.
In the field of electronic communications, HAKOM has the general power to

supervise prices, price lists and general contract terms. Notably, for universal
services, the price has to be equal on the whole territory on which the service
provider operates.65 Worth mentioning is also the price cap for roaming services
which is determined by the EU Regulation 2015/2120 and applicable throughout the
EEA area.66
With respect to postal services, HAKOM is authorized to intervene in the price of
universal services; it may fully or partially alter the price before or after its publi-
cation, if they do not conform with the pricing policy for provision of universal
services, which by nature encompasses also the prices set in the standard contract
terms.67
Pursuant to the National Framework Programme for the Development of Broad-
band Infrastructure in Areas Lacking Sufficient Commercial Interest for Invest-
ments,68 prepared by the Ministry of Maritime Affairs, Transport and
Infrastructure and endorsed by the Government, HAKOM plays an important role
in projects of supporting building of broadband infrastructure by supervising prices
for wholesale access to networks built within the framework of particular projects.
As a rule, wholesale prices and the corresponding conditions for the delivery of
services in a project should correspond to values and conditions for the same or
comparable services in areas in which operators operate under normal market
conditions, which includes prices and conditions prescribed by HAKOM’s regula-
tory measures. Any operator managing the network built during the implementation
of the project is obligated to propose prices and access conditions in accordance with
the rules set in the Framework Programme and to deliver them, together with a
detailed explanation of the process, to HAKOM, that will give its opinion on the
proposed prices and conditions. Upon the receipt of HAKOM’s opinion, the previ-
ously proposed wholesale prices and conditions shall be aligned in accordance with
HAKOM’s objections, which shall subsequently issue a final approval of wholesale
prices. If HAKOM believes that the applied method for the determination of prices
or the prices themselves and/or the conditions for the provision of services are
65
See e.g. Art. 12/1/2, 35/3, 42.a, 62, 63 of the ECA, Art. 5 of the Measures for Decreasing the
Costs of Setting High Speed Electronic Communications Networks Act (Zakon o mjerama za
smanjenje troškova postavljanja elektroničkih komunikacijskih mreža velikih brzina, NN No
121/16), Art. 17 of the Bylaw on Universal Services (Pravilnik o univerzalnim uslugama, NN No
146/12, 82/14, 41/16), Art. 23 of the Bylaw on Number Transferability (Pravilnik o prenosivosti
broja, NN No 24/15, 71/16).
66
Regulation (EU) 2015/2120 of the European Parliament and of the Council of 25 November 2015
laying down measures concerning open Internet access and amending Directive 2002/22/EC on
universal service and users’ rights relating to electronic communications network and services and
regulation (EU) No 531/2012 on roaming on public mobile communications network within the
Union, OJ 2015, L 310/1.
67
Art 46 of the Postal Services Act (Zakon o poštanskim uslugama, NN No 144/12, 153/13, 78/15,
hereinafter: the PSA), Art. 25 of the Bylaw on Provision of Universal Services, NN No 41/13.
68
http://www.mppi.hr/UserDocsImages/MPPI_Okvirni_program_NGA_BB_prenotification-EN_
v4_17072014.pdf. Last consulted on June 14, 2017.
unsatisfactory and may significantly distort competition, the proposal shall be

returned to the operator for revision. In that case, HAKOM should suggest to the
operator an alternative method, a necessary set of benchmarks or conditions for the
provision of services that should be applied by the operator in the revision of the
proposal of prices. After the revision, if HAKOM’s opinion on the proposed prices
and conditions is once again negative, a final decision on the price and conditions for
the provision of services shall be adopted by the authority that is competent for the
particular project, and not by an undertaking concerned. On the basis of that final
decision, the prescribed prices and conditions become obligatory for a certain project
and the operator in the project.
The current text of the Safety of Road Traffic Act and the relevant bylaws
prescribe the minimum price, which the driving schools may charge for provision
of their services.69 Since this pricing regulation is, from the point of view of
competition, considered as anticompetitive, the draft new legislation does not set
any minimum prices and every driving school is free to set its prices on the basis of
its own business and pricing policy.
In the energy sector, the relevant legal entity with public authority is the Croatian
Energy Regulatory Authority (hereinafter: HERA), which has different powers in
determining particular prices in the energy sector. In addition, it is to be stressed that
even the Government has certain authority in setting energy prices, but only in cases
of disturbances on the energy market or in cases of unexpected or permanent energy
deficiency, immediate threats to the independence of the country, as well as in cases
of natural disasters or technological catastrophes, by way of prescribing the mea-
sures and conditions for formation of prices and supervision thereof.70 This provi-
sion leads to the conclusion that the authority of the Government is not to set prices
directly, rather to set the pricing policy in exceptional circumstances.
Another important role of the Government is foreseen by the EA, according to
which the Government brings tariff system for production of electrical and/or
thermal energy from renewable sources and cogeneration as well as for production
of biofuels.71
As a general rule, the final price of energy consists of the part of the price, which
is freely agreed upon between the contracting parties (energy provider and buyer)
and part of the price that may be regulated by application of the tariff system,
prescribed by special legislation. The tariff system consists of the appropriate
methodology and tariff elements and this methodology is determined by HERA.
Tariff elements have to be approved by HERA following the request of an
69
Art. 202. of the Safety of Road Traffic Act (Zakon o sigurnosti prometa na cestama, NN No 67/08,
48/10, 74/11, 80/13, 158/13, 92/14, 64/15, 108/17).
70
Art. 26 of the Energy Act (Zakon o energiji, NN No 120/12, 14/14, 95/15, 102/15, 68/18,
hereinafter: the EA).
71
Art 30/3 EA.
undertaking in the energy sector. If HERA declines the request of the energy
undertaking, it is empowered to determine the tariff elements on its own.72
Tariff methodologies for energy activities of distribution, transfer and transport of
energy are to be set directly by HERA. This applies also to energy activities of
production, distribution and supply of thermal energy.73
Legislation on electrical energy differentiates between the activities, which are
fully liberalised and activities that have to be performed as public services, thus
being subjected to regulatory intervention, in order to ensure that they are carried out
transparently and objectively, without interruptions, to the benefit of consumers
(transfer and distribution of electrical energy, supply of electrical energy to desig-
nated groups of customers and organization of the electrical energy market).74 The
electricity price for the same category of customers must be the same on the whole
national territory. Based on the provision of the primary legislation, there is a
number of bylaws and decisions of HERA regarding the methodologies and setting
the tariffs for activities, which are considered public service obligations and thus aim
to ensure the supply of electrical energy to designated categories of consumers.
HERA is entitled to follow and analyse the work of energy undertakings, inter
alia, in relation to conditions, unit prices and fees for connection to transfer and
distribution network. While supervising the energy undertakings, HERA observes
irregularities which might cause financial consequences to end-users, it may, inter
alia, modify the suggested prices and fees, which are submitted to it by the energy
undertakings at the time of issuing prior consent to performance of energy acti-
vities.75 HERA is also entitled to fine energy undertakings who do not, inter alia,
adhere to the tariff methodology which has to be followed when calculating energy
price or who do not perform their activities in accordance with the general conditions
of energy supply (also including the element of price) or who do not appropriately
calculate and charge the relevant fees.
According to the provisions of the GMA, HERA has the power to determine
methodology for determining the price and other fees in relation to distribution of
gas for households.76
Undertakings involved in activities on the gas market must ensure that the fees
and tariff elements determined by HERA are fully respected in energy activities that
are carried out as public services.77 For the gas sector, regulated prices which are
either directly determined by HERA or the elements of which are determined by
HERA and/or are subject to its approval, include the tariff elements for transport of
72
Art. 28 EA.
73
Art 30/1,2 EA.
74
Art 4–7. of the Electrical Energy Market Act (Zakon o tržištu električne energije, NN No 22/13,
95/15, 102/15, 68/18, hereinafter: the EEMA).
75
Art. 72/5/2 EEMA.
76
Arts. 59 and 94 5. GMA.
77
Art. 59 GMA.
gas,78 tariff elements for storage of gas,79 tariff elements for distribution of gas,80
and tariff elements for supply of gas to citizens, the latter activity being considered as
public service obligation and subject to special rules only for a limited period of time
(until 31 December 2017) due to special conditions on the market and status of the
relevant undertakings on the market.81
Pursuant to provisions of the Oil and Oil Derivatives Market Act (hereinafter: the
OODMA), the price of oil and oil derivatives is, in principle, freely determined by
the parties on the market. However, in exceptional circumstances, the Government
may, for the protection of consumers, regulate the market or for other justifiable
reasons, determine the maximum retail price for certain oil derivatives, for a limited
period of 90 days.82
Several laws regulating free professions empower professional chambers to set
minimum price chargeable by their members to service users. Thus, e.g. the Dental
Medicine Act authorises the Croatian Dental Chamber to determine minimum price
for services of doctors of dental medicine and dental technicians,83 the Advocacy
Act entitles the Croatian Chamber of Attorneys to determine tariffs for attorneys’
services with the consent of the Minister of Justice,84 and the Notaries Act gives the
authority to the Croatian Chamber of Notaries to set the notaries’ tariff with the
consent of the Minister of Justice.85
Based on these examples, the following conclusions can be drawn:
– regulatory authorities do not have—as a default rule—the authority to determine
and/or modify prices, but instead, they are only exceptionally permitted to
influence the price;
– exceptions thereto are applicable primarily in provision of services which are
considered services of general economic interest, and notably in the energy
sector;
– in those cases, authority of a regulator to set fixed price or price range is in most
cases prescribed as part of the general authority to control and/or approve the
standard contract terms;
78
Decision on the amount of tariff elements for transport of gas, (Odluka o iznosu tarifnih stavki za
transport plina, NN No 127/17).
79
Decision on the amount of tariff elements for storage of gas (Odluka o iznosu tarifnih stavki za
skladištenje plina, NN No 122/16).
80
Decision on the amount of tariff elements for distribution of gas (Odluka o iznosu tarifnih stavki
za distribuciju plina, NN No 122/16).
81
Tariff elements for public service of supply of gas for the period 1 April 2017 to 31 December
2017 (Iznosi tarifnih stavki za javnu uslugu opskrbe plinom za razdoblje od 1. travnja do 31.
prosinca 2017. godine, NN No 26/17).
82
Art. 9 OODMA (Zakon o tržištu nafte i naftnih derivata, NN No 19/14, 73/17).
83
Art. 42 in fine of the Dental Medicine Act (Zakon o dentalnoj medicini, NN No 121/03, 117/08,
120/09).
84
Art 18 of the Advocacy Act (Zakon o odvjetništvu, NN No 9/94, 117/08, 50/09, 75/09, 18/11).
85
Art. 161 of the Notaries Act (Zakon o javnom bilježništvu, NN No 78/93, 29/94, 162/98, 16/07,
75/09, 120/16).
– price limitations (price control) are primarily designed for the benefit of con-
sumers; however, a number of provisions extend to B2B contracts;
– legislative and regulatory intervention is not limited to the notion of price in a
narrow sense, rather it extends to any fee, charge, or other payment, which the
consumer would be obligated to make;
– in some cases, the intervention into price terms amounts to obligation of an
undertaking not to charge any price (fee) for the services provided.
5 Special Disclosure Requirements Promoting Price

Under the influence of EU law, price transparency and comparability requirements

have since recently become one of the most important tools of consumer protection
in Croatia. The departing hypothesis is that an average consumer will be able to
make a rational transactional decision if properly and fully informed on all relevant
elements of a future transaction including, of course, price and other price-related
terms. In this respect, numerous legal provisions are provided for across the Croatian
legal system with the aim of enabling consumers, but other actors on the market too,
to be fully acquainted with all relevant information regarding the price, even before
the purchase. The range of mechanisms employed in this regard extends from
provisions requiring full disclosure of the price and particular price elements, pro-
visions requiring the traders to provide consumers with specifically designed and
formatted information forms, to banning particular marketing practices intended to
mislead consumers regarding the price.
One of the principal mechanisms of consumer protection is the price disclosure.
Regardless of the type of transaction, regardless of whether a transaction takes place
in an offline or online environment, or whether a transaction involves over-the-
counter or distance selling, a consumer must be informed about the price, including
all price-related elements in good time before he/she makes a transactional deci-
sion.86,87 Information about the price must be comprehensive, in order to enable a
consumer to be acquainted with a total price he/she is required to pay for a product or
service. For this purpose, the CPA requires that a consumer be informed about the
retail price, i.e. final price, which includes all applicable taxes.88 To enable compar-
ison of prices, the CPA provides that, in principle, a selling price must be
86
Art. 7, 42, 57, 83 CPA.
87
The requirement that a consumer be informed in good time before he/she makes a transactional
decision is particularly emphasised by the CJEU in cases: CJEU Judgment of 18 December 2014,
CA Consumer Finance SA, C-449/13, EU:C:2014:2464 and CJEU Judgment of 23 October 2014,
Schulz and Egbringhoff, C-359/11 and C-400/11, EU:C:2014:2317. (see in more detail Cámara
Lapuente (2019), p. 9).
88
Art. 7 OA.
accompanied by a unit price, i.e. a total price per unit of measurement, and that the
price must be indicated in a clear, visible and readable manner,89 whereas special
bylaw provides for details regarding manner in which the price is to be indicated.90
Based on respective decisions of the Court of Justice of the European Union, the
information about the price must not only be formally (grammatically) transparent,
but also substantively/materially transparent, in the sense that a consumer must be in
a position, based on the information he/she was provided with, to asses legal and
economic consequences of his/her undertakings.91
The same price transparency requirement is provided for in the CACA, which
mandates that a consumer be informed about total cost of the credit, annual percent-
age rate, and other fees and costs associated with a credit before he/she is bound by
any offer or credit agreement.92 In order to boost price transparency and compara-
bility of prices on the financial market, the recently enacted CFRA provides for an
obligation of payment services providers to inform consumer about applicable fees
related to payment accounts in good time before a consumer is bound by any offer or
agreement.93
Similar price transparency requirements are provided for in the ECA regarding
telecommunication services,94 the PSA with respect to postal services,95 the EEMA
regarding the distribution of electricity.96 It merits mention that all these acts extend
this requirement to any end-user, and not just to consumers.
Apart from requiring that the essential information be provided to consumers
before they make a transactional decision, particular laws went even further and
provided for an obligation of the trader to inform the consumer of vital elements of a
contract, including price and price-related terms, in a structured pre-formulated form,
with unified substance and format. This unique form insures that the same vital
information is provided to consumers in the same manner and in the same order
across the EU, thus enabling consumers to effectively compare different offers.97,98
89
Art. 7 OA.
90
Bylaw on a manner of indication of a selling and unit price for products and services (Pravilnik o
načinu isticanja maloprodajne cijene i cijene za jedinicu mjere proizvoda i usluge, NN 66/2014).
91
See in more detail Cámara Lapuente (2019), pp. 9–10.
92
Art. 5 OA.
93
Art. 5 CFRA.
94
Art. 42a ECA.
95
Art. 45 PSA.
96
Art. 40 EEMA.
97
Bylaw on Substance and Form of Information on Timeshare Contract (Pravilnik o sadržaju i
obliku obavijesti o ugovoru o vremenski ograničenoj uporabi nekretnine, NN No 66/14), and Bylaw
on Obligation to Inform Consumers (Pravilnik o obvezi informiranja potrošača, NN No 14/10).
98
See also Cámara Lapuente (2019), p. 10.
In order to enable consumers a swift comparison of credit offers of different

banks, since recently HNB introduced an interactive web-page with an application
containing an informative list of credit offers.99
Finally, the EU law, including Croatian law, protects consumers by banning
particular price-related marketing technics which may mislead consumers with
respect to price. Thus, for example, the CPA banns bait-and-switch and low-ball
technics as unfair commercial practices.100 The CACRIPA attempts to regulate
financial services by, inter alia, banning tying practices and providing for conditions
under which bundling practices would be permitted.101
References
Baretić M, Markovinović H (2012) Nepoštene ugovorne odredbe, opće i posebna uređenja (Unfair
Contract Terms, General Regulation and Special Regulations). Zbornik Susreta pravnika u
gospodarstvu. Zbornik 50. susreta pravnika, Opatija, pp 57–32
Cámara Lapuente S (2019) Control of price related terms in standard form contract in EU. The
Innovative Role of the CJEU’s Case-law in the Review of Price-related Terms in Standard Form
Contract. Springer, Cham, pp X–XX
Gorenc V et al (2006) The obligatins act commentary. RRiF, Zagreb, p 2
99
https://www.hnb.hr/o-nama/informacije-potrosacima/bitne-informacije/informativna-lista/
informativna-lista-ponude-kredita-potrosacima.
100
Art 35/5,6 CPA.
101
Art.11 CACRIPA.
Form Contracts in Denmark: Pragmatism
and General Clauses
Kasper Steensgaard
Abstract This chapter concerns Control of Price Related Terms in Standard Form
Contracts under Danish law. It first highlights some essential features of the freedom
of contract under Danish law as a historical and current cornerstone of contract law.
It then addresses the legislative control of price terms, which is encompassed by a
general reasonableness standard that applies universally to all contract terms. Then,
the control of contract terms at the judiciary and other authorities are presented.
Finally, it examines some examples of regimes that are subject to price caps, before
addressing the legislative and private efforts to promote transparency.
1 Freedom of Contract and Its Boundaries
1.1 The (First) Legal Basis: The 1683 Danish Code
Freedom of contract is a cornerstone in Danish Contract Law that can be traced back
to (at least) Danske Lov (1683 King Christian V’s Danish Code).1 Book 5, Chapter 1,
Sections 1 and 2 Danish Code prescribe that “promises”2 must be performed to the
letter unless it would be illegal or immoral to do so.3 These two provisions remain
applicable today and are considered the legislative manifestation of contractual
1
Ussing (1950), pp. 18, 186–188; Andersen and Madsen (2017), pp. 19–20; Andersen (2013), p. 38.
2
See below in this section on the so-called “promise theory” in Danish law.
3
Ussing (1950), p. 18; compare Andersen and Madsen (2017), pp. 246–252; Andersen (2013),
pp. 406–416. Sections 5-1-1 and 5-1-2 Danish Code are dovetailed in the 1687 Norwegian Code.
K. Steensgaard (*)
Aarhus University, School of Business and Social Sciences, Department of Law, Aarhus,
Denmark
e-mail: ks@law.au.dk

https://doi.org/10.1007/978-3-030-23057-9_12
340 K. Steensgaard
freedom—as well as a reminder that party autonomy is not without limits.4 In the
following, these two exceptions are addressed in turn.
The prohibition against immoral promises is a paraphrase of the principle of
contracts contra bonos mores in Roman Law.5 The benchmark of evaluation under
Section 5-1-2 Danish Code is the moral standard of society. As such, the standard
continuously adapts to the contemporary notion.6 Promises that would have been
immoral under previous standards may, therefore, be acceptable today.7 Examples of
promises that offend the moral standard of society include, for example, the sale
of children or personal votes in public elections.8 An illustrative example from
(Swedish) case law concerned a claim from a woman, A, who—in exchange for
having an abortion—was promised SEK 25 million by the would-be father, B. Once
the procedure had been performed, however, B refused to pay as promised, and
A sought the claim enforced. The courts declined as the transaction was immoral.9
The offending nature of immoral promises often leads the courts to refuse even to
hear cases that involve such obligations.10 This was, for example, the case in UfR
2006.1914 Western High Court, which concerned an outstanding debt under the
auspices of the UN Oil-for-Food Programme. The Western High Court dismissed the
case ex officio when the claim was exposed as a bribe intended for Saddam Hussein’s
regime. The court found that enforcement would violate Section 5-1-2 Danish
Code.11 There does not appear to be examples from the last one and a half century
of price terms being found immoral under this provision, however.
The legislative boundary for illegal promises under Section 5-1-2 Danish Code
has also changed over time.12 In the nineteenth century, the legislative regulation of
the trade was relaxed and (self-)regulation by way of guilds gained traction. The
result was a broad contractual freedom; however, it quickly became apparent that
uninhibited party autonomy caused undesirable ethical and social issues.
4
Ussing (1950), pp. 18, 186–188; Andersen and Madsen (2017), pp. 19–20; Andersen (2013), p. 38;
see, however, Nielsen (1951), pp. 214–219, who argues that Section 5-1-2 Danish Code did not
intend to convey contractual freedom but was included to express dissociation with the require-
ments of causa or consideration known in other jurisdiction. Nonetheless, Nielsen does not
question the principle of contractual freedom as an integral part of Danish law.
5
See Corpus Juris, Codex 2.3.6. Ussing (1950), pp. 189–190; Nielsen (1951), pp. 220–221;
Zimmermann (1990), pp. 706–715.
6
Ussing (1950), pp. 189–190; Andersen and Madsen (2017), pp. 250–251; Andersen (2013),
pp. 409–410; Nielsen (1951), p. 218.
7
One example is the former ban of, inter alia, the sale of pornographic imagery. See on this below.
8
Andersen and Madsen (2017), pp. 250–252.
9
Rättsfall från hovrätterna (RH) 2004:41. See also Ramberg (2005), pp. 307–315; Hauge (2009),
p. 438.
10
Compare Andersen (2013), pp. 407–408.
11
The dismissal was ex officio.
12
The distinction between illegal and immoral agreements can be challenging to draw. See for
example the just mentioned case, UfR 2006.1914 Western High Court—a bribe can be both said to
be illegal and to be immoral.
Control of Price Related Terms in Standard Form Contracts in Denmark:. . . 341
Exploitation of industrial workers and other weak parties prompted the politicians
and the incipient trade unions to react.13 The general attitude shifted in favour of
some degree of regulation on, for example, vacation rights, aspects of contracts for
rent, insurance, and credit sales. The trend of passing increasingly detailed regula-
tions continues today.
That a promise conflicts with a law does not necessarily make it illegal within the
meaning of Section 5-1-2 Danish Code (and, therefore, invalid). The consequence of
a violation must be decided in the concrete situation in consideration of the law’s
objective.14 Breaking rules that aim to protect weaker parties is generally sanctioned
by invalidity, but overstepping a rule with another objective may be sanctioned
differently.15 For example, a purchase from a trader without proper trade authorisa-
tion does invalidate the contract with the result that it must be rolled back—instead,
the trader will be fined.16 Laws that set a sanction or consequence are generally
considered to regulate the question of sanctioning exhaustively.17
The illegality part in Section 5-1-2 Danish Code was, to illustrate, applied in a
case, in which a realtor had claimed a fee of close to 10% of the purchase sum. This
was in accordance with the contract but exceeded then statutory maximum of 2%
significantly. The court refused to enforce the claim, as the aim of the price cap was
regulatory, and the violation was a criminal offence.18
1.2 The 1917 Danish Contract Act and Later Amendments
Today, the primary regulation on control of contractual terms is Lov (1917:242) om

aftaler og andre retshandler på formuerettens område (Danish Contract Act—DCA).
The DCA was drafted in collaboration with the other Nordic countries as part of an
effort to approximate the laws within the field of private law. As a result, (almost)
identical Contract Acts are found in Iceland, Finland, Norway and Sweden.19
13
Ussing (1950), pp. 18–19.
14
15
Ussing (1950), p. 194.
16
Ussing (1950), p. 194; Andersen and Madsen (2017), pp. 247.
17
Compare Andersen and Madsen (2017), pp. 247.
18
UfR 1977.874 Western High Court. Another example of a contract against the law is UfR
1969.303 Supreme Court, which concerned a contract that violated a ban on pornographic imagery.
The authorities had seized a shipment of pictures of pornographic nature that was subject of a sales
contract. Because delivery had become impossible due to the seizure, the buyer refused to pay the
seller’s claim. That led to a case before the courts, and the Supreme Court found that the sales
contract was invalid. In 1969, the legislator lifted the ban on (most) pornographic imagery, and
similar claims will not be enforced today. See, for example, cases no 1995-112/5-3, 1994-4041/5-
160, 1995-4041/5-180, 191, and 195 of the Consumer Ombudsman, who found the marketing of
pornographic movies to be permitted.
19
The Nordic countries comprise the so-called “Nordic Legal Family”, which contains features
from both common law and civil law, but cannot accurately be categorised as wholly belonging to
either; Zweigert and Kötz (1998), pp. 276–285; Due (2002), pp. 19–21.
342 K. Steensgaard
Section 1 DCA (as does Section 5-1-1 Danish Code) expresses the so-called
løfteprincip (“promise principle” or “promise theory”), which holds “offers” and
“replies to offers” binding in themselves.20 Consequently, an offer is irrevocable
once it has come to the recipient’s knowledge; s. 7 DCA.21 The recipient, on the
other hand, remains free to pursue other options, and that creates an asymmetry
(negotium claudicans). The underlying philosophy behind this approach is that the
interests of the trade, legal security, and predictability must be protected rather than
the offeror’s will to be bound or not—one should abstain from making promises that
one is not willing to keep.22 This philosophy permeates the law of obligations and
the understanding of contractual freedom.
The freedom of contract is protected by the courts, which generally only intervene
if a promise has been made involuntarily or its content falls outside the scope of the
party autonomy. The courts may, however, also intervene if the freedom of contract
has been abused to create an unreasonable agreement, as explained below in
Sect. 2.1.
The binding nature of offers requires traders to exercise care when pricing and
labelling goods. An offeror must sell the good for the quoted price—even if the
advertised price because of a mistake by the offeror is lower than he or
she intended.23 An exception is when the offeree realised or should have under-
stood that the low price was a mistake within the meaning of s. 32(1) DCA.24 This
was the case in UfR 1985.877 Danish Supreme Court. An electronics store had put
the wrong price tag on a number of televisions in its storefront window, and a
consumer who passed by the store one evening sensed a bargain. He showed up
early next morning and requested to buy all the TVs for the advertised low price.
The store, naturally, refused as the low price was a mistake. The Supreme Court
reaffirmed that offers in stores are binding promises to sell at the advertised price
and that the seller consequently, in principle, is bound to sell at that price. In the
concrete case, however, the consumer must have (or should have) understood that
the offer was too good to be true, and the offer could, therefore, not be relied on as
20
Ussing (1950), pp. 6–12, 17–28; Andersen and Madsen (2017), pp. 37–38; Rabel (1936), Vol.
1, pp. 70–71.
21
This differs from, for example, the so-called “posting” or “mailbox rule” in common law. For
English law, see, for example, Adams v Lindsell (1818) B & Ald 681; Dunlop v Higgins (1848)
1 HL Cas 381, Household Fire Insurance Company v Grant (1879) 4 Ex D 216; Henthorn v Fraser
[1892] 2 Ch 27. A tiny possibility of revoking an offer before the offeree has relied on it exists in
s. 39, 2. sentence DCA, but it only applies under extraordinary circumstances.
22
Ussing (1950), pp. 17–28; Andersen and Madsen (2017), pp. 37–38.
23
See on s. 39, 2. sentence DCA (n 21).
24
When deciding whether or not the offeree is in good faith regarding the correctness of the price,
one has to look at all the circumstances, e.g. type of store, sale advertisements, the cost of
comparable products in the store, etc.
binding under s. 32(1) DCA.25 As a consequence, an offeror is bound to the

wording of his or her offer regardless of mistakes, as long as the offeree is in
good faith.26
To sum up: Freedom of contract is generally recognised for contracts between
parties of a sound mind that can assess the consequences of their involvement—
provided that the agreement does not violate the law or offend society’s morals and
that both parties are free from duress, coercion, exploitation, etc.
1.3 Negative Contractual Freedom
Contractual freedom also encompasses the right to not enter into a contract,
i.e. “negative contractual freedom”. The right to refuse to enter into a contract is
not absolute—one person’s freedom of contract may amount to suppression of
another person’s freedom.27 Suppliers of basic utilities such as electricity, water,
and heating are, for example, required to contract with customers within the geo-
graphical area they supply.
Also, private entities with a dominant position on the market may be required to
contract on specific terms to ensure the function of the market. It is considered
unacceptable for dominant parties to dictate the terms for its resellers as a condition
of supplying them (including “take it or leave” offers with unacceptable terms). The
abuse of market dominance is prohibited under Konkurrenceloven (1997:384)
(Danish Competition Act), and the competition on the market is monitored by
Konkurrencerådet (Danish Competition Council).28 The Danish Competition Act
protects, inter alia, the access to the delivery of goods, the licensing of exclusive
rights, and the access to infrastructure owned by the dominant party (and the terms
for such contracts).29
25
See also UfR 2007.640 Western High Court, in which an expensive oriental rug was offered for
sale at 10% of the intended price. The court found that the offeree should have realised that the price
was an error and he could, consequently, not rely on the offer as binding.
26
See for example UfR 2012.3272 Western High Court, in which the buyer did not and should not
have realised that the seller had intended to omit certain expenses in the quoted price, which,
consequently, was binding for the offeror.
27
Andersen and Madsen (2017), pp. 21–22; Andersen (2013), pp. 231–234.
28
Madsen (2014), pp. 213–214.
29
Madsen (2014), pp. 173–204.
344 K. Steensgaard
2 Legislative and Judicial Control of Price Terms

in Standard Contract Terms
This section deals with the rules and remedies on the control of price terms available
under Danish law. First, the domestic regulation is presented, and how the Danish
tradition of regulation by use of general clauses instead of specific prohibitions led to
complications in the implementation of EU law. Then, the remedies when dealing
with unreasonable (price) terms are discussed and, finally, the authorities that ensure
compliance and a recent example are presented.
2.1 The General Clauses of the Danish Contract Acts
The principal basis for the Control of Price Terms in Standard Contract Terms is the
DCA. The DCA largely appears in its original version from 1917, and the few later
amendments pertain mainly to consumer protection. Chapter 3 of the DCA contains
the “classic” invalidity rules, which may, inter alia, be used to police some price
terms. Misrepresented terms may invalid under s. 30 DCA, and exploitation of a
weak party’s inability to reject an offer to gain a disproportionate advantage may
lead to invalidity under s. 31 DCA.
The chapter also contains two so-called “General Clauses”. Section 33 DCA is a
“catch-all” provision that bars enforcement of obligations under a contract if it would
contravene almindelig hæderlighed (decency) to do so. This provision may apply to
price terms.
Since s. 36 DCA was introduced in 1975, it has become the primary rule for
policing contractual terms30:
Section 36(1) DCA. A contract may be modified or set aside, in whole or in part, if it would
be unreasonable or at variance with the principles of good faith to enforce it. The same
applies to other juristic acts.
(2) In making a decision under subsection (1) hereof, regard shall be had to the circum-
stances existing at the time the contract was concluded, the terms of the contract and
subsequent circumstances.
As the wording indicates, s. 36 DCA is a broad general clause that allows the
courts to modify or set aside unreasonable contracts and contractual terms.31 The
provision does not prohibit specific, named terms but allows and requires the courts
to make a broad assessment of reasonableness on the basis of all relevant
30
31
Promises that are invalid under one of the specific rules on invalidity, e.g. misrepresentation,
mistake, duress, will often also be “unreasonable” within the meaning of s. 36 DCA, but it is
generally encouraged to use the specific rule. See also Andersen and Madsen (2017), pp. 229–230,
who warns against intellectual laziness in this regard.
circumstances. This includes, for example, the events at the contract conclusion and
the content of the contract.32 The courts will consider the balance of the parties’
rights and obligations under the contract, and they may address both negotiated and
standard terms. Section 36 DCA is a legal standard that has reduced the need for a
detailed regulation of specific clauses and situations, such as, for example, price
terms: they are already covered by the general clause(s).33
Although the wording of s. 36 DCA may appear to grant the courts an excessive
discretion to modify contracts, the courts are trusted to use the provision as a “safety
valve” only—and case law confirms that this is how the provision is used.34 In
practice, s. 36 DCA is often invoked to no avail, because the courts will not
allow the provision to be used to circumvent the fundamental principle of freedom
of contract.35
Section 36 DCA finds its primary area of application in consumer contracts.36
This includes, for example, situations, in which inequality in bargaining power and
lack of insight have been used to entice consumers to enter into contracts with
unreasonable terms. In principle, s. 36 DCA also applies to B2B contracts, but there
have only been a few examples so far.37 Professional parties are generally presumed
to make informed choices and to be able to fathom the consequences of making or
accepting an offer. Nevertheless, s. 36 DCA may be applied to protect the weaker
party in a B2B setting.38
The DCA does not contain a chapter dedicated to standard terms, which is seen in
some jurisdictions. Section 36 DCA may be applied to any clause, regardless of
whether it has been negotiated or not. However, clauses found in non-negotiated
standard terms are generally subject to a stricter standard concerning incorpora-
tion,39 validity and interpretation than negotiated terms. In practice, non-negotiated
terms are also more likely to be held unfair within the meaning of s. 36 DCA.
In conclusion, under the DCA, the incorporation of price terms in standard terms
is subject to the “classic” rules on invalidity (fraud, exploitation, etc.). Burdensome
terms, such as some price terms, warrant particular efforts regarding clarity to make
sure that the offeree understands the implications of accepting the offer. The main
32
Andersen (2013), pp. 422–431.
33
34
Compare Andersen (2013), p. 419.
35
Compare Andersen (2013), p. 418.
36
37
See, for example, UfR 2013.2041 Supreme Court, in which s. 36 was used to reduce the leasing
fee in a B2B relationship.
38
39
See for example case no 1997-522/7-32 from the Consumer Complaints Board, which concerned
a contractual term that granted the seller of a motorbike the right to 10% of the sales price if the
buyer annulled the contract. The Board found that the term had not been incorporated because it was
unexpected and burdensome to the buyer and not sufficiently emphasised. The Board further noted
that it, because of this, was unnecessary to assess the term under ss. 36 and 38c DCA and Point 1
(e) in the Annex to Directive 93/13/EEC (n. 41).
346 K. Steensgaard
rule for policing the content of price terms in standard contracts is s. 36 DCA and to a
lesser extent s. 33 DCA.
2.2 Implications of European Union Law
The Nordic tradition is to police contractual terms through general standards such as
s. 36 DCA in lieu of prohibiting specific clauses. This has caused friction with EU’s
more hands-on approach to consumer protection.40
The implementation of Directive 93/13/EEC on unfair contract terms (UCTD)41
showed the difficulty of adopting detailed rules to a legal standard.42 This Directive
contains a number of substantive provisions concerning private parties, and they
were deployed in a new Chapter IV of the Contract Act entitled: “Special Provisions
on Consumer Contracts”.43 This includes a new s. 38c DCA that supplements s. 36
DCA in consumer contracts and reads:
Section 38c(1) DCA. The provisions of section 36(1) of this Act apply to consumer
contracts. If it is contrary to the requirement of good faith and fair dealing and causes a
significant imbalance in the parties’ rights and obligations arising under the contract to the
detriment of the consumer to rely on a contractual term, the legal effects specified in section
36(1) of this Act also apply. In such a case, the consumer may demand that the other
provisions of the contract shall, if possible, continue to bind the parties.
(2) The provisions of section 36(2) of this Act apply to consumer contracts with the
modification that, in the assessment of the circumstances specified in section 36(2) of this
Act, including the terms of the contracts on which a particular contract is dependent, regard
shall not be had to subsequent circumstances to the detriment of the consumer with the result
that the contract may not be modified or set aside.
However, in an Annex, the UCTD contains a rather comprehensive list of terms

presumably unfair in consumer contracts—the so-called “grey list”.44 Such lists are
foreign to the Nordic tradition. The Nordic legislators gathered to discuss how to
implement the Annex, as they were of the opinion that the existing domestic
regulation offered a higher degree of consumer protection.45 The consumers, in
40
Denmark does not partake (among other things) in EU’s Civil Justice Cooperation, however. This
is laid down in the Edinburgh Agreement, which was made in the aftermath of the 1992 referendum,
in which the Danish voters rejected the Maastricht Treaty.
41
95/29.
42
43
Folketingstidende [Parliament Reports] 1993–1994, Tillæg A, 325–350. The public law pro-
visions of the Directive were implemented into Lov (now 2017:426) om markedsføring (Danish
Marketing Practices Act—DMPA); Folketingstidende 1993–1994, Tillæg A, 7264–7265.
44
Article 3(3) UCTD: “The Annex shall contain an indicative and non-exhaustive list of the terms
which may be regarded as unfair”.
45
Folketingstidende 1994–1995, Tillæg A, 332 and 334.
particular, were already sufficiently protected against the presumably unfair clauses
listed in the Annex by ss. 36 and 38c DCA (if the term in dispute had not been
negotiated).46 Considering that Directive 93/13/EEC only aimed to provide a “min-
imum harmonisation” among the EU Member States, the legislators chose not to put
the Annex into statute but to implement it through the travaux prèparatoires (per
Nordic legislative tradition). They justified this by stating that the content of legal
standards such as ss. 36 and 38c DCA should not be exemplified; that would entail
the risk that the Annex’ examples would become too guiding for the assessment and,
thereby, cause deterioration of the well-functioning flexible legal standard(s).47
The EU Commission disagreed with the approach taken by the Nordic Coun-
tries and commenced an action against Sweden for failure to fulfil its obligation to
incorporate properly. However, Sweden was, supported by Denmark and Finland,
successful before the CJEU in claiming that the approach taken was sufficient
to properly incorporate the Directive.48
As a result, there is still no official “grey list” against certain contractual terms in
consumer contracts in Danish law.49 The Annex is referenced in the preparatory
works and the clauses it mentions are, therefore, also presumptively unfair within the
meaning of s. 38c DCA. In any event, the Danish courts are required to interpret
Chapter IV of the DCA in harmony with EU law (including the Annex).50 Both
courts and lawyers are aware of the Annex; the Danish Supreme Court has, for
example, referred to point 1(e) in the Annex in support of a result already reached
under ss. 36 and 38c DCA.51
Section 38c DCA supplements s. 36 DCA and shifts the assessment in favour of
the consumer. Under s. 38c DCA, circumstances that cause the contract to become
(unreasonably) unbalanced after the contract conclusion may not be considered if it
would be to the detriment of the consumer.
Article 4(2) UCTD is not implemented in Danish law, and that was a conscious
choice by the legislator.52 The provision was discussed among the Nordic countries,
and they shared the sentiment that Art 4(2) was likely to reduce the level of consumer
protection compared to the existing regulation, under which the assessment under
s. 36 DCA is not subject to a similar limitation concerning which terms are subject to
46
Folketingstidende 1994–1995, Tillæg A, 334. See regarding the implementation; Andersen and
Madsen (2017), pp. 232–241.
47
Folketingstidende 1994–1995, Tillæg A, 335.
48
CJEU Judgment of 7 May 2002, Commission / Sweden, C-478/99, EU:C:2002:281.
49
See in this volume, Sergio Cámara Lapuente, The Innovative Role of the CJEU’s Case-Law in the
Review of Price-Related Terms in Standard Form Contracts, Sect. 2.
50
Which was also mentioned in the travaux; see Folketingstidende 1994–1995, Tillæg A, 334.
Compare Andersen and Madsen (2017), p. 240.
51
UfR 2002.706 Supreme Court; the case is presented below in section II.3.
52
Article 4(2) UCDT: “Assessment of the unfair nature of the terms shall relate neither to the
definition of the main subject matter of the contract nor to the adequacy of the price and
remuneration, on the one hand, as against the services or goods supplies in exchange, on the
other, in so far as these terms are in plain intelligible language”.
348 K. Steensgaard
judicial control.53 Consequently, Danish law does not employ a significant distinc-
tion between main terms and auxiliary terms, albeit the status of a term may be
embraced in an assessment under ss. 36 and 38c DCA. This differs from most other
EU Member States.54
2.3 Remedies
Under s. 36 DCA, the courts may modify or set aside, in whole or in part, unfair
contracts and contractual terms.55
The original wording of s. 36 DCA only allowed the courts to set aside unrea-
sonable agreements, and that turned out to be too constricting in some situations.
See, for example, a 1987 case: A bought a vacation home from B in 1956, and signed
a rental agreement for the building’s plot for DKK 50 a year for 49 years. Almost
20 years later, a later owner, C, demanded an increase of the rent. When A refused, C
brought suit claiming that the agreed rent was unreasonable within the meaning of
s. 36 DCA and should, consequently, be raised. A survey of the market rent
estimated the plot’s rental value to be about DKK 1000, but the Danish Western
High Court had to deny the claim because s. 36 DCA did not offer any possibility to
modify an agreement.56
In 1994, s. 36 DCA was changed to include “modified or” before “set aside”.57
The provision now allows the courts to salvage the contract, if possible. The remedy
chosen will always depend on the concrete circumstances, and if a court decides to
modify a term, it will usually make an effort not to create a new imbalance.
In the case UfR 2002.706 Supreme Court, a young person wished to annul the
purchase of a used car, which he had made a few days before. As agreed, the seller
charged a compensation in the amount of 10% of the purchase sum. The Danish
Supreme Court found that the term was agreed upon and, consequently, part of the
contract, but that it was unreasonable under ss. 36 and 38c DCA, as it did not
reasonably reflect the seller’s actual loss from the annulment.58 Thus, the term was
invalid. Compare UfR 2004.2876 Eastern High Court, which concerned a similar
contractual provision. Here, the court denied the buyer’s invalidity submission under
ss. 36 and 38c DCA, because the seller’s loss from the wrongful annulment was
proven to be approximately 10% and, therefore, proportional.
53
Folketingstidende 1993–1994, Tillæg A, 336.
54
Review of Price-Related Terms in Standard Form Contracts, Sect. 2.
55
Andersen (2013), pp. 418–419.
56
UfR 1987.711 Western High Court.
57
Lov (1994:1098) om ændring af lov om aftaler og andre retshandler på formuerettens område og
visse andre love (Modification of DCA Act). See Andersen and Madsen (2017), pp. 222–426.
58
Compare case no 1997-522/7-32 from the Consumer Complaints Board (n 39).
In consumer contracts, s. 38c DCA limits the available remedies to the unfair term
itself—which may be modified or set aside—while the remainder of the contract
stands (if possible). It is questionable whether Danish law is in accordance with the
EU law on this point, as it does not appear to take the consequence of the principle of
“dissuasive” or “deterrent effect” in the CJEU’s case law.59
2.4 Authorities that Ensure Compliance
The courts have the final word on whether price terms are allowed. A judgment only
has res judicata between the parties to the case, but third parties can reasonably
expect that the courts will reach the same result if the same clause is invoked in a
similar context.
It can be relatively costly to pursue claims at the courts. From 1 January 2008, a
new consumer-friendly, cheaper “small claims procedure” for claims of less than
DKK 50,000 is available to, for example, consumers.60 Invoking the small claims
procedure entails that the court will help prepare the case and guide the parties.
Representation by a lawyer is optional, which helps to keep costs at a minimum for
the parties.61
Consumers may alternatively opt to file a complaint with an approved “consumer
complaints board”. Several complaints boards have been enacted for different fields;
e.g. cars, vacation rentals, insurance, financial institutions, package travels, etc. The
principal complaints board is Forbrugerklagenævnet (Consumer Complaints
Board), which has a general competence in cases of between certain values and
DKK 100,000. However, the board will only hear cases after an unsuccessful
attempt to resolve the dispute in mediation administered by Center for klageløsning
(Centre for Resolution of Complaints).
Decisions of the Consumer Complaints Board become binding and enforceable
after 30 days. Within this time limit, the trader may notify the Complaints Board that
it does not wish to be bound by the decision. If so, the trader’s name is published on a
list of companies that refuse to follow the decisions of the Consumer Complaints
Board. Moreover, the consumer may request Konkurrence- og Forbrugerstyrelsen
59
Review of Price-Related Terms in Standard Form Contracts. Compare Court of Justice of the
European Union on the interpretation of Art 6 UCTD in CJEU Judgment of 14 June 2012, Banco
Español de Crédito, C-618/10, EU:C:2012:349. In this case, the CJEU ruled that: “Article 6(1) of
Directive 93/13 must be interpreted as precluding legislation . . . which allows a national court, in
the case where it finds that an unfair term in a contract concluded between a seller or supplier and a
consumer is void, to modify that contract by revising the content of that term”. See on Danish law,
for example, Sørensen (2013).
60
See Chapter 39 of Lov (Law Consolidation Act 2016:1257) om Rettens Pleje (Danish Adminis-
tration of Justice Act—DAOJA).
61
Bang-Pedersen et al. (2017), pp. 403–411.
350 K. Steensgaard
(Danish Competition and Consumer Authority) to file suit at the courts on the
consumer’s behalf62—or bring suit himself or herself. In practice, the vast majority
of decisions of the Consumer Complaints Board are accepted by the traders.
The decisions of the Consumer Complaints Board are published online on http://
www.forbrug.dk/menu/afgoerelser/.
Denmark does not keep a register of forbidden terms. It is possible, however, to
look at case law or published decisions of other authorities to acquaint oneself with
instances in which particular terms have been overruled.
In 2007, class action suits were introduced into the Danish Administration of
Justice Act (DAOJA) as Chapter 23a. So far, there has not been any examples of a
collective action concerning unfair standard contract terms. At the time of writing,
however, a group of more than 280,000 license payers has formed in order to claim
reimbursement of (allegedly) wrongfully charged VAT on the media license from
the Danish Broadcasting Corporation. Under s. 35 lov (2017:426) om markedsføring
(Danish Marketing Practices Act—DMPA), the Consumer Ombudsman (see Sect.
4.2 below) may be appointed as group representative in a collective action.
2.5 A Recent Case on a Price Adjustment Term in a SCT
As stated above, party autonomy is also prevalent when it comes to SCT, and the
terms of such contracts are also subject to general clauses.
A recent example of this concerns mortgage agreements, which generally contain
a clause that allows the lender to increase the administration fee with the contractual
notice. Some of these clauses do not detail the circumstances that would warrant an
increase.
The financial crisis led to unusually low mortgage interest rates, which caused
most financial institutions to increase the administration fees to cover their costs
from their portfolio of mortgage loans. For the customers, this meant rather signif-
icant increases in the amount payable. Some disgruntled customers decided to
challenge the legality of the rise in the administration fee at the relevant complaint
boards and before the courts.
So far, these challenges have been unsuccessful. On 8 August 2018, the Eastern
High Court decided as the court of first instance that the customers had accepted the
mechanism for adjusting the administration fee in their contracts and that the
individual increases were reasonable under the circumstances. Therefore, the court
found the customers’ claim to be meritless.63 The claimants launched an appeal to
the Supreme Court, which reaffirmed the judgments on 19 June 2019.
62
Section 35(2) Lov (524:2015) om alternativ tvistløsning i forbindelse med forbrugerklager
(forbrugerklageloven) (Danish Consumer Complaints Act).
63
Judgments of the Eastern High Court, 8 August 2018, in cases B-1640-16, B-1368-16, and
B-568-17.
The political response to the situation has been reluctant. The legislator’s has only
extending the notice to a minimum of 6 months and requiring the financial institu-
tions to give more elaborative reasons when increasing the administration fee.
3 Special Regulatory Control of Price Terms
3.1 Maximisation of Interest Rates
Agreements on interest rates are policed by ss. 36 and 38c DCA. Provisions on
interest rates, for example in SCT, that exceed the unreasonableness benchmark may
be modified or set aside.64 In more extreme cases, exorbitant interest rates may be set
aside under s. 31 DCA, and usury constitutes a criminal offence under s. 282
straffeloven (Law Consolidation Act 2017:977) (Danish Criminal Code).65
Section 5 of Lov (Law Consolidation Act 2014:459) om renter og andre forhold
ved forsinket betaling (Danish Interest Act—DIA) fixates the “default interest rate”
to the official lending rate of Nationalbanken (Central Bank of Denmark) plus 8%.66
The Central Bank announces the official rate biannually on 1 January and 1 July. The
default interest rate applies if nothing else has been agreed upon beforehand,
s. 6 DIA.
The (default) interest rate in case of late payment per s. 5 DIA cannot be
derogated from to the detriment of consumers, s. 7(1) DIA.67 The professional
party bears the burden of proving that an agreement on interests does not violate
s. 5 DIA. However, if a higher interest rate has been agreed upon before the default,
the contractual rate continues to apply, s. 7(3) DIA, and thus, a debtor cannot
speculate in breaching his or her obligations to obtain a lower interest rate.
3.2 Caps on Recoverable Expenses from Collection of Debt
Section 9a DIA stipulates that a creditor may charge a fee as compensation for his or
her “reasonable and relevant” costs from the collection of outstanding debt. Under
s. 9a(4) DIA, the Ministry of Justice has issued an Executive Order No 601 of
64
See, e.g., UfR 1987.699 Western High Court, in which the interest rate for a person’s student
loans was reduced under s. 36 DCA; Petersen (2013), p. 48.
65
Petersen (2013), pp. 48–49.
66
The act implements, inter alia, Directive 2011/7/EU of the European Parliament and of the
Council of 16 February 2011 on combating late payment in commercial transactions, OJ 2011, L
48/1.
67
Section 7(4) DIA exempts approved financial institutions from the restrictions in s. 7(1) to
(3) DIA, however.
352 K. Steensgaard
25 June 200268 that specifies in detail which expenses a creditor may recover and
caps the fees chargeable in certain respects. Under s. 2(2) of the Executive Order, a
base amount, totalling to DKK 310, may be charged in case of late payment
regardless of the size of the claim. The creditor may collect a fee for his or her
work in connection with collecting the claim, but only up to a certain limit as set out
in the tables in the annexes to the Executive Order. A larger claim warrants a
higher fee.
Section 9b(1) and (2) DIA stipulates that a creditor may charge a maximum of
DKK 100 per reminder as a “reminder fee”. A creditor may claim the fee for up to
3 reminders sent no less than 10 days apart.
Section 9b(3) DIA caps the fee for handing over a claim to a third party claim
collector at DKK 100.
3.3 Cell Phone Roaming Charges
Regulation (EU) No 531/2012 applies in Denmark.69
3.4 Price Caps on Shares in Housing Cooperatives
A significant part of the Danish housing market is made of up so-called Housing

Cooperatives, and they are subject to price caps. These cooperatives are part of a
long tradition of persons uniting in order to obtain, for example, goods, services, and
housing that would be out of reach for them individually.70 Such not-for-profit
operations are generally politically supported because they, for example, enable
persons of limited means to own (a part of) an apartment or a house.
The cooperatives are separate legal entities that own a building with several units.
The participants own a share of the cooperative, for which they pay a “rent”, and
which gives them, inter alia, the right of use to one of the units. The rent is scaled to
cover the cooperative’s mortgage payments, day-to-day maintenance, and larger
maintenance projects.
The shares in the cooperative are transferable, but the price is maximised to the
seller’s portion of the cooperative’s worth.71 This price cap counteracts speculation,
68
Subsequently changed by Executive Orders No 423 of 28 May 2009, No 105 of 31 January 2013
and No 476 of 24 May 2016.
69
Regulation (EU) No 531/2012 of the European Parliament and of the Council of 13 June 2012 on
roaming on public mobile communications networks within the Union, OJ 2012, L 172/10.
70
Andelsbevægelsen (the Cooperative Movement) dates back to the nineteenth century.
71
Section 5(1) Lov (447:2015) om andelsboligforeninger og andre boligfællesskaber (Danish
Housing Cooperative Act—DHCA).
albeit opportunism is hard to eradicate as the building’s value may be adopted

through one of three methods, of which the participants in the cooperative may be
inclined to choose the most financially favourable.72
The drop in housing prices following the financial crisis has led some coopera-
tives to become technically insolvent—i.e. owing more than their building was
worth. Consequently, many units could only be transferred gratis, which caused
problems for participants who wanted to move (for example due to a new job in
another city) but were unable to recover the (sometimes significant) sums they had
paid for their share.

4.1 Legal Basis
The DMPA hosts several provisions aimed at increasing transparency and ensuring
that a consumer’s choice to enter into a contract is informed. The current version of
the DMPA entered into force on 1 January 2017.
The current DMPA contains two general clauses that subject traders to certain
standards for marketing practices and commercial practices. This does not increase
the legislative transparency but it was made in order to implement EU law.73
Section 3 DMPA requires traders to exercise “good marketing practice” toward
consumers, other traders, and public interests, and s. 4 DMPA requires traders to
exercise “good commercial practices” vis-à-vis consumers.74 Section 3 DMPA
applies, unless the (commercial) practice in question affects the consumers’ eco-
nomic interests, then the practice is subject to ss. 4–9 DMPA instead, cf. s. 3
(3) DMPA.
Section 5 DMPA implements Art 5(1), (3), and (4) and Art 6 Directive 2005/29/
EC on unfair commercial practices75 Under s. 5 DMPA, commercial practices that
72
Section 5(2) DHCA.
73
The old version of the DMPA had one general clause only, and the decision to split it into two (for
B2C and B2B marketing practices, respectively) was made in order to implement Directive 2005/
29/EC (n. 75). This choice has—rightly—been subject to criticism, PB Madsen (2017).
74
If the commercial practice in question is at the same time contrary to interests that are not aimed at
protecting consumers’ economic interests, including taste and decency, health and safety or other
interests, or in the event that the commercial practices in question are regulated by contract law, s. 3
DMPA applies alongside ss. 4–9 DMPA; cf. s. 3(3) DMPA.
75
Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning
Council, OJ 2005, L 149/22.
354 K. Steensgaard
are likely to materially distort the economic behaviour with regard to the product of
the average consumer are prohibited (even if the information is factually correct).
Section 5(2) DMPA implements the enumeration of terms that may violate s. 5
(1) DMPA found in Art 6 Directive 2005/29/EC.76 This includes, for example, the
price or the manner in which the price is calculated and the existence of a specific
price advantage.77
While s. 5 DMPA addresses misleading actions, s. 6 DMPA prohibits misleading
inaction—i.e. commercial practices that are misleading by omitting or hiding mate-
rial information or by providing material information in an unclear, unintelligible,
ambiguous or untimely manner. Section 6(2) DMPA enumerates terms in invitations
to purchase that contain material information within the meaning of s. 6(1) DMPA.
Under this provision, the trader must inform the consumer of, for example, (3) the
arrangements for payment, delivery and performance of the contract, to the extent
that these arrangements depart from normal industry practice; (6) the price inclusive
of VAT and other taxes78; and (7) any additional freight, delivery or postal charges,
to the extent that such charges are imposed. Section 6(3) DMPA requires the trader
to state how the price is calculated if the nature of the product means that the price
cannot reasonably be calculated in advance. Moreover, where freight, delivery or
postal charges cannot reasonably be calculated in advance, the trader shall make it
clear that such charges may be payable.
Section 8 DMPA limits the applicability of ss. 4–7 DMPA to commercial
practices that materially distort or are likely to distort the economic behaviour of
the average consumer materially or of the average member of the group when the
commercial practices are directed to a particular group of consumers.
The information requirements when marketing credit agreements and mortgage
credit agreements are set out in ss. 18 and 19 DMPA. They require, inter alia,
comprehensive information about the borrowing rate (whether fixed or variable or a
combination); the particulars of any charges included in the total costs of the credit to
the consumer; the total amount of credit; the annual percentage rate of charge (APR);
the duration of the credit agreement; the cash price and the amount of any advance
payment in case of a credit in the form of deferred payment for a specific product or
service; and the total amount payable by the consumer and the amount of
76
The “blacklist” in the Annex to Directive 2006/114/EC of the European Parliament and of the
Council of 12 December 2006 concerning misleading and comparative advertising, OJ 2006, L
376/21 is implemented as an Annex to the DMPA. This constitutes a departure from the tradition of
legislating through general standards and was made to ensure proper implementation of the
directive, which prescribes a “total harmonisation” with the EU.
77
Compare also Directive 98/6/EC of the European Parliament and of the Council of 16 February
1998 on consumer protection in the indication of the prices of products offered to consumers, OJ
1998, L 80/27.
78
See for example case no 1997-512/7-155 from Consumer Complaints Board, in which a moving
company invoiced the consumer with VAT added to the agreed amount. The buyer claimed the
quoted price was including VAT. The board found that the burden of proof rested on the service
provider who was unsuccessful in showing that he had indeed quoted the price exclusive of VAT.
instalments. Mortgage credit agreements must also include a warning regarding the
fact that possible fluctuations of the exchange rate could affect the amount payable
for loans that are marketed in Denmark but in currencies other than the local
currency, Danish Kroner (DKK).
The calculation of the APR is defined in s. 16 lov (Law Consolidation Act
2015:1336) om kreditaftaler (Danish Credit Agreement Act—DCAA). While the
DMPA governs the marketing of credit agreements, s. 8 DCAA sets out the
requirements for the content of credit agreements, which requires more information.
For example, the consequences of default on payments, the procedure for terminat-
ing the agreement, and the right to early payment of the loan.
4.2 Informal Measures to Enable Price Comparisons
Recently, price comparison websites for, for example, bank, insurance, and electric-
ity services have sprouted. They are offered by private actors and trade organisa-
tions. This enables the consumer to compare relevant offers in the comfort of one’s
own home before deciding on a specific trader’s product or service.
Further, s. 31 DMPA allows the Danish Competition and Consumer Authority to
conduct and publish comparative tests of products.
4.3 The Consumer Ombudsman
Forbrugerombudsmanden (The Consumer Ombudsman) oversees compliance with

the DMPA and associated regulations.79 The Consumer Ombudsman acts chiefly in
the interests of the consumers but is not limited in that sense. He or she has the
competence to monitor the market for all types of traders and marketing practices.80
The Consumer Ombudsman may prioritise his/her focus areas in order to obtain the
best possible fulfilment of the aims of the DMPA.
Trespasses may be discovered in the course of the Ombudsman’s supervision, but
it is also possible to lodge a complaint or to informally notify the Ombudsman about
questionable practices. The Consumer Ombudsman is, therefore, not obliged to
process all complaints she/he receives but may focus on the most severe infractions.
To safeguard the Ombudsman’s ability to function, traders must surrender any
information that the Consumer Ombudsman deems necessary for effective opera-
tion, s. 25(2) DMPA.
79
Sections 25–30 DMPA.
80
Financial institutions fall outside the scope of the Consumer Ombudsman’s field of operation.
They are monitored by a separate specialised entity, the Danish Financial Supervisory Authority,
instead.
356 K. Steensgaard
The Consumer Ombudsman firstly seeks to influence traders to play by the rules.
Once a lawbreaking practice is identified, the Ombudsman invites the trader to
“negotiate” in order for them to reach an understanding about the practice’s com-
patibility with the law—and to compel the trader to promise to respect the regulation
in the future.81 The DMPA does not directly sanction breaches of such promises, but
it allows the Consumer Ombudsman to issue an order of compliance on the basis of
the promise. Violation of orders is, however, sanctioned with a fine or prison for up
to 4 months, cf. s. 37 DMPA.
Severe infractions may be reported directly to the police. A recent example of this
concerns an insurance company that advertised its insurance policies with a state-
ment that the premium payments would be unaffected by insurance events. The
company, nevertheless, included a clause in the SCT contracts that allowed it to
increase the premium with 14 days’ notice. When the company invoked this
provision to increase the payments for some customers, who had received a
pay-out through their insurance, the Consumer Ombudsman reported the insurance
company to the police for misleading practices. The case is pending.
Moreover, the Consumer Ombudsman issues guidelines on “good marketing
practices” within different areas of trade. The guidelines are prepared through
negotiation with the consumer organisations and trade organisations within the
area in question; cf. s. 29 DMPA. If they, exceptionally, cannot reach a compromise,
the Consumer Ombudsman may issue guidelines autonomously. The guidelines are
not binding per se, but the courts are expected to consider an infringement of one of
the Ombudsman’s guidelines as a violation of “good marketing practice” or “good
commercial practice” within the meaning of ss. 3 and 4 DMPA.82
References
Andersen LL, Madsen PB (2017) Aftaler og mellemmænd, 7th edn. Karnov Group, Copenhagen
Andersen MB (2013) Grundlæggende Aftaleret, 4th edn. Gjellerup, Copenhagen
Bang-Pedersen UR, Christensen, CS Petersen LH (2017) Den civile retspleje, 4th edn. Pejus,
Hellerup
Due O (2002) Danish law in a European context. In: Dahl B, Tamm D, Melchior T (eds) Danish law
in a European perspective, 2nd edn. Forlaget Thomsen, Copenhagen
Hauge H (2009) Ugyldighet ved formuerettslige disposisjoner. Universitetsforlaget, Oslo
Madsen PB (2014) Markedsret 1: Konkurrencebegrænsningsret, 6th edn. Jurist- og
Økonomforbundet, Copenhagen
81
See for example case no 2000-4015/5-74 from the Consumer Ombudsman, in which a provider of
television cable promised that it—in the future—would announce price increases with longer
notices so that the consumers would have a realistic opportunity to cancel their subscription before
the increase would take effect.
82
The case UfR 2009.909 Maritime and Commercial Court appears to support this; compare
Madsen (2015), p. 229.
Madsen PB (2015) Markedsret 2: Markedsføringsret og konkurrenceværn, 6th edn. Jurist- og

Økonomforbundet, Copenhagen
Madsen PB (2017) B2B and B2C marketing practices – the case for an integrated approach. In:
Bernitz U, Heide-Jørgensen C (eds) Marketing and advertising law in a process of
harmonisation. Hart, Oxford
Nielsen T (1951) Studier over ældre dansk Formueretspraksis: Et Bidrag til dansk Privatrets
Historie i Tiden efter Chr. d. V’s Danske Lov. Gad, Copenhagen
Petersen LL (2013) Renteloven med kommentarer, 4th edn. Karnov Group, Copenhagen
Rabel E (1936) Das Recht des Warenkaufs: Eine rechtsvergleichende Darstellung, Volume 1. G. J.
Göschen’sche Verlagshandlung, Berlin
Ramberg C (2005) Avtal om abort – pactum turpe. In: Flodgren B et al (eds) Avtalslagen 90 år,
Norstedts juridik, Stockholm
Sørensen MJ (2013) Om adgangen til at ændre urimelige kontraktvilkår i forbrugeraftaler. UfR
2013B.383
Ussing H (1950) Aftaler paa Formuerettens Omraade, 3rd edn. Gad, Copenhagen
Zimmermann R (1990) The law of obligations: Roman foundations of the civilian tradition. Juta,
Cape Town
Zweigert K, Kötz H (1998) An introduction to comparative law, 3rd edn. Oxford University Press,
Oxford
Form Contracts in Estonia: Judicial Control
Karin Sein
Abstract The principle of party autonomy enjoys a great importance in the Esto-
nian law and it has generally been held that parties are free to agree upon the
contractual price. However, the law also provides numerous statutory restrictions,
e.g. concerning APRC caps for consumer credit contracts, contractual penalties,
damages, claims or late payment interest, in order to protect the weaker party of the
contract. Those restrictions are relevant not only for standard terms but also for
individually negotiated contracts. Governmental price control is foreseen for the
so-called natural monopolies.
There is no general competence for judicial price control in Estonia and price
clauses in standard terms are exempt from unfairness test. However, the Supreme
Court has, on several occasions, acknowledged the dangers associated with absolute
party autonomy and declared void certain abusive clauses in consumer contracts.
The intervention of the Supreme Court has been based upon, firstly, a general rule
that transactions violating good morals are void and secondly, on subjecting certain
price-similar standard terms (ancillary price clauses) to unfairness control.
Estonian law contains no specific prohibition of price bundling or price partition.
A general restriction on bundling of goods and services is set forth for consumer
contracts concluded on standard terms but the case law is scarce and there seems to
be a general enforcement gap. The transparency requirements which would balance
the effect of price-partitioning or price bundling are mostly based on different EU
legislative acts.
K. Sein (*)
University of Tartu, School of Law, Tallinn, Estonia
e-mail: karin.sein@ut.ee

https://doi.org/10.1007/978-3-030-23057-9_13
360 K. Sein

of Contract
Liberal market economy has been one of the core values since Estonia regained its
independence in 1991.1 The importance of party autonomy deriving from the consti-
tutional right to free self-determination2 is reflected in § 5 Estonian Law of Obligations
Act (hereinafter LOA),3 which explicitly sets forth the principle of dispositivity. This
provision stresses that parties may, upon agreement, derogate from the provisions of
Law of Obligations Act unless this Act expressly provides, or the nature of a provision
indicates that derogation is not permitted, or unless derogation is contrary to public
order or good morals or violates the fundamental rights of a person. The importance of
the principle of party autonomy has been constantly stressed in the Supreme Court case
law, and it has generally been held that parties are free to agree upon the contractual
price.4 Still in 2002, the Supreme Court stressed that it is the constitutional right of the
parties to freely decide upon the contractual interest rate in credit contracts and that the
court has no power to interfere with the free economic activities of individuals and
control the rate of interest without a specific legal ground.5
There is also no general principle of laesio enormis in Estonian law. Furthermore,
Estonia has not extended the application of the unfairness control of standard terms to
individually negotiated terms or to terms on the adequacy of the price and the main
subject-matter. Avoidance of a contract is possible under the concepts of mistake or
fraud but one has to keep in mind that whereas mistake as to the value of the good can
amount to mistake under Estonian law, avoidance of a contract is only possible in cases
where the other party caused the mistake, used the mistake or was in mistake as well.6
The right of the parties to freely decide upon the interest rate in consumer credit
contracts has, however, been subject to change over the years. Before 2009, the
prevailing view in court practice was that even in case of consumer credit contracts
the parties are free to agree upon the interest rate of a loan and, therefore, an
unproportionally high interest rate does not, in itself, entail violation of ‘good
morals’ under § 86 Estonian General Part of Civil Code Act (hereinafter
GPCCA7) that would render the contract void.8 Later on, however, the legislator
has intervened twice on this issue and also the Supreme Court has changed its view.9
1
M Ernits in Madise et al. (2017) § 19 para 6. See also Varul et al. (2012), p. 82.
2
The fundamental right to free self-determination is laid down in Art. 19 Põhiseadus (Estonian
Constitution). RT 1992, 26, 349. See also Varul et al. (2016), p. 27.
3
Võlaõigusseadus (Estonian Law of Obligations Act). RT I, 01.07.2017, 20.
4
Decisions of the Estonian Supreme Court no 3-4-1-34-14 p. 43, 3-2-1-125-10 p. 41 and no 3-2-1-
80-13 p. 53.
5
Decision of the Estonian Supreme Court no 3-2-1-108-02 p. 10.
6
Varul et al. (2012), pp. 154–162.
7
Tsiviilseadustiku üldosa seadus (Estonian General Part of Civil Code Act). RT I, 12.03.2015, 106.
8
Sein and Volens (2014), p. 130.
9
See further on that below in Sect. 3.2.
Control of Price Related Terms in Standard Form Contracts in Estonia:. . . 361
In principle, courts could adapt contractual prices under the ‘change in circum-
stances’ doctrine found in § 97 LOA. Although use of this doctrine was heavily
pleaded by debtors after the 2008 economic crisis, the courts have been extremely
reluctant to apply it and in reality there is not a single court decision to be found
where the price was actually amended under that provision.10
Governmental price control is, however, foreseen for the so-called natural mono-
polies. The Estonian Competition Authority is an independent regulator that is, inter
alia, responsible for price control over gas, electricity network services, water,
district heating, postal and railway transport services.11 Prices and tariffs of these
service providers must be approved by the Competition Authority (or, in certain
cases, by the local municipality) before they can be applied to customers. The
Supreme Court has ruled that an electricity network services price clause in an
electricity contract is void if the price had not previously been approved by the
Competition Authority.12 This reasoning should apply to prices of other monopolies
as well.
2.1 Black and Grey Lists and General Unfairness Clause
In Estonia, rules on standard terms are set out in §§ 35 et seq of LOA and they are
based on the Directive 93/13/EEC on unfair contract terms.13 The Estonian legislator
has set forth a binding and detailed list consisting altogether of 34 terms that are
considered unfair in consumer contracts. The list in § 42(3) LOA is considerably
longer than the one in the Annex of the Directive 93/13/EEC and it is hard to define
whether the Estonian solution is the one of a black and/or grey list of unfair terms.
The fact that § 42(3) LOA contains a list of standard contract terms that in consumer
contracts are considered unfair, and thus void in all circumstances seems to suggest
that Estonia has adopted the so-called black list. However, a number of clauses in
this list involve notions as ‘unreasonably high’ or ‘unreasonably long’ and are thus
rather ‘grey’ in nature, as they require equity evaluation by the court. Therefore, it
10
Sein (2014b), pp. 586–594.
11
See the regulator’s web page at http://www.konkurentsiamet.ee/?lang¼en. The Supreme Court
has justified such restrictions of private autonomy with the protection of general interests and the
obligation of the state to guarantee the availability of certain vital services to its residents at
affordable prices. Decisions of the Estonian Supreme Court no 3-2-1-125-10 p. 41 and 3-2-1-
164-09 p. 30.
12
Decision of the Estonian Supreme Court no 3-2-1-41-15 p. 13. Breach of statutory rules on price-
determination can, additionally, trigger administrative sanctions, for example fines. See decision of
the Estonian Supreme Court no 3-2-1-113-11 p. 39.
13
95/29.
362 K. Sein
seems fair to conclude that the Estonian law contains a combination of a black and a
grey list of unfair terms.
In addition to the black and grey list of unfair terms, the Estonian Law of
Obligations Act also contains a general clause in § 42(1) LOA, transposing art 3
(1) Directive 93/13/EEC. The Estonian Supreme Court has used both the black and
grey list as well as the general clause in its case law in order to declare void unfair
standard terms.14 There is no explicit provision in the Estonian law on the ex officio
assessing obligation but the Supreme Court has stressed it in its continuous case law
and the principle seems to be well-anchored in the Estonian legal practice.15
2.2 Obligation of the Court to Examine Possible Unfairness

Ex Officio and Legal Consequences of Unfairness
Under Estonian law, when a clause is declared unfair, the consequence is that the
clause becomes null and void with effects ex tunc and legal provisions of the type of
contract concerned are applied in lieu of such terms.16 The rest of the contract stays
intact unless the party supplying the term proves that the party would not have
entered into the contract without the void standard term (§ 41 LOA).
A reduction of an unfair term to the acceptable level is expressly prohibited in §
39(2) of the Law of Obligations Act and the rule is accepted in the court practice as
well.17 An example could be a situation where a standard term enables its supplier to
impose an unreasonably high contractual penalty on a consumer. According to § 42
(3)(5) of the LOA such standard term is invalid. If the relevant standard term has
been declared invalid, the supplier of the term can no longer rely on the agreement
with the consumer regarding payment of the contractual penalty and is thereby
deprived of any grounds to claim the penalty. The Supreme Court has legitimately
followed similar reasoning, ruling that a clause of a disproportionately high late
payment interest in standard terms is void and therefore the trader can claim payment
of the interest only in the amount and on the basis provided by law.18
14
See for example Kalamees and Lilleholt (2014), pp. 553–554; Sein and Lilleholt (2014),
pp. 31–32.
15
Kalamees and Sein (2017), pp. 117–119 with further references to the case law.
16
An exception is foreseen for cases of dividable terms via the “blue pencil test”, see Varul et al.
(2016), p. 213.
17
See the decision of the Estonian Supreme Court no 3-2-1-123-12 and Sein (2013a), p. 214.
18
Decision of the Estonian Supreme Court no 3-2-1-25-16 p. 13. Furthermore, the Supreme Court
pointed out on the same occasion that claiming the late payment interest in part does not mean that
“an essentially unreasonable standard term which gives its supplier the right to, inter alia, collect
interest on late payment, turns into a reasonable term if its supplier does not collect the interest or
reduces it for some reason”.
Under Estonian law, a court decision is only binding to the parties of the
particular case so a court decision establishing the unfairness of an unfair term
does not extend to all contracts of the trader concerned, not to speak to the contracts
of other traders containing similar term. However, § 457(7) of the Estonian Code of
Civil Procedure19 stipulates that if a person applying a standard term violates a court
judgment whereby termination of the application of the standard term is required, the
standard term is deemed to be invalid if the other contracting party relies on the court
judgment. This means that the court has no obligation to examine, on its own
motion, the invalidity of such standard term. Such effect runs contrary to the position
adopted by the CJEU in Invitel20 from which it follows that under the circumstances,
the court is nevertheless obliged to examine the validity of the standard term of its
own motion, and the term is to be deemed invalid also as regards the consumers who
conclude a contract including the invalid term, with the supplier of this standard term
after the court’s decision.21
Another situation where the court’s obligation to assess the unfairness of the
standard term of its own motion cannot be effectively followed under Estonian law,
concerns enforcing contractual claims via the order for payment procedure. Namely,
in Finanmadrid, the CJEU ruled that national procedural rules which do not allow
neither the court performing the order for payment proceedings nor the court
deciding upon enforcement of the order for payment to assess of its own motion
the unfairness of a standard term, are not in compliance with the Directive 93/13/
EEC.22 Analysis of the reasoning of the CJEU in Finanmadrid suggests that the
Estonian current system of order for payment procedure, characterised by extreme
formalisation, is not compatible with the European standards as set by the CJEU.23
2.3 Applicability of Unfairness Control to B2B Contracts
Estonia has extended the applicability of the rules on unfairness control also to B2B
relations. Namely, § 44 LOA stipulates that if a standard term is used in a contract
where the other party to the contract is a person who entered into the contract for the
purposes of the economic or professional activities of the person, the term is
presumed to be unfair. In practice, however, establishing the unfairness of a standard
term in B2B contracts is an exception rather than the rule. It is probably the reason
19
Tsiviilkohtumenetluse seadustik (Estonian Code of Civil Procedure). RT I, 26.06.2017, 52.
20
CJEU Judgment of 26 April 2010, Invitel, C-472/10, EU:C:2012:242, pp. 32–44.
21
Kalamees and Sein (2017), p. 128.
22
CJEU Judgment of 18 February 2016, Finanmadrid EFS, C-49/14, EU:C:2016:98, para 55.
23
Kalamees and Sein (2017), p. 125.
364 K. Sein
why the applicability of unfair terms rules has not been contested in the Estonian
legal literature.24
2.4 Collective Action
The Estonian Consumer Protection and Technical Surveillance Board is entitled to

file a claim at civil court and demand termination of the application of an unfair
standard term or withdrawal of recommendation of an unfair standard term (§ 45
(1) LOA, § 65(3) Estonian Consumer Protection Act, hereinafter CPA25). Before
doing so, the Board must give the trader a possibility to explain.26 The Estonian
Consumer Protection Board and Technical Surveillance Board has no power to
initiate collective proceedings on the legal consequences of an unfair term such as
claiming damages or restitution.
Also, in limited circumstances non-profit associations that represent traders are
allowed to file an action to stop the usage of a grossly unfair term27 concerning terms
of payment, interest for late payment, or compensation for collection costs (§ 45(21)
LOA). This rule originates from Late Payment Directive28 but has until now never
been used in practice.

3.1 General
There is no explicit rule in the Estonian law on whether the courts are allowed or
prohibited to exercise control over contractual price clauses other than the general
prohibition in § 42(2) LOA to subject price clauses in standard terms to unfairness
control. However, the Supreme Court has, on several occasions, acknowledged the
dangers associated with absolute party autonomy and declared void certain abusive
clauses in consumer contracts. The intervention of the Court is based upon, firstly, a
general rule that transactions violating good morals are void (§ 86 GPCCA) and
24
It is however, argued, that a standard term should not be considered unfair in B2B contracts if
such term is commonly found in the given type of contract. Varul et al. (2016), pp. 254–255.
25
Tarbijakaitseseadus (Estonian Consumer Protection Act) RT I, 21.06.2017, 7.
26
Such actions can also be filed by an non-profic consumer protection association but in practice
these associations have never used that power. Until now, also the Estonian Consumer Protection
Board has only once initiated action to ban unfair terms. This is the so-called Elisa case, see decision
of the Estonian Supreme Court no 3-2-1-135-15.
27
Including individually negotiated terms.
28
combating late payment in commercial transactions, OJ 2011, L 48/1.
secondly, on subjecting certain price-similar standard terms (ancillary price clauses)

to unfairness control.
Somewhat more indirect price control mechanisms are the possibility of the court
to determine the contractual price in case this has not been agreed upon by the parties
(§ 28 LOA), the possibility to view certain standard price clauses as surprising and
therefore not part of the contractual relationship (§ 37(3) LOA) and rules allowing
the court in certain circumstances to reduce the late payment interest or contractual
penalty (§ 113(6), § 162 LOA) and the rent in residential lease contracts.
There is no administrative body vested with the power to exercise direct price
control in contractual relationships. The only exception is the obligation of certain
providers of services of general interest to get approval for their prices from
regulators. Such providers include, for example, businesses offering district heating,
gas, water, seweage, electricity network and public transport services. The charge for
the so-called universal services (that is, connection to a communications network in
a fixed location enabling telephone services and the availability of a universal
electronic public number directory and directory enquiry services) is determined
by the responsible minister on the proposal of the Consumer Protection and Tech-
nical Surveillance Board (§ 74 Electronic Communications Act).29
3.2 Price Control Under the General “Good Morals”

Provision (§ 86 GPCCA)
Although there is no general laesio enormis principle in Estonian law and courts
generally have been reluctant to exercise price control under the general prohibition
of contracts violating good morals in § 86 GPCCA, an exception has been made for
cases of usurious instant consumer loans.30 Such loans created major socio-
economic problems for almost a decade until 2015, when APRC caps were intro-
duced.31 Before that, the legislator tried to solve the problem by less-intrusive
measures, namely by setting relative APRC caps in combination with the uncon-
scionability doctrine. In 2009, the Estonian Parliament passed a legislative amend-
ment and attempted to set forth a rule that usurious credit contracts can be considered
to be against good morals and thus void under § 86(1) GPCCA. In order to consider a
consumer credit contract against good morals and thus void under this provision,
objective (gross disparity) and subjective requirements (circumstances imperilling
the rational choice of the consumer such as his urgent needs or inexperience) had to
be met together.
29
Elektroonilise sideteenuse seadus (Estonian Electronic Communication Act). RT I, 23.03.2017, 6.
30
On the probleem of usurious instant loans in Estonia and its devastating social impact, see Sein
(2013b), pp. 32–36; Sein and Volens (2014), pp. 120–123.
31
See on that in Sect. 4.1.
366 K. Sein
The unconscionability doctrine proved to be ineffective against the usurious

practices.32 This was due to the high burden of proof standard set by the Supreme
Court, according to which it was the consumer who has to prove that he or she had
concluded a usurious consumer credit contract due to his or her urgent needs or
inexperience.33 As the problem persisted, the Supreme Court intervened in 2013 and
urged the legislator to foresee APRC caps as a more efficient consumer-protection
measure. In the same decision, the Supreme Court partly amended its earlier
position, ruling that if the APRC is more than six times the average market
consumer-credit APRC, the consumer-credit agreement is presumably violating
good morals and should therefore be considered void.34 As APRC caps were
introduced in 2015, this landmark decision is of no practical relevance anymore.
Resorting to § 86 GPCCA for price control should, at least theoretically, be also
open for other cases then consumer credit contracts. One can argue, for instance, that
this should be the case for residential lease contracts as there are no other ceilings set
by law for residential rent prices. In practice, however, this has not (yet) been applied
and residential lease prices are subject to liberal market economy principles exactly
as other prices.
3.3 Unfairness Control of Price-Similar Standard Terms
As mentioned above, unfairness control of price terms is prohibited by § 42

(2) LOA.35 In other words, a situation where a party has paid too much for the
object of the contract can not be regarded as unfairness under Estonian law.36 The
Supreme Court has, for example, declared that interest clauses of credit contracts can
not be subject to the unfairness control as those clauses determine the price of credit
and, thus, the relationship between the price and the value within the meaning of § 42
(2) Estonian LOA.37
The exemption from unfairness price control does not, however, concern clauses
that present the methods for determining the price (such as certain formula) as these
clauses can not be regarded as price clauses.38 Even if the Estonian Supreme Court
has not explicitly differentiated between price clauses and ancillary price clauses as
32
Sein (2013b), p. 35.
33
34
Decision of the Estonian Supreme Court no 3-2-1-186-13 pp. 22–25.
35
This provision transposes § 4(2) Directive 93/13/EEC and stipulates: ‘A standard term is not
deemed to be unfair if it relates to the main subject matter of the contract or to the relationship
between the price and the value of the services or goods supplied in exchange or if the contents of
the term is based on such legislation which must not be derogated from pursuant to an agreement
between the parties.’
36
Varul et al. (2016), p. 226.
37
38
was done in CJEU case law,39 it still has subjected certain price-related standard
terms to unfairness control and rendered such clauses void. A leading case concerns
paper-bill fees clauses in mobile phone contracts concluded with consumers. In this
case, the Supreme Court of Estonia did not even mention the possibility that
charging a fee for a paper bill could be considered a price clause; instead, it relied
on the premise that such charges should be subject to the unfairness control of
standard terms.40 Thus, the Estonian Supreme Court took the position that clauses
setting out a charge for paper bills do not constitute price clauses and eventually
established the unfairness of such standard terms under the so-called general unfair-
ness clause of § 42(1) LOA.41
Other cases where the Supreme Court has used unfairness control in order to set
aside certain harmful price-related standard clauses concern contractual penalties,
interest for late payment and debt collection fees as damages. Such extremely
consumer-unfriendly clauses with unreasonably high fees were very common prac-
tice before 2010, especially among creditors offering usurious consumer loans. The
Estonian Supreme Court intervened and declared such clauses void. The contractual
penalty clauses we regarded as contrary to the mandatory provisions of the LOA’s
consumer-credit contract terms.42 As for the high fees for debt collection and
payment reminders, the Supreme Court ruled that clauses according to which
consumers have to compensate for debt collection and for payment reminder fees
as fixed in the standard terms of the creditor can be deemed unfair under § 42(3)
(5) LOA, if they are unreasonably high.43 For both those issues legal certainty was
later on created when the legislator set forth prohibition of such contractual penalties
as well as fixed ceilings for debt collection fees.44
In a recent judgment, the Supreme Court has indirectly set a ceiling also to
interest for late payments in consumer contracts concluded on standard terms. The
Court declared presumably unfair and thereby void clauses in which the agreed
interest rate for late payment exceeded three times the rate provided for late payment
interest by law.45 In this context it is worth stressing that a Supreme Court decision
declaring a particular standard term unfair has a strong impact for other courts on
how the rules of unfair terms are interpreted.
39
CJEU Judgment of 26 February 2015, Matei, C-143/13, EU:C:2015:127, paras 56-62.
40
41
See further on that decision, also from the comparative perspective, Sein (2017), pp. 3–9.
42
43
44
See further on that in Sect. 4.2.
45
368 K. Sein
3.4 Power of the Court to Reduce Interest for Late Payment

and Contractual Penalties
Estonian law also entitles the court to reduce the interest for late payment: according
to § 113(8) LOA, a person required to pay interest for late payment may claim for a
reduction of it pursuant to the provisions of § 162 LOA. However, the court may not
reduce it on its own initiative; the debtor must so request. When deciding upon
reduction, the court must consider circumstances such as the extent to which the
obligation has been performed by the debtor, the legitimate interests of the creditor,
and the economic situation of the parties. If the amount of interest for late payment
exceeds the capital of the claim, then the creditor has to prove having suffered loss in
a larger amount.46 A similar right to reduce is also foreseen for contractual penalties
in § 162 LOA. These norms are both applicable also to individually negotiated
terms47 as well as to B2B contracts.
3.5 Power of the Court to Reduce Rent in Residential Lease

Contracts
Although Estonian law does not provide for a general judicial control of rent prices
for residential lease contracts, the lessee can demand reduction of excessive amount
of rent by court in cases where a lessor receives excessive benefit due to significant
changes in the bases for calculation of the rent, particularly a decrease in expenses (§
302(1) LOA). Moreover, a lessee can also contest an excessive increase in the
amount of the rent for a dwelling (§ 303 LOA). The notion of excessiveness
which should serve as a guidance for the courts is defined in § 301(2) and is, in
the first place, related to the market price.48 Secondly, the increase in the rent is not
excessive if it is based on an increase in the expenses incurred in relation to the
dwelling or an increase in the obligations of the lessor or if the increase in the rent is
necessary in order to make reasonable improvements or alterations, including
improving the condition of a part of a leased room or building such that the room
or building is in the usual condition for such rooms and buildings (§ 301(3) LOA).
The law defends the lessee only to rent increases over the market price that take place
during the term of contract. The lessee does not have the right to claim reduction of
the rent if the residential lease contract was already concluded on higher-than-
average price from the very beginning.49
46
47
In case of standard terms unreasonably high contractual penalty or late payment interest clauses
may be unfair and thus void under § 42(3)(5) LOA.
48
§ 301(2) LOA stipulates: ‘The amount of the rent for a dwelling is not excessive if it does not
exceed the usual rent for a dwelling in a similar location and condition.’
49
Varul et al. (2007), p. 215.
3.6 Determination of Contractual Price by the Court
Under Estonian contract law at least B2B contracts not containing an agreement on
price are not void as such.50 Contracts entered into in economic or professional
activities are presumed to have a price (§ 28(1) LOA). Where a contract does not
determine the price or a method for determining the price and the nature of the
contract or other circumstances do not dictate the price or the method of determining
the price, the price will be decided by the court. Such price shall be the price
generally charged at the time of the entry into the contract at the place of perfor-
mance of the contract for the performance of such contractual obligations or, if no
such price can be determined, a price reasonable under the circumstances (§ 28
(2) LOA). Therefore one can say that in cases where the agreement between the
parties on the contractual price can not be determined, the court has de facto a
considerable amount of discretion over the price.
3.7 Transparency Control of Price Clauses in Standard

Terms
Courts also have an indirect way of controlling the price, or, more precisely, setting
aside certain price agreements under the transparency control of standard terms.
Estonian law contains somewhat more detailed rules on transparency than the
Directive 93/13/EEC does. Namely, § 37(3) LOA stipulates that standard terms,
the contents, wording or presentation of which are so uncommon or unintelligible
that the other party cannot, based on the principle of reasonableness, have expected
them to be included in the contract or which the party cannot understand without
considerable effort are not deemed to be part of the contract. If the price agreement is
not transparent from the view of an average consumer then the agreement does not
become part of the contractual program.51 The Estonian law deals with transparency
issues under the incorporation test and not as a part of unfairness test. The legal
consequences are, however, the same: an unclear/non-transparent clause is not
binding for the consumer.52
In court practice, transparency test has been used several times to declare certain
terms of insurance contracts to be non-binding to the consumer.53 However, this far,
the Supreme Court has not yet declared specific price clauses to be non-transparent.
It should be also noted that the current wording of the Estonian Law of Obligations
Act entitles the Estonian Consumer Protection and Technical Surveillance Board to
50
Varul et al. (2016), p. 151.
51
Varul et al. (2016), pp. 204–207; Decision of the Estonian Supreme Court no 3-2-1-75-10 p. 15.
52
Saare and Sein (2012), pp. 64–65.
53
See decisions of the Estonian Supreme Court no 3-2-1-178-12 pp. 18–22, 3-2-1-90-06 p. 20 and
3-2-1-76-07 p. 22.
370 K. Sein
file an injunction at the court for terminating the use of unfair standard terms but not
non-transparent standard terms. This deficit has been criticized in the legal literature
for leaving consumers without effective protection54 and it seems to also not be in
conformity with the Directive 93/13/EEC.

4.1 Explicit Price Caps in Legislation
The most important direct regulatory intervention in contractual price terms concerns
the APRC in consumer credit contracts. Consumer protection in credit agreements
became an increasingly acute legal and social problem during the recent economic
crisis. The crisis was at least partly rooted in the lending boom, during which credit
was extremely easily obtainable even for non-creditworthy borrowers.
Due to the major socio-economical problems connected with the usurious instant
consumer loans the legislator set forth explicit price caps in July 2015, tying the
allowed maximum annual percentage rate to the average APRC in Estonia that is
charged upon consumer credit contracts.55 The newly added § 4062 LOA prescribes
nullity of a consumer credit contract, if the annual percentage rate payable by the
consumer exceeds at the time of granting the credit the past 6 months’ average
annual rate of consumer credits granted by credit institutions to private individuals56
and last published by Eesti Pank for more than three times. The publishing of the
average annual percentage rate is arranged by 1 January and 1 July of each year by
Eesti Pank on its website57 and currently amounts to 20.01%. Thus, at the present
moment, all consumer credit contracts where the APRC exceeds 60.03%, are
deemed null and void.
The legal consequences of such void consumer credit contracts deviate to a
certain extent from the general consequences of nullity of a contract. According to
§ 4022(3) LOA, in case of nullity of a consumer credit contract due to an excessive
APRC, the consumer shall repay the amount received on the basis of the void
consumer credit contract by the date by which the consumer had to repay the
whole credit according to the void consumer credit contract. In this case, the
consumer must only pay interest provided by law for the period of use of the credit.
54
Saare and Sein (2012), p. 66.
55
See further on this Koll (2015), pp. 252–258.
56
The calculation of the average annual percentage rate of consumer loans granted to private
individuals by credit institutions specified in this subsection shall not take into account the
consumer loans secured by mortgage (§ 4062(1) LOA second sentence). In the case of leasing
contracts the costs relating to insuring of the object of leasing shall not be taken into account upon
calculation of the annual percentage rate payable by consumers (§ 4062(2) LOA).
57
Available at http://statistika.eestipank.ee/?lng¼et#listMenu/2273/treeMenu/FINANTSSEKTOR/
147/979.
The prerequisites provided for in consumer credit law apply to the determination of
the terms and conditions for repayment of any amounts received on the basis of
consumer credit contracts entered into for an unspecified term. The creditor must
also redetermine the repayments and dates for repayments taking into account the
reduction of the interest rate and other expenses, and communicate these to the
consumer (§ 4062 (3) LOA last sentence).
It is theoretically possible to resort to the general good-morals clause in §
86 GPCCA and claim the nullity of a consumer credit contract that does not fall
under § 4062 LOA but in practice this has had relevance only to those consumer
credit contracts that were concluded before 1 July 2015, that is before the legislative
amendments entered into force. The introduction of APRC ceilings has definitely
reduced the usurious lending practices in Estonia and excessive interest rates are at
least not publicly offered any more.
In addition to the private law consequences (nullity of the contract), the use of
APRCs exceeding the ceiling can also result in administrative penalties. Creditors
can face administrative fines up to 32,000 euros set by the Estonian Financial
Supervision Authority (§ 65(5) and § 72(2) CPA). In most severe cases, the creditor
can even lose its license58 although in practice this has never happened.
4.2 Restrictions for Contractual Penalties, Late Payment

Interest and Debt Recovery Costs
For certain types of contracts, the legislator has foreseen restrictions or even pro-
hibitions for contractual penalties, damages, claims or late payment interest, in order
to protect the weaker party such as a consumer or a lessee of a dwelling. Those
restrictions are relevant not only for standard terms but also for individually nego-
tiated contracts. The most prominent examples are § 287 LOA59 setting forth a
prohibition to agree upon a contractual penalty in case of residential leasing contracts
and § 415(1) LOA60 laying down a maximum limit of late payment interest and
58
Koll (2015), p. 261.
59
§ 287 LOA stipulates: ‘Any agreement which requires the lessee of a dwelling to pay a contractual
penalty upon violation of a contract is void.’
60
§ 415(1) LOA stipulates: ‘If a consumer delays the payments owed, any penalty for late payment
demanded from the consumer shall not exceed the amount provided for in subsection 113(1) of this
Act. This does not preclude or restrict the right of the creditor to demand compensation for damage
from the consumer in an amount which exceeds the penalty for late payment. Agreements which
allow to claim payment of earnest money or contractual penalty from the consumer in the case of
late payments are void.’ According to the first sentence of § 113(1) LOA, the statutory penalty rate
is calculated by adding 8% to the statutory interest rate specified in § 94 LOA. For credit
agreements, an alternative calculation method is provided for in the third sentence of § 113
(1) LOA: if a contractual interest rate exceeds the statutory rate of interest for late payment, then
the contractual interest rate constitutes the rate of interest for late payment.
372 K. Sein
precluding a contractual penalty in case a consumer is in delay with his consumer

credit payments. Introducing the latter provision in 2011 brought about changes in
creditors’ practices and today such clauses cannot be found in most standard terms of
consumer credit contracts anymore.61 In case of violations against § 415(1) LOA, the
Consumer Protection and Technical Surveillance Board is entitled to file a claim at
the county court in order to protect the collective interest of the consumers and to
require a creditor (and credit intermediary) to terminate such violation and to refrain
from future violation (§ 420 LOA, § 65(3) CPA).
As for residential leasing contracts, the Supreme Court discussed recently
whether the leasing law allows to agree upon a late payment interest that exceeds
the statutory late payment interest. The Court came to the conclusion that party
autonomy still exists in this respect and parties are free to agree upon a higher late
payment interest rate than the statutory one.62 Although the Court did not clarify this,
the principle that in standard terms a clause setting forth more than thrice the
statutory late payment interest, is presumed to be unfair and thus void63 should
remain applicable also to residential leasing contracts.
An indirect intervention in price terms concerns the caps set forth for debt
recovery costs. For many years, creditors took advantage of vulnerable consumers
by charging excessive debt recovery costs in cases where the consumer delayed his
or her contractual payment. Although in 2008 the Supreme Court eased their
situation by ruling that unproportionately high debt recovery cost clauses can be
considered void as unfair terms in standard contracts,64 in court practice there was no
general understanding of how high exactly should these costs be in order to qualify
as unfair terms.65 Therefore, in 2015 the legislator deemed it necessary to intervene
and to provide for exact numerical caps. The Nordic and Dutch legislation served as
the blueprint for these rules.66 The ceilings for debt recovery costs are not to be seen
as direct price control as their breach does not result in nullity of the main contract
(for example a consumer credit contract or an internet services contract) nor in the
nullity of the contract between the creditor and debt collection agency. Rather, the
legal nature of these caps is the restriction of damages that a trader can claim from a
consumer because of the utilization of the debt collection agency.67
The respective provision § 1132 LOA differentiates between ceilings for debt
recovery costs during the term of and after termination of a contract. During the term
of a contract, the trader may require that a consumer compensate for debt collection
costs relating to only one reminder letter sent per each obligation fallen due in the
amount of up to 5 euros. The trader is entitled to this compensation only in the case
61
Sein (2013b), p. 38.
62
Decision of the Estonian Supreme Court no 2-15-8794 p. 12.
63
64
See on that in Sect. 3.3.
65
Sein and Volens (2014), p. 136.
66
Koll (2015), p. 259; See also Margus (2014), pp. 120–126.
67
Varul et al. (2016), p. 579.
he has first sent at least one free reminder to the consumer (§ 1132 LOA). After the
termination of a contract, the maximum amounts of the debt recovery costs are set in
§ 1132(2) as follows:
1) compensation for collection costs in the total amount of up to 30 euros, and up to
15 euros may be demanded for the first reminder sent to the consumer for a fee
and 5 euros each for two subsequent letters, if the claim of the creditor amounts to
up to 500 euros;
and 5 euros each for two subsequent letters, if the claim of the creditor is more
than 500 euros and up to 1000 euros;
and 5 euros each for two subsequent letters, if the claim of the creditor is more
than 1000 euros.
The consumer may also claim reduction of the amount of these costs in the court
(§ 1132(5) LOA) and vice-versa: in specific justified cases the trader can claim a
higher amount of costs under § 1132(4) LOA. Thus, the courts still retain a certain
amount of judicial control over the amount of recoverable debt recovery costs in a
specific case despite the existence of price caps in the law.
In addition to private law consequences, the Estonian Consumer Protection and
Technical Surveillance Board can also exercise administrative measures in order to
sanction traders who are claiming excessive debt recovery costs from consumers.
Firstly, the Consumer Protection and Technical Surveillance Board can issue a
prescript and demand termination of such practices (§ 65(2) CPA). Secondly, the
Consumer Protection and Technical Surveillance Board can fine the trader with up to
32,000 euros (§ 72(2) CPA).
4.3 Restriction of Price Bundling
There is no specific prohibition of price bundling or price partition in Estonian law.

A general restriction on bundling of goods and services is set forth for consumer
contracts concluded on standard terms. § 42(3)(24) LOA provides that terms pre-
scribing the obligation of the other party to enter into another contract with the party
supplying the term or a third party is considered unfair, unless entry into such other
contract is reasonable, taking into account the relationship between such contract
and the contract with standard terms. Until now, there is no case law to be found on
this restriction. The legal literature lists several day-to-day bundled contracts where
bundling should be deemed reasonable and thus allowed also in standard terms. The
author lists contracts such as a sale of a smartphone combined with an obligation to
conclude also a mobile network services contract; a rental of a car combined with an
obligation to use only parking lots of a specific parking lot operator as well as a sale
of an apartment combined with an obligation to conclude also contracts with certain
374 K. Sein
services (digital TV, internet, cleaning service) providers.68 There are, however, no
legal arguments and reasoning as to why in these cases, bundling should always be
deemed reasonable.
Specific rules apply to electronic communications market. The Consumer
Protection and Technical Surveillance Board may prohibit price bundling in order to
ensure efficient competition on the market. If, as a result of a market analysis, the
Consumer Protection and Technical Surveillance Board determines that a retail market
in electronic communications services is not effectively competitive and imposition of
the obligation of access and interconnection on a communications provider does not
ensure competition, the Consumer Protection and Technical Surveillance Board may
impose on the provider designated as having significant market power in the relevant
service market the obligation not to link the provided services to each other without
reason such that, upon use of one service, a subscriber is also forced to use another
service and pay for it (§ 54 Electronic Communications Services Act).

5.1 General
Labelling requirements, including transparency requirements for prices are set forth
in the Consumer Protection Act and in a regulation enacted by the Minister of
Economic Affairs.69 The rules contained in these acts are based on the Price
Indication Directive.70 These detailed rules have considerably improved the aware-
ness of Estonian consumers about the unit prices, especially among low-income
consumers.
There are not many independent institutions publishing comparative listings of
prices on their websites. One exception is the Consumer Protection and Technical
Surveillance Board, which is obliged to make freely available technical means for
comparison of prices of communications services on its web page.71 The comparison
of the fees of different banking and investment services are freely available on the
specific consumer-oriented web page of the Financial Supervision Authority.72
68
Varul et al. (2016), p. 245.
69
Kauba ja teenuse hinna avaldamise nõuded (Requirements for indicating the prices of services
and goods). RT I, 11.02.2016, 17.
70
consumer protection in the indication of the prices of products offered to consumers, OJ 1998, L
80/27.
71
§ 1001 Elektroonilise sideteenuse seadus (Estonian Electronic Communication Act). RT I,
23.03.2017, 6.
72
http://www.minuraha.ee.
5.2 Disclosure Requirements Deriving from EU Legislation
5.2.1 General
There is only a limited number of transparency requirements in the Estonian law

which would balance the effect of price-partitioning or price bundling. They are
mostly based on different EU legislative acts such as Consumer Credit Directive,73
Mortgage Credit Directive74 and Payment Services Directive.75 These acts lay down
certain disclosure and explanation obligations for traders, for example the obligation
to inform the consumer of the APRC of the offered consumer credit product before
concluding the contract. There is information and explanations obligations that the
creditor has to comply with before concluding consumer credit contracts that
correspond to the requirements of Consumer Credit Directive and Mortgage Credit
Directive. One of the aims of such information and explanation obligations is to
place the consumer in a position enabling him of her to assess whether the proposed
consumer credit contract corresponds to his or her needs and financial situation. In
the case of consumer credit contracts relating to residential immovable property, the
creditor or the credit intermediary is obliged to provide the consumer also explana-
tions of the ancillary agreement proposed to the consumer so that the consumer
could assess whether the ancillary agreement corresponds to the needs and financial
situation of the consumer (§ 4035(1)-(3) LOA).
For breach of these obligations, regulators (the Consumer Protection and
Technical Surveillance Board and the Financial Supervision Authority) are entitled
to initiate collective proceedings in civil court or fine the trader up to 32,000 euros.
5.2.2 Private Law Consequences
The breach of APRC disclosure obligation triggers specific private law conse-
quences. If the consumer credit contract provides no information on the interest
rate, annual percentage rate or initial annual percentage rate, or the gross amount of
all the payments to be made by the consumer in order to repay the credit and bear the
total cost of the credit, the interest rate provided for in law is deemed to be the
contractual interest rate, unless this is higher than the interest rate previously agreed
(§ 408(4) LOA). If the annual percentage rate is indicated in a consumer credit
73
Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit
agreements for consumers and repealing Council Directive 87/102/EEC, OJ 2008, L 133/66.
74
credit agreements for consumers relating to residential immovable property and amending Direc-
tives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010, OJ 2014, L 60/34.
75
Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015
on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and
2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC, OJ 2015, L
337/35.
376 K. Sein
contract as being lower than the actual rate, the rate of interest which is agreed in the
consumer credit contract will be reduced by the percentage rate by which the
indicated annual percentage rate is lower than the actual rate (§ 408(4) LOA).
5.2.3 Pre-contractual Information Obligations Concerning Prices

and the Product
Art 5(1) of the Consumer Rights Directive76 sets forth certain pre-contractual
information obligations for consumer contracts that are neither off-premises nor
distance contracts but allows Member States to limit their application to day-to-
day transactions which are performed immediately (Art 5(3) Directive 2011/83/EU).
This option has not been used in Estonia and thus the transposing provision § 141
LOA applies to all consumer contracts, except where the law provides for a specific
information obligation regime (such as off-premises or distance contracts, consumer
credit contracts, package travel contracts, etc.). This provision obliges traders to
provide, prior to entry into the contract or making a binding offer for this purpose by
the consumer in a transparent way also information concerning the total price of the
object of contract inclusive of taxes, or where the nature of the object of the contract
is such that the price cannot reasonably be calculated in advance, the manner in
which the price is to be calculated, and all additional freight, postal or other delivery
costs, if the consumer has to cover these costs or where those costs cannot reason-
ably be calculated in advance, as well as information on that such additional costs
may be payable (§ 141(1)(4) LOA).
5.2.4 Transparency Requirement Concerning Fees
Transparency requirements concerning fees in consumer contracts that derive from

Articles 8(2), 19, 21 and 22 Directive 2011/83/EU are transposed in § 281 and § 622
LOA. The Estonian legislator has extended the scope of application of these pro-
visions to all types of consumer contracts, including those that are outside of the
scope of this Directive. This results in the consumer protection rules being applicable
to all consumer contracts, including, for example, residential lease contracts, insur-
ance contracts and package travel contracts.77
76
Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on
consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the
European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive
97/7/EC of the European Parliament and of the Council, OJ 2011, L 304/64.
77
Sein (2014a), p. 270.
5.3 Disclosure Obligations of the Lessor of a Residential

Dwelling
The Estonian Law of Obligation Act foresees certain disclosure obligations for the
lessor of a residential dwelling that are, at least partly aimed at enabling the lessee to
determine whether the dwelling is suitable for his or her financial situation.78 Firstly,
the lessor is obliged, before concluding the contract, to disclose the lessee the rent
payable according to the previous lease contract (§ 295 LOA). This disclosure
obligation concerns also the accessory expenses.79 Secondly, the lessor must enable
the lessee to examine documents certifying accessory expenses during the term of
the contract (§ 292(2) LOA). The lessor must meet these obligations only at the
request of the lessee and not on its own motion.
5.4 Information Obligations Under the Electricity Market Act

and Gas Act
The Electricity Market Act80 sets forth certain information obligations for the trader
in cases in which he enters into connection contract, network contract of electricity
sales contract with a consumer. Before entering into such a contract, the trader has to
provide the consumer with information concerning the material terms and conditions
of the contract and any possible alternatives in terms of its content (§ 85(1) Electricity
Market Act). This obligation does not apply if the contract is concluded orally or if
the consumer does not wish to be given such information.
Similarly, § 101(1) Natural Gas Act81 obliges the gas undertaking to provide the
consumer, prior to concluding a connection contract, network contract or a contract
for the sale of gas, information concerning the material terms and conditions of the
contract and any possible alternatives in terms of its content.
There is only a limited number of transparency requirements in the Estonian law
which would balance the effect of price-partitioning or price bundling. One such
example concerns electricity market. § 85(3) Electricity Market Act stipulates that if,
by agreement with a network operator, a seller of electricity also arranges settlement
of accounts for the network services provided by the network operator under a
network contract, the seller has to present the consumer a separate invoice for the
network services or distinguish the relevant date related to network services in the
invoice issued on the basis of the electricity contract. Similarly, as of 1 July 2007,
gas undertakings must submit separate invoices for the sale of gas and for the
78
Varul et al. (2007), p. 199.
79
Varul et al. (2007), pp. 199–200.
80
Elektrituruseadus (Estonian Electricity Market Act). RT I, 30.06.2017, 2.
81
Maagaasiseadus (Estonian Natural Gas Act). RT I, 30.06.2017, 26.
378 K. Sein
provision of network services, or to distinguish such activities as separate items of a

single invoice (§ 9(4) Natural Gas Act).
5.5 Price Partitioning
The rules concerning price-partitioning in Estonia derive only from the EU law. The
most prominent examples are Article 23 EU Air Services Regulation that applies
directly in Estonia as an EU Member State, and the consumer credit rules on APRC
that are harmonized in the Law of Obligations Act. Furthermore, § 421 LOA that sets
forth the mandatory nature of consumer credit contract provisions, stipulates that
these provisions apply also in case where an attempt is made to avoid their applica-
tion by different wording of agreements, in particular upon division of the credit
amount between several contracts.
References
Kalamees P, Lilleholt K (2014) Early termination of consumer contracts for the leasing of cars
under Estonian and Norwegian laws. Eur Rev Priv Law 22(4):553–554
Kalamees P, Sein K (2017) Case law of the Court of Justice of European Union on Unfair Contract
Terms Directive: implications on Estonian domestic law. Int Comp Jurisprud 3(1):117–119
Koll K (2015) Tarbija kaitsmine tarbijakrediidilepinguga seotud ebamõistlike kulude eest. Juridica
5:252–258
Madise Ü et al (eds) (2017) Eesti Vabariigi Põhiseadus. Kommenteeritud väljaanne. Juura, Tallinn
Margus K (2014) Võla sissenõudmiskulude regulatsiooni muutmise vajalikkus tarbijaõigussuhetes.
Juridica 2:120–126
Saare K, Sein K (2012) Transparenzgebot der AGB-Klauseln in den Verbraucherverträgen. Juridica
Int 19:64–65
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1-114-12 ja 3-2-1-123-12. Juridica 3:214
Sein K (2013b) Protection of consumers in consumer-credit contracts: expectations and reality in
Estonia. Juridica Int 20:32–40
Sein K (2014a) Transposition of the consumer rights directive: Estonia. J Eur Consum Mark
Law:270
Sein K (2014b) The principle of change in circumstances in Estonian Contract Law – “Much Ado
About Nothing?”. In: Jurisprudence and culture: past lessons and future challenges. University
of Latvia Press, Riga, pp 586–594
Sein K (2017) A consumer’s right to a free paper bill in mobile phone contracts. J Eur Consum
Market Law 6:3–9
Sein K, Lilleholt K (2014) Enforcement of security rights in residential immovable property and
consumer protection: an assessment of Estonian and Norwegian Law. Oslo Law Rev 1:20–46
Sein K, Volens U (2014) Legal problems and regulations related to easy-access non-secured
consumer loans in Estonia. Juridica Int 22:130
Varul P, Kull I et al (eds) (2007) Võlaõigusseadus II. Kommenteeritud väljaanne. Juura, Tallinn
Varul P, Kull I et al (2012) Tsiviilõiguse üldosa. Juura, Tallinn
Varul P, Kull I et al (eds) (2016) Võlaõigusseaduse üldosa. Kommenteeritud väljaanne. Juura,
Tallinn
Form Contracts in France
Gaël Chantepie
Abstract Recent developments in French contract law reflect a greater focus on the
balance of bargaining power before the conclusion of contract. Standard form
contract is regarded as a criterion of unequal bargaining power, both in consumer
law and in ordinary contract law. Nevertheless, the control of price terms is not
subject to uniform and consistent treatment.
1 Introduction
French contract law allows for considerable party autonomy.1 In a liberal economy,
the contracting parties are expected to freely determine the nature and content of
their contractual relationships. The Civil code does not regard a contract as void
simply because of inequality of performance, the lésion being perceived as “the price
of freedom”.2 With uncommon exceptions, including rescission for laesio enormis
in property sales, which appears to have been maintained on the grounds of its
historical origin alone,3 the courts have no right to control price level in contracts.
More specifically, the substantive fairness is most often controlled indirectly, with
the emphasis on the contractual procedure rather than on the imbalance between the
two sides of the contract.4 In this regard, developments in contract law reflect a
greater focus on the balance of bargaining power in the process of forming the
contract, sometimes adopting the existence of a standard form contract as a criterion.
1
On the distinction between private autonomy and theory of party autonomy, see Rouhette
(1965), p. 60.
2
Ripert (1949), no 63: “la rançon de la liberté”.
3
Code civil, Article 1674 s.
4
On this point, see Chantepie (2006).
G. Chantepie (*)
University of Lille, Faculty of Legal, Political and Social Sciences, Lille, France
e-mail: gael.chantepie@univ-lille.fr

https://doi.org/10.1007/978-3-030-23057-9_14
380 G. Chantepie
This justifies making a consideration of the way that price-related terms in con-
tracts—that have not been individually negotiated—are actually controlled.
2 Scope of Freedom of Contract
2.1 Protection of Freedom of Contract
Freedom of contract is recognized as a fundamental principle of contract law in the

French Constitution and Civil code. On one hand, having long refused to give
contractual freedom the status of a constitutional principle, merely prohibiting the
legislator from “significantly compromising the economics of lawfully concluded
agreements and contracts to the extent that there is an obvious disregard for the
freedom deriving from Article 4 of the Declaration of Human and Civic Rights”,5 the
French Constitutional Council has softened its position to the point that it now
accepts that “it is permissible for the legislator to establish limitations related to
constitutional requirements or that are in the public interest, on the freedom of
business and contractual freedom that derive from Article 4 of the Declaration of
1789, provided that they do not undermine the desired objective”.6 Contractual
freedom still remains intellectually bound up with freedom of business, since the
contract is designed to be the preferred instrument for economic exchange. In other
words, the Constitutional Council will continue to be responsible for holding
economic operators harmless against excessive infringements by the legislator of
the principle of freedom of contract.
On the other hand, freedom of contract is also an acknowledged principle in the
French Civil Code. Since 1804, Article 6 has provided that “One may not by private
agreement derogate from laws that concern public order and good morals”. Con-
versely, contracting parties therefore have the freedom to determine how to do
business, by means of private contracts. This implicit enshrining has recently
found formal expression in the ordinance of 10 February 2016 on the reform of
contract law, the general regime of obligations, and proof of obligations.7 Article
1102 of the French Civil Code provides that “Everyone is free to contract or not to
contract, to choose the person with whom to contract, and to determine the content
and form of the contract, within the limits imposed by legislation. Contractual
freedom does not allow derogation from rules which are an expression of public
policy”.
Admittedly, this enshrining does not alter the place of freedom of contract in the
legal order. The safeguards provided under the terms of its protection by the
5
Cons. const. 10 June 1998, no 98-401 DC.
6
Cons. const. 13 June 2013, no 2013-672 DC.
7
Ordinance no 2016-131 of 10 February 2016, JO 11 Feb 2016.
Control of Price Related Terms in Standard Form Contracts in France 381
Constitution and the limits within which this is permitted, continue to prevail.
Nonetheless, it is significant that freedom of contract is now enshrined at the start
of the section relating to contract law, not least to guide interpretation in reading
subsequent laws. While the legislator challenged this, the position of contractual
freedom—alongside force of legislation and good faith in “introductory provisions”,
at the start of the section relating to the contract—demonstrates its symbolic value.
2.2 Meaning of Freedom of Contract
Freedom of contract is the instrument of a market economy. This requires a principle

of freedom of competition, which “is itself based on two major freedoms: on one
hand, freedom of trade and industry, especially through freedom of business and, on
the other, contractual freedom, whereby competitors have to be able to conclude the
contracts they want under the conditions they choose”.8 Stating that the contracting
parties are free to enter into a contract, under the conditions they choose, immedi-
ately after defining the contract, confirms that French contract law is rooted in a
liberal understanding of the economy and private law contracts.
This is reflected in particular in the various expressions of freedom of contract:
freedom to enter or not to enter into a contract, freedom to choose the person with
whom to contract, and freedom to determine the form and content of the contract.9
As such, not only can the parties make use of an existing type of contract or create
new contractual arrangements and stipulate provisions appropriate to their interper-
sonal relationship, but they can also determine the economic conditions for their
contract, price being just one aspect of the freedom to enter into a contract under the
desired conditions. In this regard, free competition is protected by the Autorité de la
concurrence, an independent administrative authority, which acts in an advisory,
decision-making and oversight capacity.10
Nonetheless, exercising freedom of contract remains subject to legal require-
ments. As Rouhette summed it up, “Far from freedom being the principle and
mandatory or prohibitive law the exception, the law is a normal and ongoing
restriction on contractual activity”.11 To consider the law as the source of and
limitation on freedom of contract is to exclude the notion of an essence of freedom
in the contract. Article 1102 of the French Civil Code remains true to a conventional
analysis of control over freedom of contract, subject to vertical restraints, the
authority of the law and public order.12 Public policy rules, of either statutory or
8
Oppetit (1995), p. 242.
9
Code civil, Article 1102(2) 2.
10
Code de commerce, Article L. 461-1.
11
Rouhette (1987), n 4.
12
“La liberté contractuelle ne permet pas de déroger aux règles qui intéressent l’ordre public”.
Cf. Code civil, Article 6.
382 G. Chantepie
judicial origin, could therefore limit the exercise of contractual freedom, in compli-
ance with the protection established by the Constitutional Council. While not
explicitly articulated by the legislator, the parties’ exercise of freedom of contract
must also be reconciled with respect for their fundamental rights and freedoms. In
this regard, the February 2015 draft version of the ordinance considered making
freedom of contract subject to fundamental rights and freedoms, by providing that,
“freedom of contract does not permit (. . .) an adverse effect on the fundamental
rights and freedoms recognized in a document applicable to the relationships
between private individuals, unless this effect is essential for the protection of
legitimate interests that are proportionate to the desired aim”. This approach was
not adopted, which does not prevent the occurrence of issues likely to affect price
setting in contracts.13
3 Control of Standard Form Contracts

3.1 Control of Consumer Contracts
French law has authorized the judicial control of unfair terms in consumer contracts
since 1978. The applicable laws now result from the transposition of Directive
93/13/EEC.14 The French judge is therefore required ex officio to detect the presence
of an unfair term within the meaning of Article 3(1).15 While the definition of
significant imbalance coincides exactly with the definition adopted under
European law, Article L. 212-1 of the French Consumer Code extends its scope
beyond consumers alone.
3.1.1 Scope of Application of Consumer Contracts
The application of Article 3(1) Directive 93/13/EEC is restricted to contractual

terms, which have “not been individually negotiated”. Only pre-formulated or
standard form contracts are affected, therefore, to the exclusion of contracts nego-
tiated between the parties, despite a presumption that no negotiation has taken
place.16 French law has broadened the scope of sanctions for unfair terms to all
13
See, in particular, ECHR, 19 June 2006, Hutten-Czapska, Req. no 35014/97.
14
95/29.
Cámara Lapuente (2019).
15
CJEU Judgment of 4 June 2009, Pannon GSM, C-243/08, EU:C:2009:350. Addendum Code de la
consommation, Article R. 632-1.
16
Directive 93/13/EEC, Article 3(2).
consumer contracts, “whatever the contract form or medium”,17 thereby establishing

the application of control of significant imbalance to “purchase orders, invoices,
performance bonds, delivery slips or notes, tickets or receipts, containing stipula-
tions which may, or may not, have been freely negotiated, or references to general
terms fixed in advance”.18 The decision was therefore made to focus on a criterion
based exclusively on the categories of protected persons, rather than a composite
criterion combining the contracting parties category and the procedure for forming
the contract.
Article L. 212-1 of the Consumer Code covers “contracts agreed between busi-
nesses and consumers”, where the “consumer” is “any individual acting for purposes
which are primarily outside his trade, business, craft, profession or agricultural
activity”.19 By restricting the notion of consumer to individuals only, French law
complies with the interpretation of Article Directive 93/13/EEC.20
Nonetheless, even prior to the adoption of the 1993 Directive, it has always been
permitted under French law for unfair terms to be controlled in contracts between
businesses and “non-businesses”; this can now be found in Article L. 212-2 of the
French Consumer Code. This novel concept—the origin of which dates back to a
drafting discrepancy between the two houses of the French Parliament—has recently
been clarified. A “non-business” is “any legal person who is not acting for business
purposes”.21 This allows for joint ownership associations22 to be included in this
category, as legal persons who might not act as “consumers”. This broadening of the
scope of the measure deriving from the Directive 93/13/EEC remains very limited
however, since the scenarios where legal persons may not be acting for business
reasons are minimal.
3.1.2 Striking Out Terms Creating a Significant Imbalance in the Rights

and Obligations of the Parties
3.1.2.1 Definition of Significant Imbalance
Neither the Directive 93/13/EEC nor French law provides a clear definition of the
criterion for significant imbalance in the rights and obligations of the parties. The
courts will generally refer to multiple criteria such as constraint on the exercise of
consumer rights, the imposition on him of an additional obligation,23 or unilateral or
17
Code de la consommation, Article L. 212-1(6).
18
19
Code de la consommation, introductory article.
20
CJEU Judgment of 22 November 2011, Cape and Idealservice MN RE, C-541/99, EU:
C:2001:625.
21
Code de la consommation, introductory article.
22
Civ. 1, 29 March 2017, no 16-10.007.
23
CJEU Judgment of 16 January 2014, Constructora Pincipado, C-226/12, EU:C:2014:10.
384 G. Chantepie
unjustified advantage,24 leading some authors to bemoan the relative lack of clarity
of the criteria used.25 In practice though, there is guidance available to assist the
judge in their interpretation.
3.1.2.2 Lists of Terms Considered or Presumed to Be Imbalanced
The initial transposition into French law of Directive 93/13/EEC did not provide for
lists of terms that could be declared unfair, within the meaning of Article 3(3).
Nonetheless, an independent administrative authority established under the Law of
10 January 1978—the Commission for Unfair Terms—can inspect typical template
consumer contracts and issue recommendations for removing terms that could be
unfair.26 Hundreds of template consumer contracts have therefore been examined, in
fields as varied as removals, social media provision, gas or electricity supply,
personal services and co-ownership associations, to cite only the most recent exam-
ples. If the recommendations issued are not mandatory, they form a corpus of soft
law that the judge will generally follow.
It was not until 2008 that the legislator added a list or, more accurately, two lists
of contract terms. Now codified in Articles R. 212-1 and R. 212-2 of the French
Consumer Code, they cover 22 practices that largely overlap with the scenarios laid
down by the Annex to the Directive. French law has opted for a system that
distinguishes terms which are in all circumstances considered unfair and are now
prohibited (on the black list) from those that are simply presumed to be unfair and
allow the business to provide evidence to the contrary (on the grey list). The first
category includes terms which intentionally or unintentionally “Establish the con-
sumer’s agreement to terms that do not feature in the written document that they
accept or are covered in another document which is not explicitly referred to when
concluding the contract and of which they were not aware prior to its conclusion”,
“Reserve the right for the business to unilaterally change the provisions of the
contract relating to its term, the characteristics or price of the goods to be delivered,
or the service to be provided”,27 or “Remove or reduce the right to compensation for
the loss incurred by the consumer if the business fails to meet any one of its
obligations”.28 The second category includes terms which intentionally or
unintentionally “Require a consumer who fails to fulfil their obligations to pay
compensation of an amount that is clearly disproportionate”, “Acknowledge a
possibility for the business to terminate the contract without reasonable notice”, or
24
Sauphanor-Brouillaud (2013), no 596 ff.
25
Lagarde (2006).
26
Code de la consommation, Article L. 822-4.
27
For a contract term deemed to be valid in the airline business, see Civ. 1, 26 April 2017, no
15-18.970.
28
Code de la consommation, Article R. 212-1(1), (3) and (6). The text covers 12 contract terms.
“Subject the rescission or termination of the contract to conditions or procedures that

are more stringent for the consumer than for the business”.29
3.1.3 Individual and Collective Action
The practical effect of action to remove unfair contract terms depends on their
author. When the action is brought by the consumer or non-business who is subject
to the term in their contract, Article L. 241-1 of the French Consumer Code provides
that “unfair contract terms shall be deemed unenforceable,” with the contract
remaining “applicable in all its provisions other than those deemed unfair, if it can
persist without these terms”. In principle, therefore, the sanction is limited only to
disputed terms in the individual contract, as the ancillary terms of the contract are the
main focus of the control mechanism.
However, when a consumer association brings the action, the solution is more
complex. The association can ask the judge to “order the respondent or defendant,
subject to a fine, if applicable, to undertake any measure to stop these unlawful
activities or remove an unlawful term from the contract or the type of consumer
contract or from any contract in the course of performance.” This affects all terms
that contravene public order legislation, even when the template contract provided
by a business creates a contract between individuals.30 The association can also ask
the court to “declare that this term be deemed unenforceable in all like contracts in
the course of performance entered into by the respondent or defendant with con-
sumers and order them to inform consumers affected by all appropriate means and at
their own expense”.31 Accordingly, the effect of the court ruling extends to a variety
of contracts, since removal can be ordered not only for the template consumer
contract, but also for all like contracts in the course of performance. In practice,
action by consumers’ associations has been pre-eminent in combating unfair terms in
consumer contracts over the last 20 years. In their ability to act on the basis of
standard templates and obtain the removal of terms from all current or future
contracts, consumers’ associations play a role similar to that of the authorities in
instituting action in contracts between businesses.
3.2 Control of Contracts Between Businesses (B2B)
The French legislator has made several attempts to regulate the conclusion of B2B
contracts, considering the unequal bargaining power in the large retail sector.
29
Code de la consommation, Article R. 212-2(3), (4) and (8). The text covers 10 contract terms.
30
Civ. 1, 3 Feb 2011, no 08-14.402.
31
Code de la consommation, Article R. 621-2, paras 1 and 2.
386 G. Chantepie
Following several legal provisions of limited effectiveness,32 the Law of 4 August

2008 introduced a sanction for significant imbalance when one of the parties has
subjecting or seeking to subject “a trading partner to obligations that create a
significant imbalance in the rights and obligations of the parties”. The use of the
criterion of “significant imbalance” is important, and promotes a common interpre-
tation of the legislation relating to B2B and B2C contracts.33 Yet despite its
similarity to consumer law, the control of unfair terms in B2B contracts is distinctive
in nature.
3.2.1 Scope of Application of Article L. 442-6, I(2) of the French

Commercial Code
As in consumer law, the scope of application of Article L. 442-6, I(2) of the

Commercial Code is not explicitly restricted to standard form contracts or standard-
ized terms. The text considers two criteria. The first relates to the concept of “trading
partner”, which could have narrowed the scope of application to longer-term con-
tracts only.34 The Court of Cassation rejected this analysis, however, by aligning the
concepts of trading partner and contracting party.35 The second criterion relates to
the fact that one of the contracting parties must have subjected or attempted to
subject their trading partner to a significant imbalance. The term “subjection” is
easily applied to imposed terms, particularly within the context of standard form
contracts. While the issue remains unresolved for the moment, there are some rulings
that reject significant imbalance when the contracting party “has freely accepted the
proposed financial terms”.36 In other words, control is understood to be restricted to
standard form contracts, if not in the legal rules then in practice at least.
3.2.2 Concept of Significant Imbalance
Significant imbalance refers to the concept of consumer protection, while deviating

from it. The distinction between imbalance of power and imbalance of value is a
handy focus for its evaluation. Imbalance of power would most often be reflected in
a lack of reciprocity in the prerogatives conferred on the parties by the contract. This
is the case in particular when a distributor can unilaterally and automatically
32
See, in particular, the Code de commerce, Article L. 442-6, I(1) which addresses the offence of
“Obtaining, or seeking to obtain, from a trading partner any advantage unrelated to a commercial
service effectively rendered or which is clearly disproportionate to the value of the service
rendered”.
33
Cf. Cons. const., 13 Jan 2011, Dec no 2010-85 QPC.
34
See Court of appeal of Paris, 16 March 2018, no 16/04144.
35
Com., 26 April 2017, no 15-27.865.
36
Com., 8 June 2017, no 15-15.417.
introduce a price revision option while the supplier is deprived of this facility or is
held to a complicated renegotiation process. Despite its limitations, lack of reciproc-
ity is a reliable marker of an imbalance of power to the detriment of one of the
parties. To compensate for this, it would require an identifiable counterparty capable
of restoring a financial balance jeopardized by the prerogatives granted to the
contracting party.37
3.2.3 Sanction for Significant Imbalance
A finding of significant imbalance ensures that the person who has imposed the
unfair terms can be held liable, and that the term can be removed. Provision is also
made for a civil fine of up to five million euros.38 Despite its abstract nature, far
removed from the victims of unfair commercial practices, the civil fine is assessed
with reference to specific evidence, such as the behaviour of the parties.
3.2.4 Action Brought by the Contracting Party, the Minister

for the Economy or the Office of Public Prosecutor
The contracting party who is subject to these practices can invoke Article L. 442-6, I
(2) of the French Commercial Code. Nonetheless, at present, this provision has
mostly been taken up by the administrative authority, to control agreements between
suppliers and large retails groups. Their powers mean they can examine all contracts
concluded by a distributor (several dozen) in order to detect any patterns and to
highlight potential wrongdoing.39 While hotly disputed by some businesses, the
Constitutional Council40 and the European Court of Human Rights41 deemed this
intervention by the authorities to be compliant with fundamental rights. In case of a
request for nullity, repayment of amounts wrongly received or compensation for
damages resulting from the practices pursued, the action must, however, ensure that
the parties are informed in advance.
37
See, in particular, Com., 3 March 2015, nos 13-27.525 and 14-10.907.
38
Code de commerce, Article L. 442-6, III.
39
Code de commerce, Article L. 442-6, III.
40
Cons. const. 13 May 2011, no 2011-126 QPC.
41
ECHR, 17 Jan 2012, GALEC v. France, 51255/08.
388 G. Chantepie
3.3 Control of Standard Form Contracts in Ordinary

Contract Law (“droit commun du contrat”)
Ordinary contract law features numerous mechanisms for use by the judge in
removing contract terms that affect the use or balance of the contract. In addition
to defects in consent, Article 1170 of the French Civil Code states that “Any contract
term which deprives a debtor’s essential obligation of its substance is deemed not
written”. Based on a body of case law from the Court of Cassation,42 this provision
makes it possible to strike out terms that affect the debtor’s essential obligation to the
point that the debtor’s undertaking becomes illusory. This is the case in particular for
terms exonerating them from liability, or even limiting compensation to a paltry
amount, in the event that they fail to meet their essential obligation. Officially
adopted by the legislator at the time of the 2016 reforms, this mechanism could
provide the judge with increased control over standard form contracts, although it is
not limited to that by the Civil code, in contrast to another, highly controversial
mechanism. The ordinance of 10 February 2016 offered the French legislator the
opportunity to introduce a process for removing unfair terms into general rules of
law of contract. Although it does not use the expression “unfair terms”, Article 1171
of the French Civil Code is based on the measures provided by Article 3 Directive
93/13/EEC.
3.3.1 Scope of Application
Article 1171 of the French Civil Code restricts the scope of control of terms creating
a significant imbalance to standard form contracts only. The text is based on the idea
that a sanction for significant imbalance would only be justified in non-negotiated
contracts because of the underlying unequal power balance. General law of contract
also embraces the aim of protection for the weakest contracting parties, hitherto
relegated to special rights. In contrast to consumer law, which confines itself to the
status of the parties as business and consumer or non-business, absence of negoti-
ation is a determining factor for common law.
More specifically, Article 1171 of the French Civil Code applied to standard form
contracts (“contrats d’adhésion”) where “the general conditions, not subjected to
negotiation, are determined in advance by one of the parties”.43 This required both
the existence of general terms and the absence of negotiation. The interpretation of
this legal provision was the subject of much current debate.44 The law no 2018-287
of 20 April 2018 revised the initial wording: “A standard-form contract is one which
comprises a collection of non-negotiable terms which are determined in advance by
42
Com., 22 Oct 1996, no 93-18.632.
43
Code civil, Article 1110(2) 2.
44
See, in particular, Chantepie and Latina (2018), no 147 ff. and 443; Chénedé (2016), no 23.351 s.;
Deshayes et al. (2016), p. 66.
one of the parties without negotiation.”45 Otherwise, is deemed not written “any term
which is non-negotiable and determined in advance by one of the parties and which
creates a significant imbalance in the rights and obligations of the parties to the
contract”.46
Remaining faithful to Saleilles’ doctrinal formulation, the expression “contrat
d’adhésion” (standard-form contract) has been retained, without any real consider-
ation for its symbolic significance. The concept of standard form contract implies a
contractual relationship in which one of the parties imposes their will and the other
consents simply by agreeing to it.47 In this regard, the terminology used differs from
some international texts, which cover standard (non-negotiated) terms, a more
neutral formulation that emphasizes the physical instrument rather than the intention
to create legal relations. The definition adopted by Article 1110(2) allows the
inclusion of such situations, even if the legislator’s intention may have been to
exclude them.
3.3.2 Concept of Significant Imbalance
The concept of significant imbalance is an assessment standard taken directly from

Directive 93/13/EEC and also used in B2B contracts. It is therefore tempting to refer
to special rights. Similar terms will no doubt be covered in the ancillary terms to the
contract. In the absence of an indicative list of prohibited terms, the judge will be
responsible for determining the scope of this concept.
3.3.3 Sanction for Significant Imbalance
The term that creates the imbalance is deemed not written; this enables the contract
to continue in its entirety with the exception of the disputed term. Since assessment
of the significant imbalance involves neither “the main subject matter of the con-
tract” nor “the adequacy of the price in relation to the act of performance”,48 it can be
considered that no term essential to the existence of the contract would be affected.
In this case, however, it needs to be recognized that the whole contract could be
unravelled, unless the judge can change the content of such a term, something which
the structure of the text does not encourage. Incidentally, even if the term were
essential for one of the parties, and in particular for the party that has imposed it, the
contract could not be declared null and void in its entirety. Article 1184(2) states that
“the contract will be maintained” despite the determining effect of the term, when
“the law deems it (. . .) unenforceable”.
45
Code civil, Article 1110(2), revised by Loi no 2018-287 of 20 April 2018.
46
Code civil, Article 1171, revised by Loi no 2018-287 of 20 April 2018.
47
Kessler (1943).
48
Code civil, Article 1171(2). 2.
390 G. Chantepie
3.3.4 Entitlement to Bring Action
The action available under common law is restricted to the contracting party whose
interests were protected by the provision. In contrast to consumer contracts or
distribution contracts, there is no provision for any form of action by the authorities
or by associations, limiting the effectiveness of this arrangement.
4 Judicial Control of Price-Related Terms in Standard

Form Contracts
In principle, French law does not allow for any judicial control of prices in contracts,
no matter how they are entered into. Article 1168 of the French Civil Code reiterates,
“In synallagmatic contracts, a lack of equivalence in the acts of performance of the
parties is not a ground of nullity of the contract, unless legislation provides other-
wise”. As a consequence, any judicial action to avoid or revise a contract because of
disparity between performance and counterperformance is an exception. However, a
distinction must be drawn depending on whether the price was fixed by agreement
between the parties, or unilaterally by one of them.
4.1 Control of Prices Fixed by Agreement Between the Parties
As discussed, standard form contracts are subject to judicial control of terms, which
aim to create or result in the creation of a significant imbalance in the rights and
obligations of the parties. In consumer contracts, however, control is precluded if the
price is not adequate for what is agreed in return; this has been the solution under
general rules of contract law since the ordinance of 10 February 2016. In contrast,
contracts between businesses allow for such control, which appears surprising.
4.1.1 Exclusion of Judicial Control if the Price Is Not Adequate

for What Is Agreed in Return
4.1.1.1 Consumer Contracts
In consumer contracts, French law has transposed Directive 93/13/EEC, Article 4

(2) of which provides that the assessment of the unfair nature of terms shall relate
neither to the definition of the main subject matter of the contract nor to the adequacy
of the price and remuneration, on the one hand, as against the services or goods to be
supplies in exchange, on the other, in so far as these terms are in a plain intelligible
language. To begin with, the French legislator did not transpose Article 4(2) in full,
removing the latter restriction. Further to infringement proceedings by the European

Commission, Article 4(2) was transposed in full in connection with the Decree of
23 August 2001. Article L. 212-1(3) of the French Consumer Code now provides
that “Evaluation of the unfair nature of terms in the sense of the first paragraph does
not involve either the definition of the main purpose of the contract nor the adequacy
of the price of, or remuneration for, the goods being sold or the service being offered,
provided that the terms are written in a clear and comprehensible manner”. As noted,
this provision “is based on a concern for procedural justice: correctly applied, the
procedure for entering into the contract would warn the consumer of any damage to
their interests”.49 Considered in precisely this sense, there seems to be little in the
text to encourage dispute. Some decisions deny control, considering that the terms
relate to the definition of the main subject matter of the contract,50 or the adequacy of
the price for the service provided.51 However, the judge may find that it is unfair in
nature. A term stipulated in a home help contract and providing that the “carer’s/
carers’ travelling time is included in the working hours” entails a significant imbal-
ance, with the method of calculating the price for the service creating “real uncer-
tainty as to the actual duration of the service provision, since the price of the service
provided changes depending on the travelling time.”52 Extensive litigation has also
been instigated in respect of mortgages denominated in Swiss francs and repayable
in Euros. In a law dated 26 July 2013, the French legislator restricted the opportunity
for taking out “loans denominated in a currency other than the Euro, repayable in
Euros or in the currency in question” to borrowers who “say they primarily receive
their income or hold assets in that currency at the time of signing the loan contract,
unless the currency risk is not borne by the borrower”.53 For contracts already
entered into, the Court of Cassation, having identified ex officio the unfair nature
of the term, recently enforced a court of appeal to verify that the currency risk did not
affect only borrowers and whether, as a result, the litigious term intentionally or
unintentionally created a significant imbalance in the rights and obligations of the
parties to the contract, to the detriment of consumers.54 A similar case went before
the European Court of Justice, which left it up to the national judges to decide
whether the disputed terms were drafted so that they were clear and comprehensible
within the meaning of Article 4(2) Directive 93/13/EEC, noting that this drafting
requirement “means that a term under which the loan must be repaid in the same
49
Rochfeld (2004), p. 994.
50
Civ. 1, 3 June 2015, nos 14-13.193 and 14-13.194: terms limiting the period of validity of call
credit in a contract providing for the installation of a telephone line with a prepaid card.
51
See, in particular, Court of Appeal of Toulouse, 25 Sep 2007, no 06/02410, refusing to control the
terms of a private detective contract since “it can be seen from the work order produced that these
terms have been drafted so that they are clear, and the brown colour of the paper, which includes
darker and lighter shades of brown from the top to the bottom of the sheet, does not prevent the
printed characters, some of which are in bold, from being clearly read.”
52
Civ. 1, 1 Oct 2016, no 15-20.060.
53
54
Civ. 1, 29 March 2017, nos 16-13.050 and 15-27.231.
392 G. Chantepie
foreign currency as that in which it was contracted must be understood by the

consumer both at the formal and grammatical level, and also in terms of its actual
effects, so that the average consumer, who is reasonably well informed and reason-
ably observant and circumspect, would be aware both of the possibility of a rise or
fall in the value of the foreign currency in which the loan was taken out, and would
also be able to assess the potentially significant economic consequences of such a
term with regard to his/her financial obligations.”55 Some appeal jurisdictions have
already found such terms to be unfair.56
4.1.1.2 Ordinary Contract Law
This is the model that was used to draft Article 1171(2) of the French Civil Code,
which restricts the scope of sanctions for unfair terms in standard form contracts
under general rules of law of contract exclusively to those terms not related to the
adequacy of the price in relation to the act of performance. The rule is distinct from
Article L. 212-1 of the French Consumer Code in two respects. Firstly, there is no
mention of the “principal” nature of the provision; then, it does not include the
condition that terms must be drafted so that they are clear and comprehensible. In
other words, while the price terms stipulated in a standard form contract might be
unclear, the judge cannot exercise control over any imbalance created. The text is
certainly designed to ensure that a contract is not void simply because of disparity
between performance and counterperformance in ordinary contract law. The proce-
dural dimension of the text of consumer law is therefore absent. With that proviso,
Article 1171 of the French Civil Code should, however, be interpreted in the same
sense as the consumer protection provision.
4.1.2 Judicial Control of Price-Related Terms in Contracts Between

Businesses (B2B)
As explained above, French law has a novel mechanism for sanctioning significant
imbalances in most contracts concluded between businesses. Article L. 442-6, I(2) of
the French Commercial Code allows the judge, on referral from one of the parties or
from the authorities, to strike out terms that create a significant imbalance between
the rights and obligations of the parties. Although the Constitutional Council has
highlighted that the judge could seek guidance from consumer case law in making
their interpretation, Article L. 442-6, I(2) does not cover the exclusion of terms
which relate to the definition of the main subject matter of the contract or the
adequacy of the price in relation to the act of performance. As a consequence,
55
CJEU Judgment of 20 September 2017, Andriciuc and others, C-186/16, EU:C:2017:703. See
also Cámara Lapuente (2019).
56
Court of Appeal, Paris, 16 June 2017, RG 15/21389, 15/23316 and 15/23333.
while there is no sanction for financial imbalance under either consumer law or Civil
Code, this is precisely the purpose of the text of the French Commercial Code.
The Court of Cassation has recently validated this interpretation. Needing to
assess the validity of a term providing for an end-of-year discount in the relationship
between suppliers and a distributor, the Court initially found that the “similarity of
the concepts of significant imbalance in Articles L. 132-1, now L. 212-1, of the
French Consumer Code and L. 442-6, I(2) of the Commercial Code, noted by the
Constitutional Council in its decision no 2010-85 QPC of 13 January 2011, does not
preclude the existence of differences between them in the arrangements pertaining to
the legislator’s objectives in each of these areas, in particular with regard to the
category of persons the legislator intended to protect and the nature of the contracts
in question”. In other words, despite the similarity in the words used and the close
relationship between the concepts, significant imbalance in B2B contracts is not
modelled on significant imbalance in B2C contracts. The Court adds that Article
L. 442-6, I(2) “does not, in contrast to Article L. 212-1 of the French Consumer
Code, preclude significant imbalance from being the result of a price that is not
adequate for the goods sold”. This paves the way for judicial control of price-related
terms in contracts between businesses: “Article L. 442-6, I(2) of the French Com-
mercial Code permits judicial control of pricing when the price is not the result of
free negotiation and is characteristic of a significant imbalance in the rights and
obligations of the parties”.57 If initial applications of the legislation sometimes
pertained to terms affecting price discovery (renegotiation of prices in the course
of performance,58 anticipated discounts, etc.), the decision of 25 January 2017 marks
a significant development in the judicial control of price-related terms in B2B
contracts by allowing for control at the very heart of the economic balance of the
transaction, the correspondence between the price and the principal service.
4.2 Control of Price Fixed Unilaterally by One of the Parties
If price is, in principle, a decisive factor for consent that is requires an agreement of
the parties in advance of their performance, economic necessity may be grounds for
leaving the price to be fixed by one of the parties. This is how, in distribution
contracts, the supplier is often granted powers to set the price of implementation
contracts. This type of contract prompted a considerable body of litigation before the
Court of Cassation recognized the validity of the principle, in 1995.59 Enshrining
this solution, Article 1164 of the French Civil Code now provides that, “In frame-
work contracts it may be agreed that the price will be fixed unilaterally by one of the
parties, subject to the requirement that the latter must provide the reason for the
57
Com., 25 Jan 2017, no 15-23.547.
58
Com., 3 March 2015, nos 13-27.525 and 14-10.907.
59
Ass. plén., 1 Dec 1995, nos 91-15.578, 91-19.653, 91-15.999 and 93-13.688.
394 G. Chantepie
amount if it is challenged.” This requirement to state grounds paves the way for
judicial control “in the event of abusive price setting”, with the judge being able to
award damages, or even rescind the contract.60 The judge is thereby granted original
supervisory power over the implementation of unilateral authority for setting the
price. It is noted, however, that since 1995, cases about abusive price fixing have
been rare, which reduces the practical significance of this provision.61
5 Special Provisions Allowing for Control of Price-Related

Terms
Since prices “are freely determined on the basis of competition”,62 provisions

allowing for control of the price set by the contracting parties remain the exception.
Sectors, which formerly had regulated tariffs, have gradually been pushed into the
competitive arena. So, while there was previously a legal rule that provided that “the
minimum and maximum rates for insurance transactions can be set by decree,
following consultation with the Conseil National des Assurances (French national
insurance council)”,63 they are now subject to the principle of freedom to set prices.
However, a good number of regulated tariffs remain, in particular for book price,64
pharmaceuticals or the tariff for activities covered by the monopoly of ministerial
officials (bailiffs or notaries, for example); the legislator also reserves the option of
restricting price competition in exceptional circumstances.65 Apart from these sce-
narios based on restricting competition, two major series of provisions allowing for
control of price-related terms can be observed, relating to the price level or break-
down of the advertised price.
5.1 Price Level Control
5.1.1 Direct Control
Usury legislation is an historical exception amongst the provisions for price level
control, although its assessment procedures have changed considerably over time.
60
The same solution is also applicable in contracts for the supply of services since, if the parties do
not reach an agreement prior to performance, the price can be set by the creditor, provided there is
no abuse (Code civil, Article 1165).
61
See, however, Com., 15 May 2002, no 99-21.172.
62
63
Code des assurances, Article L. 310-3. Cf. Code des assurances, Article L. 310-7.
64
Law no 81-766 of 10 August 1981 on book prices.
65
See, Decree 89-680 of 20 Sep 1989, JO 21 Sep 1989.
Interest is commonly assessed as the payment due to the lender for the amounts paid
that are tied up and for the risk it has taken. Assessing a usurious interest rate requires
consideration of the annual percentage rate (APR), which includes all fees, com-
mission or remuneration payable by the borrower and represents the overall cost of
the service provided to the borrower. The loan is designated as usurious when it is
made at an APR “which, at the time of its granting, is more than one third higher than
the average percentage rate applied by the credit institutions during the previous
quarter for loans of the same type presenting a similar risk factor, as defined by the
administrative authority after consulting the Conseil national du crédit, constitutes a
usurious loan.”66
5.1.2 Indirect Control
Without directly affecting the price set by the parties, the purpose of some provisions
is to limit the amount of any penalties that may be payable in case of failure to
perform by one of the parties. In case of such failure, penalty clauses allow for the
amount of compensation to be paid by the defaulting debtor to be set in advance, at a
fixed rate. The many abuses seen in leasing agreements during the 1960s led the
legislator to intervene in 1975, giving the judge the power of moderate or increase
the penalty if it is manifestly excessive or derisory.67 This judicial power is not
confined to standard form contracts, nor to consumer contracts. In any event, since
penalty clauses are presumed to be unfair in consumer contracts,68 the power of
review is used instead in contracts between individuals or between businesses,69
without the criterion of standardized terms being an issue. Some special instruments
also limit the amount of penalties that can be imposed on a contracting party.
Therefore, in case of borrower default in consumer mortgages and where immediate
repayment of the capital is not required, the lender may not increase the interest rate
by any more than three points.70
5.2 Control of Price Breakdown
Subscriber contracts for the supply of a service are likely to conceal the actual cost of
the services for the customer. The price that the consumer perceives and the actual
price differ due to the various mandatory fees or optional services that are not
66
67
Code civil, Article 1231-5.
68
Code de la consommation, Article R. 212-2(3).
69
Com., 27 May 2015, no 14-11.387: penalty clause creating a significant imbalance in a B2B
contract.
70
Code de la consommation, Article R. 313-26.
396 G. Chantepie
included in the fixed price. Generally speaking, the business must ensure that it has
“the express consent of the consumer for any further payment which may be added to
the price of the main subject of the contract”.71 In addition to measures intended to
increase the information available to consumers (see below), such practices may be
penalized as unfair terms. This is the case in particular for access to a sports club or
gym, where a distinction is drawn between fixed-price services and other optional or
ancillary services,72 especially when the subject matter of the service is not drafted
so that it is clear and comprehensible.73 Conversely, sometimes it is a legal provision
that specifically provides that the price for the services is a fixed amount, precluding
the term from being described as unfair.74
Some situations have warranted specific intervention by the French legislator,
however. As such, parking contracts for a public car park must provide for pricing in
15-min increments, rather than a full hour in keeping with past practice.75
A more notable example can be found in co-ownership association contracts.
Each co-owner is a member by right of the co-owners’ association, a legal person
responsible for administering the building (but not having ownership of it). The
co-owners’ association appoints an agent who may be one of the co-owners acting in
a voluntary capacity, but is frequently a real estate professional. The property
management contract, a variation on an agency contract, is therefore drawn up
between the co-owners’ association and the agent. Decree no 2015-342 of
26 March 2015 made available a standard management company contract, which
creates a basis for the comparison of different management companies by eliminat-
ing the variable of excessive terms and slightly different services, which change the
focus of the contract and—by extension—its balance. The standard contract incites
all contracting parties in the same business sector to provide a comparable service,
enhancing competition based on the financial consideration. Specifically, the man-
agement company’s remuneration has, for many years, been the source of disputes
involving the lack of transparency around the services invoiced.
The initial principle was freedom of pricing, set by explicit agreement in the
contract binding the management company and the association.76 Professional
management-company contracts generally drew a distinction between fixed remu-
neration for day-to-day management and variable remuneration for specific tasks,
calculated either on the basis of the time spent or as a percentage of the amount of the
contracts. Clearly, there was a risk that the contract would reduce the services
71
Code de la consommation, Article L. 121-17 which adds that, “In the event that the additional
payment is the result of the consumer’s consent by default, that is to say, in the absence of explicit
objections on their part to the separately priced options they did not request, the consumer may
claim a refund of the amounts paid in respect of this additional payment”.
72
Written questions with answer no 60748, 15 July 2014, JOAN 2 Sept. 2014.
73
For an illustration, Court of Appeal, Grenoble, 1st Civil Chamber, 5 June 2012, no 09/00977.
74
See in particular, for care homes, Civ. 1, 3 Nov 2016, no 15-20.621.
75
76
Decree 17 March 1967, Article 29.
covered by the fixed price in order to make the price seem attractive, while inflating
the variable remuneration, which is more difficult to evaluate. There seem to have
been many cases of inappropriate excess charges, not only leading the Commission
for Unfair Terms to publish two recommendations,77 but especially, prompting the
legislator to overhaul the system for management company remuneration.
Apart from associations consisting solely of legal persons and where the building
is not used for residential purposes, who can decide to derogate from the special rules
and agree with the management company the terms of its remuneration, “the
management company’s remuneration is determined on a fixed-price basis. How-
ever, specific additional remuneration may be received for particular services as
decreed by the Council of State.” The legislator’s aim is to make it impossible for the
parties to vary the categories of services covered by a fixed price or which can attract
additional remuneration. The standard contract established by decree upholds the
principle of fixed-price remuneration, with an amendment for specific remuneration
for particular services. It leaves the parties almost no flexibility, given the level of
detail of the provisions on fixed-price remuneration and remuneration for additional
services. A non-exhaustive list provides an overview of the services that must be
covered by the fixed-price.78 The particular services that may attract specific addi-
tional remuneration are provided in a restrictive list that covers preparing, calling and
holding additional general meetings, exceeding agreed baseline schedules, drawing
up, amending or publishing the co-ownership regulations further to decisions by the
association, or certain services relating to litigation and disputes.79
6 Provisions to Promote Transparency in Pricing

and Competition
Since the Ordinance of 10 February 2016, Article 1112-1 of the French Civil Code
has provided that, “If one party has knowledge of information that is of decisive
importance for consent by the other party, the party that has knowledge of the
information must inform the other if they are legitimately unaware of it or are relying
on their co-contractor to provide it.” The text sets aside “the estimate of the value of
the service”, however, restricting its scope. The scope of the obligation of informa-
tion is therefore inadequate to ensure prices are transparent. Special rights take over
where general rules leave off on this point, however. Most of the provisions are
77
Recommendations no 96-01 and no 11-01 relating to management company contracts. The
Direction générale de la concurrence, de la consummation et de la repression des frauds also
found very frequent irregularities (http://www.economie.gouv.fr/dgccrf/contrats-syndic-
copropriete).
78
Decree 28 March 2015, Appendix 1.
79
Decree 17 March 1967, Article 29, final paragraph, revised by Decree 28 March 2015, referring to
Appendix 2 of the latter text.
398 G. Chantepie
intended to protect the consumer, either in all consumer contracts or in contracts

subject to specific provisions. Rather than taking a purely sector-based view, the
purpose of the provisions will be adopted as a criterion. As well as background
information on price and price trends, there are mechanisms that make it easier for
the consumer to be better informed on the exact content of the service provided or
competitor offers.
6.1 Background Information on Prices and Price Trends
There are numerous laws and regulations that provide for price information to be
communicated before the conclusion of contract or during the course of
performance.
In B2B contracts, the French Commercial Code promotes price transparency. In
addition to the obligation to issue an invoice,80 businesses (producers, service pro-
viders, wholesalers or importers) are required to disclose their “general terms and
conditions of sale to all buyers of products or or all requesters of services who ask for
them for a professional activity”,81 subject to civil liability or even the imposition of
a civil fine.82 It is imperative for this disclosure to include the terms and conditions of
sale, the schedule of unit prices (unit prices for each product before any reduction),
price reductions (markdowns, discounts or rebates), and the terms of payment.
Disclosure of terms and conditions of sale is not automatic, with the text covering
only the scenario where the purchaser “asks for them”. Nonetheless, the obligation to
disclose the terms and conditions of sale benefits all distributors who are likely to be
interested in the offer if they can demonstrate a business interest. In other words, a
competitor who had no intention of purchasing the products could not invoke this
obligation.83
In B2C contracts, a number of express rules also provide for an obligation of
information on the business. Article L. 111-1 of the French Consumer Code estab-
lishes a pre-contractual obligation of public information disclosure; requirements in
respect of price are specified in Articles L. 112-1 et seq. “All product vendors or
service providers shall, by means of marking, labelling, display or any other
appropriate procedure, inform the consumer of the prices and the specific conditions
of sale and service performance, according to the procedures decreed by the Minister
for the Economy, following consultation with the Conseil national de la
consommation (French national consumer council).”84 In particular, the Decree of
80
81
Code de commerce, Article L. 441-6(1). 1.
82
Code de commerce, Article L. 442-6, I(9).
83
Com.., 1 June 1999, no 97-15.421.
84
Code de la consommation, Article L. 112-1. By way of exception, “when the price cannot
reasonably be calculated in advance because of the nature of the goods or service, the business
3 December 1987 on consumer price information includes considerable detail on

how prices are to be displayed depending on the marketing arrangements for the
product or service.
This general obligation to supply information is stipulated, in broadly similar
terms, in numerous sector-specific contracts: insurance contracts85; energy supply
contracts86; LPG supply contracts87; contracts for the provision of a telecommuni-
cations service88; marriage brokerage89; deposit account agreements from banking
institutions.90 Decrees from the Minister for the Economy can provide further details
in addition to these general rules. Without going into detail, these various texts have
the same objective: to ensure the provision of clear, appropriate information on the
contractual terms and conditions, particularly the pricing conditions of the services
offered, to ensure “an effective market economy, based on the interaction of supply
and demand.”91
There is a significant volume of general legislation on obligations of information
disclosure. Price information and price transparency have been a particular consid-
eration for the French legislator since price setting was liberalized in 1986. Authority
control help to ensure the implementation of these provisions, although it is impos-
sible to make an assessment of its effectiveness or efficiency.
6.2 Information Promoting Price Comprehensibility
On the face, price is a clear piece of data that warrants no specific explanation. This
view needs to be qualified, however. Indeed, in some instances, price can only be
reliably evaluated with comprehensive information on the service provided. This is
the case, for example, for the cost of use of goods, which necessarily affects the
determination of their value. To allow for fully transparent evaluation of the pro-
posed price, the legislator has intervened on occasion to impose an obligation of
information on aspects relating to the principal service. Particular examples of this
are the energy performance certificate required prior to any property sale or rental,92
and consumption labelling on various domestic electrical appliances.
shall supply the price calculation method and, if relevant, all additional transport, delivery or
postage costs and any other costs (Code de la consommation, Article L. 112-3(1). 1.
85
Code des assurances, Article L. 112-2.
86
87
Code de la consommation, Article L. 224-18(3) and (4).
88
89
90
Code monétaire et financier, Article L. 312-1-1.
91
Circ. 19 Jul 1988 implementing the provisions of the Decree of 3 December on consumer price
information, JO 4 August 1988, p. 9951.
92
Code de la construction et de l’habitation, Article L. 134-3(2). 2.
400 G. Chantepie
This difficulty in assessing the balance between the services provided and the
price paid is found in contracts that cover services of a different kind, in particular in
subscriber contracts. In this case, a single contract involving sequential performance
concatenates fixed-price services and services linked to actual consumption. Article
L. 112-4 of the French Consumer Code therefore stipulates that, “in the case of a
contract of indefinite duration or a subscription contract, the total price shall include
all costs incurred for each billing period. When such contracts are invoiced at a fixed
price, the total price shall also include the total monthly costs.” This involves
breaking down the price invoiced to show the variety of services supplied and
how the price is divided between them. Contracts for energy supply93 and electronic
communications services use this mechanism, including in the contract the price of
services supplied by third parties.94 Nonetheless, as recently highlighted by the
CJEU, in the case of the sale of a computer equipped with pre-installed software
where it is not possible for the consumer to obtain the same type of computer without
pre-installed software, “failure to indicate the price of each of those items of software
is not such as to prevent the consumer from taking an informed transactional
decision or likely to cause the average consumer to make a transactional decision
that he/she would not have taken otherwise. Therefore, the price of each of those
items of software does not constitute material information within the meaning of
Article 7(4) Directive 2005/29 on unfair commercial practices.”95,96
Conversely, the price stated does not have to include certain costs inherent in the
supply of the service. The issue has resulted in an important piece of legislation on
the calculation of interest rates, with the annual percentage rate (APR) including
“direct or indirect fees, taxes, commissions or remuneration of any kind, borne by
the borrower and known to the lender on the issue date of the offer of credit or the
amendment to the credit agreement, or the amount of which can be determined on
these same dates, and which are a prerequisite for obtaining credit or for obtaining it
under the conditions laid down.97 In the same spirit, the sale of fuel in connection
with the sale of a tanker must show its sale price or, if applicable, its take-back price
during the performance98; the price of airline flights must include taxes and fuel
surcharges99; and funeral services must “show, item by item, the price and terms and
93
Decree of 18 April 2012 relating to invoices for electricity of natural gas supply, their terms of
payment and the terms and conditions for carrying forward or refunding overpayments, Article 5.
94
Decree of 13 December 2013 relating to invoices for electronic communications services and
information for the consumer on usage under their plan, Article 5.
95
Directive 2005/29/EC of the European Parliament and of the Council of 11 may 2005 concerning
Council, OJ 2005, L 149/22.
96
CJEU Judgment of 7 September 2016, Sony Europe Limited, C-310/15, EU:C:2016:633.
97
98
For the sale of LPG, see Code de la consommation, Article L. 224-18(5).
99
CJEU Judgment of 15 January 2015, Air Berlin, C-573/13, EU:C:2015:11.
conditions of sale for services and supply”, separating the mandatory items from the
other items,100 with the same approach being specified, at the extreme level of detail,
for coffins.101
6.3 Information on Competitor Offers
To ensure free competition, the French legislator has also been concerned to require
information on competitor offers. In some instances, it is a simple matter of the
service provider giving the consumer information on all its available services,
allowing it to adapt its offer to the consumer’s actual needs.102 In particular, it
must be possible to make a comparison with other providers. Several “official”,
easy-to-use price comparison websites have emerged as a result, set up by an
independent organisation or the authorities: fuel prices103; energy supply prices104;
care home services105; key bank rates,106 etc. This is just the tip of the iceberg in
terms of commercial offers and does not replace the myriad of private-sector price
comparison websites. Taking account of the practices of such websites, monitoring
has been introduced, and there is an upcoming amendment to its content. At present,
“any person whose business consists of supplying online information to allow for the
comparison of the prices and features of the goods and services provided by
businesses is required to provide accurate, clear and transparent information, includ-
ing in respect of advertising within the meaning of Article 20 of the same Law”.107
This implies that it should be easy, on all pages of the site, to access information on
“whether or not the businesses listed on the site pay for such listing and, if
applicable, how such payment impacts on the ranking of the offers,” as well as the
“constituent elements of the price and the possibility that further charges may be
added.”108 This arrangement is shortly to be replaced by a text adopted under the
Digital Republic Law of 7 October 2016. The entry into force of this Law is
conditional on the adoption of a number of implementing decrees.109 Case law
sanctions price comparison websites on the grounds of unfair business practices
where “the lack of clear identification of priority listing is likely to substantially
100
Decision of 11 January 1999 on price information for funeral services.
101
Decision of 11 January 1999 on price information for funeral services, Article 3.
102
Decree of 18 April 2012 relating to invoices for electricity or natural gas supply, their terms of
payment and the terms and conditions for carrying forward or refunding overpayments, Article 3.
103
https://www.prix-carburants.gouv.fr/.
104
http://www.energie-info.fr.
105
http://www.pour-les-personnes-agees.gouv.fr/.
106
https://www.tarifs-bancaires.gouv.fr/.
107
108
Code de la consommation, Article D. 111-7.
109
402 G. Chantepie
distort the economic behaviour of the consumer who is initially directed to products
and offers from “paying” e-tailers and, therefore, has no objective criteria for
choosing them.”110 These infringements must also be likely to distort the consumer’s
economic behaviour.111
7 Conclusion
There are two key lessons to be drawn from the detailed analysis of the control of
price-related terms in French law. On one hand, the distinction between standard
form contracts and negotiated contracts gradually surfaced in the discussions,
implicitly at first but now in a way that is more visible. Beyond the use of the
term, French law now appears to have developed around two major types of
contractual relations: equal relationships, freely negotiated between the parties;
and structurally unequal relationships, which warrant the intervention of the legis-
lator.112 Most often, however, the economic balance of the contract remains the
parties’ concern, since the judge is only empowered to intervene indirectly or in
respect of these ancillary terms of the contract.
On the other hand, there has never been any systematic evaluation of the
measures adopted by the legislator over the last 40 or so years, initially in consumer
law, and then in relations between businesses and in the Civil code. This is true in
particular for consumer information obligations, which seem to stack up one on top
of the other in response to new practices from market players. While French
consumer law has always attached great importance to consumer protection, it shares
other purposes from economic rights, including the pursuit of efficiency. In this
regard, French law maintains a dogmatic approach, with contributions on economic
behaviour from other disciplines having little influence.
References
Contract, Section XX
Chantepie G (2006) La lésion. LGDJ, Paris
Chantepie G, Latina M (2018) Le nouveau droit des obligations. Commentaire théorique et pratique
dans l’ordre du Code civil, 2nd edn. Dalloz, Paris
Chénedé F (2016) Le nouveau droit des obligations et des contrats. Consolidations – Innovations –
Perspectives. Dalloz, Paris
110
Civ. 1, 4 Dec 2012, no 11-27.729.
111
Civ. 1, 29 Nov 2011, no 10-27.402.
112
Revet (2016), p. 5.
Deshayes O, Genicon T, Laithier Y-M (2016) Réforme du droit des contrats, du régime général et
de la preuve des obligations. Commentaire article par article. LexisNexis, Paris
Kessler F (1943) Contracts of adhesion – some thoughts about freedom of contract. Columbia Law
Rev 43:629
Lagarde X (2006) Qu’est-ce qu’une clause abusive? Étude pratique. Semaine juridique édition
générale 2006(I):110
Oppetit B (1995) La liberté contractuelle à l’épreuve du droit de la concurrence. Revue des sciences
morales et politiques 1995:241
Revet T (2016) Une philosophie générale? Revue des contrats 2016(HS):5
Ripert G (1949) La règle morale dans les obligations civiles, 4th edn. LGDJ, Paris
Rochfeld J (2004) Les clairs-obscurs de l’exigence de transparence appliquée aux clauses abusives.
In: Études de droit de la consommation, Liber Amicorum Jean Calais-Auloy. Dalloz, Paris, p
981
Rouhette G (1965) Contribution à l’étude critique de la notion de contrat. thesis Paris, 1965
Rouhette G (1987) La force obligatoire du contrat, Rapport français. In: Tallon D, Harris D (eds) Le
contrat aujourd’hui: comparaisons franco-anglaises. LGDJ, Paris, p 27
Sauphanor-Brouillaud N (ed) (2013) Les contrats de consommation. Règles communes. LGDJ,
Paris
Form Contracts in Germany
Matthias Fervers and Beate Gsell
Abstract The question whether or not a price-related term can be subject to a

fairness test is highly debated in Germany. The judiciary differentiates between
principal and ancillary price terms; only ancillary price terms shall be subject to a
fairness test. However, the results of this approach are at least partly unconvincing. A
preferable approach is presented by parts of the academic literature: the decisive
measure is whether a free-market competition can be established with regard to the
respective clause. Only if this is the case a fairness test is not justified since there is
no reason for a judicial control of a decision based on freedom of contract.

of Contract
Even though the German Bürgerliches Gesetzbuch (Civil Code) does not state it
explicitly freedom of contract without any doubt forms one of the essential principles
of German Private Law. Moreover, it is widely acknowledged that freedom of
contract is even guaranteed by the constitution as part of the fundamental liberty
rights and notably falls within the ambit of the general freedom to act (allgemeine
Handlungsfreiheit), as laid down in Art 2 (1) Grundgesetz (Basic Law).1 From a
more general perspective freedom of contract also appears to be deeply entangled
with Germany’s competitive social market economy system.2
1
See especially BVerfG, 19.10.1993 – 1 BvR 567/89, 1 BvR 1044/89 ¼ BVerfGE 89, 214, para
51 ff.; BVerfG, 5.8.1994 – 1 BvR 1402/89 ¼ NJW 1994, 2749, para 20 ff.; for further references see
Busche (2015), preliminary notes to § 145 BGB, para 3.
2
On the administrative level effective competition is mainly ensured by bans on cartels, a merger
control as well as the control of abusive practices of dominant or powerful companies. On the
M. Fervers (*) · B. Gsell (*)

Ludwig-Maximilians-University, Faculty of Law, Chair of Civil Law, Civil Procedure,
European Private Law and Procedure, Munich, Germany
e-mail: matthias.fervers@jura.uni-muenchen.de; beate.gsell@jura.uni-muenchen.de

https://doi.org/10.1007/978-3-030-23057-9_15
406 M. Fervers and B. Gsell
Freedom of contract is supposed to encompass the freedom to conclude or not to

conclude a contract (positive und negative Abschlussfreiheit) as well as the freedom
to determine the content of the contract (Inhaltsfreiheit/Gestaltungsfreiheit) and
finally the freedom to change the content of the contract or to terminate it
(Abänderungs- oder Auflösungsfreiheit).3
However, it is obvious that the concrete circumstances do not always allow for a
free and self-determined decision as to the conclusion (or rejection) and the content
of a contract. Above all an autonomous decision (privatautonome Entscheidung)
might seriously be hampered by an imbalance in economic and negotiation power
between the (potential) contractual parties. Therefore, it is widely acknowledged that
freedom of contract must not be understood in a purely formal sense, but requires—
at least to a certain extent—a judicial control of the content of contracts which goes
beyond the formal consensus of the parties, in order to avoid extreme imbalance and
to ensure substantial self-determination (materielle Privatautonomie).4 Hence, even
though there might well be a formal consensus, a contract still might be considered
void. The German Bürgerliches Gesetzbuch (Civil Code) mainly offers the follow-
ing provisions as a legal basis for such a control: § 138 BGB generally bans
unconscionable (sittenwidrige) contracts and above all proscribes usury. Further-
more, contracts which are contrary to statutory prohibitions (gesetzliche Verbote) are
void under § 134 BGB. And last but not least a judicial control of the content of
contracts might be based on the seminal principle of good faith, as laid down in §
242 BGB.
However, and not surprisingly, there is much controversy as to the proper ambit of
judicial control of contracts. For the present report it must suffice to illustrate this debate
by recalling the German Federal Constitutional Court’s (Bundesverfassungsgericht)
seminal—as well as highly controversial—decisions on bank guarantees given by
spouses and close relatives.5 In these decisions the Federal Constitutional Court
clarified the civil courts’ constitutional6 duty to control the content of contracts, that
are the outcome of structurally imbalanced negotiation power and put an unusual heavy
burden on one party. The Federal Constitutional Court thereby corrected the previous
jurisprudence of the Federal Court of Justice (Bundesgerichtshof)7 who had to a very
federal level this control is exercised by the Bundeskartellamt, an independent competition author-
ity for further information see http://www.bundeskartellamt.de/EN/AboutUs/aboutus_node.html;
jsessionid¼D18251E19F454885968F4FEEDBA121D6.2_cid387 (available on 4.2.2018).
3
See Busche (2015), preliminary notes to § 145 BGB, para 2 with further references.
4
As to the general tendency of a materialisation (Materialisierung) of German contract law see
especially Canaris (2000), pp. 295 ff.
5
See above Fn. 1; for further references with regard to the controversial perception of these
decisions see Busche (2015), preliminary notes to § 145 BGB, para 3 note 13.
6
The Federal Constitutional Court mainly relied on the general freedom to act (allgemeine
Handlungsfreiheit), as stipulated in Art 2 (1) Grundgesetz (Basic Law).
7
See on the one hand BGH, 28.2.1989 – IX ZR 130/88 ¼ BGHZ 107, 92 and BGH, 16.3.1989 – IX
ZR 171/88 ¼ BGH NJW 1989, 1605 and on the other hand and subsequent to the Federal
Constitutional Court’s decisions BGH, 24.2.1994 – IX ZR 227/93 ¼ NJW 1994, 1341.
Control of Price Related Terms in Standard Form Contracts in Germany 407
large extent strictly stuck to the parties’ formal consensus in these cases and thus
considered the contracts valid irrespective of the circumstances of their conclusion and
of their conclusion and of imbalanced content.
German Law subjects Standard Contract Terms to a judicial control that is mostly
considered far-reaching and particularly so with regard to the extent of the control of
SCT in B2B contracts.8 Historically, judicial control of SCT in Germany was
developed by the courts, while there was no particular legal provisions dealing
with SCT. Therefore, the Imperial Court of Justice (Reichsgericht) as well as its
successor the Federal Court of Justice (Bundesgerichtshof) had to rely on the
Bürgerliches Gesetzbuch’s (Civil Codes’s) general provisions limiting freedom of
contract, such as § 138 BGB,9 which, as mentioned above, nullifies immoral
contracts and also § 242 BGB,10 which imposes on the contractual parties a duty
to act in good faith and in accordance with common usage.
The judiciary, right from the outset mainly dealt with B2B contracts. As a matter
of fact, early on, the Federal Court of Justice explicitly rejected the idea of the
judicial control, based on the presupposition, that it is part of the parties economic or
intellectual superiority in drafting and thus introducing the SCT into the contractual
negotiations.11 Neither did the Federal Court of Justice consider the other party’s
special need for protection against particularly disadvantaging terms a necessary
condition for the contract terms’ judicial control.12 The Federal Court of Justice,
though, held this lack of differentiation between businesses and consumers, or—
more generally speaking—between strong and weak contractual partners justified by
the main rationale for the judicial control of SCT That is, according to the Federal
Court of Justice’s view, the unilateral exercise of the freedom to determine the
content of the contract (einseitige Gestaltungsfreiheit): This means that a contractual
party who unilaterally drafts SCT and gets the otherwise applicable legal provisions
8
See e.g. Leuschner, AGB-Recht für Verträge zwischen Unternehmen – Unter besonderer
Berücksichtigung von Haftungsbeschränkungen, Abschlussbericht vom 30. September 2014, avail-
able on 1.2.2018 at http://www.bmjv.de/SharedDocs/Downloads/DE/Fachinformationen/
Abschlussbericht-AGB-Forschungsprojekt.pdf?__blob¼publicationFile. In this survey, commis-
sioned by the German ministry of Justice (by then: Bundesministerium für Justiz, today:
Bundesministerium für Justiz und Verbraucherschutz), Leuschner, who analysed French, English,
US-American, Austrian, Swiss and Polish Law comes to the conclusion (see p. 10) that under
German Law businesses cannot effectively limit their liability by way of SCT.
9
See e.g. RGZ 20, p. 115, 116; RGZ 62, 264, 266.
10
See e.g. BGH, 6.3.1956 – I ZR 154/54 ¼ BGHZ 20, 164, 167; BGH, 28.2.1973 – IV ZR 34/71 ¼
BGHZ 60, 243.
11
See BGH, 7.7.1976 – IV ZR 229/74, NJW 1976, 2345 para 18 with further references.
12
replaced with these unilaterally drafted terms, thus depriving the other party of her
freedom to effectively influence the contract’s content.13 Since this unilateral deter-
mination of the contract’s content may take place with regard to any person, under
this approach no personal distinction should be implemented.
However, the judiciary’s comprehensive and uniform approach did not stay
undisputed. During the 1970s, of the past century an intensive academic debate
took place on whether a future legislative Act on the control of Standard terms
should be confined to B2C contracts or not.14 When the respective Act, i.e. The
Standard Terms and Conditions Act (Gesetz zur Regelung des Rechts der
Allgemeinen Geschäftsbedingungen—AGBG15) finally was enacted in 1976, the
legislature followed a policy of compromise: On the one hand he stated two
catalogues of prohibited terms in §§ 10 and 11 AGBG16 with the scope of applica-
tion mainly limited to B2C- (and C2C-) contracts. On the other hand, a general
measure for the judicial control of standard terms, was stipulated in § 9 AGBG which
even applied to B2B-contracts. According to § 9 AGBG standard contract terms are
void, if they disregard the requirement of good faith and thus put the other party at a
disadvantage. In § 9 (2) AGBG this general measure of control was specified more
precisely. Accordingly, a term was supposed to be disregarded for putting the other
party at disadvantage, if it either contradicted essential principles stated in the default
legal rule from which the term deviated (No 1) or if it restricted a party’s essential
contractual rights or obligations to an extent putting in jeopardy the contract’s main
objective (No 2). Even though the catalogues of prohibited terms in §§ 10 and
11 AGBG were not directly applicable to B2B contracts § 24 sentence 2 AGBG
expressis verbis clarified that the possible outcome of a judicial control of a
B2B-term under § 9 AGBG might be the same as if one applied §§ 10 or
11 AGBG. In other words: Judicial control under the general provision of §
9 AGBG was not necessarily supposed to be less strict than one under §§ 10 and
11 AGBG. Thus, in conclusion one can say, that the legislative structure of the
AGBG allowed for a general differentiation between B2B and B2C contracts,
without necessarily creating such a differentiation in every single case.
The Federal Court of Justice, however, notwithstanding the enactment of the
AGBG, kept its scepticism towards a split measure of judicial control differentiating
between consumers on the one hand and businesses on the other hand. The court
rather stuck to its previous uniform approach and it did so by according a so called
indicative effect (Indizwirkung) to the catalogue-terms in §§ 10 and 11 AGBG: Even
though §§ 10 and 11 AGBG were not applicable to B2B contracts a term banned by
13
14
See e.g. Ständige Deputation des deutschen Juristentages (ed.), Verhandlungen des 50. Deutschen
Juristentages Hamburg 1974, vol. II (session reports) part H, 1974.
15
Gesetz zur Regelung des Rechts der Allgemeinen Geschäftsbedingungen vom 9.12.1976, BGBl.
1976 I, p. 3317.
16
Whereas § 11 AGBG (today: § 309 BGB) contains a “black” list of terms prohibited without
discretion of the judge, whereas § 10 stipulates a “grey” list, requiring the court to determine, with
regard to the term in question whether it is inappropriate and therefore void.
these provisions with regard to consumer contracts was regularly presumed inap-
propriate under § 9 AGBGB.17 Thus, §§ 10 and 11 AGBG were in a way indirectly
applied to business-contracts, by using the detour of § 9 AGBG. However, the
jurisprudence’s sticking to a uniform approach does not so much come as a surprise
if one takes into consideration the fact that most of the forbidden terms in §§ 10, 11
AGB were modelled on previous court decisions18 and these court decisions—as
mentioned above—mainly dealt with B2B contracts.
When Germany passed the law reform on the law of obligations in 2002, the legal
provisions dealing with the control of standard terms were integrated into the BGB
(Civil Code).19 Their structure remained the same, though. Thus, § 307 BGB
corresponds to the former § 9 ABGB whereas §§ 308 and 309 BGB subsequently
to the former §§ 10 and 11 ABGB. The law reform did not, however, require the
Federal Court of Justice to shift away from its previous stance on the control of
standard contract terms including B2B contracts. As a consequence, under the
current law the Federal Court of Justice still follows this approach thus treating §§
308, 309 BGB as an indicative with regards to the catalogue prohibitions in §§
308 and 309 BGB (previously §§ 10, 11 AGBG).20
Since the 2000s, a debate has arisen on whether the legislature should revise the
rules on the judicial control of SCT by restricting the control with regards to B2B
contracts or even go as far to exempt B2B contracts from a judicial control.21 As of
yet, the critique has not provoked any concrete draft bill.22
17
See above all BGH, 8.3.1984 – VII ZR 349/82 ¼ BGHZ 90, 273, 278; see also BGH, 20.4.1993 –
X ZR 67/92 ¼ BGHZ 122, 241.
18
For references see the draft bill of the later AGBG, BT-Drs. 7/3919, 6.8.1975, p. 27 ff.
19
See Gesetz zur Modernisierung des Schuldrechts vom 26.11.2001, BGBl. 2001 I, p. 3138.
20
See e.g. BGH, 10.10.2013 – VII ZR 19/12 ¼ NJW 2014, 206.
21
For references see Leuschner, AGB-Recht für Verträge zwischen Unternehmen – Unter
besonderer Berücksichtigung von Haftungsbeschränkungen, Abschlussbericht vom 30. September
2014, (see above Fn. 1), p. 11 n. 1; see also Leuschner (2015a, b), pp. 1045 and 1326; Maier-Reimer
and Niemeyer (2015), p. 1713; Wittuhn (2014), p. 131; Kästle (2014) p. 288; Kähler (2015), p. 450.
22
But see the (not officially submitted) draft bill for a revision of the rules on the judicial control of
standard terms (Gesetzgebungsvorschlag zur Änderung des AGB-Rechts im unternehmerischen
Geschäftsverkehr) proposed by the (private) Frankfurt initiative for the revision of the rules on the
judicial control of standard contract terms (Frankfurter Initiative zur Fortentwicklung des
AGB-Rechts), available on 1.2.2018 at http://www.zvei.org/Downloads/AGB-Initiative-
Positionspapier-Stand-04-2015.pdf.
3.1 Legal Framework
The relevant provision for the control of price-related terms is § 307 (3) of the
German Civil Code (BGB), according to which, standard terms are only controlled
through a content review process by which the fairness of the term is assessed
(Inhaltskontrolle), if the terms derogate from legal provisions, or supplement those
legal provisions. According to § 307 (3) St. 2 BGB, however, a term that is not
subject to the test of fairness of contents may still be ineffective, due to a breach of
the transparency requirement (Verstoß gegen das Transparenzgebot) as laid down in
§ 307 (1) St. 2 BGB. The test of transparency reviews the provision, to assess if it is
ambiguous or incomprehensible. Thus, the wording of § 307 (3) BGB is general and
therefore, does not specifically address the control of price-related terms.23 Even
though it could be assumed that price-related terms do not derogate from legal
provisions, since there is no legal standard of review for price-related stipulations
it must be conceded, that price-related stipulations may at least supplement legal
provisions, which would lead to an applicability of the test of fairness of contents
according to § 307 (3) St. 1 BGB. However, it is recognized by the judiciary and in
literature that assessment of the unfair nature of the terms under § 307 (3) BGB shall
not relate to the substance of the contract, neither to the adequacy of the price or
remuneration, on the one hand, nor as to the services or goods supplied in exchange,
on the other.24 This is also apparent from the legislators materials, especially the
explanatory memorandum, regarding § 307 BGB25 and, in particular, the materials
regarding the antecedent provision § 8 AGBG.26,27 With this understanding the
content of § 307 (3) BGB is—at least in principle—exactly in line with Art.
4 (2) Directive 93/13/EEC on unfair contract terms.28,29 There is broad consensus
about this fact in general, however, details are subject to heavy debates. The great
challenge is to determine, what the main subject matter of the contract actually
consists of. Obviously, it would be going too far, to assume that any obligation
against consideration (jede Leistung, der eine Gegenleistung gegenübersteht) is the
23
Wurmnest (2016), § 307 para 1; Coester (2013), § 307 para 283.
24
Eckelt (2018), § 307 para 165; Schmidt (2018), § 307 para 68.
25
BT-Drs. 14/6040, p. 154.
26
The Standard Terms and Conditions Act (Gesetz zur Regelung des Rechts der Allgemeinen
Geschäftsbedingungen v. 9.12.1976, BGBl. 1976 I, p. 3317) was repealed on 1 January 2002
whereby its provisions were essentially implemented in the BGB as part of the Act to modernise the
law of obligations (Gesetz zur Modernisierung des Schuldrechts v. 26.11.2001, BGBl. 2001 I,
p. 3138). Thus, the content of § 8 AGBG and § 307 (3) St. 1 BGB is identical.
27
BT-Drs. 7/3919, p. 22.
28
95/29.
29
See Coester (2013), § 307 para 283.
main subject matter of the contract. And all the more, it would be inappropriate to
assume that the main subject matter consists of any obligation that is part of the
contractual balance.30 Hereinafter, the study will focus on the approach of the
judiciary including some case-examples. Afterwards, the approaches in the academic
literature will be presented and the judiciary’s point of view will be subjected to
critical evaluation.
3.2 Judiciary
The judiciary mainly distinguishes between principal price terms (Preishauptabrede)

and ancillary price terms (Preisnebenabrede). Principal price terms are those directly
determining the price to be paid in exchange for the performance of the obligation;
they are exempt from any review of their content31 since they are not subject to legal
provisions but must be agreed on by the parties themselves.32 Conversely, ancillary
price terms that only narrow or modify the principal price agreement are subjected to
a test of fairness33 since those agreements may have indirect effects on the price but
can be replaced by legal default rules (dispositives Recht) in case a term is found to
be ineffective.34 Thus, according to the judiciary, the only agreements that are
exempt from a fairness test are those which are not replaceable by default rules
30
See BGH, 9.5.2017 – XI ZR 308/15 ¼ NJW 2017, 2538 para 23; BGH, 22.12.2012 – VII ZR
222/12 ¼ NJW 2013, 856 para 16.
31
BGH, 5.10.2017 – III ZR 56/17 ¼ WM 2017, 2212 para 15; BGH, 22.9.2016 – III ZR 264/15 ¼
NJW-RR 2016, 1387 para 12; BGH, 9.10.20214 – III ZR 32/14 ¼ NJW 2015, 328 para 37; BGH,
9.4.2014 – VIII ZR 404/12 ¼ BGHZ 200, 362 ¼ NJW 2014, 2269 para 43; BGH, 13.1.2011 – III
ZR 78/10 ¼ NJW 2011, 1726 para 15; BGH, 29.4.2010 – Xa ZR 5/09 ¼ NJW 2010, 1958 para 20;
BGH, 12.6.2001 – XI ZR 274/00 ¼ BGHZ 148, 74 ¼ NJW 2001, 2635 para 14; BGH, 24.3.1999 –
IV ZR 90/98 ¼ BGHZ 141, 137 ¼ NJW 1999, 2279 para 27; BGH, 13.7.1994 – IV ZR 107/93 ¼
BGHZ 127, 35 ¼ NJW 1994, 2693 para 15; BGH, 30.11.1993 – XI ZR 80/93 ¼ BGHZ 124, 254 ¼
NJW 1994, 318 Rn 12; BGH, 23.6.1993 – IV ZR 135/92 ¼ BGHZ 123, 83 ¼ NJW 1993, 2369 para
10.
32
NJW 2011, 1726 para 15.
33
NJW 2015, 328 para 37; BGH, 9.4.2014 – VIII ZR 404/12 ¼ BGHZ 200, 362 ¼ NJW 2014, 2269
para 44; BGH, 6.7.2011 – VIII ZR 293/10 ¼ NJW 2011, 3510 para 10; BGH, 13.1.2011 – III ZR
78/10 ¼ NJW 2011, 1726 para 16; BGH, 29.4.2010 – Xa ZR 5/09 ¼ NJW 2010, 1958 para 20;
BGH, 12.6.2001 – XI ZR 274/00 ¼ BGHZ 148, 74 ¼ NJW 2001, 2635 para 14; BGH, 24.3.1999 –
IV ZR 90/98 ¼ BGHZ 141, 137 ¼ NJW 1999, 2279 para 27; BGH, 13.7.1994 – IV ZR 107/93 ¼
BGHZ 127, 35 ¼ NJW 1994, 2693 para 15; BGH, 30.11.1993 – XI ZR 80/93 ¼ BGHZ 124, 254 ¼
NJW 1994, 318 Rn 12; BGH, 23.6.1993 – IV ZR 135/92 ¼ BGHZ 123, 83 ¼ NJW 1993, 2369 para
10.
34
BGH, 30.11.1993 – XI ZR 80/93 ¼ BGHZ 124, 254 ¼ NJW 1994, 318 Rn 12; BGH, 24.11.1988
– III ZR 188/87 ¼ BGHZ, 106, 42 ¼ NJW 1989, 222; para 17; BGH, 6.2.1985 – VIII ZR 61/84 ¼
BGHZ 93, 358 ¼ NJW 1985, 3013 para 12.
and whose existence is therefore crucial for the existence of a valid contract.35
Whether or not a standard term qualifies as a principal or an ancillary price term
shall be determined by interpretation of the term. As to this interpretation § 305c
(2) BGB applies, according to which, any doubts as to the meaning of the term are to
be resolved by interpreting it against the user.36 Principal price terms are put to a
fairness test (Inhaltskontrolle) only in the exceptional case whereby the agreement
deviates from price-regulating statutory provisions such as the HOAI37 (fee structure
imposed on architects and engineers acting as public contractors), the GOÄ38
(statutory scale of fees for physicians), the GOZ39 (statutory scale of fees for
dentists) and § 675d (4) St. 2 BGB.40
3.2.1 Terms That Are Subjected to a Fairness Test
Since the judiciary’s understanding of a principal price term is rather narrow, in most
cases the courts hold that the disputed term may be subject to the test of fairness.
A warranty in a contract between a car manufacturer and the customer may
include a standard term according to which, the customer may only assert his rights
from the guarantee, if he has carried out maintenance in predefined intervals by an
authorized contract workshop, is subject to a fairness test41: The Federal Court of
Justice (Bundesgerichtshof) points out that in case of a warranty in return for
payment,42 the payment constitutes the consideration, whereas the aforementioned
35
BGH, 5.10.2017 – III ZR 56/17 ¼ WM 2017, 2212 para 15; BGH, 14.5.2014 – VIII ZR 114/13 ¼
BGHZ 201, 230 ¼ NJW 2014, 2708 para 15; BGH, 9.4.2014 – VIII ZR 404/12 ¼ BGHZ 200, 362
¼ NJW 2014, 2269 para 44; BGH, 25.9.2013 – VIII ZR 206/12 ¼ NJW 2014, 209 para 17; BGH,
6.7.2011 – VIII ZR 293/10 ¼ NJW 2011, 3510 para 10; BGH, 29.4.2010 – Xa ZR 5/09 ¼ NJW
2010, 1958 para 20; BGH, 12.6.2001 – XI ZR 274/00 ¼ BGHZ 148, 74 ¼ NJW 2001, 2635 para
14; BGH, 24.3.1999 – IV ZR 90/98 ¼ BGHZ 141, 137 ¼ NJW 1999, 2279 para 27; BGH,
13.7.1994 – IV ZR 107/93 ¼ BGHZ 127, 35 ¼ NJW 1994, 2693 para 15; BGH, 23.6.1993 – IV
ZR 135/92 ¼ BGHZ 123, 83 ¼ NJW 1993, 2369 para 10.
36
BGH, 4.7.2017 – XI ZR 562/15 ¼ NJW 2017, 2986 para 25; BGH, 13.5.2014 – XI ZR 405/12 ¼
BGHZ 201, 168 ¼ NJW 2014, 2420 para 25.
37
BGH, 9.7.1981 – VII ZR 139/80 ¼ BGHZ 81, 229 ¼ NJW 1981, 2351 para 10 ff.
38
BGH, 30.10.1991 – VIII ZR 51/91 ¼ BGHZ 115, 391 ¼ NJW 1992, 746 para 14.
39
BGH, 19.2.1998 – III ZR 106/97 ¼ BGHZ 138, 100 ¼ NJW 1998, 1786 para 26.
40
BGH, 17.12.2013 – XI ZR 66/13 ¼ BGHZ 199, 281 ¼ NJW 2014, 922 para 12.
41
BGH, 6.7.2011 – VIII ZR 293/10 ¼ NJW 2011, 3510; BGH, 25.9.2013 – VIII ZR 2016/12 ¼
NJW 2014, 209; divergent the former decision OLG Nürnberg, 27.2.1997 – 8 U 3754/96 ¼ NJW
1997, 2186 para 15.
42
However, the Federal Court of Justice has left open the question whether a comparable standard
term is subject to a fairness test if the warranty was not provided in return for payment but as an
additional (“voluntary”) warranty, BGH, 12.12.2007 – VIII ZR 187/06 ¼ NJW 2008, 843 para 12.
standard term only modifies the warranty conditions; the warranty would be valid
without the restriction.43
The unfairness is also assessed in case of a standard term in a mobile phone
contract, according to which the customer is to pay an additional fee for getting a
paper invoice. Since such an agreement does not regulate the price for the mobile
phone service itself, it is not an essential part of a mobile phone contract and has to
be considered an ancillary price term.44
Likewise, a standard term in a mobile phone contract obliging the customer to pay
additional fees for the cancelling of the customer account, the changing of the
payment method, the deactivation of the mailbox or for return debits shall be subject
to a fairness test. The Higher Regional Court (Oberlandesgericht) of Duesseldorf
argued, that these agreements modified the general principle that the supplier can
only claim payment for a service which is provided on a contractual basis to the
customer instead of passing his own costs to the customer.45
A standard term stating that a tenant must bear the costs for minor repairs up to a
certain amount, is considered an ancillary price term and is therefore subject to a
fairness test. This applies even though according to the judiciary at least the tenant’s
obligation to bear the costs for cosmetic repairs46 is considered part of the consid-
eration47 since such an agreement modifies the provisions of §§ 535, 538 BGB.48
A fairness test also applies to a standard term in a waste disposal contract
(Abfallentsorgungsvertrag) stating that the contractual partner is to pay the entire
remuneration for the disposal, irrespective of whether he delivered the agreed
amount of waste or not (“bring-or-pay-clause”)49: The main reciprocal obligations
are the disposal of the waste on the one hand and the payment of the remuneration on
the other hand. The “bring-or-pay-clause” does not constitute a main obligation in
itself but only modifies the §§ 280, 281 BGB in favour of the waste disposer.50
There are several decisions of the Federal Court of Justice regarding standard
terms in loan contracts. A standard term in a building loan contract (Bausparvertrag),
according to which the customer is obliged to pay a “loan fee” at the time of loan
disbursement, is not exempt from a fairness test within the meaning of § 307 (3) St.
43
BGH, 6.7.2011 – VIII ZR 293/10 ¼ NJW 2011, 3510 para 19 f.; BGH, 25.9.2013 – VIII ZR 2016/
12 ¼ NJW 2014, 209 para 19.
44
BGH, 9.10.2014 – III ZR 32/14 ¼ NJW 2015, 328 para 38.
45
OLG Düsseldorf, 18.7.2002 – I-6 U 218/01, 6 U 218/01 ¼ NJW-RR 2002, 1716 para 5. For the
development of this principle by the Federal Court of Justice see Fn. 47 ff.
46
The cosmetic repairs are the necessary periodic refurbishments or repainting of the walls which—
according to the statutory provisions—the landlord is obliged to undertake (§ 535 (1) St. 2 BGB).
47
See BGH, 27.5.2009 – VIII ZR 302/07 ¼ BGHZ 181, 188 ¼ NJW 2009, 2590 para 20 with
further references.
48
BGH, 7.6.1989 – VIII ZR 91/88 ¼ BGHZ 108, 1 ¼ NJW 1989, 2247 para 16 f. (with reference to
the former §§ 536, 548 BGB which are the preceding provisions of §§ 535, 538 BGB).
49
BGH, 22.12.2012 – VII ZR 222/12 ¼ NJW 2013, 856.
50
BGH, 22.12.2012 – VII ZR 222/12 ¼ NJW 2013, 856 para 17.
1 BGB.51 The Federal Court of Justice argues that the payment for making the credit
available cannot be divided in a term dependent (laufzeitabhängig) and term inde-
pendent (laufzeitunabhängig) interest. According to § 488 (1) BGB52 it is the main
obligation of the lender to make the credit available and leave it to the borrower.
Thus, the term dependent interest must be considered as payment for both. There-
fore, an additional fee for making the credit available cannot be classified as a main
obligation.53
Likewise, an account management fee (Kontoführungsgebühr) standard term in a
building loan contract is considered as an ancillary price term and can therefore be
subject to a fairness test.54
The same applies to a standard term that introduces a processing (administrative)
fee (Bearbeitungsgebühr) for the conclusion of the contract,55 which even applies to
B2B contracts.56
A standard term in a giro contract (Girovertrag) according to which the customer
is obliged to pay a fee for deposits and withdrawals at cash machines are classified as
ancillary price terms as well, since according to the legal default rules the lender is
prohibited from passing costs to the customer, that are essentially his own adminis-
tration costs. According to the giro contract the lender is obliged to make the loan
available to the customer and to accept instalments from the borrower to avoid he is
not defaulting on the loan (Annahmeverzug), thus that the lender must not charge an
additional fee for these services.57
A fairness test has also been applied to a standard term stating that the customer
must pay a fine, should the bank fail to execution a transfer, a direct debit or a
standing order due to insufficient funds in the customer’s account. Here the court has
to examine by using the fairness test if those fees are charged for actual
consideration.58
3.2.2 Terms That Are Exempt from the Fairness Test
There are, however, numerous examples in which the judiciary has assumed that
standard terms are exempt from a fairness test.
51
BGH, 8.11.2016 – XI ZR 552/15 ¼ BGHZ 212, 363 ¼ NJW 2017, 1461.
52
“The loan contract obliges the lender to make available to the borrower a sum of money in the
agreed amount. The borrower is obliged to pay interest owed and, at the due date, to repay the loan
made available.”
53
BGH, 8.11.2016 – XI ZR 552/15 ¼ BGHZ 212, 363 ¼ NJW 2017, 1461 para 22 with further
references to diverging decisions of the lower courts.
54
BGH, 9.5.2017 – XI ZR 308/15 ¼ NJW 2017, 2538 para 21 ff., 25 ff.
55
BGH, 13.5.2014 – XI ZR 405/12 ¼ BGHZ 201, 168 ¼ NJW 2014, 2420 para 24 ff., 26 ff.
56
BGH, 4.7.2017 – XI ZR 562/15 ¼ NJW 2017, 2986 para 23 ff., 28 ff.
57
BGH, 30.11.1993 – XI ZR 80/93 ¼ BGHZ 124, 254 ¼ NJW 1994, 318 para 14 ff.
58
BGH, 21.10.1997 – XI ZR 5/97 ¼ BGHZ 137, 43 ¼ NJW 1998, 309 para 9 ff.
A standard term in a mobile phone contract including mobile internet access

stating that after the complete consumption of the data volume agreed, the supplier is
entitled to make available additional data volume to the customer against an addi-
tional fee, is not subject to a fairness test. According to the Federal Court of Justice,
this is a principal price term and therefore cannot be reviewed.59 The Court held that
the obligation to make data volume available constituted the supplier’s main obli-
gation and that the regulation of the respective conditions was essential for the
determination of the obligation; the agreed conditions could not be replaced by
legal default rules.60 The decision is noteworthy and even more so given the fact that
the District Court (Landgericht) of Duesseldorf subjected a comparable clause to a
fairness test: The respective clause entitled the supplier, in the case of exhaustion of
the agreed upon data volume to make another amount of data available to the
customer for an additional fee, unless the customer objected via text message.
Such an objection would entail a reduction of the internet speed.61 According to
the Federal Court of Justice these two cases were to be considered differently: In the
latter case the supplier’s main obligation only consisted of providing the customer
with the agreed data volume and subsequently to provide the customer with slowed
access. By way of contrast, the supplier providing further access in return for an
additional fee did not form part of the original main obligation (or its price). It is a
new ancillary agreement subsequent to the original contract being agreed. In com-
parison, in the case decided by the Federal Court of Justice, the supplier’s main
obligation a priori consisted of first providing the agreed data volume and subse-
quently providing additional volume in return for a fee.62
A clause stipulated by an insurance company (Versicherer) in the general terms of
insurance (Allgemeine Versicherungsbedingungen) granting a percentage reduction
of the annual premium to the customer which would be cancelled in the event that
the insurance company had to settle a dispute or in the event that the insured party
(Versicherungsnehmer) did not renew the insurance contract is, according to the
Federal Court of Justice, a principal price term, and thus exempt from a fairness
test63: The insured party’s obligation to pay the annual premium constituted the
party’s main obligation and was determined by the respective clause.64
Likewise, the judiciary considers a clause in a tenancy agreement, granting a
reduction of the rent which can be cancelled if the landlord has to pursue the rental
claims by judicial process, as a principal price term and therefore as exempt from a
fairness test.65
59
BGH, 5.10.2017 – III ZR 56/17 ¼ BeckRS 2017, 128867.
60
BGH, 5.10.2017 – III ZR 56/17 ¼ BeckRS 2017, 128867 para 23 f.
61
LG Düsseldorf, 14.12.2016 - 12 O 311/15.
62
BGH, 5.10.2017 – III ZR 56/17 ¼ BeckRS 2017, 128867 para 25.
63
BGH, 13.7.2005 – IV ZR 83/04 ¼ NJW-RR 2005, 1479.
64
BGH, 13.7.2005 – IV ZR 83/04 ¼ NJW-RR 2005, 1479 para 14 ff., 17.
65
LG Köln, 15.11.2001 – 7 O 128/01 ¼ MDR 2002, 630.
If a tenancy agreement contains a standard term according to which the tenant has
to pay a surcharge for the costs of undertaking cosmetic repairs (Zuschlag auf die
Hauptmiete für die Kosten der Vornahme von Schönheitsreparaturen), this clause is
also considered to be exempt from a fairness test.66 According to the Federal Court
of Justice the payment of the surcharge constitutes part of the tenant’s main
obligation. It is considered irrelevant whether the landlord, a priori, claims a higher
rent or whether he divides the tenant’s obligation into two parts. In the latter case, the
surcharge for the costs of undertaking the cosmetic repairs is only based on the
landlord’s own assessment, which is without any legal relevance.67
A standard term in a care-rate agreement (Pflegekostentarif) used by a hospital,
which states that the patient shall be obliged to pay the remuneration for the service
“accommodation in a one-bed-room or two-bed-room” also for the day of admission
and discharge, is also considered a principal price term by the judiciary, because it
directly determined the form and extent of the supplier’s main obligation.68
A standard clause in a contract for work (Werkvertrag) obliging the customer to
pay a call-out charge (Anfahrtskostenpauschale) is considered exempt from a fair-
ness test.69 In this decision the Federal Court of Justice conceded that the agreement
concerning the contractor’s call-out charge might be an ancillary price term.70
However, according to the Federal Court of Justice, in the case of a contract for
work, it is irrelevant whether an agreement constitutes a principal or an ancillary
price term, because the total amount of remuneration consists of several components,
including the remuneration for the main and the ancillary services. All these com-
ponents being part of an overall cost-calculation, a fairness test would not be
appropriate.71 The amount of the remuneration cannot be replaced by legal default
rules due to the lack of legislation.72 This point of view is noteworthy as the Federal
Court of Justice had held in a former decision that a standard term in a contract for
work stating that travel time should be deemed as working time had to be subject to a
fairness test.73 In the newer decision the Court abandoned this position insofar as the
clause concerning call-out charges had been generally considered as an ancillary
agreement to be subject to a fairness test.74
A standard clause, according to which the owner of an annual hunting license
(Jahresjagdscheinerlaubnisinhaber) is to pay an annual fee, consisting of the hunting
license fee (Erlaubnisscheingebühr), as well as a lump sum, for the damages caused
by game (Wildschadenpauschale), is exempt from a fairness test. In this case, the
66
BGH, 30.5.2017 – VIII ZR 31/17 ¼ NJW-RR 2017, 981.
67
BGH, 30.5.2017 – VIII ZR 31/17 ¼ NJW-RR 2017, 981 para 7.
68
BGH, 24.9.1998 – III ZR 219/97 ¼ NJW 1999, 864 para 2.
69
BGH, 19.11.1991 – X ZR 63/90 ¼ BGHZ 116, 117 ¼ NJW 1992, 688.
70
BGH, 19.11.1991 – X ZR 63/90 ¼ BGHZ 116, 117 ¼ NJW 1992, 688 para 17 ff., 19 f.
71
BGH, 19.11.1991 – X ZR 63/90 ¼ BGHZ 116, 117 ¼ NJW 1992, 688 para 17 ff.
72
BGH, 19.11.1991 – X ZR 63/90 ¼ BGHZ 116, 117 ¼ NJW 1992, 688 para 19 f.
73
BGH, 5.6.1984 – X ZR 75/83 ¼ BGHZ 91, 316 ¼ NJW 1984, 2160.
74
BGH, 19.11.1991 – X ZR 63/90 ¼ BGHZ 116, 117 ¼ NJW 1992, 688 para 20.
lump sum for the damages caused by game constituted a part of the total fee and it
was considered not being appropriate to differentiate between paying the full fee or
breaking it down into its separate components.75
A standard term in a credit card contract (Kreditkartenvertrag) stating that the
customer has to pay an additional fee for the use abroad, that is not included in the
general annual fee, is considered a principal price term.76 The Federal Court of
Justice argued that since there was no statutory regulation of a credit card contract,
the card issuer (Kartenherausgeber) was free to stipulate the fees and in particular to
decide whether to charge an all-inclusive-fee or a basic-fee, excluding all the
services offered.77
3.3 Approaches in the Academic Literature
Whereas the approach by the judiciary is partly agreed upon in the academic
literature,78 the reasoning towards the approach is mainly different. It is partly
assumed by academics, that the provision of § 307 (3) BGB is only a declaratory
provision, which has no impact on the fairness test according to §§ 309, 308,
307 (2) BGB. Furthermore, that the provision’s function is limited to clarify that a
fairness test according to § 307 (1) BGB, presupposes the existence of pertinent
default laws.79 Another approach presented in the academic literature, is the differ-
entiation between clauses effecting/influencing the effective overall burden
(effektive Gesamtbelastung) of a contractual partner, and those not having such an
impact.80 This approach is based on the idea, that according to the free-market-based
reasoning of the courts, they are not allowed to subject price and performance terms
to a fairness test.81 This reasoning would, for instance, lead to the conclusion that a
standard term according to which the tenant must bear the costs for cosmetic repairs
would be generally exempt from a fairness test since this provision has an influence
on the effective overall burden of the tenant.82
Most scholars, however, put emphasis on the protective purpose of the fairness
test. Accordingly, only parts of the contract which unmistakably must catch the
75
BGH, 8.10.1998 – III ZR 278/97 ¼ NJW-RR 1999, 125 para 17 ff., 23 with a reference to the
aforementioned decision BGHZ 116, 117 (Fn. 69).
76
BGH, 14.10.1997 – XI ZR 167/96 ¼ BGHZ 137, 27 ¼ NJW 1998, 383.
77
BGH, 14.10.1997 – XI ZR 167/96 ¼ BGHZ 137, 27 ¼ NJW 1998, 383 para 14.
78
BeckOGK/Eckelt, 1.10.2017, § 307 para 165 ff., 174, 178 ff.
79
Billing (2006), pp. 151 ff., 157 ff., 166 f.
80
Dylla-Krebs (1990), pp. 185 ff., 279 ff.
81
Dylla-Krebs (1990), pp. 152 ff.
82
Expressly Dylla-Krebs (1990), pp. 218 ff.
attention of the customer are exempt from a fairness test.83 The decisive question is
whether or not it is possible that a free-market competition can be established with
regard to the respective clause.84 Not carrying out a fairness test is only justified in
cases in which the market is able to regulate itself, particularly by the freedom to
contract (Privatautonomie) of the market participants.85
3.4 Analysis and Critical Evaluation of the Judiciary’s

Approach
3.4.1 The Accurate Concept
In order to determine the cases in which a fairness test of a standard term is

inappropriate it is crucial to recall the main purpose of the review of standard
terms in the first place since this should, vice versa, make it possible to specify the
cases in which such a review is not justified. It seems correct to assume that the main
reason for a review of standard terms, lies in the fact that it is not possible to establish
a free-market-competition with regard to the “small print”.86 A consumer or a market
participant can normally simply avoid entering into a contract including conditions,
he considers to be inappropriate. If the consumer chooses to conclude the contract
under these terms regardless, his decision has to be respected as a decision based on
freedom of contract. However, with regard to standard terms a free-market compe-
tition is not possible, since a market participant would always have to read and
examine all of the small print extensively which would cause a severe burden and
expense in both time and money. Thus, it is not too far from the imagination that a
market participant could present a certain offer on the free market and then substan-
tially altering this offer via standard terms.87 Therefore, it is consistent to suggest
that only those standard terms can be exempt from a fairness test on whose basis a
free-market competition can be established.
In contrast, the concept according to which a standard term is already exempt
from any review if it has an impact on the effective overall burden of a contractual
partner,88 cannot be seen as convincing. In almost every case, a price-related term
will have an impact on the contractual balance and most price-related terms would
therefore be exempt from a fairness test. Consequently, every contractual partner,
83
Wurmnest (2016), § 307 para 12, 15 whereby the author seems to consider this approach to be in
line with the jurisprudence’s.
84
Drexl (1998), p. 359; Fervers (2014), p. 511; Coester (2013), § 307 para 320 ff.; Stoffels (2001),
pp. 847 f.; see also Börner (1997), pp. 597 f.
85
Coester (2013), § 307 para 320; Drexl (1998), p. 359.
86
Fastrich, Richterliche Inhaltskontrolle im Privatrecht, 1992, pp. 80 ff., 86; Drexl (1998),
pp. 329 ff.; Canaris (2000), p. 324.
87
Wurmnest (2016), § 307 para 15.
88
Fn. 80 f.
including consumers, would have to examine the whole small print in order to avoid
far-reaching obligations. Yet the fundamental objective of the fairness test is to avoid
such an obligation in the first place.
3.4.2 Analysis of the Judicial Decisions
A closer look at the judicial decisions reveals that the judiciary’s approach cannot be
seen as convincing. This holds particularly true with regard to cases in which the
courts have considered a standard term to be exempt from a fairness test.
The Federal Supreme Court held, that a standard term in a mobile phone contract
including mobile internet access, with a clause stating that after the complete
consumption of the data volume agreed upon the supplier was entitled to make
another amount of data volume available to the customer against an additional fee,
was exempt from a fairness test.89 However, it should be clear that such a term is
neither subject to the customer’s special attention nor subject to a free-market-
competition. Instead, this is a typical example for a clause a consumer will overlook.
A free-market competition in case of a mobile phone contract including mobile
internet access might be established with regard to the (monthly) fee and with regard
to the amount of the data volume but probably not as to the question, whether the
supplier is entitled to provide additional volume against fee or not. Furthermore, it
does not seem convincing to assume that this clause is exempt from any review
whereas the clause examined by the District Court of Duesseldorf90 is considered to
be subject to a fairness test: In fact, the situation is much more advantageous for the
consumer in the latter case: Here, he was to be informed via SMS on his right to
object and he could actually decide against receiving additional data volume and
paying for it. In contrast, in the former case the Federal Supreme Court decided
upon, the supplier did not offer any possibility to get additional data volume without
an additional fee. Both cases have in common that no free-market competition can be
established with regard to these terms. Furthermore, the standard term used in the
former case is particularly unfair, since the customer basically does not have the
possibility to use the promised data volume at the price agreed upon, as it is
practically impossible for the customer, to exactly exhaust the agreed volume; for
example, if a volume of 500 MB has been agreed upon, the customer is not able to
use exactly 500 MB instead of 499 or 501 MB. He has either the possibility to stop at
an amount that is lower than 500 MB or to pay the additional fee for the additional
volume. Therefore, he either does not use the promised service completely or he pays
a higher price. In conclusion one should bear in mind the following: Due to the fact
that there will hardly be any price competition on additional data volume terms,
hidden in the small print it will probably create strong incentives for suppliers to
89
BGH, 5.10.2017 – III ZR 56/17 ¼ BeckRS 2017, 128867; see Fn. 59 ff.
90
LG Düsseldorf, 14.12.2016 - 12 O 311/15, see Fn. 61.
charge fairly large amounts on such additional volumes if the respective terms will
be exempt from a fairness test.
In many court decisions, there can be found the assumption, that a clause is
exempt from a fairness test, if it directly determines the main obligation of the user of
this standard term, such as in the decisions regarding the general terms of insur-
ance,91 the tenancy agreements92 and the hunting license.93 These cases have in
common, that the standard term directly constituted the customer’s main obligation
or a part thereof. Whereas this assumption might be accurate, it is not appropriate to
consider these clauses exempt from a fairness test in any case.
For example, in the case of the expenses for cosmetic repair,94 it makes a big
difference whether the landlord makes an offer for a contract with a rent of 800 € and
then illustrates via standard terms that this amount consists of the “basic rental fee”
with an amount of 700 € and additional lump sum (100 €) for the expenses for the
cosmetic repairs, or, if the landlord makes an offer for a contract with a rent of 700 €
and then adds an additional rental fee with an amount of 100 € in the small print. In
the former case, the landlord confronts the challenge of competition and indicates the
final price right from the beginning, whereas in the latter case the landlord offers a
rent of 700 € on the market despite the total rent actually amounting to 800 €.
The same applies to a tenancy agreement that grants a reduction of the rent that
shall subsequently be cancelled if the landlord has to pursue the rental claims.95 It
makes a big difference whether the landlord makes an offer for a contract with a rent
of 800 € and then uses a standard term that grants a reduction down to 700 € if the
landlord does not have to pursue the rental claims or if he makes an offer for a
tenancy agreement including a rent of 700 € and then increases the rent in the small
print up to 800 € in case of a dispute. In the former case, the landlord presents the
correct rent on the market and adds an advantageous bonus for the tenant in the
standard terms. In the latter case the landlord conceals the correct amount of rent in
his market-offer.
Exactly the same applies to the standard term in the general terms of insurance,
which grants a percentage reduction of the annual premium to the customer but states
that this discount is cancelled, if the insurance company has to settle a damage or if
the insured party does not renew the insurance contract96: A reduction of the annual
premium in the small print is unproblematic, if it effectively favours the insured
party; in this case such a clause would not be exempt from a fairness test, but would
not be considered an unfair term. However, the insurance company conceals the
actual annual premium, if it uses a standard term that effectively increases the annual
91
Fn. 63 f.
92
Fn. 65 ff.
93
Fn. 75.
94
BGH, 30.5.2017 – VIII ZR 31/17 ¼ NJW-RR 2017, 981, see Fn. 66.
95
LG Düsseldorf, 14.12.2016 - 12 O 311/15, see Fn. 61.
96
BGH, 13.7.2005 – IV ZR 83/04 ¼ NJW-RR 2005, 1479, see Fn. 63 f.
premium in relevant cases.97 In such a case, it would be inappropriate to assume, that

a fairness test is not justified due to the self-regulation of the free market since with
regard to this clause a free-market-competition won’t occur.
The cases regarding the credit card contract,98 the care rate agreement99 and the
call-out charge for travel costs in a contract to produce a work100 deal with different
situations insofar as in these cases the standard term used by the supplier does not
necessarily extent the main obligation of the customer. If, in the case of the care
agreement, the customer is discharged on the admission day and therefore only stays
for one day, he only has to pay the agreed remuneration for this day. If the credit card
holder does not use his credit card abroad he does not need to pay additional fees. If
no travel is necessary the customer is not obliged to pay a call-out charge to the
contractor. However, this does not amount to a crucial difference since all three
terms lead to the result, that under certain circumstances or usual circumstances the
customer will have to pay more. One purpose of holding a credit card typically
consists of using it abroad, in the vast majority of cases a patient will not be
discharged on the admission day and it is highly unlikely that the contractor can
perform his services without any travel. And here again it holds true, that there is no
free-market-competition with regard to these terms. Competition only takes place
with respect to the basic fees but not with respect to additional fees in the small print
and clauses charging additional fees. Thus, it cannot be seen as convincing to
consider these terms exempt from a fairness test.
3.4.3 Criticism on the Jurisprudence’s Conceptual Approach
After it has become clear in the previous section that the judicial’s approach does not
lead to consistent and convincing results, this paper shall now assess the conceptual
basis of this approach. At first glance, the differentiation between principal and
ancillary price terms might seem convincing; Art. 4 Directive 93/13/EEC is—in
principle—interpreted in the same way by the CJEU.101 The problem is, though, that
this differentiation is a fairly technical one102 and lacks substantive differentiation
criteria. This can be shown by way of examining the care agreement case.103 It is
true, that a term obliging the customer to pay the remuneration, which is calculated
97
It is not obvious according to the facts of the case which contractual construction had been used
by the insurance company.
98
BGH, 14.10.1997 – XI ZR 167/96 ¼ BGHZ 137, 27 ¼ NJW 1998, 383, see Fn. 76 f.
99
BGH, 24.9.1998 – III ZR 219/97 ¼ NJW 1999, 864, see Fn. 68.
100
BGH, 19.11.1991 – X ZR 63/90 ¼ BGHZ 116, 117 ¼ NJW 1992, 688, see Fn. 69 ff.
101
EuGH, 30.4.2014, C-26/13, EuZW 2014, 506; EuGH, 23.4.2015, CJEU Judgment of 23 April
2015, Van Hove, C-96/14, EU:C:2015:262, EuZW 2015, 516.
102
See Börner (1997), p. 597 who criticizes the differentiation criteria used by the jurisprudence as
“descriptive”; Stoffels (2001), p. 847 who criticizes the extensive collection of cases and points out
the risk to lose sight of the purpose of the fairness test.
103
BGH, 24.9.1998 – III ZR 219/97 ¼ NJW 1999, 864, see Fn. 68, 93.
on a daily basis entirely for the days of admission and discharge affects the
customer’s obligation. But it could just as well be considered an ancillary term,
which only modifies the main obligation without affecting it directly. The customer’s
main obligation is the payment of the remuneration for the accommodation on the
basis of a standard rate per day. And the respective term only extends the customer’s
obligation to commenced days. The term isn’t an essential part of the contract which
is necessary for its validity. Without this term it would simply be assumed—at least,
by way of supplementary interpretation (ergänzende Vertragsauslegung)—that the
customer was to pay for the relevant part of the day. The difficulty with a technical
differentiation can also be illustrated with the term containing the call-out charge for
the travel costs in a contract for work.104 A term regulating the travel costs is
definitely not crucial for the validity of the contract. Additionally, the payment for
the travel costs has to be considered an ancillary obligation in relation to the
obligation to pay the remuneration. The argument of the Federal Supreme Court
that the total amount of the remuneration consisted of several components all being
part of an overall costing cannot be seen as convincing. Whenever a user of standard
terms charges additional fees, it could be said, that these fees are part of an overall
calculation. Therefore, it is not surprising that the Federal Supreme Court has held in
other decisions that this fact was irrelevant.105
But above all, it is not appropriate from the start to declare a term exempt from a
fairness test if it constitutes a part of a main obligation. On the contrary, it is even
more disadvantageous for the customer to find not only ancillary terms but even
principal price terms in the small print. The user of standard terms could simply
divide the potential obligation of the customer in several parts and then, offer
performance for just one part on the free-market and hide the remaining parts in
the small print. This can be illustrated on the basis of the decisions regarding the
general terms of insurance,106 the tenancy agreements107 and the hunting license.108
A user of standard terms who makes an offer on the market which includes a certain
rental fee, a certain annual premium or a certain hunting license fee but hides further
parts of these obligations in the small print cannot be rewarded by declaring these
hidden parts to be exempt from a fairness test. This becomes particularly clear in the
example, where the landlord charges a fee for the costs of the cosmetic repairs via
standard terms. It is heavily debated under what conditions a landlord may transfer
his obligation to undertake the cosmetic repairs (§ 535 (1) St. 2 Alt. 2 BGB) to the
104
BGH, 19.11.1991 – X ZR 63/90 ¼ BGHZ 116, 117 ¼ NJW 1992, 688, see Fn. 69.
105
BGH, 13.5.2014 – XI ZR 405/12 ¼ BGHZ 201, 168 ¼ NJW 2014, 2420 para 38; BGH, 7.6.2011
– XI ZR 388/10 ¼ BGHZ 190, 66 ¼ NJW 2011, 2640 para 20.
106
Fn. 63 f.
107
Fn. 65 ff.
108
Fn. 75.
tenant; especially the judiciary applies strict standards.109 There is no obvious reason
why, in a case in which the transfer to the tenant would not be possible via standard
terms, the landlord should be permitted to charge the costs for the cosmetic repairs in
the small print without the possibility of a fairness test. Particularly, it cannot be
assumed that a supplement to the rent typically catches the tenant’s attention rather
than a transfer of the obligation. The question whether a standard term catches the
customer’s attention is already answered by the accurate concept, namely the
examination whether a free-competition can be established with regards to the
respective clause. And a landlord who offers an apartment for a rent of 500 € on
the market and then hides a supplementary rental fee of 100 € in the small print may
not rely on the argument that this supplement could have caught the customer’s
attention: He could have offered 600 € from the start.
The Federal Supreme Court often relies on the argument that, principal price
terms had to be exempt from a fairness test, since they could not be replaced by legal
default rules.110 For instance, in the case regarding the mobile phone contract the
Federal Supreme Court argued that, without the term stating that the supplier was
entitled to provide additional volume against a fee after the consumption of the basic
data volume, there would be a gap in the contract which could not be filled by legal
default rules which would lead to the invalidity of the contract. While it is the case
that there are no legal default rules concerning the specific situation of the data
volume consumption before the end of the month, this is hardly a reason to accept
every regulation via standard terms by the supplier and declare it to be exempt from a
fairness test. On the contrary, this is a common problem of the fairness test and
within the scope of § 306 (2) BGB111 it is recognised by the judiciary and in
literature that supplementary interpretation can be applied if there are no applicable
legal default rules.112 There is no reason why supplementary interpretation could not
be applied in a case like the one regarding the mobile phone contract. The supple-
mentary interpretation could lead to the result, due to ineffectiveness of the standard
term, that the supplier is obliged to provide slowed access free of charge after the
consumption of the basic data volume—which would be the customary agreement.
Apart from the aforementioned, further arguments are to be raised against the
conceptual framework the Federal Court of Justice’s approaches: As described in
detail above113 the Federal Court of Justice refers to several—more or less
109
BGH, 18.3.2015 – VIII ZR 185/14 ¼ BGHZ 204, 302 ¼ NJW 2015, 1594; BGH, 23.6.2004 –
VIII ZR 361/03 ¼ NJW 2004, 2586; an illustrative overview is given by Lehmann-Richter (2016),
pp. 529 ff.; see also the references given by Eisenschmid (2017), § 535 para 72.
110
BGH, 5.10.2017 – III ZR 56/17 ¼ BeckRS 2017, 128867 Rn 23; BGH, 19.11.1991 – X ZR
63/90 ¼ BGHZ 116, 117 ¼ NJW 1992, 688 para 19 f.
111
“To the extent that the terms have not become part of the contract or are ineffective, the contents
of the contract are determined by the statutory provisions.”
112
BGH, 17.11.2016 – VII ZR 6/16 ¼ BGHZ 213, 18 ¼ NJW 2017, 662 para 32; BGH, 6.4.2016 –
VIII ZR 79/15 ¼ BGHZ 209, 337 ¼ NJW 2017, 320; BGH, 15.4.2015 – VIII ZR 59/14 ¼ BGHZ
205, 43 ¼ NJW 2015, 2566; Schmidt (2018), § 306 para 12; Basedow (2016), § 306 para 22 f.
113
See under Sect. 3.2.
technical—elements in order to determine whether there is a principal price term

(Preishauptabrede) or an ancillary price term (Preisnebenabrede) such as, firstly, the
criterion of whether the term in question is of direct impact on the main obligations
of the parties (including the price as the main counter-obligation) or not and secondly
and thirdly, the aspects of, whether there are default rules apt to replace the
respective term, and of, whether the term in question therefore is crucial for the
determination (or determinability) of the contract’s content and thus even for the
assumption of a valid contract.
However, even though these elements are closely entangled with one with
another, no clear theoretical—or at least practical—hierarchy can be established
among them. Assume, for example, a hypothetical case, in which due to a lack of
pertinent default rules a certain standard term could not be replaced by a legal
provision, but the term in question would all the same only have a very indirect
impact on the main obligation or the price. It is difficult to predict whether, in such a
case, the Federal Court of Justice would be willing to subject the term to a judicial
control or not. Hence, the combination of different elements due to a lack of stringent
order of application causes considerable legal uncertainty as to the extent of judicial
control of price related terms.
Still, the most important argument against the Federal Court of Justice’s approach
on price-related terms is not confined to criticism against the elements used in order
to distinguish between principal price terms (Preishauptabrede) and ancillary price
terms (Preisnebenabrede) but it is more fundamental. As developed above the
appropriate substantive yardstick for deciding on whether a standard term is to be
exempted from judicial control or not should be its quality—or lacking quality—of
being subject to a free-market-competition. To put it in more precise words: When-
ever a standard term cannot be considered as the outcome of a free-market-compe-
tition its judicial control is legally justified and should be implemented by the courts.
In order to sum up, as well as to sharpen the core point of criticism against the
German jurisprudence, one can say that the Federal Court of Justice, when relying on
the distinction between principal price terms (Preishauptabrede) and ancillary price
terms (Preisnebenabrede), makes reference to an imprecise proxy variable of the
free-market-competition-criterion and thereby, at least in some cases, risks to miss
the proper measure. This methodological inaccuracy entails two shortcomings: On
the one hand, it might result in the exemption of a standard term from judicial control
for the only reason of its constituting a part of a main obligation, even though judicial
control might be justified with regard to the respective term due to a lack of free-
market-competition. On the other hand, the Federal Court of Justice’s approach
proves to be unable to handle standard terms that escape the principal price terms-/
ancillary price terms-dichotomy. This last aspect is particularly problematic with
regard to one important yet notorious feature of standard term drafting: Contract
lawyers are usually pretty inventive when it comes to drafting of new standard terms
in reaction to court decisions considering a previously used term as void. Thus, the
judicial control and ban of a particular pricerelated standard term due to its qualifi-
cation as ancillary price term might well provoke the drafting of a slightly different
term to be qualified as a principal price term and therefore being outside the scope of
judicial control. The similarity of the two aforementioned terms on additional data
volume in mobile phone contracts114 might well illustrate this problem. In other
words: By not directly referring to the free-market-competition-criterion the judi-
cial’s approach bears the continuous risk of provoking a bypass of judicial control by
clever drafting.
3.5 Summary
The judiciary differentiates between principal and ancillary price terms; only ancil-
lary price terms shall be subject to a fairness test. Based on this the judiciary
developed an approach with partly unconvincing results. A preferable approach is
presented by parts of the academic literature: the decisive measure is whether a free-
market competition can be established with regard to the respective clause. Only if
this is the case a fairness test is not justified since there is no reason for a judicial
control of a decision based on freedom of contract.
Whereas some individual regulatory provisions controlling price terms exist there is
no self-contained system. According to § 270a BGB an agreement according to
which the debtor is to pay an additional fee for the use of a SEPA direct debit, a
SEPA credit transfer or a payment card is deemed ineffective. According to § 312a
(4) BGB an agreement according to which the consumer is to pay an additional fee
for the use of a certain payment method is ineffective, if there is no other common
and reasonable payment method free of charge or if the fee agreed upon exceeds the
costs arising for the business. According to § 312a (5) BGB, an agreement stating
that the consumer is to pay an additional fee for the use of a telephone number
serving the purpose of the business answering questions regarding a B2C contract is
deemed ineffective, if the fee exceeds the costs for the regular use of the telecom-
munication service.
While all these provisions were introduced as an implementation of European
Law, national provisions exist in tenancy law limiting the rent the parties may agree
upon (Mietpreisbremse), if the apartment is situated in an overstretched housing
market, §§ 556d ff. BGB. According to § 2 of the Housing Agency Act
(Wohnungsvermittlungsgesetz), an estate agent may only claim a brokerage fee
which arises out of a brokerage contract with the house seeker (Bestellerprinzip).
Thus, an agreement between the landlord and the tenant stating, that the tenant is to
114
See LG Düsseldorf, 14.12.2016 - 12 O 311/15 on the one hand and BGH, 5.10.2017 – III ZR
56/17 ¼ BeckRS 2017, 128867 on the other hand.
pay the brokerage fee, even though the broker had been engaged by the landlord is
ineffective. However, both provisions rather limit the freedom of contract, than
being examples for a control of standard-terms.

An essential provision with regards to price transparency is § 1 of the Price

Indication Ordinance (Preisangabenverordnung). According to this provision any-
one who professionally offers goods on the market to consumers is obliged to
indicate the prices including the value added tax and all other price components.
According to §§ 492 (2) BGB, Art. 247 § 3 (1), 6 (1) Nr. 2 EGBGB a lender is
obliged to indicate inter alia the borrowing rate (Sollzinssatz) and the annual
percentage rate (effektiver Jahreszins). As to the control of standard terms a standard
term is ineffective in case of a breach of the transparency requirement (Verstoß
gegen das Transparenzgebot) as laid down in § 307 (1) St. 2 BGB. The test of
transparency reviews the provision, to assess if it is ambiguous or incomprehensible.
The transparency review also applies, if a standard term is free from review
according to § 307 (3) BGB. However, the previously discussed problem cannot
be solved by a transparency requirement since it is simply not possible to create a
small print with the transparency of a clause that is subject to a free-market
competition.115 If it has been stated that a standard term is not subject to the
consumer’s attention anyway and is therefore not subject to a free-market competi-
tion, a fairness test is required; it is just not sufficient to perform a transparency
review of the small print.
References
Basedow J (2016) Münchener Kommentar zum BGB, vol 2, 7th edn. C.H.Beck, München
Billing T (2006) Billing, Die Bedeutung von § 307 III 1 BGB im System der AGB-rechtlichen
Inhaltskontrolle. C.H. Beck, München
Börner A (1997) Die “Heilung” von AGB durch die Berücksichtigung
vertragsabschlußbegleitender Umstände nach § 24a Nr 3 AGBG. Juristenzeitung:595–601
Busche J (2015) Münchener Kommentar zum BGB, vol 1, 7th edn. C.H.Beck, München
Canaris C (2000) Wandlungen des Schuldvertragsrechts - Tendenzen zu seiner “Materialisierung”.
Archiv für die civilistische Praxis 200:273–364
Coester M (2013) J. von Staudingers Kommentar zum Bürgerlichen Gesetzbuch. Sellier De
Gruyter, Berlin
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und Wirtschaftsrecht unter Berücksichtigung gemeinschaftsrechtlicher Bezüge. Mohr Siebeck,
Tübingen
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systematische Abgrenzung kontrollfreier von kontrollunterworfenen Klauseln. Nomos,
Baden-Baden
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Jelzalogbank Zrt). Europäische Zeitschrift für Wirtschaftsrecht:510–511
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Der Betriebsberater:450–455
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Gesellschaftsrecht:288–295
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Anforderungen an wirksame Schönheitsreparaturklauseln in der Wohnraummiete.
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Rechtsverkehr. Zeitschrift für Wirtschaftsrecht 36:1045–1052
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unternehmerischen Rechtsverkehr. Zeitschrift für Wirtschaftsrecht 36:1326–1332
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Wochenschrift:1713–1719
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München
Stoffels M (2001) Schranken der Inhaltskontrolle. Juristenzeitung:843–849
Wittuhn G (2014) Unternehmenskaufverträge und das Recht der Allgemeinen
Geschäftsbedingungen. Neue Zeitschrift für Gesellschaftsrecht:131–136
Wurmnest W (2016) Münchener Kommentar zum BGB, vol 2, 7th edn. C.H.Beck, München
Three Modes of Regulating Price Terms
in Standard-Form Contracts—The Israeli
Experience
Eyal Zamir and Tal Mendelson
Abstract Regulation of the content of standard-form contracts usually focuses on

the invisible terms that customers hardly ever read. It does not refer to the price,
because price is a salient component of the transaction, to which customers usually
pay attention and sometimes even compare between suppliers. However, it is often
difficult to draw the line between the price and price-related, invisible terms.
This chapter analyzes the Israeli experience concerning the regulation of prices
and price-related terms. The Israeli experience is interesting for several reasons.
These include the fact that in 1964, Israel was the first country to enact a specific Law
regulating the content of standard-form contracts, which established both a frame-
work for ex post judicial supervision and a mechanism for ex ante, administrative/
quasi-judicial supervision; the various reforms made in these mechanisms through-
out the years, including the de facto abolition of the administrative/quasi-judicial
mechanism in 2014; and the activist policy adopted by the Israeli Banking Super-
visor. While Israeli law—much like other systems—has long imposed strict dis-
closure duties on banks, insurers, and other suppliers, unlike some other systems,
it has always regulated the content of contracts, as well. This regulation was vital
during the 2008 subprime crisis, in which Israel suffered little, and recovered.
1 Introduction
Like other legal systems, Israeli law has long faced the challenge of regulating price
terms in standard-form contracts. Several characteristics make the Israeli experience
in this regard particularly interesting. These include the fact that in 1964, Israel was
the first country to enact a specific Law regulating the content of standard-form
contracts, which established both a framework for ex post judicial supervision and a
mechanism for ex ante, administrative/quasi-judicial supervision; the various
reforms made in these mechanisms throughout the years, including the reenactment
E. Zamir (*) · T. Mendelson (*)

The Hebrew University of Jerusalem, Faculty of Law, Jerusalem, Israel
e-mail: eyal.zamir@mail.huji.ac.il

https://doi.org/10.1007/978-3-030-23057-9_16
430 E. Zamir and T. Mendelson
of the Standard Contracts Law (SCL) in 1982 and the de facto abolition of the
administrative/quasi-judicial mechanism in 2014; and the activist policy adopted by
the Israeli Banking Supervisor. While Israeli law, much like other systems, has long
imposed strict disclosure duties on banks, insurers, and other suppliers, unlike some
other systems, it has always chosen to do more than just impose such duties, and
regulated the content of contracts, as well.
The Report is structured as follows: Sections 2 and 3 provide a brief, general
background on Israeli private and consumer law and the role of freedom of contract
and competing values in the Israeli system. Section 4 describes the regulation of
standard-form contracts in Israel and the various reforms it has undergone. Section 5
analyzes the special status of price terms in the regulation of standard-form contracts.
Section 6 surveys some of the special regulatory regimes controlling price terms,
with particular focus on financial transactions. Finally, Sect. 7 deals with special
disclosure regulations aimed at promoting price transparency and competition.
2 Israeli Private and Consumer Law
Established in 1948, Israel is a mixed legal system, strongly influenced both by

Common Law and by Civil Law traditions.1 Having inherited an unsystematic
patchwork of Ottoman, British, and religious legal norms, Israel embarked on the
challenging project of crafting its own modern Civil Code, based primarily on Civil
Law systems but incorporating Common Law concepts and institutions, as well.
This process, which was carried out gradually from the 1960s onwards, relied
considerably on existing international attempts to harmonize Civil Law and Com-
mon Law, notably the Uniform Law on International Sales of 1964. It resulted in
twenty-odd separate Laws, each dealing comprehensively with a certain field or
transaction. In substance, Israel now enjoys modern, codificatory legislation in most
fields of private law.2 The two centerpieces in contract law are the Contracts
(General Part) Law, 1973, and the Contracts (Remedies for Breach of Contract)
Law, 1970.
Along with codificatory legislation, numerous Laws—most of which have been
enacted since the early 1980s—deal with consumer protection, with separate super-
visory mechanisms for banking and insurance contracts.3 Of particular interest for
the present discussion are the Consumer Protection Law, 1981; the Banking (Service
to Customer) Law, 1981; the Control of Financial Services (Insurance) Law, 1981;
and the Regulation of Non-Bank Loans Law, 1993.
The categories of codificatory Laws and consumer Laws are not mutually exclu-
sive, and partially overlap. Some Laws—including the Sales (Housing) Law, 1973
1
See generally Barak (1994) and Wasserstein Fassberg (2003).
2
For an overview, see Zamir (2014). See also Rabello and Lerner (2007).
3
Deutch (1993).
Three Modes of Regulating Price Terms in Standard-Form. . . 431
and the Insurance Contract Law, 1981—are infused with consumer-protection

policies, but apply to both consumer and commercial transactions. The same is
true of the SCL of 1982, which is both an important piece in the puzzle of
codificatory legislation, and arguably the most important Law in the field of con-
sumer contracts.
For reasons that are mostly historical and institutional, there is no unitary
regulation of consumer contracts in Israel. The Consumer Protection Law, 1981,
and the powers it confers upon the Commissioner of Consumer Protection and the
Consumer Protection and Fair Trade Authority (CPA) do not apply to banking and
insurance contracts—each of which is subject to separate legislation and regulators.
However, in addition to the specific Laws governing each sphere, other Laws,
including the SCL, apply to all types of consumer contracts (and sometimes, as
previously noted, to non-consumer contracts, as well).
3 Freedom of Contract and Competing Values
Section 24 of the Contracts (General Part) Law, 1973, states that “the contents of a
contract may be whatever is agreed upon by the parties.” It goes without saying that,
subject to specific exceptions, the parties are free to agree on the price paid for any
good or service. Moreover, while freedom of contract (including the freedom to
refrain from contracting) is not explicitly mentioned in the Basic Law: Human
Dignity and Liberty (1992), it is generally acknowledged that freedom of contract
is a basic human right under Israeli constitutional law.4 Thus, shortly after the
enactment of that Basic Law, in the famous case of Hevra Kadisha
v. Kastenbaum, Justice Aharon Barak made it clear that the autonomy of the
individual will, by virtue of being a component of human dignity and freedom, is
a fundamental human right—hence “freedom of contract is a constitutional right.”5
However, the practical implications of recognizing the constitutional status of
freedom of contract are fairly limited, for at least two reasons. First, constitutional
rights do not enjoy absolute protection, but may be limited “by a law befitting the
values of the State of Israel, enacted for a proper purpose, and to an extent no greater
4
The question as to whether or not Israel does indeed have a constitution remained controversial for
many years (and, to a certain extent, still is). Since the establishment of the State, the Israeli
parliament has enacted a series of “Basic Laws” that address most of the institutional and human
rights issues that are ordinarily governed by a constitution. Only in the 1990s, however, with the
enactment of the Basic Law: Human Dignity and Liberty (1992), and the Basic Law: Freedom of
Occupation (1992, replaced with a new Basic Law in 1994), and the ruling of the Israeli Supreme
Court in United Mizrachi Bank v. Midgal Coop., 49(4) PD 221 (1995), did it become clear that
Basic Laws constitute supra-statutory constitutional norms. See Navot (2007), pp. 40–48.
5
Hevra Kadisha Ghasha “Kehilat Yerushalayim” v. Kastenbaum, 46(2) PD 464, 533 (1992). See
also Barak (1996).
than is required.”6 Second, in many (arguably, most) cases in which a legal norm is
examined through a constitutional lens, freedom of contract is likely to conflict with
other fundamental rights—whether expressly stated in the Basic Laws (such as
freedom of occupation), or judicially derived from them (such as the right for
equality, which is considered part of human dignity).7 Thus, in the Hevra Kadisha
judgment, while hailing freedom of contract as a constitutional right, Justice Barak
emphasized that very often, basic constitutional principles and rights conflict with
one another, so a balance needs to be struck between them.8
While Israel has always been a western democracy, it is relatively socialist in
orientation (although clearly less so today than during its formative years). Even
after privatization, the decline of workers’ unions, the demise of communal forms of
agricultural settlements (kibbutzim and moshavim), and so forth, the political atmo-
sphere in Israel is more communitarian and far less free-market-oriented than, for
example, in the United States. In the sphere of contract law, the principle of freedom
of contract is often curtailed by the competing principle of good faith, which—
following the German tradition—plays a major role in Israel with regard to contract
performance, interpretation, pre-contractual negotiations, and virtually all spheres of
private law and beyond.9 Statutory, administrative, and judicial regulation of con-
tract terms is prevalent and rather effective—sometimes more so than in any other
legal system we are familiar with.10 In light of all this, it is not surprising that Israel
was the first country to statutorily tackle the challenges created by standard-form
contracts head on.
6
Section 8 of the Basic Law: Human Dignity and Liberty.
7
See, e.g., Beit Yules Ltd. v. Raviv Moshe & Co. Ltd., 43(1) PD 441 (1989).
8
Hevra Kadisha v. Kastenbaum (1992), p. 533.
9
Sections 12 and 39 of the Contracts (General Part) Law, 1973 impose duties to negotiate contracts,
fulfill contractual obligations, and exercise contractual rights “in customary manner and in good
faith.” Section 61(b) of this Law extends the application of these norms mutatis mutandis to legal
acts other than contracts, and to obligations not arising out of a contract. On the central role of the
principle of good faith in Israeli private law, see Shalev (2005), pp. 85–127; Rabello (1996).
10
For example, to the best of our knowledge, Israel is the only legal system in which mandatory
statutory cooling-off periods apply not only to door-to-door sales and telemarketing transactions,
but to practically all consumer transactions, with specific exceptions. See sections 14–14H of the
Consumer Protection Law, 1981; Consumer Protection (Annulment of Transaction) Regulations,
2010. While the statutory cooling-off period generally lasts up to 2 weeks, in the cases of
telemarketing and door-to-door sales, the period is 4 months (!) if the consumer is a disabled
person, a new immigrant, or a senior citizen.
4 Regulation of Standard-Form Contracts: An Overview
As early as 1958, a Commission was appointed to examine the “problem of standard

contracts”. The Commission, chaired by the leading Israeli private law professor of
the time, Prof. Gad (Guido) Tedeschi, submitted its report in 1959,11 recommending
the enactment of a Law that would authorize courts to invalidate or restrict exploit-
ative terms in standard-form contracts. Based in part on the Commission’s recom-
mendations, the original Standard Contract Law was enacted in 1964, authorizing
judicial scrutiny of nine types of restrictive terms (outlined in section 15) in
standard-form contracts for the supply of a “commodity or a service” (section 1).
The Law also allowed suppliers to submit their contracts for a priori approval before
a Restrictive Trade Practices Board. Such approval exempted the contract from court
scrutiny based on the Law for 5 years.12 A 1969 amendment empowered the
Attorney General (AG) to challenge restrictive clauses before the Board, though
this tool was not significantly utilized.
Although the innovative 1964 Law attracted considerable international atten-
tion,13 its great potential never materialized. Not only did the AG rarely petition
for the terms of a contract to be invalidated, but firms rarely applied to have their
contracts validated, because the prospect of 5-year immunity was not worth the risk
of invalidation of their contract terms.14 Firms reasonably assumed that customers
would rarely challenge standard-form contracts in court. Meanwhile, ordinary courts
did not make much use of the Law, either.15 Even in cases where the Law was clearly
and directly applicable, attorneys and courts kept resorting to general, traditional
doctrines, such as interpreting contracts contra proferentem, rendering clauses
ineffective as against public policy, or denying suppliers’ reliance on exemption
clauses when such reliance was deemed contrary to the duty of good faith.16
The failure of the 1964 Law prompted legislative action. Realizing that much of
the failure was not due to the Law’s content, but rather to the reluctance of
practitioners and judges to use it, the legislator complemented necessary improve-
ments to the content of the Law with declaratory measures aimed at changing how it
was perceived. Thus, the 1964 Law was not merely amended but wholly repealed—
and a new Law was enacted in 1982.17 Section 1 of the new Law states: “The object
11
Tedeschi and Hecht (1960). See also Hecht (1968).
12
Sections 9–10 of the Standard Contracts Law, 1964; Hondius (1978), p. 530; Deutch (1985),
p. 473. While the Board’s discussions resembled court proceedings, the ensuing res judicata
applied to all of the supplier’s contracts “in accordance with” the one placed before the Board.
See Hecht (1968), p. 592.
13
See, e.g., Lando (1966), Comment: Administrative Regulation of Adhesion Contracts in Israel
(1966) and Elman (1972).
14
Deutch (1980), p. 69.
15
See generally Deutch (1980); Deutch (1985), p. 474; Berg (1979), p. 561; Hondius (1978), p. 531.
16
See, e.g., Rot v. Yasupa, 33(1) PD 617 (1979); Deutch (1980), pp. 86–102.
17
For an overview, see Deutch (1986).
of this Law is to protect customers from unduly disadvantageous conditions in

standard contracts.” Though largely tautological, this overarching statement (very
rare in Israeli private law legislation) was meant to guide the Law’s interpretation
and implementation. It implies that the Law does not primarily aim to overcome
market failures or sanction free will, but rather that it has a protective goal. The new
Law also replaced the Restrictive Trade Practices Board with an independent
Tribunal, in the hope that the very change of its title—from Board to Tribunal—
would strengthen its self-perception.18 The AG’s authority to apply to the Tribunal
for the annulment of conditions in standard-form contracts was extended to the
Commissioner of Consumer Protection and consumer organizations.19
According to the current SCL, courts and the Tribunal shall annul or amend any
condition in a standard-form contract that involves “an undue disadvantage to
customers or an unfair advantage to the supplier likely to lead to the deprivation of
a customer” (section 3; see also sections 17 and 19). Section 4 lays down a long list
of conditions—inspired by section 15 of the 1964 Law—that are presumed to be
unduly disadvantageous, thus placing on suppliers the burden of persuading the
court or Tribunal of their legitimacy.20 Along with this gray list, section 5 contains a
very brief black list of conditions that are deemed null and void.21 Unlike the 1964
Law, the current Law does not limit the courts’ or Tribunal’s authority to annul or
amend unduly disadvantageous conditions to the terms explicitly included in the
gray or black lists.
The re-enactment of the SCL, coupled with an initiative by some governmental
authorities to require certain firms to obtain the Tribunal’s approval of their standard-
form contracts,22 vitalized the Tribunal’s activity. Initially, the Tribunal’s attitude
was somewhat conservative (leading to the Supreme Court reversing its rulings).23
The adversary procedure, whereby suppliers and AG representatives argued before
the Tribunal, and the fact that the Tribunal was chaired by judges who were
accustomed to resolving disputes rather than fulfilling a quasi-regulatory function,
18
Hondius (1978), p. 540.
19
Shalev (1990), pp. 234–237; Deutch (1990), p. 188. Additionally, section 4(b) authorized the AG,
in exceptional cases, to challenge disadvantageous clauses before the Tribunal, even after immunity
had been granted.
20
Broadly speaking, these presumptions cover clauses that compromise customers’ default legal
rights, obstruct their access to justice, exempt suppliers from liability, or allow suppliers to alter the
contract unilaterally. Specific presumptions include removal or unreasonable diluting of suppliers’
statutory liabilities (section 4(1)), shifting the burden of proof to the customer (section 4(7)), and
clauses wherein customers confirm any fact or acknowledge having read and understood the
contract (section 4(12), as added in 2014).
21
Prior to the 2014 amendment, the so-called black list included only the denial of customers’ right
to apply for judicial relief. The amendment added conditions exempting the supplier from liability
for bodily injury and malicious acts.
22
For example, the Ministry of Housing required construction firms to get the Tribunal’s approval
for their apartment sales contracts as a precondition to participating in the Ministry’s housing
projects.
23
See, e.g., Attorney General v. Gad Construction Co. Ltd., 43(1) P.D. 183 (1989).
resulted in the Tribunal adopting a rather passive attitude.24 For similar reasons, the
Tribunal largely neglected its duty to publicize its decisions to the public.25 How-
ever, the appointment of several contract-law professors to the Tribunal in the 1990s
and 2000s did result in a change of its outlook. The Tribunal handed down a series of
landmark decisions regarding the standard-form contracts used by construction firms
for the sale of apartments (the largest transaction most consumers ever make), by
travel agencies, by auction websites, and others. These decisions guided court
rulings on those issues in specific disputes, as well as triggered legislative and
administrative regulation.26
Nevertheless, over time it became evident that the Tribunal’s actual impact on the
formulation of standard-form contracts in Israel was negligible, while its operation
was costly. This was due in part to the Tribunal’s lack of authority to prevent the
continued use of exploitative terms in standard-form contracts. Not only did the
Tribunal have no authority over suppliers whose contracts had not been brought
before it, but it could not even compel suppliers whose contracts it had approved to
use the approved version, or prevent suppliers from using terms that had been
declared invalid following an AG application.27 Thus, practically all standard-form
contracts used in Israel (except for specific fields, such as car- or apartment-
insurance policies, where the regulator mandated the use of policies it formulated),
continued to include disadvantageous (that is, invalid) terms. Meanwhile, due to
24
Messika (2001), pp. 105–109.
25
Under the SCL, the Tribunal was required to publish its decisions to annul or change unduly
disadvantageous conditions in two daily newspapers, or in another manner prescribed in regula-
tions, and had discretion over the publication of other decisions. In reality, however, the Tribunal
failed to comply with the Law; see Messika (2001), pp. 118–120. The 2014 amendment extended
the publication duty to approved contracts, and required that publication be in the same manner as
district court judgments are published—but because the Tribunal has largely ceased to function, this
provision is meaningless. Currently, some of the Tribunal’s decisions are available through the
Ministry of Justice’s website. Decisions from the past two decades, and some older ones, are
available through commercial online databases, as well.
26
For example, in the Gad case: Attorney General v. Gad Construction Co. Ltd., 43(1) P.D.
183 (1989), the Supreme Court, on appeal from the Tribunal, accepted the AG’s position that
exemption clauses in apartment sales contracts—which drastically deviated from the recommen-
dations of an expert committee regarding minimal liability for construction defects—were unduly
disadvantageous and hence void. However, the Court opined that imposing these recommendations
on the construction industry should be done through legislation, rather than through the Tribunal’s
power to change clauses. In response, the Knesset (Israeli Parliament) amended the Sales (Housing)
Law, which initially focused on disclosure duties, and statutorily adopted the expert committee’s
recommendations. See Zamir (1993), pp. 203–204.
27
Deutch (1990), pp. 193–194. Even respectable institutions, such as credit-card companies, simply
waited until the 5-year immunity period had elapsed to change their standard contracts. The AG did
not challenge these “new” contracts. See Bachar (2007), p. 351, n. 113. In fact, even the State,
which drastically reformed its standard contract for construction works following adjudication
before the Tribunal, subsequently made changes in the contract, to the detriment of the construction
firms.
budget and manpower difficulties, the AG and other authorized organizations rarely
initiated proceedings before the Tribunal.28
In light of all this, the SCL was substantially amended in 2014. Among other
things, the Tribunal was authorized to issue enforcement orders to ensure suppliers’
compliance with its decisions.29 The binding power of the Tribunal’s decisions was
extended to contracts “substantively similar” to the ones brought before it, thus
addressing the problem of suppliers circumventing invalidation by making minor
alterations to annulled clauses. Most importantly, the amendment eliminated the
suppliers’ option to apply for pre-approval of their standard forms, thus leaving only
the AG, the Commissioner for Consumer Protection, and other listed organizations
with the power to initiate proceedings before the Tribunal.
The proclaimed justification for this major reform was cost-effectiveness: the
contracts submitted for pre-approval were not necessarily the most important ones,
from a public perspective.30 In fact, however, the AG staff has come to realize that,
by and large, the Tribunal is not an effective mechanism for regulating the content of
standard-form contracts. One extreme example of the shortcomings of the Tribunal’s
mechanism may be found in the case of Bank Leumi LeIsrael. In that case, the AG
demanded that the largest bank in Israel revise its standard current account contract
and have it approved by the Tribunal, or else the AG would apply to have it
invalidated. In response, the bank applied to the Tribunal in 1987, but withdrew
its application after prolonged, fruitless negotiations between the bank and the
AG. Then, in 1997, the AG filed its own application to invalidate unduly disadvan-
tageous conditions in the contract, prompting another lengthy process of negotiation
and adjudication. Only in 2004 did the Tribunal rule on the remaining disputes31—a
decision which the bank then appealed to the Supreme Court. The Supreme Court
suspended the Tribunal’s ruling, and encouraged the parties to further negotiate the
disputed issues. Only in 2010—6 years after the filing of the appeal, and some
25 years after the AG’s initial move to invalidate exploitative clauses in one of the
most important consumer contracts—was the final verdict handed down.32 Even
this, however, was not the end of the saga, because according to the pre-2014 SCL,
this ruling was not legally binding upon other Israeli banks—and, in fact, not even
upon Bank Leumi itself, which (at least in theory) could have continued using the
contract containing the invalid clauses. Hence, in 2011, the Israeli Banking Super-
visor issued a mandatory directive requiring all banks to change their contracts to
comply with the rulings of the Tribunal and the Supreme Court. Evidently, issuing
28
Messika (2001), pp. 104–105; Becher and Gelbard (2013b), pp. 44–45.
29
Section 17(c) of the SCL. See Gelbard and Adar (2013), pp. 170–171.
30
Bill of Amendment No. 4 of the Standard Contracts Law, 2010, HH (Gov.) No. 547 pp.
294, 296–297.
31
Attorney General v. Bank Leumi, PM 5763(1) 481 (2004). For a critical analysis of this decision,
see Ben-Oliel (2005). See also Plato-Shinar (2016), pp. 166–167.
32
Bank Leumi LeIsrael Ltd. v. Attorney General (available at Nevo, a commercial legal database,
February 18, 2010).
such an appropriate instruction in the mid-1980s would have saved a huge amount of
time and effort.
Unsurprisingly, the AG—who even before the 2014 amendment had rarely
submitted applications to the Tribunal—has currently virtually stopped submitting
them. Fifty years of experimentation with this administrative/quasi-judicial mecha-
nism have led to the conclusion that it is not cost-effective, and the Tribunal has
practically ceased to function. In recent years, a partial, indirect substitute for the
Tribunal has been possibly emerging with the expanding use of class action in
Israel,33 but it is too early to judge the effectiveness of this route in supervising
the content of standard-form contracts.
Along with the practical termination of the Tribunal’s activity, the underlying
idea of the 2014 reform was that the CPA would assume the mantle of supervising
standard consumer contracts—much as the Israeli Banking and Insurance Supervi-
sors have been doing in their respective fields for decades. However, although the
CPA’s legal powers, personnel, and budget have considerably expanded in recent
years, the legislation necessary to give it comparable powers to those of the banking
and insurance regulators with regard to the supervision of the content of contracts
has not yet been completed. There is a tentative plan to authorize the CPA to issue
compulsory guidelines regarding the content of consumer contracts in specific
transactions (based on criteria set out in the SCL), and to administratively penalize
suppliers who use contracts with prohibited clauses. Until such powers are conferred
and employed, however, the unhappy situation in Israel is that, outside of the areas of
banking and insurance, only the Knesset (the Israeli Parliament) possesses the
general authority to statutorily regulate the content of standard-form contracts.
It should be stressed that much of the impact of the SCL has always been through
regular court decisions in ordinary contractual disputes (and, recently, in class
actions as well)—and this impact is not expected to diminish in the wake of what
appears to be the end of the Tribunal’s activity. It is therefore important to examine
how price terms are treated by the SCL.
5 Price Terms Under the Standard Contracts Law
The 1982 SCL applies to any condition in any standard contract, between a supplier
and a customer (terms that are defined in section 2 of the Law). A standard contract
is the text of a contract whose conditions have been determined in advance, in whole
or in part, by one party (the supplier), to serve in multiple contracts between the
supplier and persons undefined in number or identity (its customers).34 A condition
33
See Engel et al. (2017).
34
The definition refers to the “text of a contract” rather than a contract, because the Law applies both
to actual contracts and to texts prepared for future use, which suppliers might approve in advance.
Following a series of controversial interpretations of the “commodity or service” element of the
is any term that constitutes part of the contract, except for a term “specifically agreed
by a supplier and a customer for the purpose of a particular contract.” Under section
22, the Law applies to the State as well. Section 23 then excludes several types of
contracts and conditions from the Law’s purview. Most importantly for our pur-
poses, prior to the 2014 amendment, subsection 23(1) excluded “a condition deter-
mining the monetary consideration to be paid by the customer.” This formulation
was replaced in 2014 by “a condition determining the monetary consideration to be
paid by the customer or the supplier for the object of the transaction, provided that it
is formulated in a simple and clear language.”
Thus, not only is a specifically agreed price excluded from the ambit of the SCL
under section 2, but so, too, is a unilaterally predetermined price, under section 23
(1). Several justifications have been offered for this exclusion. One is that the price is
not one of those “invisible terms” in standard-form contracts that customers hardly
ever read.35 Rather, it is a salient component of the transaction, to which customers
usually pay attention and sometimes even compare between suppliers. It is therefore
much more likely to reflect genuine agreement.36 Consequently, while market
competition does not necessarily affect the one-sidedness of most standard-form
clauses, it does affect the price.37 Moreover, while judges and Tribunal members are
competent to assess the reasonableness of substantive contractual clauses (such as
exemptions from liability and arbitration clauses), they are arguably less qualified to
determine whether prices are the product of market competition or of market
failures—a task that requires analysis of the characteristics of the market as a
whole. It is therefore preferable to leave price regulation, if at all necessary, to
more competent and knowledgeable authorities, be they administrative or legis-
lative.38 Determining whether a certain price is unduly disadvantageous is parti-
cularly tricky—and perhaps futile—considering that such determination by the
Tribunal used to be in effect for 5 years, while market prices may fluctuate consider-
ably during such a long period.39 Finally, it has been argued that there are sufficient
alternative mechanisms of price regulation in Israel to obviate price regulation
through the SCL.40
Prior to its amendment in 2014, judges and commentators were divided over two
issues concerning section 23(1). The first issue appears to be the product of flawed
definition of standard contract in the 1964 Law, the 1982 Law omitted this phrase altogether, thus
applying to any standard-form contract, regardless of its object. Furthermore, the 1982 Law clarifies
that “supplier” in this context is the party who drafts the contract—whether it is the seller or the
buyer of any goods or services (see also n. 41–43 and accompanying text).
35
Rakoff (1983), pp. 1248–1283; Bakos et al. (2014).
36
Bin-Nun (1987), p. 111; Lusthaus and Spanic (1994), p. 34; Deutch (1985), p. 468.
37
Marotta-Wurgler (2008).
38
Lusthaus and Spanic (1994), p. 35.
39
Ministry of Justice, The Standard Contracts Law, 5743–1982: Explanatory Notes, p. 76 (1984).
This consideration, based on section 14 of the SCL, was valid until 2014, when the possibility of
pre-approval by the Tribunal was abolished.
40
Bin-Nun (1987), p. 111.
drafting. As previously noted, section 23(1) excluded clauses that determined “the
monetary consideration to be paid by the customer.” Since section 2 defines “cus-
tomer” as the “person to whom a supplier proposes that an engagement between
them shall be in accordance with a standard contract,” under strict interpretation of
section 23(1), it did not apply to terms determining the price to be paid by the
supplier. When the drafter is the party who pays for the goods or services—e.g.,
when sport clubs use standard-form contracts with professional athletes, or when the
state uses such contracts with nursing homes paid by the state for their services—
strict interpretation leads to the conclusion that the price term is not excluded from
the ambit of the Law. Indeed, in one case the Tribunal adopted this interpretation,
with a view to expand its jurisdiction.41 In another case, however, the Tribunal opted
for a purposive interpretation, whereby “customer” in section 23(1) is the party who
pays the monetary remuneration, regardless of whether it is the drafter of the form.42
Commentators endorsed this interpretation.43 Indeed, virtually all justifications for
excluding the price from the purview of the SCL apply regardless of whether the
monetary remuneration is paid by, or to, the customer. In any event, the 2014
amendment clearly resolved this issue by adding the words “or the supplier” after
the words “paid by the customer.”
A more substantive controversy—similar to the one troubling other legal sys-
tems44—concerned the scope of the expression “condition determining the monetary
consideration.” According to a broad interpretation, this may include not only the
amount to be paid as price, rent, insurance premium, etc., but also various provisions
that affect the payment, such as indexing clauses; clauses authorizing the supplier to
change the price unilaterally (or give such power to a third party); payment dates;
acceleration clauses; late-payment and other ancillary fees; multidimensional and
complex formulas for calculating and updating the price; and so forth. In contrast, a
narrow interpretation excludes from the Law’s ambit only the basic amount of
money to be paid, while all other arrangements are subjected to the Law’s scrutiny.
Of course, one can think of intermediate interpretations based on various criteria.
One of Israel’s leading contract-law scholars, Gabriela Shalev, has suggested that
the expression “condition determining the monetary consideration” included not
only the price, but also the “payment conditions.”45 This expression might cover
many of the additional elements mentioned above. However, the prevailing position
among Israeli judges and scholars is that the expression “condition determining the
monetary consideration” merits a narrow interpretation. While analytically and
logically, all of the abovementioned ancillary provisions determine the price, the
main issue is not logical, but psychological and practical: which elements determine
41
Israel Nursing Home Assoc. v. State of Israel (available at Nevo, October 11, 2009).
42
Israel Football Players’ Organization v. Israel Football Assoc. (available at Nevo, November
11, 1988).
43
Bin-Nun (1987), p. 111; Lusthaus and Spanic (1994), pp. 36–37; Porat (2003), pp. 753–754.
44
See, e.g., Atamer (2017).
45
Shalev (1995), p. 627.
the perceived—as opposed to the actual—price. Unlike the basic price—the money
to be paid under the contract—the ancillary clauses are very often more complex,
less salient, and more open to suppliers’ manipulation. They are, indeed, invisible
terms, which customers tend not to read—and even if they do, they are likely to
misunderstand them, misperceive their significance, or pay little attention to them,
due to cognitive limitations and biases.46
Further support for the narrow interpretation of section 23(1) is found in section 4
(4) of the SCL. According to this provision, “a condition conferring on the supplier
the right to alter unilaterally, after the contract has been made, a price” is presumed
unduly disadvantageous “unless the alteration arises out of factors over which the
supplier has no control.” This presumption clearly implies that a condition confer-
ring such discretion is not one that “determin[es] the monetary consideration” under
section 23(1)—otherwise the Law would not have applied to it in the first place.
Similarly, section 4(11), which was added in 2012, lays down a presumption of
undue disadvantage when conditions asymmetrically link the price or other contrac-
tual payments to a certain index, such that any rise or decline of the index would only
benefit the supplier, not the customer.47 Again, if indexation clauses had been
excluded altogether from the Law’s ambit according to section 23(1), this presump-
tion would have been meaningless.
Thus, in the Beit Yehonatan case, the Tribunal ruled that a cost-plus formula for
the calculation of remuneration for maintenance services of a commercial condo-
minium is subject to the undue disadvantageousness test48—and this ruling was
followed in similar cases.49 While a cost-plus formula that places no constraints on
the service provider was held to be unduly disadvantageous,50 such a formula was
deemed acceptable when the contract limited the supplier to reasonable and custom-
ary costs.51 Similarly, in B.G. Financing and First International Bank for Mort-
gages, the Tribunal decided that indexing clauses in loan contracts are subject to the
46
Israel Nursing Home Assoc. v. State of Israel (available at Nevo, October 11, 2009), para 25;
Association of Residents of Retirement Communities v. Achuzat Bait—Commercial Center and
Elderly Residence, para 13 (available at Nevo, May 28, 2013); Bar-Gill (2012), pp. 7–27; Zamir and
Teichman (2018), pp. 297–299; Atamer (2017).
47
For a critical review of this provision in light of previous Tribunal rulings on such clauses, see
Becher and Gelbard (2013a).
48
Attorney General v. Beit Yehonatan Co. Ltd. (June 5, 1988) (unpublished); see Lusthaus and
Spanic (1994), pp. 36 and 325–326.
49
See, e.g., Attorney General v. Gad Construction Co. Ltd., 43(1) P.D. 183 (1989), pp. 191–192;
Kiryat Wolfson Apartment Owners and Residents Association v. Kiryat Wolfson in Jerusalem—
Management and Services Co. Ltd., para 50 (available at Nevo, March 14, 2007).
50
Attorney General v. Gad Construction Co. Ltd., 43(1) P.D. 183 (1989), pp. 191–192.
51
Kiryat Wolfson Apartment Owners and Residents Association v. Kiryat Wolfson in Jerusalem—
Management and Services Co. Ltd., paras 44–51 (available at Nevo, March 14, 2007).
SCL,52 as it did in cases regarding apartment sales contracts.53 The Tribunal

similarly scrutinized clauses concerning various fees and charges in contracts
between banks and their customers.54
In the same vein, the Tribunal examined mechanisms for future updates of
payments for nursing-home services in a standard contract between the state and
nursing homes,55 as did the Supreme Court concerning a standard contract between a
retirement community and one of its residents.56 In these and other contracts, the
Supreme Court and the Tribunal ruled that in long-term, relational contracts, unilat-
eral updates of the price by the supplier are not necessarily illegitimate.57 Indeed,
section 4(4) of the SCL implicitly legitimizes such clauses, inasmuch as the need for
an update “arises out of factors over which the supplier has no control.” Sometimes,
the one-sidedness of such power is counterbalanced by the customer’s option to
terminate the contract.58 Thus, for example, the Tribunal approved terms in sales and
services contracts that allowed the price to be updated due to changes in applicable
taxes, when the customer had the option to annul the contract if the resulting increase
exceeded 20% of the original price.59
However, there are instances where terminating the contract is practically impos-
sible (e.g., when a resident of a retirement community must move from independent
living to the assisted living accommodations) or impracticable (e.g., in a contract
between car owners and a firm with a market share of over 80% which provides
location-based services for stolen vehicle recovery, which are mandated by insur-
ance companies).60 In such cases, the Supreme Court and the Tribunal annulled
clauses that gave the supplier unlimited license to update the remuneration, even if
the customer had the nominal option to end the contractual relationship.61 In the
Milgrom Estate case, the Supreme Court went so far as to invalidate a clause that
52
B.G. Financing v. Attorney General (June 8, 1993) (unpublished); Israeli Banking Supervisor
v. First International Bank for Mortgages, paras 66–68 (available at Nevo, May 5, 2009).
53
See, e.g., Attorney General v. Shikun U’Fituach LeIsrael Ltd., paras 20–28 (available at Nevo,
December 6, 2011); Attorney General v. B. Yair Construction Co. 1998 Ltd., paras 29–34 (available
at Nevo, February 19, 2012). See also Becher and Gelbard (2013a).
54
See, e.g., Attorney General v. Bank Leumi, PM 5763(1) 481 (2004), pp. 520–524; Israeli Banking
Supervisor v. First International Bank for Mortgages, paras 69–77 (available at Nevo, May 5, 2009).
55
Israel Nursing Home Assoc. v. State of Israel, paras 11–29 (available at Nevo, October 11, 2009).
56
Inheritors and Estate Executor of the Late Hinda Milgrom z”l v. Mish’an Center, 52(4) P.D.
145 (1998).
57
See, e.g., ibid., p. 166; Israeli Banking Supervisor v. First International Bank for Mortgages, paras
74–75 (available at Nevo, May 5, 2009).
58
Israeli Banking Supervisor v. First International Bank for Mortgages, para 75 (available at Nevo,
May 5, 2009).
59
Lusthaus and Spanic (1994), pp. 322–323.
60
See Ituran Location & Control Ltd. v. Attorney General, paras 95–99 (available at Nevo, January
26, 2004).
61
See, e.g., Attorney General v. SHL Telemedicine Ltd (available at Nevo, April 30, 2007); Ituran
Location & Control Ltd. v. Attorney General, paras 95–99 (available at Nevo, January 26, 2004).
required a retirement community resident who had moved into a nursing home to
pay according to the nursing home’s tariff for such services at the time of moving.
The Court reasoned that, in the absence of objective criteria for setting and updating
the tariff, the clause was unduly disadvantageous.62 In general, the Tribunal and
courts insist that the suppliers’ discretion be based on objective criteria, or hinge on
factors beyond their control.63
The Tribunal decisions, court judgments, and scholarly commentaries described
thus far referred to section 23(1) prior to its 2014 amendment, but undoubtedly apply
to the amended section, as well.64 The 2014 amendment sought to clarify the
expression “a condition determining the monetary consideration” by adding the
words “provided that it is formulated in a simple and clear language.” This clarifi-
cation—which might have been inspired by the proviso “in so far as these terms are
in plain intelligible language” in Article 4(2) of Directive 93/13/EEC on unfair
contract terms65—echoes previous rulings of the Tribunal and courts that stressed
the importance of a condition’s clarity when determining its validity.66 Thus, the
Court refused to invalidate a price clause in an apartment sales contract that obliged
the buyer to pay an additional 2% to the basic price for the seller’s “expenses”
because this addition had been clearly stated and not concealed within the contract.67
In the Achuzat Bait case, the Tribunal approved a contract between a retirement
community and a resident that had precisely stipulated in advance the additional
charge that would apply once the resident is joined by a caregiver.68 While the
Tribunal recognized that residents might underestimate the chances that they might
62
Inheritors and Estate Executor of the Late Hinda Milgrom z”l v. Mish’an Center, 52(4) P.D.
145 (1998), pp. 163–167. In so ruling, the Court deviated from previous decisions of the Tribunal,
which approved future updates in accordance with the supplier’s effective tariff. See Lusthaus and
Spanic (1994), pp. 323–325. In the Milgrom case, the outcome was that the estate paid for the
nursing home’s services according to the independent living tariff—i.e. one-fifth of the nursing-
home tariff.
63
Ituran Location & Control Ltd. v. Attorney General, para 99 (available at Nevo, January
26, 2004); Israel Nursing Home Assoc. v. State of Israel, paras 17–20 (available at Nevo, October
11, 2009); Attorney General v. SHL Telemedicine Ltd, paras 41–41 (available at Nevo, April
30, 2007);
64
Indeed, the official explanatory notes for the amendment (HH 2010, 294, 299–300) stated that the
words “for the object of the transaction” were meant to clarify that the exclusion of “a condition
determining the monetary consideration” pertains only to the consideration for the object itself—
and not to ancillary conditions, such as terms regarding the calculation or determination of the
consideration, the duty to give a deposit, timing of payment, etc. It is, however, moot whether
adding the words “for the object of the transaction” makes this clearer.
65
95/29.
66
See, e.g., Israeli Banking Supervisor v. First International Bank for Mortgages, para 72 (available
at Nevo, May 5, 2009).
67
Wexlin v. Engel General Const. Co. Ltd., para 11 (available at Nevo, February 28, 2005).
68
Elderly Residence, para 24 (available at Nevo, May 28, 2013).
need a caregiver, it validated the clause as serving the supplier’s legitimate inter-
ests.69 Similarly, the Tribunal approved a clause that allowed a provider of emer-
gency medical services to raise its remuneration by 3% after 2 years, and by an
additional 2% annually thereafter.70 However, a clause allowing a retirement home
to raise the monthly payment by up to 5% annually, over and above the rise in the
Consumer Price Index (or even more, if justified by a rise in operational costs) was
struck down as conferring overly wide discretion.71
To further limit the significance of section 23(1), the Tel-Aviv District Court
opined (in an obiter dictum) that that section does not apply to terms pertaining to
payments by the customer to a third party (e.g., a maintenance company referred to
in an apartment sales contract).72 However, there is reason to doubt that this position
is consistent with the section’s wording and rationale.
Lastly, it should be noted that while section 23(1) does not provide immunity
from scrutiny under the SCL for price-related provisions, such immunity may be
granted under section 23(2), which excludes conditions that strictly follow statutory
provisions. Accordingly, once the legislature determined rules concerning price
updates in retirement homes, the Tribunal refused to examine contractual conditions
that adopted those rules (despite their shortcomings).73
In line with the general principle of Israeli law, section 24 of the SCL clarifies that its
provisions do not derogate from any other law under which contract clauses might be
deemed void or voidable. However, challenging onerous clauses is usually easier
under the SCL than under the Contracts (General Part) Law, which addresses defects
in contract formation (mistake, deceit, duress, and extortion), as well as contracts
that are illegal, or contrary to public policy.74 Unlike the SCL, under the general
Law, customers must show causality between the defect and signing the contract.
The implications are usually different as well: contracting defects render the contract
wholly or partially voidable, whereas the SCL targets only the disadvantageous
69
Elderly Residence, para 13 (available at Nevo, May 28, 2013);
70
Attorney General v. SHL Telemedicine Ltd, paras 38–43; (available at Nevo, April 30, 2007).
71
Migdal HaZahav Ltd. v. Attorney General, paras 9–21 (available at Nevo, December 11, 2003).
72
“Lev HaIrr” Condominium Board v. O’Neill Construction Ltd. (available at Nevo, September
21, 2014).
73
Association of Residents of Retirement Communities v. Attorney General (available at Nevo,
December 30, 2014).
74
Sections 14, 15, 17, 18, and 30, respectively, of the Contracts (General Part) Law, 1973.
clause and preserves the contract itself. Specific provisions that expand the notions
of deceit, duress, and extortion apply to consumer transactions.75
Of the various contracting defects, only extortion explicitly refers to extreme
inadequacy of remuneration as a constitutive element of the defect. However, for
evidentiary and for substantive reasons—that is, both because extreme substantive
unfairness is a strong indication of a flawed contracting process, and because courts
do care about the fairness of exchange—inequality of exchange also looms large
when assessing other contracting defects.76
These general rules are complemented by specific laws that regulate prices in
various markets. Following economic liberalization and deregulation, the scope of
price regulation appears to be smaller nowadays than it used to be in the 1950s and
1960s, but it is still quite prevalent. One remnant of old price regulation, which is
becoming increasingly rare, is the rent control mechanism set under the Tenants’
Protection Law (Consolidated Version), 1972. A more recent piece of legislation—
the Supervision of Prices for Goods and Services Law, 1996—authorizes govern-
ment ministers to regulate the price of goods and services in monopolistic and
low-competition markets, for state-subsidized goods and services, and for essential
goods and services. It also authorizes the regulation of prices when goods or services
are scarce due to exceptional circumstances, or when such regulation is necessary to
achieve the goals of government economic or social policies.
Pursuant to this broad authorization, price limits currently apply, for example, to
public transportation fares77; the fees charged by driving schools for driving tests78;
fees charged by private entities (usually construction firms) for private registration
services that they provide pending title registration in the official Land Registry79;
school textbooks80; fuel sold at gas stations81; blood transfusion components82;
prescription drugs83; and deposits for household gas equipment.84
75
Sections 2–7A of the Consumer Protection Law, 1981; sections 55–58 of the Control of Financial
Services (Insurance) Law, 1981; sections 3–4 of the Banking (Service to Customer) Law, 1981.
76
See Zamir (1998, 2016).
77
See, e.g., Supervision of Prices for Goods and Services (Fares for Buses and Local Trains) Order,
2003; Supervision of Prices for Goods and Services (Train Fares) Order, 2008.
78
Supervision of Prices for Goods and Services (Applying the Law to Driving Test Services,
Determining Level of Supervision, and Setting Maximum Prices) Order, 2014.
79
Supervision of Prices for Goods and Services (Applying the Law to Service Providers in the
Absence of Registration in the Title Land Registration) Order, 1999.
80
Supervision of Prices for Goods and Services (Maximum Price for Approved Textbooks) Order,
2014; Supervision of Prices for Goods and Services (Maximum Price for Approved Textbooks)
(Books for Arabic Speakers) Order, 2016.
81
Supervision of Prices for Goods and Services (Maximum Prices at Filling Stations), 2002.
82
Supervision of Prices for Goods and Services (Maximum Prices for Blood Products), 2008.
83
Supervision of Prices for Goods and Services (Maximum Prices for Prescription Drugs), 2001.
84
Supervision of Prices for Goods and Services (Determining Level of Supervision and Maximum
Prices for Gas Equipment Deposits), 2015.
The Supervision of Prices for Goods and Services Law, 1996, is not the only Law
used to supervise prices. Thus, the prices of water, electricity, public summer
day-camps, and the legal costs paid by purchasers of new apartments are capped
pursuant to special legislation.85 Of particular importance is the legislation regarding
interest rates, and default interest rates. Currently, the Interest Law, 1957, and the
Interest Rate (Determination of Maximum Interest Rate) Order, 1970, set general
limits on those rates, and further restrictions apply to non-bank lenders, pursuant to a
specific Law.86 The separate regulation of loans by banks and non-bank entities has
resulted in some anomalies. To level the playing field and to encourage competition
in the credit market, the Regulation of Non-Bank Loans Law, 1993, has recently
been renamed the Fair Credit Law, and its provisions—including its caps on credit
rates and other protections for borrowers—currently apply equally to all institutional
lenders. The legislative process of this reform was completed in July 2017, and most
of its provisions came into force in November 2018.87
Apart from the judicial supervision of price terms under the SCL and recent
statutory reforms regarding interest rates, other regulations of prices and price terms
in specific contexts do not appear to be systematic, but rather the product of ad-hoc,
sporadic initiatives by governmental agencies and legislators.
7 Promoting Price Transparency and Competition
Much like other legal systems, Israeli law imposes extensive disclosure duties on all
aspects of consumer and other transactions. Some of these duties pertain to prices,
payment conditions, and the like. Thus, various provisions in the Consumer Protec-
tion Law, 1981,88 and in the Fair Credit Law,89 1993, deal with disclosures. These
85
See section 112 of the Water Law, 1959; section 31 of the Electricity Sector Law, 1996;
Supervision of Prices for Public Summer Day-Camps Law, 2017; and section 6C of the Sales
(Housing) Law, 1973 (as amended in 2014), and Sales (Housing) (Restriction of Legal Expenses)
Regulations, 2014, respectively.
86
Sections 5 and 6 of the Regulation of Non-Bank Loans Law, 1993.
87
Regulation of Non-Bank Loans Law (Amendment no. 5), 2017.
88
See, e.g., sections 2(a)(13) (disclosure of products’ ordinary price, or the price charged in the past,
including credit conditions and interest rate), 9 (various aspects of credit sales, including the
non-credit price, interest rate, any price additions, payment times, etc.), 14A(b)(9–10) (various
components of the price in timesharing transactions, including maintenance payments), 14C(a)
(3) (price and payment conditions in telemarketing), and 17B (suppliers’ duty to display the price
visibly and clearly on products’ packages, in Israeli currency, and the price per specific weight or
volume units).
89
Section 3 requires disclosure in writing, prior to signing the agreement, of the interest rate for the
loaned amount, calculated annually and incorporating compound interest in the calculation, in
accordance with the loan repayment dates; the components of variable interest, if applicable, the
principles for changing the interest rate, and the dates or events upon which rates are to be changed;
the type and rate of linkage to an index or another base, if applicable; the base of linkage and its
disclosures are meant to facilitate rational decision-making by customers and to

promote competition, but their efficacy is questionable due to problems of informa-
tion overload and customers’ bounded rationality and limited numeracy.90
In general, the fact that the Israeli market is relatively small and concentrated is a
major concern for policymakers. While effective steps to increase competition have
been taken in the past decade in several spheres—notably the cellular phone
services—competition in other areas is still imperfect, both between Israeli suppliers
and between Israeli and overseas ones. A case in point is the Israeli banking system,
which is highly concentrated. We will not discuss the various initiatives to introduce
structural changes that would enhance competition in this sphere—such as recent
recommendations to separate the ownership of banks and credit-card providers and
to facilitate the entry of new banks,91 which formed the basis of recent legislation.92
Instead, we will focus on regulatory measures concerning bank-customer relation-
ships. It should be noted that in Israel, the Banking Supervisor is entrusted both with
securing the financial stability of the banks and protecting bank customers. Much
effort, it seems, is devoted to the latter goal, even at the expense of banks’ profits.93
The limited competitiveness of the Israeli banking system would have allowed
fees to skyrocket were it not for strict peremptory rules, backed by administrative
and criminal sanctions,94 coupled with judicial inclination to view banks as quasi-
public bodies and to hold them to high standards of conduct vis-à-vis their cus-
tomers.95 This regulation proved to be vital during the 2008 subprime crisis, in
which Israel suffered little, and recovered quickly. In the years preceding the crisis,
the Banking Supervisor had kept banks on a tight leash, resulting in a stable,
conservative structure with a reliable mortgage system and no significant real estate
or credit bubbles; this strict supervision continued throughout the crisis, as well.96
Two specific examples relating to price terms are bank fees and interest discounts
during the initial period of residential loans. Following public criticism of the
date, and the elements to which linkage applies; the effective annual cost of the credit; and more.
See also section 15 of the Banking (Service to Customer) (Full Disclosure and Submission of
Documents) Regulations, 1992.
90
See, e.g., Ben-Shahar and Schneider (2014). See also Zamir and Teichman (2018), pp. 314–318.
91
Ministry of Finance, Committee for Increasing Competition in Common Banking Financial
Services: Summary Report (September 1, 2016): http://www.mof.gov.il/Committees/
CompetitivenessCommittee/SummarizingReport.pdf.
92
Law for Increasing Competition and Reducing Concentration in the Israeli Banking
Market, 2017.
In the same vein, the 2016 Credit Data Law (effective November 2017) mandates the establish-
ment of a credit data register accessible to licensed credit bureaus and the customers themselves, to
assist non-bank lenders in formulating reliable credit ratings based on information that used to be
held almost exclusively by the banks.
93
Plato-Shinar (2014), pp. 17–21.
94
Plato-Shinar (2016), pp. 14–15, 31–35, 45–51, 66–72, and 139–141.
95
Ibid., pp. 15, 40–41, and 135; Plato-Shinar (2007).
96
Plato-Shinar (2016), pp. 89–90 and 197; Razin and Rosefielde (2016), pp. 61–62; Portnov et al.
(2016), p. 399.
complex, onerous fees charged by banks—which were nearly impossible to under-

stand or compare—a 2007 legislative amendment allowed the Banking Supervisor to
introduce a far-reaching reform in 2008. Rather than merely requiring more disclo-
sure, the Supervisor instructed the banks to reduce the number of fees from several
hundred to a few dozen.97 Moreover, to increase transparency and facilitate compe-
tition, the Bank of Israel created a website with links to the price lists on the various
banks’ websites (which they are required to display, according to the 2008 reform).98
The success of this reform is, however, unclear. On the one hand, a comprehen-
sive empirical analysis found that shortly after the reform, the total cost of fees
dropped significantly, the variability of fee rates among banks increased, and that the
reform predominantly benefited the weaker, less sophisticated sectors of the popu-
lation.99 On the other hand, a few years later it was argued that the banks were
sharing information, and possibly colluding, with a view to raising fees. This led to a
class-action lawsuit that ended with a multi-million shekel settlement (without the
banks conceding to any wrongdoing).100 The Banking Supervisor responded by
appointing an inter-ministerial team to examine competitiveness, whose conclusions
sparked a series of regulations, including reduced fees for small businesses and
compelling banks to offer uniform “baskets” of fixed-price current-account fees.101
The other issue worth mentioning—particularly because it has been handled by
Israeli regulators differently than by their overseas counterparts—pertains to interest
discounts during the initial period of residential loans. Such initial discounts exploit
borrowers’ shortsightedness, limited computational ability, and other cognitive
biases to induce them to taking on more and larger loans—which, as the subprime
crisis dramatically demonstrated, they might be unable to repay. In most legal
systems, regulators have dealt with this and comparable practices by imposing strict
disclosure duties—a well-known example being the U.S. Truth in Lending Act. As
previously noted, although such duties are also imposed under Israeli law, the
97
Banking Rules (Customer Service) (Fees), 2008; Bank of Israel, About the 2008 Bank Fees
Reform, available at: http://www.boi.org.il/en/ConsumerInformation/ConsumerIssues/Pages/
AmalotReform.aspx, accessed September 19, 2018; See also Plato-Shinar (2016), pp. 143–145;
Haim (2013), pp. 57–58; Bachar (2012), pp. 103–119.
98
Bank of Israel, Price Lists of Banks and Credit Card Companies (Fees), available at: http://www.
boi.org.il/en/ConsumerInformation/Pages/CommissionRates.aspx. Page consulted on September
19, 2018.
99
Bachar (2012), pp. 222–226 and 231–232.
100
Sharnoa Computerized Machines Tel-Aviv Ltd. v. Bank HaPoalim Ltd. (available at Nevo, May
15, 2016). See also Haim (2013), p. 58.
101
Banking (Service to Customer) (Supervision on Basic Track Service) Order, 2014; Bank of
Israel, Encouraging Banking Competition and Increasing Transparency (July 8, 2013), available at
http://www.boi.org.il/en/NewsAndPublications/PressReleases/Pages/08-07-2013-Pikuach.aspx;
Bank of Israel, Summary Report of the Team to Examine Banking Competitiveness (April
18, 2013), available at: http://www.boi.org.il/en/BankingSupervision/Survey/Pages/competition.
aspx; Plato-Shinar (2016), pp. 145–146.
regulator was not content with them, and in 2004, well before the subprime crisis, the
Bank of Israel banned the practice of short-term teaser rates in mortgages
altogether.102
8 Conclusion
As the first country to enact a special Law to deal with standard-form contracts and to
experiment with various legislative, administrative, quasi-judicial, and judicial
mechanisms to supervise price terms, Israel is a fascinating laboratory in these
spheres. While Israel faces unique challenges due to its small size and its particular
social, political, and economic conditions, most of the issues discussed above are
common to all market economies. While there is much to be done at the macro-level,
especially with regard to the enhancement of competition, as far as contract and
consumer law is concerned, much, it seems, can be learned from the Israeli
experience.
Acknowledgments We thank Hila Davidovich, Ronnie Neubauer, and Reut Ofek for helpful
comments.
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Form Contracts in Italy
Michele Graziadei
Abstract The control of price related terms in consumer contracts in Italy is

governed by a complex set of rules and regulations. In this field, the traditional
distinction between private and public law has given way to new approaches,
spanning the public law/private law divide. The civil code and the consumer code
(which implements EU law on unfair contract terms) provides limited assistance in
this matter, while special regulations do offer substantial relief against unfair price
related terms in certain contractual contexts. The enforcement of rules protecting
consumers in this respect is no more the exclusive preserve of Courts; administrative
agencies and alternative resolution bodies are regularly involved in the same exer-
cise. Nonetheless, at least some of the major problems that arise with respect to the
control of price conditions in mass transactions are still directly dealt with by the
legislature, even after waves of privatisation. The policy in favour of more informed
consumer decisions still has to be fully achieved, while the regulators are beginning
to react to marketing techniques that tend to exploit consumers’ cognitive biases.
The author is a component of one of the panels of the Arbitro Bancario e finanziario—Banca
d’Italia. Opinions expressed in this paper are personal. The author declares no conflict of
interest. In this essay references to the literature have been kept to a minimum, to respect the
word limit set by the editors of the volume. The author thanks Dr. Marco Giraudo for his
comments on the manuscript and Mr. Michael Gardiner for editorial assistance. The usual
disclaimer applies.
M. Graziadei (*)
University of Turin, Department of Law, and Collegio Carlo Alberto Fellow, Turin, Italy
e-mail: michele.graziadei@unito.it

https://doi.org/10.1007/978-3-030-23057-9_17
452 M. Graziadei
1 Freedom of Contract and Its Limits in Italy: A First

Introduction
In the Italian legal system, freedom of contract is usually presented as a key principle
of contract law, concurring with other contractual principles to the regulation of
contracts. The principle in question is indirectly protected under the Italian Consti-
tution (1948), as a way to express the right to develop one’s personality (Cost. it., art.
2), and as a manifestation of the freedom to conduct a business, that cannot be in
conflict with social utility, or individual security, liberty and dignity (Cost. it., art.
41).1 The Italian Constitutional Court upheld the principle on a number of occasions,
but it has also ruled that the legislature can intervene to regulate freedom of contract
under art. 41 of the Italian Constitution, provided that this intervention falls within
the boundaries of what is properly justified.2
In recent years, constitutional provisions have been invoked in a few cases by the
Courts to assess the fairness of certain contractual terms (see Sect. 2). From an
historical perspective, the drafters of the civil code of 1942 were aware of the
problems arising from the asymmetry of the position of the contracting parties on
the market. This awareness explains why the civil code contains a few provisions
that should have worked to safeguard contractual freedom against one sided con-
tractual terms (see Sect. 2). The advent of the republican constitution, the develop-
ment of consumerism, the introduction of Italian antitrust legislation in the 1990s,
and the successive waves of liberalisation and regulation, as well as the impact of EU
law on the development of the internal market, have all contributed to the ripening of
new thinking about the contemporary dimensions of freedom of contract and its
limits. This has triggered the evolution of contract law. What once was considered
‘private’ behaviour—namely the conduct of individuals and firms on markets—is
now regulated with a view to advance public policy goals, a movement that can be
summed up in the formula of ‘regulated autonomy’.
This trend extends well beyond the field of consumer contracts. Historically, it
was inaugurated by legislation dedicated to labour contracts which was first passed
by Parliament between the end of the nineteenth century and the first decades of the
twentieth century. By now, the vast field of contractual relationships in which the
parties’ position is asymmetrical is regulated in Italy by laws that tend to control the
risk of an abuse of the contractual relationship by one party to the detriment of the
other, and the functioning of market.3 Subcontracting, franchising, commercial
agency, distribution contracts in the agro-industrial sectors, etc., are all governed
by provisions that in one way or another pursue these goals. Still, the framework of
EU law is of crucial importance because it provides the core rules applicable in
1
Sacco and De Nova (2016), pp. 27 ff.
2
See, e.g. Corte cost., 11 February 1988, n. 159 (compulsory insurance scheme for motor vehicles).
3
See, e.g., Comparato et al. (2016), pp. 35 ff; Comparato and Domurath (2015), p. 267; Roppo
(2009), p. 304.
Control of Price Related Terms in Standard Form Contracts in Italy 453
business to consumer contracts and more generally proceeds on the basis that private
autonomy is regulated autonomy.4
When the Italian Constitution entered into force in 1948, neither the European
Convention of Human Rights, nor the Treaty establishing the European Economic
Community, were yet existing. In the following decade, Italy became a founding
member of the Council of Europe and of the European Union. Hence, the above
mentioned constitutional principles and Italian law more generally are now impli-
cated in the dynamics relating to the implementation of European fundamental rights
law and EU law, which provide, in their own right and for their own purposes,
protection of the principle of freedom of contract, within certain boundaries.5
According to art. 1322 CC, the parties to a contract can freely determine its
content, within the limits established by law. The first section of art. 1322 CC is
generally taken to be the consecration of freedom of contract as a fundamental
principle of private law. A general limit imposed to freedom of contract is that
contracts can constitute, regulate, or extinguish patrimonial relationships only (art.
1321 CC, see also art. 1174 CC). This precludes the possibility to contract over non
patrimonial matters. Agreements of this kind fall outside the scope of the law of
contracts, and their validity and enforceability is the origin of several problems.6
The wording of art. 1322 CC admits the possibility to limit freedom of contract by
law (legge), and therefore legislative acts may impose such limits, provided that they
are within the boundaries set by Italy’s constitutional norms, EU law, and European
fundamental rights law. For example, the legislature may establish a system of
compulsory motor insurance, or of compulsory insurance for medical doctors
(in force since 2017).7 The second section of the same article provides that the
parties can also enter into contracts that are not governed by specific provisions of
law (innominate contracts), to pursue interests that are worthy of protection under
the law. The qualification of the rule is a reminder of the fact that the Italian civil
code goes back to 1942, and that the economic and political system prevailing at the
time was illiberal. The last part of the provision is usually read in a liberal way now,
by assuming that any interest that the parties pursue is, in principle, worthy of
protection, if the contract does not run against mandatory rules of contract law,
that include, e.g., ordre public and good morals (CC art. 1343). In assessing freedom
of contract, appropriate weight must also be given to the general prerequisites
4
For reflections on the evolution of European consumer contract law and its present features:
Graziadei (2016), pp. 82 ff.; Sibony and Helleringer (2015). The central place that must be
recognised notion of ‘regulated autonomy’ is highlighted in the path breaking works of Hans
Micklitz.
5
A full discussion of the impact of European Convention of human Rights and of EU law in this
matter is beyond the scope of this paper. The judgment in CJEU Judgment of 18 July 2013, Alemo-
Herron and Others, C-426/11:EU:C:2013:521 highlights the weight that the notion of freedom of
contract has under the EU Charter of fundamental rights. For commentary see: Hesselink (2016),
p. 425; Weatherill (2014), p. 167.
6
For an analysis of this theme: Sacco and De Nova (2016), pp. 963 ff.
7
Medical doctors must be insured under the law that, inter alia, reformed medical liability (art. 10 of
the law 2017, n. 24). Compulsory motor car insurance goes back to the law 990/1969.
454 M. Graziadei
established by our legislation for contracts to be valid, such as causa and form,
rescission for grossly unfair transactions as regulated by the civil code,8 as well as to
obligations of good faith and fair dealing. These requirements fall under the general
rules on contract law, and will not be examined in detail here.
Freedom of contract must be protected from its abuse, in the first place. The
codice civile was one of the first codes to tackle the problem with respect to standard
form contracts by introducing for the first time in our law a specific regime
governing certain unfair contract terms. Art. 1341 CC provides that unfair contrac-
tual terms, not specifically approved in writing, are not binding upon a contracting
party. The rule applies to all kind of contracts, whether concluded by consumers or
not, that qualify as standard form contracts. More recently, Directive 93/13/EEC on
unfair contract terms9 was implemented in Italy with the enactment of an additional
set of rules on unfair contract terms in consumer contracts. These rules are now set
out in the Consumer Code (Codice del consumo, Legislative Decree no. 206 of
6 September 2005, with amendments), arts. 34–37.10 Art. 2 of the same Code
proclaims with a certain emphasis that the individual and collective rights of
consumers include as ‘fundamental rights’ the right to “fairness, transparency and
equity in contractual relations”. As explained in the following sections, more specific
provisions come into consideration as well with respect to certain sectors of the
economy, or for certain contractual relationships.
Freedom of contract typically includes the right to determine the price that is
agreed between the parties. Nonetheless, the legislature can regulate the price of
certain goods or services, or the consideration which is due as the quid pro quo for
performance, and may also delegate these powers to certain administrative bodies,
that act as regulatory agencies. Price control legislation in Italy has a distinguished
career. For example, until a few decades ago, the price of bread was fixed by the law;
rent control legislation was applicable to the greatest part of the housing sector up
until the 1980s, as well as to agricultural leases. This landscape has changed with the
wave of liberalisations and privatisations that abolished or softened most of these
controls in the last decades of the twentieth century. But in certain sectors of the
economy the parties are not free, or completely free, to fix the price over and above
certain thresholds prescribed by the law, as it happens with respect to credit
agreements (see below Sect. 5), and for several aspects of contracts relating to the
supply of energy, gas, or telecom services.
The Italian civil code enacts two provisions that set a general limit on the price
that can be agreed upon under certain circumstances. The first deals with unfair
contracts concluded in presence of an imminent, serious danger to life or health, if
this is known to the other party to the transaction (art. 1447 CC). The second
8
This point is covered in Sect. 2.
9
95/29.
10
An English translation of the Consumer code is available on the web site of the Autorità Garante
della Concorrenza e del mercato: (2005) (the translation must be checked for subsequent
amendments).
concerns contracts concluded by a person in need, if the consideration paid or

promised was grossly disproportionate and the other party knew that the contract
was concluded by a person who was under the pressure of the need (art. 1448 CC).
For the latter case, the code provides that the relevant gross disproportion is
established if the consideration paid or promised to obtain performance exceeds by
one half the value of the counter performance at the time of the conclusion of the
contract. In both cases, the contract can be rescinded, unless it is duly modified to
obtain fairness in the exchange (art. 1450 CC). The limitation period established for
rescinding the contract is relatively short, namely one year since the conclusion of
the contract; a longer period applies only when the extortionate transaction amounts
to a crime (art. 1449 CC). These provisions place a substantial burden of proof on the
aggrieved party.
In other cases, the legislature limits the power of the parties to determine the price
with regard to specific contracts. The consequences of the violation of a mandatory
provision of law establishing a certain price for certain goods or services in Italy is
established in a general way by the civil code. The Code provides for the automatic
insertion in contracts of the price for goods and services set by the law, even when
the parties agree to a different price (art. 1339 CC). This is a clear and remarkable
deviation from the autonomy of the contracting parties with respect to price deter-
mination. The origins of this article of the civil code are rather obscure, but despite
the criticism levelled against it, it is regularly applied by our Courts. There are
similar provisions with respect to specific contracts too. For example, if a bank fails
to correctly indicate an effective annual percentage rate (APR) in a consumer credit
contract the agreed interest rate shall be considered void, and the applicable rate is
the interest rate on Italian treasury bond in the last year (Italian banking law, art. 117
(7)).11
Although market competition cannot by itself iron out unfair contract terms, the
legislature can use the legal framework regulating market competition as a peg to
control the use of such terms. In Italy the Law no. 287 of 10 October 1990 introduced
a first set of national antitrust rules (“The Competition and Fair Trading Act”). This
law established an independent administrative authority (Autorità Garante della
Concorrenza e del mercato—AGCM), governed by a Board composed by a Pres-
ident and two members, that carry out a number of tasks. It is financed by annual
allocations through a special chapter of the Ministry of Economic Development’s
budget, as well as being partly financed by the firms regulated by the Authority. The
Authority is in charge of the antitrust business, as well of the repression of unfair
commercial practices, of misleading and unlawful comparative advertising, and of
the application of conflict of interests laws to government-office holders. Since 2012,
the Authority has also the power to declare that contract clauses in standard form
consumer contracts are unfair, and to discourage their use, by making known to the
public their unfairness. The legislative decree 24 January 2012 n. 1 (Disposizioni
urgenti per la concorrenza, lo sviluppo, delle infrastrutture e la competitività),
11
Testo unico bancario, legislative decree 1 September 1993, n. 385, as amended.
456 M. Graziadei
converted into law with modifications by the law 24 march 2012, n. 27, and
eventually consolidated as art. 37bis of the Consumer Code, grants the Authority
the power to take action in this matter, either on its own motion, or on demand of a
number of subjects. The decisions of the Authority that declare certain terms unfair
can be challenged before the administrative courts, in the first instance before the
Tribunale Amministrativo per il Lazio, and on appeal before the Consiglio di Stato.12
The task of inhibiting standard contracts containing unfair contract terms is also
entrusted to the Chambers of Commerce, under art. 2 of the legislative decree
15 February 2010, n. 23 (Riforma dell’ordinamento relativo alle camere di
commercio, industria, artigianato e agricoltura). This form of control, if it does
not lead to compliance by firms, may be followed by judicial proceedings instituted
under art. 37 of the Consumer Code by the Chambers of Commerce to inhibit by
judicial decision the use of unfair standard terms.13 To facilitate recourse to fair
contract clauses the Chambers of Commerce under the same legislation have the
power to offer to businesses and to the public standard form contracts that do not
include unfair contractual terms. Several Chambers of Commerce in Italy have
published these standard terms contracts for certain business sectors on their web
sites.
While the AGCM and the Chambers of Commerce have a general competence to
promote the use of fair standard terms in consumer contracts, some public entities or
agencies are entrusted with more specific tasks in these fields. The Banking law
contains several provisions applicable to standard form consumer contracts, which
detail their content in terms of form, adequacy and transparency requirements
(Banking Law, arts. 115 ff.). Under its statutory powers, the Bank of Italy has
recently negotiated with the banks operating in Italy and with the Ministry of the
Economy a cost free ‘plain vanilla’ deposit account to be offered to low income
clients that are resident in the European Union. This type of contract can be offered
also to other clients, provided that its costs are determined on a reasonable basis, and
having in mind the purpose of financial inclusion. Other independent Authorities
have regulatory powers concerning public utilities (energy and gas contracts fall
under the competence of ARERA –Autorità di regolazione per reti energia e
ambiente), and they too issue regulations that are applicable to consumer contracts;
some of these regulations influence the determination of the price of the service or
the goods to which consumers must have access, as explained below (Sect. 2).
12
For a comprehensive analysis of the system: Battelli (2014).
13
Consumer Code, art. 37: “Consumers’ associations pursuant to Article 137, associations
representing professionals, and Chambers of Commerce, may bring proceedings against any
professional or professional association that uses or recommends the use of contractual terms
drawn up for general use, and may request the competent court to grant orders preventing the use
of terms that have been found unfair (. . .). Injunctions may be granted, when there are fair grounds
of urgency, pursuant to Articles 669-bis et seq. of the Civil Procedure Code. The court may direct
that the order be published in one or more newspapers, of which at least one is distributed
nationwide. For all matters not covered by this Article, the provisions of Article 140 shall apply
to applications for injunctions brought by consumers’ associations. . .”.
The Italian Consumer code, art. 140bis, which became effective in 2010, and was
then amended in 2012, introduces a means of collective redress that was initially
presented to the public as a kind of class action (azione di classe) by which one could
have sought damages resulting from the use of unfair contract terms. The provision
turned out be ‘a blatant debacle’,14 because it was introduced without strong political
support, and is currently considered to be a largely ineffective means to vindicate
consumers’ rights. Part of the problem lies in the chronic inefficiency of the Italian
civil justice system, which offers poor incentives to file these claims.15 It is too early
to know what consequences the transposition in Italy of the Directive shall have on
actions for antitrust damages (legislative decree n. 3/2017, implementing Directive
2014/104/UE16), perhaps this will be a more successful effort to provide a remedy
against anticompetitive practices. On the other hand, the associations of consumers
and “users” that are registered in the list kept by the Ministry of Economic Devel-
opment (Cons. Code art. 137) can bring actions to protect consumers and users’
collective interests by demanding injunctive or restorative relief (Cons. Code, art.
37, 139–140). These associations can apply to a Court to obtain: a prohibition order
against actions damaging the interests of consumers and users; suitable measures to
remedy or eliminate the damaging effects of any breaches; an order to publish
measures in national or local newspapers, where such publication measures may
contribute to correct or eliminate the effects of any breaches. Recourse to this type of
judicial relief by consumers’ associations is also not very common, but a few
decisions have been rendered to inhibit the use of unfair contract terms by banks,
for example.17
Italy has some alternative dispute resolutions systems that provide cheap and fast
means of resolution of consumer complaints for certain types of litigations, such as
those relating to banking services (arbitro bancario e finanziario, set up by the Bank
of Italy), telecommunications (so called corecom—comitato regionale di controllo—
under the surveillance of AGCM), energy and gas, etc. (supported by ARERA). The
most recent of these organism is the Arbitro per le controversie finanziarie, dedi-
cated to financial services, set up by the National commission for the supervision of
the stock exchange (Consob).
These organisations were created in Italy to implement EU law on alternative
dispute resolution mechanisms. Altogether, they handle a high number of individual
complaints each year, and effectively provide relief for many if not most consumer
14
Silvestri (2014), pp. 79 ff. and 98 ff.
15
Pailli and Poncibò (2018). The numbers as reported in this publication are telling: since its
introduction in 2010, up to the beginning of 2016, 58 azione di classe were filed, 18 were declared
non admissible and were rejected; 10 were declared admissible (3 reached the decision); 30 are
pending at the admission stage.
16
Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on
certain rules governing actions for damages under national law for infringements of the competition
law provisions of the Member States and of the European Union Text, OJ 2014, L 349/1.
17
Trib. Milano, Ordonance, 3 April 2015; Trib. Biella, Ordonance, 7 July 2015, annotated by
Petrazzini (2015).
458 M. Graziadei
cases in their respective sectors.18 Although the decisions rendered by these organi-
sations do not have the same binding force of judicial decisions, consumers who
have concluded contracts containing unfair terms quite often obtain prompt and
effective relief by individual recourse to these organisms. At least with respect to
banking and telecom services consumers are massively presenting their claims to
these alternative dispute resolution panels. If not satisfied by their decisions, they can
still litigate their claims in court.
2 From the Civil Code to the Consumer Code and Beyond
2.1 Control of Standard Contract Terms Under the Civil Code
The control of standard contract terms in Italy is primarily governed by the pro-
visions of the Civil Code and of the Consumer Code.19 The first set of rules,
contained in the civil code, have a general character, and are in principle applicable
to all contracts, whether concluded by consumers or not, with the exceptions
provided by the legislation that specifically regulates consumer contracts. The
second set of rules, applicable to consumer contracts only, is contained in the
Consumer Code. Other provisions, contained in more specific legislation
(or secondary sources) governs contract terms with respect to specific contracts,
such as consumer credit, which is regulated in the Banking law, or telecom contracts
that are regulated by the Electronic communication code (dlg. 1 August 2003,
nr. 259). This is a fragmented field, and therefore it is difficult to provide a complete
view of the law in force, for example contracts for water, gas and electricity are also
governed by regulations issued by the respective national regulators.
Art. 1341 CC governs the effects of standard form contracts prepared by one
party, that are set out in general conditions of a contract. Art. 1341 CC holds that
these terms are effective only if at the time of formation of the contract the other
party: “knew of them, or should have known of them by using ordinary diligence”.
In any case, according the same article:
some specific types of clauses are not effective unless specifically approved in writing. Such
clauses are those which establish, in favour of him who has prepared them in advance,
limitations on liability, the power of withdrawing from the contract or suspending its
performance, or which impose time limits involving forfeitures on the other party, limita-
tions on the power to raise defences, restrictions on contractual freedom in relations with
third parties, tacit extension or renewal of the contract, arbitration clauses, or derogations
from the competence of courts.
18
A complete description of these systems goes beyond the scope of this paper. For a first analysis
of the Arbitro bancario e finanziario that handles about thirty thousands claims every year under the
supervision of the Bank of Italy: Pellegrini (2015), pp. 131 ff. Abundant documentation on the
activity of this institution is accessible via the website: https://www.arbitrobancariofinanziario.it.
19
For a general discussion: Nebbia (2007).
Art. 1342 CC adds that this rule applies also to contracts concluded with the use
of standard contract forms. According to art. 1342 CC terms added to such forms
prevail over the original text, if incompatible with it. This rule establishes that
individually negotiated terms prevail over standard terms. Lastly, art. 1370 CC
enacts a version of the contra proferentem rule: “Terms contained in standard
terms contracts or in forms or formularies which have been prepared by one of the
contracting parties must be interpreted, in case of doubt, in favour of the other
party.”.
As mentioned above, these provisions are applicable to all contracting parties,
whether they are consumers or businesses. These rules govern the incorporation of
general conditions of contract into the contract, and make most one-sided, unfair
terms, binding, provided that they are specifically approved in writing. In any case,
the party preparing the contract has a duty to speak clearly, because contract terms
that raise doubts as to their meaning shall be interpreted in the sense that is more
favourable to the party that has not had the benefit of drafting the terms.
A first question under art. 1341 CC is to establish whether the standard terms that
one party intends to incorporate into the contract were known (or ought to have been
know) by the contracting party against whom they are invoked, or not. Standard
contract terms printed on the back of the ticket issued by an automated parking lot
can, for example, be excluded from the contract because the client did not have a
have a reasonable opportunity to consider them when the contract was concluded.20
The second question related to art. 1341 CC is whether the list of unfair terms that
it enacts is an exhaustive list or not. The prevailing opinion is that the list contained
in this article is exhaustive, so that recourse to analogy is not admitted, although the
language of the provision should be constructed to cover cases that are liminal.21 The
requirement of “specific approval in writing” has been interpreted to mean that the
unfair terms listed in that article must be specifically recalled in the contractual
document, and approved by a signature that is separate from the signature of the
contract as a whole (even if, for example, the unfair clauses are in large print in the
contract). This requirement is, however, easily satisfied in practice. Therefore, by
going through this formality, unfair contract terms are regularly incorporated into
contracts, and are thus rendered fully effective under art. 1341 CC. This is why the
protective effect of the provision contained in art. 1341 CC. is limited. Needless to
say, when this formality is omitted, for lack of care of the business, by chance, or for
any other reason, the unfair terms not specifically approved in writing are without
effect.
The rule set out in art. 1341 CC typically applies to contractual terms that
exonerate from liability for breaches of the contractual obligations. On the other
20
Cass., 26 February 2004, n. 3863 annotated by Bitetto (2004); Cass., 20 December 2005,
n. 28232; Foro it., 2006, I 2065.
21
Cass., 4 June, n. 14038.
460 M. Graziadei
hand, terms that actually define contractual obligations, are not subject to the
requirement of specific approval in writing. The line to draw in this respect can be
fine, and the Courts have repeatedly been engaged in the exercise of providing an
answer to this crucial question, because the efficacy of some terms depend on it.22
Two more specific provisions of the Civil Code limit freedom of contract with
respect to all contracts, including standard term contracts as well, whether concluded
with consumers or not. These are the rules governing the validity of exemption
clauses (art. 1229 CC), and penalty clauses (1382 ff. CC).
According to art. 1229 CC., any agreement that excludes or restricts liability for
cases of wilful default (dolo) or gross negligence (colpa grave), or exempts or limits
liability in cases where the act of the debtor or his auxiliaries constitutes a breach of
duties arising from rules of public order, is void. This provision cannot be derogated
from by the parties. A contract containing such an exemption clause shall maintain
its validity, while the contractual term that is void under this rule shall no longer form
part of the contract. As a consequence, for example, exemption clauses governing
the liability of a bank with respect to clients’ safe deposit boxes are void, if they
would exempt the bank for gross negligence or wilful default,23 and a contract term
exonerating a freight forwarder from liability for gross negligence, or wilful default,
is void as well.24
According to art. 1384 CC penalty clauses that require a contracting party to pay a
disproportionately high sum for a breach of contract may be subject to equitable
reduction by the Court.25 The power of the Court to reduce the amount due under
such a clause is currently justified with reference to the need to curb an abuse of
contractual freedom that is contrary to good faith. It is also claimed that this power
would be sanctioned by art. 2 of the Italian constitution, on the duty of solidarity.
The provision cannot be derogated from by the parties. The Corte di Cassazione held
that its application is not limited to the case of an express request asking for a
reduction by the non-performing party. The court may thus declare on its motion that
the penalty is manifestly disproportionate. Whether the agreed sum is ‘manifestly
excessive’ is to be evaluated in accordance with good faith. The excessive nature of
contract term is evaluated at the time when the contract is enforced, instead of when
it was concluded, to ensure that the clause has a compensatory function, rather than a
deterrent function.
The Civil code also provides as well special rules for the caparra confirmatoria,
namely a sum of money, or other fungible things, advanced by one party to the other
to both show willingness to fulfil the contract and secure the payment of the balance
due. Although in most cases the sums agreed as earnest money are not very high, and
22
Cass., Joint Panels 1 July 1994 n. 6225, Giur. it., 1995, I, 206 (banker’s liability for loss of items
contained in a safe deposit box).
23
Cass., Joint Panels 1 July 1994 n. 6225 (1995).
24
Trib. Milano, 3 July 2000.
25
Patti (2015), p. 309. An agreement to the contrary is without effect: Cassazione, 15 June 2018,
n. 15753 (ordinanza).
are given simply to confirm the seriousness of the agreement, in some cases the
caparra confirmatoria may be a substantial sum, and thus play out as a contractual
penalty. If the caparra is high, and indeed excessive, does the rule on reduction of
penalties apply here as well? The Corte di Cassazione answered the question in the
negative with respect to the sale of a building, because the power of the Court to
reduce an excessive penalty is exceptional. The question was raised again before the
Constitutional court in a subsequent litigation, with reference to a violation of art.
3 Cost, namely the principle of equality.26 The Court ruled that it is within the
powers of the judge to declare that a disproportionate caparra is void, all or in part,
being contrary to a mandatory rule of law, namely art. 2 of the Italian Constitution,
which proclaims imperative duties of solidarity, and in light of the principle of good
faith. This ruling has been received with mixed reactions, because several scholars
have expressed doubts and perplexity about an unstructured judicial control of unfair
clauses which could be considered void as being contrary to art. 2 Cost. Nonetheless,
the Constitutional Court pointed out one major difference between the current rules
on sums agreed as penalties to be paid under art. 1384 CC and the caparra
confirmatoria governed by art. 1385 CC. As a matter of fact, sums due as earnest
money go to the performing party only if the other party’s non performance is of
major importance, while contractual penalties could be established for minor viola-
tions as well.27
In considering these developments, one should keep in mind that, with respect to
consumer contracts, the power of the judge to reduce an excessive penalty has been
excluded by the CJEU. The CJEU ruled that such power unduly mitigates the
dissuasive effect of the inefficacy of such terms under Directive 93/13/EEC.28 In
Italy, this decision requires rethinking current practice. With respect to consumer
contracts, contract terms imposing excessive penalties for exercise of certain con-
tractual rights should be considered void, rather than subject to the power of the
judge to conform the contract to requirements of fairness in the exchange by
adjusting what is owed under the contract.
2.2 Control of Standard Contract Terms Under

the Consumer Code
At first, the implementation of Directive 93/13/EEC in Italy took place through

amendments to the civil code. In 2005 this was changed, and eventually the newly
enacted Consumer Code became the sedes materiae. A discussion of the features of
the Directive is beyond the scope of this chapter, but it is clear that the Directive, as
26
Corte Cost., 2 April 2014 n. 77 (ordinanza); Corte Cost., 24 October 2013, n. 248 (ordinanza).
27
For commentary: Vettori (2016), p. 1; Patti (2015), p. 309.
28
CJEU Judgment of 30 Mai 2013, Asbeek Brusse and de Man Garabito, C-488/11, EU:
C:2013:341.
462 M. Graziadei
well as many other measures enacted by the EEC and the EU is driven by a market
integration approach that explains certain common features of all these
instruments.29
Arts. 33–34 of the Consumer Code, which are applicable only in business to
consumer contracts, replicate the key provision of the Directive, and the list of ‘grey
clauses’ that are accordingly presumed to be unfair, unless the contrary is proved.
Art. 36 of the consumer Code added to that first list a few more contract terms that
are unfair even when individually negotiated. The terms contained in this second list
overlap with some of those that are in the ‘grey’ list of the Directive. The Italian
‘supplement’ includes the following terms: (a) contract terms that exclude or limit
the actions or legal rights of the consumer vis-a-vis the professional or another party
in the event of total or partial non-performance or inadequate performance by the
professional; (b) terms that bind the consumer to terms with which he had no
opportunity of becoming acquainted before the conclusion of the contract;
(c) terms which, even though individually negotiated, have as their object or effect
to exclude or limit the liability of the professional in the event of the death or
personal injury to the consumer resulting from an act or omission of the professional.
From this point of view, the level of protection established under the Italian
regime is higher than that provided for by the Directive.
Unfair contract terms governed by these provisions are void (Cons. C. art. 36).
This kind of invalidity may be invoked only to protect the consumer, and the judge
should indeed proceed on his or her own motion to do so, for the same purpose,
according to the jurisprudence of the CJEU and our own precedents.
Consumers associations, as well as other entities, such as Chambers of Commerce
and professional associations, can initiate judicial proceeding to enjoin the use of
unfair contract terms under art. 37 of the consumer Code, or under art. 140 of the
Code. As far as Consumer Associations are concerned, only by those associations
that are representative of consumers’ interests according to the law, namely who
possess some prerequisites established by the legislation, can initiate judicial actions
according to this rule. The Court rendering a judgment in these proceeding does not
have before itself all the circumstances of the concrete case. Therefore, although the
unfair nature of a term included in a contract with the consumer may have been
already judicially recognised, there is the risk that a single contract containing the
same term is not actually considered to be unfair, as it happens when that term was
individually negotiated.30 According to EU law, Courts are to draw all the conse-
quences provided for by national law to ensure that consumers will not be bound by
that term. In Italy this may lead to a Court order that provides that the decision shall
be published in one or more newspapers (Cons. Cod., 141 (3),(4)), and to the
imposition of a penalty on the defendant for delay in implementing the Court order.
As mentioned above, since 2012, an independent administrative Authority—the
AGCM—has the power to control unfair terms in consumer contracts. This
29
Graziadei (2016), pp. 82 ff.; Sibony and Helleringer (2015).
30
Cass., 21 maggio 2008, n. 13051.
independent agency may open proceedings leading to the declaration of unfairness

of a specific term or set of terms on its own motion, or under the impulse of a
consumer, a consumer association, or a business, either in a preventive way, or
ex-post. The decision of the Authority on the matter, after a preliminary phase, is
taken after hearing the party concerned. Such party has the duty to collaborate and
provide all the relevant information to assess the nature of the clause, including
explanations about the reasons and the objectives that motivate its insertion in the
contract and the way the clause will be negotiated with individual consumers. The
authority has the power to order on site inspections, to check documents and records,
as well as to order economic assessments of relevant data, consult experts, conduct
statistical analysis. . . etc.31 The decision of the Authority on standard terms is
merely declaratory, it does not affect the validity/invalidity of the term, and the
judiciary is not bound by it, but its deterrent effect is enhanced by the obligation to
publish it both on the web site of the AGCM, and of the business whose terms are
declared unfair. Failure to publish the decision on the web site of the business results
in a fine between €5000 and €50,000. This is not a serious fine, if compared to the
profits that may be reaped by resorting to unfair contract terms in certain business
sectors, but it is a fine that has reputational effects.
Is the Authority a tough regulator? It surely aims to be regarded as such. Recently,
it declared that the terms of use applied by WhatsApp Messenger to users based in
Italy are unfair on a number of counts. WhatsApp “Terms of Use” include a right of
withdrawal granted exclusively to the company, the limitation on liability in favour
of the company, and the identification of the competent court for disputes resolution
(currently only US Courts). All these terms have been considered unfair by the
AGCM. The Authority also considered unfair that, in case of a mismatch between
the original English version of the Terms of Use and the Italian translation of the text
made available to consumer, the first shall prevail. The norm that is infringed here is
the rule that, in case of doubt, the interpretation more favourable to the consumer
shall prevail (art. 35 Cons. Code). The Authority published this decision together
with another decision sanctioning WhatsApp with a fine of €3,000,000 for aggres-
sive trade practices. The sanction was applied to misleading users to subscribe to
new terms and conditions on the sharing of data with Facebook. WhatsApp misled
users to believe that they would have been cut out of the service if the new terms and
conditions were not accepted.32
As mentioned above, the decisions rendered by the AGCM on the unfair nature of
certain terms are subject to judicial review. The rule here is judicial deference to the
evaluation conduced by the Authority. The judge can therefore only assess whether
31
Regolamento sulle procedure istruttorie in materia di pubblicità ingannevole e comparativa,
pratiche commerciali scorrette, violazione dei diritti dei consumatori nei contratti, violazione del
divieto di discriminazioni, clausole vessatorie.
32
The first ruling, dated 17 May 2017 (CV154) is available together with the second ruling of the
same date mentioned below in the text on the AGCM web site: <http://www.agcm.it/media/
dettaglio?id¼61dde0b6-d8aa-4a34-b9c8-aeb9a39ee71e>. The firm did not comply with the obli-
gation to publish this decision on its web site, and was further sanctioned by AGCM for this.
464 M. Graziadei
the facts upon which the decision is premised have been ascertained and check the
logical soundness of the motivation given for the adoption of a certain ruling.33 The
fact that the authority publishes its decisions relating to unfair terms on its web site
helps businesses and consumers to trace which clauses can be considered unfair, and
thus subject to subsequent judicial control. Italy’s Union of the chambers of com-
merce manages a similar database, but this seems to be much less effective in terms
of publicity and effects on the behaviour of contracting parties.

Terms
The Italian implementation of Directive 93/13/EEC prevents the possibility to

declare that a certain term is unfair because it stipulates a disproportionate price
for goods or services, if this element is clearly identified in plain, intelligible
language, while under the general law a disproportionate price does not per se render
the contract invalid.34
Accordingly, art. 34 of the Consumer Code provides that:
Assessment of the unfair nature of the terms shall relate neither to the definition of the
subject matter of the contract nor to the adequacy of the price of the goods or services as long
as these elements are identified in plain, intelligible language.
This means, first of all, that if the price is not set in plain, intelligible terms, the
term in question may be considered unfair. The issue is still debated because the
Italian legislation, as well as the directive, does not spell out the consequences of
unclear language. The AGCM has ruled that to speak clearly in this context is not a
mere matter of using expressions which are linguistically accurate or precise. The
consumer must be put in a condition to understand what the effects of the contract
are. A similar position has been taken by the Arbitro bancario e finanziario, namely
the alternative dispute resolution institution set up by Bank of Italy to promptly
resolve dispute relating to banking contracts. According to this rule, for example, a
loan contract that is concluded by a consumer in Swiss francs, according to a rather
obscure formula does not satisfy the transparency requirement under the Consumer
Code.35 This clearly follows on the ruling of the Court of Justice. In the case
Kásler,36 the CJEU held that:
not only that the relevant term should be grammatically intelligible to the consumer but also
that the contract should set out transparently the specific functioning of the mechanism of
33
Consiglio di Stato, 2 March 2004, n. 926, annotated by Bastianon (2005); Cass. Joint panels,
29 April 2005, n. 2358, annotated by Palmieri (2005).
34
Cass., 4 November 2015, n. 22567, Foro it., 2015, 2505.
35
Collegio di Coordinamento, decision n 7727 (20 November 2014).
36
CJEU Judgment of 30 April 2014, Kásler and Káslerné Rábai, C-26/13, EU:2014:282.
conversion for the foreign currency to which the relevant term refers and the relationship
between that mechanism and that provided for by other contractual terms relating to the
advance of the loan, so that consumer is in a position to evaluate, on the basis of clear,
intelligible criteria, the economic consequences for him which derive from it.
If, on the basis of this test, the language of the contract with respect to remuner-
ation due is not completely clear, the Courts can assess the proportionality of the
price on the basis of art. 24 of the Consumer Code. A good example in this respect is
a judgment by the Milano Court of Appeal relating to an estate agent’s contract. In
this case the principal signed a contract that stipulated a remuneration for the agent
which was basically the same whether the transaction with the third party went
through, or not. The Court held that, when the transaction does not go through, the
agent may still be entitled to a remuneration, but this must be proportionate to the
work done by the agent to under the contract. Since the term in question did not
reflect this approach and was rather ambiguous, the Court held that the term was
unfair, and therefore void.37
On the other hand, so far Italian courts have not explicitly relied on the distinction
between terms relating to the principal object of the contract and ancillary terms to
decide that, with respect to the latter kind of term, the price was unfair. This
statement should, however, be qualified, with respect to the case of a consumer
who fails to fulfil his obligation, and who is obliged under the contract “to pay a
disproportionately high sum in compensation” (Directive 93/13/EEC). As men-
tioned above, terms of this kind are either subject to judicial review under art.
1384 CC, if inserted in business contracts, or they are void, under art. 33 of the
Consumer Code.
Why is it that so far Italian courts have refrained from openly embracing the
distinction between contractual terms that define ‘the main subject-matter of the
contract’ according to art. 4(2) Directive 93/13/EEC and those terms that do not
concern it, which is instead en vogue in other European legal systems?38 Why have
they so far failed to seize this crucial distinction, considering that only the first class
of terms is excluded from a fairness check under the Directive and the Italian
legislation implementing it ?
One possible explanation lies in the peculiar wording of the Italian legislation
implementing art. 4(2) Directive 93/13/EEC, namely the text of art. 34(2) of the
Italian Consumer Code.
Under Art. 4(2) of the directive: “Assessment of the unfair nature of the terms
shall relate neither to the definition of the main subject-matter of the contract nor to
the adequacy of the price and remuneration, on the one hand, as against the services
or goods [supplied] in exchange, on the other, in so far as these terms are in plain,
intelligible language”.39 Art. 34 of the Consumer Code, as cited above, at the
37
Corte d’Appello Milano, Sezione 1 civile, 2 May 2016, n. 1694, banca dati Sole 24 ore.
38
See on this point Atamer (2017), pp. 624 ff.
39
The Italian version of art. 4(2) Directive 93/13/EEC follows the English text cited above: “La
valutazione del carattere abusivo delle clausole non verte né sulla definizione dell’oggetto
466 M. Graziadei
beginning of this section, omits the crucial qualification ‘main’ with respect to the
subject matter of the contract, and thus apparently provides a broader exemption
from the fairness check than the original text of the Directive warrants. To sum up,
the textual support for the distinction between terms covering the main subject
matter of the contract and ancillary terms is lacking in Italy. This could be considered
an error in the transposition of the directive, of course, or an issue that should be
redressed by way of interpretation.40 On the other hand, when the contract presents a
significant imbalance of the rights and obligations of the parties, that goes to the root
of the contractual exchange, the Courts may resort to other techniques to provide
redress to an aggrieved consumer. For example, the Joint panels of the Corte di
Cassazione have recently held that under certain circumstances a ‘claims made’
insurance term under which both the incident and the damage resulting from it must
occur during the running of the contract, can be void. In certain contexts, the term is
the source of: “a significant imbalance in the parties’ rights and obligations under the
contract to the detriment of the consumer. The term in question in question was
assessed with regard to a number of provisions of the Italian of the civil code41
4 Old and New Regulatory Provisions Controlling Price

Terms
It is quite difficult to provide a clear view of what are the different regulatory
responses to an increasing difficulty for consumers to avoid the distorting effects
of selling techniques that exploit consumers’ cognitive biases, though this topic has
garnered much attention in the literature.
The current rules against unfair trade practices, resulting from the implementation
of EU law (Cons. Code: arts. 21–26) are an important complement to the rules
applicable to unfair trade terms. Under these rules, for example, the bundling of
credit agreements with a credit protection insurance, or a deposit or current bank
principale del contratto, né sulla perequazione tra il prezzo e la remunerazione, da un lato, e i

servizi o i beni che devono essere forniti in cambio, dall’altro, purché tali clausole siano formulate
in modo chiaro e comprensibile.”. On the other hand, the Italian Codice del Consumo, art. 34
(2) omits that crucial adjective: “La valutazione del carattere vessatorio della clausola non attiene
alla determinazione dell’oggetto del contratto, né all’adeguatezza del corrispettivo dei beni e dei
servizi, purché tali elementi siano individuati in modo chiaro e comprensibile.”.
40
To be sure, art. 34 Cons. Code should be interpreted in conformity with the unfair contract terms
directive. See, for example, Barenghi (2017), p. 265 (highlighting that only terms referring to the
main subject matter of the contract should not be assessed for fairness). Still, the distinction between
‘main terms’ and ‘ancillary terms’ is obscured by the wording of the Consumer Code.
41
Cass. Joint Panels 5 June 2018 n. 22437. This decision is the last in a controversial series of the
decisions on the same matter: Cass., Joint Civil Panel, 6 May 2016, n. 9140. Along the same lines:
Cass. 26 April 2017, n. 10506.
account, is forbidden.42 To the same effect, the general framework provided by

antitrust law to combat anti-competitive behaviour is by no means of secondary
importance. A further point to keep in mind concerns the existence of specific
legislation, which lays downs rules that carve out exceptions from the general
framework provided by Directive 93/13/EEC on unfair terms in consumer contracts.
This is the case of the rules applicable to telecom contracts under art. 70 of the Code
on electronic communications, which implements in Italy a number of European
directives. The article in question introduces special rules on the termination of
contracts, which deviate from the provisions of the Directive 93/13/EEC.43
A first reaction is simply to pass legislation that bans certain contracts from the
(legal) markets, because the price is not fair. The classic case is usurious loans.
The current rules on usurious loans go back to the 1990s. They were enacted as a
response to social alarm about an increase in banking operations that were consid-
ered at the limits of usury, and also to combat organised crime. They have a
substantial impact in practice through the fixing of ceilings on interest rates calcu-
lated by public institutions. Charging fees above these ceilings in Italy is deemed to
be usury, that is to say a crime punished by our penal code with imprisonment from
2 to 10 years and a fine ranging from €5000 to €30,000 (art. 644 PC).44 Since May
2011, the ceilings in question are calculated by using as a benchmark that is
represented by the average overall effective rate practiced on the markets (AOER),
increased by one quarter, with a margin of an additional four percentage points. The
difference between the ceiling rate and the average rate cannot exceed eight per-
centage points in total (Law 7 March 1996, n. 108, art. 2, as amended).45 The AOER
is derived from the quarterly survey conducted by the Bank of Italy on behalf of the
Ministry of Economy and Finance. The AOER includes fees, remuneration of any
sort, and expenses (excluding taxes and duties), and refers to the annual interest rate
charged by bank and financial intermediaries on like operations. In exercising
supervisory controls, the Bank of Italy checks that banks and financial intermediaries
comply with the calculation criteria set out in its instructions and respect the usury
ceiling rates. One feature of the system is that default interests enter into the
42
This provision was first introduced as art. 36-bis(1), of the D.L. 6 December 2011, n. 201, as
modified by Law 22 December 2011, n. 214 and art. 28(3) of the law decree 24 January 2012, n. 1,
as modified by the law 24 March 2012, n. 27. Before the entry into force of this rule, the bundling of
an offer for a credit contract and an insurance protection policy has produced a high level of
interpenetration of these markets.
43
Zoppini (2016).
44
Under art. 644 CP usury is punished as well when, outside the circumstances set out in the text, a
disproportionate advantage is obtained as the consideration for a sum of money or other utility from
a person who is in financial or economic distress. The lack of proportion is assessed considering all
the circumstances of the market, and the circumstances of the case. For a review of the decision of
Italian criminal courts on usury: De Nigris (2017). For estimates about the size of the illegal market
in Italy: Marinaro (2016).
45
This calculation method was introduced by the Law Decree 70/2011, which modified Article 2
(4) of Law 108/96.
468 M. Graziadei
calculation of the rate of interest is considered as usurious according to the jurispru-

dence of the Corte di Cassazione.46
A second option is to offer to consumer more transparent deals, by setting up a
system of mandatory disclosures that should facilitate the comparison of prices and
conditions with respect to the costs related to bank accounts and credit contracts.
Although the situation has substantially improved over the years, the expectations of
the public are not yet fulfilled by what can be achieved through the court system and
administrative agencies. It thus happens that legislation is mobilized to establish
fairer contractual conditions by intervening on the content of certain contract terms.
This provides a second model of intervention. A case is the legislative provision that
has banned the so-called “overdraft facility commission” (commissione di massimo
scoperto). Banks charged clients’ bank accounts a commission for a possible
overdraft, even if clients did not actually make use of it. This fee has now been
substituted by a new regime (commissione di istruttoria veloce). According to it,
banks can only charge an all comprehensive sum, calculated on a quarterly basis,
which cannot be higher than 0.5% of the sum that the bank would be willing to loan
to the client in case of an overdraft. The sum must in any case be proportionate to the
period for which the loan is granted and to its amount (Italian Banking Law, art.
117 bis). Litigation of this and of other similar issues has been intense, showing that
judicial control of such fine points of contract law involves substantial investments.
On the other hand, before the reform which introduced new rules in this matter, the
Italian Competition Authority repeatedly took action to react to the anomalous
nature of these bank charges, and instructed banks to avoid this type of remuneration
structure.
Regulatory Authorities that have the power to regulate essential facilities such as
energy and gas have the power to regulate certain aspects of contract law as well, for
instance the determination of prices. AGCM imposes certain transparency, public
access to information, non-discrimination, price control and cost accounting obliga-
tions on each of the mobile operators in Italy. AGCM regulates fixed termination
rates (“FTR”) for certain operators, and collection and transit fees for others.
Pursuant to EU law, AGCM, may require an operator with “significant market
power” to regularly produce a “reference interconnection offer”, or “RIO”, setting
forth the terms and conditions on which such operator will provide access to
specified services approved by the regulator. The Energy and Gas authority regulates
both terms and conditions of consumer contracts, and has established a pricing
mechanism by which abatements of prices must be automatically transferred to
consumers under the respective contracts. Under the present regulatory regime,
consumers have the possibility to opt for contracts that are priced according to the
46
Cass. 9 January 2013, n. 350, Foro it, 2013, I, p. 128; Cass., ord. 30 October 2018, n. 27442. This
is criticised by several authors, because the norms against usury are not designed to modify the rules
concerning default interests payments: Dolmetta (2013), pp. 501 ff.; Barenghi (2017), pp. 446–447.
The Corte di Cassazione, joint civil panels, n. 24675/17, held that the question whether the interest
rate was usurious must be answered with reference to the moment of the formation of the contract.
rules set by these authorities if they wish, but this is a temporary regime that will
expire in 2019.
Despite these safeguards, the regulation of consumers’ long term contractual
relationships with firms operating in these economic sectors remains a problematic
tasks for a variety of reasons that cannot be examined in detail here.
To better illustrate how regulatory authorities, the judiciary, and the legislature
proceed in this field, it is worth considering the recent so called 28 days telephone
billing saga. This ended up with the statutory imposition to telecom operators and
other digital service providers of the duty to bill services per month, as usual, instead
of per week, as they attempted for the first time in 2016. Four major telecom
operators in 2016 decided to switch to a billing system that calculated fees on a
weekly, rather than on a monthly basis, with an increase in the number of annual
payments (13 vs. 12). In economic terms this corresponded to 8.6% in overall annual
costs for telecom clients. The Italian Competition authority reacted to the move by
raising the point that consumers had not been duly informed of the new billing plans,
in accordance with art. 70 of the Electronic Communications code (D.lgs. 1 August
2003, n. 259).47 The Telecom companies challenged the sanctions imposed by the
Competition authority before the competent administrative Court, with litigations
that are still pending. Meanwhile, consumers’ associations moved to obtain from
Parliament a law that prohibited the new billing system, which was approved in 2017
(law n. 172/2017). Nonetheless, major operators have confirmed in the press that the
return to monthly billing will be accompanied by an increase of the fees of 8.6%,
which corresponds exactly to the increase that was applied by introducing the
weekly billing system. This practice was reprimanded by the Italian antitrust author-
ity with a temporary measure that nullified the increase, and imposed a different,
uncoordinated strategy, which would have been compatible with antitrust rules.
5 Disclosure Regulations Promoting Price Transparency

and Competition
Italy implemented both Directive 98/6/EC on consumer protection in the indication

of prices of products,48 and Directive 2008/48/EC on credit agreements,49 as well as
other directives in the field of consumer contracts and consumer rights. The first
47
Art. 70 of the Electronic communications code provides that telecom companies can unilaterally
propose a change of the terms of the contract concluded with clients; in such case, clients who do
not accept the new terms can withdraw from the contract without penalty or decommissioning costs.
The proposed changes must be communicated with adequate notice (at least 30 days).
48
80/27.
49
470 M. Graziadei
measure (Directive 98/6/EC) is now transposed in the Consumer Code, arts. 13 ff.,
while the second is transposed in the Italian Banking law, arts. 121–126. These
instruments intend to facilitate price comparisons across products. As far as access to
reasonably priced consumer credit is concerned, this remains a crucial problem. The
Italian Banking Law establishes a comprehensive framework that provides con-
sumers with access to essential information. It mandates disclosure of the APR,
regulates advertising relating to it, and prohibits, for example, any banking charge or
commission that is not written in the contract, or references to trade usages to
regulate the relationships with clients. Nonetheless, shopping around remains an
arduous exercise for consumers with respect to markets that offer complex contracts,
exploiting general conditions of contract law, as it happens for consumer credit.
With respect to telephone services, art. 1(2) of the law n. 40/2007, on the
protection of consumer and the strengthening of competition, provides that: “The
commercial offer of the prices of the different telephone operators must highlight all
the items that make up the offer, in order to allow individual consumers to make an
appropriate comparison”, and enacts an entire set of rules that should facilitate price
comparisons.50 This was followed up by a ruling of the Competition authority that
further strengthened transparency of the economic and contractual conditions
applied to clients of telecommunication services. This: “required operators to pub-
lish, on their websites, summary statements of the prices of each offer, prepared
according to a standardized model that is clear and understandable to users, allowing
the quick comparison of certain items (e.g., one-minute call price, two-minute call
price, connection fee, withdrawal costs, etc.)”.51 Two further rulings of the same
Authority entitle consumers to know their own past usage patterns,52 and establish a
system of certification for price comparisons in the field of telecommunications.53
The Italian Authority for gas and energy has set up its own web site to compare
prices and contract conditions on the basis of past individual consumption needs.
Empirical research in the field of telecommunications shows that even the
relatively simpler world of consumer contracts for phone services is still the source
of a good amount of controversies. They show what could be ameliorated. The main
sources of consumer complaints with respect to telephone services in 2016 were:
incorrect billing (15%); unilateral modifications of the terms of contracts (11.75%);
problems with number portability (11.26%); activation of unsolicited services
(9.93%); no reply from operators to consumers’ complaints (8.32%); roaming
(6.90%); right of withdrawal (6.58%).54 In addition the regional committees for
telecommunications (Corecom), in charge of the alternative dispute resolution
50
The text of the relevant provision is much longer, and clearly sets out to devise a contractual
regime that should facilitate price comparisons; it bans several terms and conditions or contractual
practices that would hinder an effective price comparison by declaring those terms void.
51
AGCM delibera n. 96/07/CONS.
52
AGCM delibera n. 126/07/CONS.
53
AGCM delibera n. 331/09/CONS. To date, just one web site has obtained this certification.
54
The relevant data are set out in Europe’s Digital Progress Report (2017), p. 7.
system, have handled 90,415 disputes between users and operators of electronic
communications that in 82% of the cases ended with an agreement between the
parties involved. A recent Eurobarometer survey shows that Italian consumers can:
easily compare bundle offers (88%, first in EU); find it easier to monitor consump-
tion for mobile (73%, EU average 69%) than for fixed (67%, EU average 71%); and
yet they could probably be more satisfied with the information in contracts (21%
unsatisfied, EU average 16%).55
6 Conclusions
The complex patterns of regulation discussed in the previous pages show a variety of
sources of inspiration and trends. In this field the traditional distinction between
private and public law has given way to new approaches, in which private and public
enforcement of various rules coexist. From a legal process point of view, courts,
administrative agencies, the legislature are all implicated in the regulatory process.
Administrative agencies in the last decades have acquired new important powers,
which may be helpful to obtain timely and effective enforcement of fair contracts.
The Italian civil justice system does not deliver in terms of prompt, effective judicial
remedies, and yet litigation is still a strategy to make policy makers focus on crucial
regulatory issues, including price terms in consumer contracts. Many disputes today
are settled through specialised alternative dispute resolution procedures, under the
surveillance of quasi-governmental bodies. There is a growing awareness of the need
to allow consumers to make more informed decisions, and to work to overcome the
cognitive bias that affect their decision making processes, among the regulators and
in the literature relating to consumer contracts. Nonetheless, quite often, the political
process must be mobilised to target at least some of the major problems that arise
with respect to the control of price conditions in mass transactions.
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Form Contracts in Japan
Hiroo Sono
Abstract This national report provides an overview of Japanese law on the topic of
control of price terms in standard form contracts. After providing general back-
ground information on the primacy of freedom of contract and control of standard
terms in general under the Japanese legal system, the report turns to the central
question of private law control of price terms in standard contract terms. However,
this has not been an issue that has been fully discussed or developed under Japanese
law, and therefore, there is a lack of a coherent analytical framework. Nonetheless,
there are recent high-profile Supreme Court cases that utilize private law rules such
as the Consumer Contract Act to control price terms. In addition, public law
regulations that may affect price terms also exist. One recent area that is gaining
academic as well as public attention is the pricing practice in mobile telecommuni-
cation contracts. These movements may become a trigger for the development of
rules on control of price terms in Japan.
1 Introduction
This national report is a short response to the questionnaire provided by the general
reporters on the topic of control of price related terms in standard form contracts. We
begin by providing general information about Japanese law on the scope of freedom
of contract (Sect. 2) and control of standard terms (Sect. 3). Then we turn to the
central question of private law control of “price terms” in standard contract terms
(Sect. 4). That will be followed by some explanation of special regulatory public law
rules controlling price terms (Sect. 5), and related public law rules on disclosure of
price terms (Sect. 6).
H. Sono (*)
Hokkaido University, School of Law, Sapporo, Japan
e-mail: sono@juris.hokudai.ac.jp

https://doi.org/10.1007/978-3-030-23057-9_18
474 H. Sono
Two technical notes at the outset: First, the English translations of statutory
provisions are taken from the Japanese Law Translation website <http://www.
japaneselawtranslation.go.jp/>, maintained by the Japanese Ministry of Justice,
except for the 2017 revision of the Civil Code and 2018 revision of the Consumer
Contract Act which are not made available on that website yet.
Secondly, terms such as “null”, “void”, and “invalid” when referring to the effect
of contracts or its terms are used interchangeably.

of Contract
2.1 Freedom of Contract
2.1.1 Freedom of Contract in General
At the outset, it should be noted that there has been a recent revision to the Japanese
Civil Code [Minpo] (Act No. 89 of 1896) which resulted in a major reform of the law
of obligations. The revised Civil Code was enacted in June 2017 and will come into
force on 1 April 2020.1 It is a reform of the Civil Code of 1896 of which the law of
obligations has been left almost intact during the past 120 years.
The principle of “freedom of contract” has been an unwritten but undisputed
pillar of Japanese contract law under the Civil Code of 1896. It was unwritten
because the drafters of the 1896 Code tended to omit provisions that provided
only matters that went without saying. The 2017 revision of the Civil Code reversed
that course, and included a series of written provisions that declare this principle.
This was because one of the purposes of the Civil Code reform was to make the Code
understandable and transparent to the general public, and it was considered neces-
sary to spell out basic “principles”.
The Japanese Civil Code, amended in 2017, provides the “freedom to conclude a
contract” (Article 521(1)); the “freedom to determine the content of a contract”
(Article 521(2)); and the “freedom of form” (Article 522(2)). Under the original
1896 Code, it was generally considered that there was also a “freedom to choose a
contracting partner”. This was not provided in the 2017 revision due to concern that
such a provision might send out the wrong message that discrimination, e.g., based
on gender, age, nationality, are permissible.
On the other hand, it has also been undisputed that these freedoms are not without
limits. This applies especially in modern society where equality or interchangeability
of positions between the parties cannot be considered a given. The “freedom of
contract” provisions of the 2017 Code also clarifies that there are restrictions.
1
For an overview of the reform process, see, for example, Sono (2014) and Kozuka and
Nottage (2014).
Control of Price Related Terms in Standard Form Contracts in Japan 475
2.1.2 Freedom to Determine the Content of the Contract
For the moment, let us focus on the “freedom to determine the content of a contract”
(Article 521(2) of the revised Civil Code) which is most relevant to the question of
control of price terms. Article 521(2) provides:
Parties to a contract are free to determine the content of the contract, subject to restrictions
provided by law.
Thus, the most important interpretive question is what “restrictions provided by

law” means. Here, one must distinguish restrictions by private law rules and by
public law rules.
2.1.2.1 Limitation by Public Policy and Mandatory Private Law Rules
There is consensus that contracts or clauses that violate public policy (Article
90 Civil Code) and contracts or clauses that deviate from mandatory provisions
are void (cf. Article 90 and/or Article 912 Civil Code). Mandatory provisions that are
most relevant to this report include: Article 548-2(2) of the revised Civil Code
(control of standard terms)3; Article 572 of the revised Civil Code (validity of
exemption of liability for non-conformity); Articles 8–10 of the Consumer Contract
Act (Act No. 61 of 2000) (“CCA”) (invalidity of exemption clauses, waiver of
termination right clauses, liquidated damages clauses, clauses that unilaterally
impair the interests of consumers)4; Interest Rate Restriction Act (Act No. 100 of
1954)5; Act on Land and Building Leases (Act No. 90 of 1991) (cf. Article 30);
Labor Standards Act (Act No. 49 of 1947) (cf. Article 13).
2.1.2.2 Limitation by Public Law Regulations
On the other hand, violations of public law regulations do not automatically render
contracts void, but there are exceptions.
First, some regulations explicitly provide that contracts violating the regulation
are void. For example, the Agricultural Land Act (Act No. 249 of 1951) (“ALA”), a
public law legislation aimed at protection of agriculture, requires parties to obtain
permission from a local governmental authority for the sale of agricultural lands
2
Article 91 of the Civil Code provides that parties can agree on terms that deviate from
non-mandatory rules. There is discussion whether a contrary interpretation of this provision is
allowed to conclude that parties cannot deviate from mandatory provisions, and that such agreement
is void. Those who disagree with such interpretation consider Article 90 (public policy) is the
ground for voiding contracts or terms that deviate from mandatory provisions.
3
See Sect. 3.1 below.
4
See Sect. 3.2.2 below.
5
See Sect. 4.1 below.
476 H. Sono
(Article 3(1) ALA). It further provides that sale of agricultural land executed without
such permission is “void” (Article 3(7) ALA).
Secondly, even if the regulation does not expressly provide private law conse-
quences of its violation, courts may hold the contract void after balancing several
factors. If the purpose of the regulation cannot be met should the contract be given
effect, or if the manner of violation is outrageous, such factors will tend to support
voiding the contract. On the other hand, if voiding the contract will adversely affect a
third party, or if voiding the contract will bring unfairness between the parties such
as benefiting the more blameworthy party, such factors will tend to support keeping
the contract effective. As for the ground for voiding contracts under this framework,
there is disagreement whether the ground is Article 90 (public policy) or Article
91 (rules on non-mandatory rules).6
2.2 Mechanism to Protect Competition in the Market
“Free competition” is another pillar of Japanese contract law7 as freedom of contract

can be justified only in markets where the parties have a choice. A regulatory
framework exists to protect competition.
The core legislation in that field is the “Act on Prohibition of Private Monopo-
lization and Maintenance of Fair Trade” (Act No. 54 of 1947) (“Anti-monopoly Act”
or “AMA” in short), originally enacted in 1947. It regulates anti-competitive behav-
ior such as private monopolies, cartels, and unfair trade practices. The Fair Trade
Commission (“FTC”), an independent administrative commission, is charged with
the mandate to enforce the AMA. With respect to price terms, the FTC designates
several pricing practices, including sale at unjustly low price (i.e., dumping), pur-
chase at unjustly high price, and deceptive pricing as unfair (FTC’s Public Notice
No. 15 (Designation of Unfair Trade Practices) Items 6–8). In order to more
effectively regulate such pricing practices, a special legislation that supplements
the AMA regarding unfair labeling was enacted in 1962. That is the “Act against
Unjustifiable Premiums and Misleading Representations” (Act No. 134 of 1962)
(“AUPMR”). It regulates representations or labeling that can mislead customers. The
FTC was originally the authority in charge of enforcing AUPMR, but when the
Consumer Affairs Agency (“CAA”) was established in 2009, that function of
enforcing the AUPMR was transferred to the CAA. The regulatory scheme of the
AUPMR will be explained in Sect. 6 below.
6
See (n 2).
7
Parties are even free to choose to enter into a contract even if that means inducing the other party to
breach a contract with another party. This extreme position has been questioned since the 1980s. For
example, Isomura (1985), p. 395, argues that Japanese scholarship have “overly treated ‘free
competition’ as a divine value”, and have coined the term “the myth of free competition”.
3 General Information on Control of Standard Contract

Terms
Control of standard contract terms may take the form of controlling “incorporation”
of standard terms or by “invalidating” certain terms that are incorporated. “Injunc-
tion” is another measure that is available. The Civil Code and the Consumer Contract
Act (Act No. 61 of 2000) (“CCA”) are the two most relevant pieces of legislation.
3.1 Incorporation
One possible measure of control of standard terms is to control “incorporation” of

standard contract terms into consumer contracts, i.e., stopping standard terms at the
gate. However, this has long been a weak point of the Japanese legal tradition.
Generally, incorporation of standard terms was automatic and the binding nature of
the standard terms was taken for granted.8
The 2017 revision to the Civil Code added some new rules on incorporation of
“standard terms” (teikei yakkan), which applies not only to B2C contracts but also to
B2B contracts. They intend to balance the benefit of using standard terms and the
protection of self-determination of the contracting parties, although they seem to be
generally in favor of “incorporation”. The basic provision is Article 548-2(1) of the
revised Civil Code. It provides:
1. Parties who agree to engage in a standardized transaction (defined as transactions which
are entered into by one specific party with numbers of unspecific parties and the content
of which are reasonable for both parties to be wholly or partly uniform) are deemed to
have agreed to the individual clauses in the standard terms (defined as a set of terms
prepared by the aforementioned specific party with the purpose of constituting the
contents of standardized transactions) if:
(i) there is agreement to make the standard terms the content of the contract; or
(ii) the party who prepared the standard term . . . has indicated9 to the other party in
advance that the standard terms will constitute the content of the contract.
This paragraph, especially item (ii), virtually results in a general authorization for
incorporation of standard terms.
Furthermore, two more provisions of the revised Civil Code heavily tilt in favor
of incorporation.
8
However, the court may utilize general contract interpretation techniques to exclude incorporation
of standard forms. One possibility was demonstrated in Supreme Court, 16 December 2005, Hanrei
Jiho 1291–61 (holding that a clause in a residential lease contract obligating the lessee to pay
restoration fee does not become part of a contract unless clearly agreed at the time of the contract).
See, Okino (2012), p. 11.
9
For standard terms used in public transportation (e.g., rail, buses, road, air, etc.), there are special
legislations deeming that this “indication” is given by “publicizing” the use of standard terms.
478 H. Sono
First, Article 548-3 provides that, unless the party who prepared the standard
terms has already disclosed the standard terms in writing or in electronic form, that
party needs to disclose its content only if the other party demands disclosure “within
a reasonable period of time before or after entering into the transaction” (Article
549-3(1)). If the demand for disclosure is not complied with, then the incorporation
rule under Article 548-2(1) explained above does not apply resulting in a denial of
incorporation of the standard terms (Article 548-3(2)). The purpose of this disclosure
rule is to reduce the costs of standardized transactions by limiting demands for
disclosure to a limited period of time, in light of the fact that “other parties” generally
do not read standard terms.
Secondly, Article 548-4 provides measures to allow modification of standard
terms. It provides:
1. The party who prepared the standard terms may modify the standard terms, and without
the need of obtaining individual agreement, deem that the other party has agreed to the
modified standard terms, if:
(i) the modification of the standard terms is in the interest of the other parties in general;
or
(ii) the modification of the standard terms does not conflict with the purpose of the
contract, and is reasonable in light of the circumstances of the modification, inter
alia, the necessity of the modification, reasonableness of the content of the modifi-
cation, the existence of a clause to the effect that modification according to this
article may take place.
2. [Duty to give publicity to the modification]
3. [Modification under Article 548-4(1)(ii) takes effect when the modification is
publicized.]
4. The provision of Article 548-2(2) does not apply to modification of standard terms
pursuant to paragraph 1 of this article.
In this way, Articles 548-2(1), 548-3, and 548-4 are rather lenient on incorpora-
tion of standard terms.
However, there is also a counterbalance. Article 548-2(2) provides rules for
controlling incorporation:
2. Notwithstanding the preceding paragraph, the parties are deemed not to have agreed to
clauses that restrict the rights or expand the duties of the other party, if, in light of the manner
and reality of the standardized transaction and the general sense of trade, such clauses are
considered to unilaterally impair the interests of the other party in violation of the funda-
mental principle [of good faith].
The wording is very similar to that of Article 10 Consumer Contract Act (CCA),
which will be explained at the Sect. 3.2.2.2, but its scope is larger in the sense that it
applies not only to B2C contracts but to any standardized transactions including B2B
contracts. Another one important difference is that Article 548-2(2) is a rule of
“incorporation” whereas Article 10 CCA is a rule of “invalidation”.
However, whether Article 548-2(2) applies also to “price terms” is an unsettled
matter.
3.2 Invalidation and Injunction
3.2.1 Civil Code Remedies
For substantive control of standard terms, one may rely on Article 90 Civil Code
which provides that contracts against public policy are void. Contracts involving
“excessive profiting” or “gross disparity” (bori koi) are often regarded to be in
violation of public policy.10 Case law originally required both that (1) one party
has taken advantage of the other party’s distress, thoughtlessness, or inexperience
and that (2) the contract gives excessive profit to one party. Recent trends
deemphasize the second requirement, and this is now more a tool for procedural
policing rather than substantive policing.11
However, since Article 90 is a general clause, predictability is not guaranteed.
During the drafting of the 2017 revision of the Civil Code, there was a serious
attempt to manifestly provide a rule on “excessive profiting”, but this attempt failed
because of opposition from the business sector who argued that such rule is
unpredictable and that it may solicit frivolous claims.
3.2.2 Consumer Contract Act (CCA)
3.2.2.1 An Outline of the Consumer Contract Act (CCA)
The Consumer Contract Act [Shohisha Keiyaku Ho] (Act No. 61 of 2000) (“CCA”)
which applies to B2C contracts (“consumer contracts”) was enacted in 2000. It was
originally a set of substantive private law rules to invalidate consumer contracts
under certain conditions.12 In 2006, a new set of procedural rules allowing “injunc-
tion” suits, most typically against the use of unfair standard terms were added as we
will see in the Sect. 3.2.2.3. The most recent revisions are the amendments of
substantive rules in 2016 and 2018 to strengthen consumer’s rights. These reforms
10
This reasoning led to an important case law development although these are not necessarily
consumer law cases. It often happened that in monetary loan contracts, the lender would insert into
the contract a clause providing that, in case of default, the lender has the option of obtaining
ownership of a specific immovable from the borrower, in lieu of repayment of the debt. That option
right could be registered, and by registration it achieved a security agreement status. However, since
there tends to be disparity between the amount of outstanding debt and the value of the immovable,
these contracts were considered to be highly problematic. Case law developed a “settlement duty”
which requires the lender to settle the difference in value. See, Supreme Court (Grand Bench),
23 October 1974, Minshu 28-7-1473. The legislature also followed up with the case law develop-
ment by enactment in 1978 of the Act on Contract for Establishment of Security Interests by Use of
Provisional Registration (Act No. 78 of 1978). See generally, Haley (1974) and Bennett (2009).
11
For example, in a case where an inexperienced 52 years old housewife was lured into futures
trading, the Supreme Court ruled that the contract was concluded in a grossly unfair manner, and
thus is void as being against public policy. Supreme Court, 29 May 1986, Hanrei Jiho 1196-102.
12
For an overview of the legislative history, see Karaiskos (2010), pp. 14–20.
480 H. Sono
resulted in relaxing conditions for consumer’s right to rescission for misrepresenta-

tion; addition of right of rescission for excessive-volume transactions or abuse of
inexperience; nullification of clauses waiving consumer’s right to termination due to
breach, etc. This stemmed from the Cabinet’s 2010 “Consumer Basic Plan” which
gave mandate to the Ministry of Justice and the Consumer Affairs Agency to
consider revisions of the CCA in conjunction with the Civil Code Reform. The
actual drafting began in 2014, when the direction of the Civil Code reform bill was
almost foreseeable. This process proceeded carefully and quietly, not with the
fanfare that accompanied the Civil Code reform. The 2016 revision of the CCA
entered into force on 3 June 2017. The 2018 revision will enter into force on 15 June
2019. Thus the 2017 revision of the Civil Code and the 2016/2018 revisions of the
CCA are interrelated.13
3.2.2.2 Invalidation of Unfair Terms
The CCA includes two sets of rules invalidating unfair terms. They apply not only to
standard terms but also to negotiated terms, because the premise is that there is
“disparity in the quality and quantity of information and negotiating power between
Consumers and Business Operators” (Article 1 CCA).
First, it provides a very limited “black list” of clauses it considers to be void:
Article 8 on (business operator’s exemption/limitation of liability clause); Article
8-2 (clause waiving consumer’s right to terminate the contract due to breach); Article
8-3 (clause conferring the business operator a right to terminate the contract upon
commencement of adult guardianship of the consumer); and Article 9 (consumer’s
liquidated damages clause).
Secondly, it also has a general clause which provides that any derogation from
non-mandatory provisions of the Civil Code or Commercial Code (Act No. 48 of
1899)14 are void if (1) the derogation unilaterally impairs the interest of consumers
and (2) if the derogation was entered into in violation of the principle of good faith
(Article 10 CCA).
The invalidity of these clauses does not invalidate the entire contract. It is only
those clauses that are invalidated, and provisions of non-mandatory rules will fill the
gaps. The invalidation is absolute, which means that it may affect the right of third
parties such as sub-purchasers. However, that situation is unlikely to occur in the
situation of B2C contracts.
This new invention of CCA can be a powerful tool for consumers as we will see in
Sect. 4.
13
See Sono (2014).
14
This includes not only the written provisions, but also ruling of courts interpreting those pro-
visions. Supreme Court, 15 July 2011, Minshu 65-5-2269.
3.2.2.3 Injunction Against Unfair Standard Terms
With respect to injunction against unfair standard terms, a new set of procedural
rules allowing “injunction” suits was added in 2006 to the CCA (Art 12 CCA).15 It
allows “qualified consumer organizations”, approved by the government, to bring
injunction suits against unfair standard terms listed under Articles 8, 8-2, 8-3,16
9 CCA and unfair standard terms that fall under Article 10 CCA (Art 12(3) CCA).
The availability of this injunction suit was subsequently extended in 2009 to the
actions violating the “Act for Specified Commercial Transactions” (Act No. 57 of
1976) (“ASCT”) (Articles 58-13 to 58-25 ASCT) and the “Act against Unfair
Premiums and Misleading Representations” (Act No. 134 of 1962) (“AUPMR”)
(Article 30 AUPMR), and in 2013 to the Food Labeling Act (No. 70 of 2013)
(Article 11 Food Labeling Act).
As of this writing, there has been only one such injunction suit brought by a
consumer organization. It did not concern questions of price terms, but involved
misleading representation about the quality of a health food product known as
“chlorella”. The consumer organization brought the injunction suit claiming that
the representation violated Article 10 AUPMR (which is currently renumbered
Article 30). The court of first instance found in favor of the consumer organization
and ordered injunction.17
3.3 Control of the Contracting Process

3.3.1 Civil Code
With respect to procedural control of the contracting process, which may be used for
controlling standard terms, we saw above that Article 90 Civil Code is one tool that
consumers may employ. In addition, there are traditional invalidating rules of
mistake, fraud and duress (Articles 95 and 96 Civil Code). However, the rigid
requirements of these rules made it difficult for consumers to rely on them. For
procedural control, we have to turn to other legislative responses.
15
For an overview, see Madderra (2014). In 2013, a separate legislation supplemented this
development by allowing certain qualified consumer organizations to bring damages claim for
collective redress for property damages incurred by consumers: the Act on Special Measures
Concerning Civil Court Proceedings for the Collective Redress for Property Damage Incurred by
Consumers (Act No. 96 of 2013). This came into force on 1 October 2016.
16
However, Article 8-2 CCA was added later in 2016 and Article 8-3 CCA in 2018.
17
Kyoto District Court, 21 January 2015, Minshu 71-1-17. The order was overturned upon appeal
by both the court of second instance and the Supreme Court, but that was on the grounds that the
misleading representation has already ceased. Osaka High Court, 25 February 2016, Minshu 71-1-
34, Supreme Court, 24 January 2017, Minshu 71-1-1.
482 H. Sono
3.3.2 Consumer Contract Act (CCA)
Article 4 CCA enacted in 2000 provides for consumer’s rescission rights which
expand the fraud and duress provisions of the Civil Code. However, the expansion is
available only in very limited situations. This makes them inconvenient tools for
consumers.
Expansion of rescission for fraud is allowed only when the consumer’s mistake
was caused by “misrepresentation of an important matter” (Article 4(1)(i) CCA)18;
by “providing conclusive evaluation of an uncertain matter” (Article 4(1)(ii) CCA);
or by “non-disclosure of an important matter that is unfavorable to the consumer”
(Article 4(2) CCA).
Expansion of rescission right for duress is allowed, for example, when the
consumer’s distress was caused by the business operator’s “refusal to leave” (Article
4(3)(i) CCA); by preventing a consumer to leave (Article 4(3)(ii) CCA). The 2018
revision of the CCA added some grounds for rescission when the business operator
abused the anxiety of the consumer caused by inexperience. This includes abuse of
excessive anxiety concerning important matters about one’s social life (career,
marriage, etc.) or important matters concerning one’s physicals (beauty, shape
etc.) (Article 4(3)(iii) CCA); anxiety caused by aging or deterioration of health
(Article 4(4) CCA); anxiety caused by supernatural/spiritual force (Article 4
(5) CCA) etc.

Terms
Now we turn to the central question of control of price terms. Other than for control
of interest rates, there is no private law rule specifically designed to address this
issue. Thus the question is whether the existing rules, the CCA in particular, can be
utilized to control price terms.
4.1 Control of Interest Rate
One piece of legislation that controls price terms is the “Interest Rate Restriction
Act” (Act No. 100 of 1954) (“IRRA”) enacted in 1954 which controls high interest
rates in lending transactions. Article 1(1) IRRA sets the maximum interest rate at:
18
The 2016 revision broadened what can be “important matters” for the purpose of Article 4 CCA.
Prior to the revision, “important matters” was defined as information about the “subject” of the
transaction. That definition was revised to add “circumstances” that usually affect consumer’s
decisions. Thus even if there was no misrepresentation about the subject of transaction, consumer
contracts may be rescinded if there was misrepresentation about the circumstances.
(i) where the amount of the principal is less than ¥100,000: 20% per annum;
(ii) where the amount of the principal is ¥100,000 or more but less than
¥1,000,000: 18% per annum; or
(iii) where the amount of the principal is ¥1,000,000 or more: 15% per annum.
There was also a criminal statute controlling high interest rates. The “Act
Regulating the Receipt of Contributions, the Receipt of Deposits, and Interest
Rates” (Act No. 195 of 1954) (“Contribution Act”) enacted in 1954 originally
imposed criminal sanction for high interest rates over 109.5% per annum (Article
5, Contribution Act).
With respect to the IRRA, it should be noted that there was an interesting tug-of-
war between the legislature and the judiciary.19 Until 2006, Article 1(2) IRRA
provided that if the borrower “voluntarily” pays interest in excess of the limitation,
that is a valid payment. The intent of the legislature was to give leeway to the lenders
and by doing so not to overly discourage lenders from lending.
The court has been constantly trying to limit what constitutes “voluntary pay-
ment”. In 1964, the Supreme Court held that if there is still unpaid principal,
payment of excessive interest should be appropriated to the principal.20 In 1968,
the Supreme Court further held that if the principal has been paid in full, interest
cannot accrue and therefore any payment of excessive interest is unjust enrichment
and is subject to restitution.21 These judicial decisions effectively turned Article 1
(2) IRRA into dead letter.
However, lending at high interest rates persisted in reality outside the courtroom.
Such lenders were known as “loan sharks” and have become a social problem. In
response, the legislature enacted the “Money Lending Business Act” (Act No. 32 of
1983) (“MLBA”) in 1983 which allowed lenders to accept “voluntary payment” of
interest above the limit provided in the IRRA but up to a certain limit (which was
originally set at 73% per annum and was eventually lowered to 29.2% per annum),
provided that the lender is “registered” and “complies with certain procedural rules”.
This created a range of interest rate known as the “grey zone interest rate” because
there could be interest rates that violated the IRRA, but were allowed under the
MLBA. Moneylenders operated within this grey zone.
The Supreme Court began countering in 2003, by a series of decisions that strictly
interpreted the requirement of “voluntary payment” and “compliance with certain
procedural rules”.22 The legislature finally caved in. In 2006, it (1) abolished Article
1(2) IRRA which allowed voluntary payment of high interest rates, and (2) stream-
lined the restrictions of high interest rate in various legislations to conform to that
provided in the IRRA.
19
Kozuka (2007), pp. 83–84; Pardieck (2008).
20
Supreme Court, 18 November 1964, Minshu 18-9-1868.
21
Supreme Court, 13 November 1968, Minshu 22-12-2526.
22
The development is too intricate to spell out in this report. See, Kozuka (2007) and
Pardieck (2008).
484 H. Sono
4.2 Control of Other Price Terms
4.2.1 Views Regarding the Applicability of the CCA to Price Terms
With respect to control of price terms other than interest rates, that topic was taken up
during the drafting and thereafter of the CCA.23 Drafters of the CCA consistently
refused to make price terms subject to judicial control.24 In the drafting of the rules
on unfair terms in CCA, it was emphasized that (1) the main subject matter of the
transactions (e.g., destination in the case of a travel contract) and (2) price terms, are
not subject to control as unfair terms. The basic rationale was that control of price
would be an undue intervention into the market, and that price terms should be left to
the market to decide. Of course, this is subject to the general regulation of public
policy, and if the price terms amounts to gross disparity, the contract could be
considered void under Article 90 of the Civil Code.
This exclusion of price terms from application of the CCA was not explicitly
provided in the CCA, but this is the view that a semi-official commentary to the CCA
adheres to,25 and is shared by many commentators.26 Apart from the market ratio-
nale, it was also pointed out that the will of the parties to be bound by such core terms
is required from the viewpoint of contract law theory27 and also that it is not
necessary to regulate price terms because parties actually do pay attention to price
terms when they enter into contracts.28 There was also some discussion that if price
terms were to be regulated, it should take the form of disclosure regulation rather
than content regulation.29
However, there are also strong oppositions to such interpretation.30 The opposi-
tions are based on the view that it is often difficult to distinguish core terms, such as
price terms, from ancillary terms, particularly in contracts for the provision of
23
Yamamoto (1999); Kuwaoka (2002), pp. 356–357 provides a brief overview of the discussion.
24
Consumer Policy Committee of the 16th Quality of Life Council (1998), p. 49. Consumer Policy
Committee of the 16th Quality of Life Council (1999), p. 41; the 17th Quality of Life Council (2000),
p. 648 takes the same position.
25
The commentary of CCA written in 2000 by the Economic Planning Agency, which was
responsible for consumer matters at the time, emphasized that “the price and subject matter of the
contract is outside the scope of contract terms that are to be examined for possible invalidation
under [the CCA]”. This has not changed in its latest edition: Shohishacho Shohishaseidoka
(2018), p. 20.
26
Yamamoto (2000), p. 62; Ochiai (2001), pp. 152–153. Only reluctantly so, Yamamoto (2016),
pp. 203–205 and 270–271.
27
Kawakami (1988), p. 250; Hirose (1992), pp. 43–45.
28
Yamamoto (1998), pp. 83–85; Omura (2011), pp. 146–147. Yoshio Shiomi disagrees in
Taniguchi and Igarashi (1996), p. 213 arguing that even price terms should be regulated if the
parties have not autonomously determined it.
29
Consumer Policy Committee of the 16th Quality of Life Council (1998), p. 49.
30
Okino (1998), p. 53; Shiomi (1999), pp. 144–153; Matsuoka (2001), pp. 84–86;
Nihonbengoshirengokai Shohishamondaitaisakuiinkai (2015), pp. 195–197; Tanaka (2001),
p. 233 n 58. Yamamoto (2016) is also in line with these arguments.
services. It is also argued that the conditions for consumers to make a rational choice
from among several price terms are not often satisfied, because consumers do not
have sufficient information to make the judgment or are not given an opportunity to
negotiate those terms.
In addition, there was some developing awareness that there may be variations in
price terms: i.e., (1) price of the subject matter of trade, (2) price of ancillary
obligations, and (3) other terms that relate to price.31 Terms in category (2) include
various fees, such as delivery fee, installment fee, insurance, fees for installment
payment etc. Terms in category (3) include price sliding clauses, acceleration
clauses, and liquidated damages clauses. It was pointed out that business can
disguise the overall price structure by setting a low price for the subject matter but
setting various additional fees that will add up. Thus doubts were raised regarding
whether distinction should be made between types of price terms in (1) and those in
(2) or (3).
The Supreme Court has indirectly addressed this question in several cases to
which we turn next.
4.2.2 Supreme Court Cases Concerning Control of Price Terms
The Supreme Court has decided on the validity of several ancillary price terms:
refund clauses, university fees, and automatic deduction of security deposits and
renewal fees in residential leases.32
4.2.2.1 NOVA Case
In the NOVA case,33 one student cancelled a foreign language conversation school
contract and claimed refund of advance payment. To make it simple, the school
(NOVA) sold “points” which students can use to attend classes (or to purchase a
right to attend a specific class). The regular rate for the points is ¥1350 per class, but
for advance payment for a large volume of points, a discounted rate of ¥1200 per
class applied. After using some of the points, one student sought cancellation of the
contract. The cancellation itself was allowed under Article 48 of the Act for
Specified Commercial Transactions (Act No. 57 of 1976) (“ASCT”) which gives
rights to consumers to terminate the remainder of certain types of long-term service
contracts without cause. The question was the amount to be refunded under Article
31
Most notably, Yamamoto (1999), pp. 107–109.
32
There are also several lower court decisions on cancellation fees of consumer contracts. See
Maruyama (2015), pp. 342–345. Some of those lower court decision concern fees related to mobile
telecommunication contracts. Control of fees in mobile telecommunication contracts will be briefly
mentioned in Sect. 5 below.
33
Supreme Court, 3 April 2007, Minshu 61-3-967. See also Kozuka (2007).
486 H. Sono
49 ASCT which allows the service provider to deduct the value already received by
the consumer.34
The school refunded the student according to their refund policy which provided
that the value of education already received by the consumer should be deducted at
the regular non-discounted rate, i.e., ¥1350 per class. The student argued that such
refund policy is in violation of Article 49(2)(i)(a) ASCT, and thus void, and sued for
the difference in amount. Article 49(2)(i)(a) provided that upon cancellation, the
service provider may not demand payment of an amount of money that exceeds the
amount equivalent to the consideration (or value) of the service that were provided,
even if there is an agreement for liquidated damages or a provision for penalties.35
The court held that since the refund policy always apply the regular rate (¥1350
per class) for calculating the value of the service received by the student, “the refund
policy is void because it allows the service provider to request the service recipients
to pay an amount of money that exceeds the statutory limit prescribed in Article 49
(2)(a) of the Act. It is appropriate to determine that the amount equivalent to the
consideration for the services already offered pertaining to the Cancellation is the
amount of consideration for the Consumed Points calculated by applying the
[discounted rate].”
This decision has effectively controlled an ancillary price term by characterizing
it as a liquidated damages clause regulated under Article 49 ASCT. The decision is
based on the interpretation of a specific provision in the ASCT, and therefore its
scope is limited, but it does signal the Supreme Court’s willingness to be more active
in promoting policies in consumer legislations.36
34
On Article 49 ASCT, see generally, Maruyama (2015), pp. 276–280.
35
Article 49 (2) ASCT provides:
Where a Specified Continuous Service Contract has been canceled pursuant to the provisions
of the preceding paragraph, the Service Provider may not demand that the recipient of the
Specified Continuous Services pay an amount of money that exceeds the total of the amount
specified in each of the following items in accordance with the case listed therein and the
amount of the relevant delinquency charges based on the statutory interest rate, even if there
is an agreement for liquidated damages or a provision for penalties:
(i) where the Specified Continuous Service Contract was canceled after the Specified
Continuous Services began to be provided: the total of the following amounts:
(a) the amount equivalent to the consideration for the Specified Continuous Services
that were provided; and
(b) . . .
36
Kozuka (2007). However, Morita (2012), p. 263 is critical of this decision because consequence
will follow from this decision that the school will stop or limit the use of large volume discounts. It
will be too risky for them to continue this discount because consumers will no longer purchase the
tickets at the full rate even if they have no intention of using all the tickets they purchase. This may
not always be in the interest of consumers in general.
4.2.2.2 University Fees
Secondly, the Supreme Court addressed the question of university fees.37 It is

customary in Japan for universities to charge “admission fees” and “tuition” (typi-
cally for the first semester) when students enroll. It is also customary that many
students apply to multiple universities, and once they receive a letter of admission
from one university, that student may decide to pay the “admission fee” and secure
his/her enrollment, while still waiting to hear from other universities. The practice
was that universities did not refund the admission fees and tuition once they were
paid, even though the student eventually chose not to enroll (and chose to go to
another university).
Encouraged by the enactment of the CCA in 2000, many students began to bring
lawsuits against universities they chose not to enroll in, and demanded refund of the
admission fees and tuition. Among others, their argument was based on Article 9
(i) CCA which provides that clauses providing for liquidated damages in case of
termination of the contract by a consumer are partially void, if the total amount
exceeds “average loss” to the business operator caused by the termination. The part
that is void under the CCA is the amount of liquidated damages that exceeds
average loss.
The Supreme Court38 distinguished “admission fees” and “tuition”. First, the
court held that universities may retain “admission fees”. The rationale was that
admission fees were the price of option to secure position to enroll in the university,
and also that the fee is actually used by universities for expenses necessary for
administrative work in order for the university to accept new students. In other
words, the students have already received the benefits of the admission fees by
securing their position. In the course of the reasoning, the court also emphasized that
the no-refund policy is explicitly written in the application materials outlining the
selection and entrance procedure.
For “tuition”, however, the court held that if the student terminated the contract
before the beginning of the academic year (typically 1 April in Japan), there is no
loss to the university, and therefore under Article 9 CCA, the no-refund policy
concerning tuition is void.39 It also held that if termination takes place after the
beginning of the academic year, the university will incur loss equal to the tuition fee
for the first semester (because, for example, it is too late for them to extend letters of
admission to other applicants), and in that case, the university will be allowed to
retain the tuition.
37
For an overview of these cases, see Ohsawa (2010), pp. 16–28.
38
Supreme Court, 27 November 2006, Minshu 60-9-3597. See also, Kozuka (2007).
39
This is not a totally convincing argument as it would also be too late for a university to find a
substitute student if a student terminated the contract on 31 March. See Ohsawa (2010), pp. 26–27.
488 H. Sono
4.2.2.3 Lease of Real Property
However, the court is not always favorable to the consumer. The third group of cases
again concerns Article 10 CCA.
In 2011, the Supreme Court applied Article 10 CCA in a series of decisions
concerning the validity of an “automatic deduction clause” (“shikibiki” clause) in
residential lease contracts.40 It is customary in Japan that lessees will pay a security
deposit (known as “shikikin”) when entering into a lease contract. The security
deposit will be returned to the lessee at the end of the lease after deducting all
outstanding payments such as unpaid rents and restoration fees. However, in the
Kansai region, there is a twist to this security deposit agreement. Usually, there is an
agreement to automatically deduct a fixed sum even when there are no outstanding
debts.
With respect to such automatic deduction agreement, many lessees brought
lawsuits against their lessors claiming for return of the security deposit on the
basis of Article 10 CCA. Their argument was that the automatic deduction clauses
are void pursuant to Article 10.
The Supreme Court ruled41:
Where a stipulation on a deduction from the security deposit is attached to a lease contract
and the amount of money to be obtained by the lessor (as such deduction from the security
deposit) is clearly specified in the written contract, the lessee concluded the contract clearly
recognizing the amount of the deduction from the security deposit in addition to the amount
of the rent, and in such case, the parties clearly agree that the lessee will bear the burden of
payment of the deduction from the security deposit. . . . Furthermore, from the perspective of
preventing a dispute over the necessity of maintenance of any normal wear and tear, etc. or
the amount thereof, it is not always unreasonable to fix the amount of money, which is to be
obtained by the lessor to be used as maintenance expenses. In this context, a stipulation on a
deduction from the security deposit cannot immediately be regarded as impairing the interest
of the lessee unilaterally against the principle of good faith.
It is true that, under a lease contract that is categorized as a consumer contract, the lessee
does not have sufficient information about the amount of maintenance expenses for any
normal wear and tear, etc. that would normally be caused to the property that he/she leases,
and what is more, it is difficult for the lessee to delete a stipulation on a deduction from the
security deposit through negotiation with the lessor. Accordingly, where the amount of a
deduction from the security deposit is too high for the purpose of the stipulation on a
deduction from the security deposit, it is often the case that the lessee is presumably forced
to bear a unfair burden unilaterally, because of the inferiority in the quality and quantity of
the information available to the lessee as well as in the lessee’s bargaining power as
compared to the lessor.
In consequence, where a stipulation on a deduction from the security deposit is attached to a
lease contract for a residential building that is categorized as a consumer contract, and the
40
Okino (2012), pp. 10–14; Karaiskos (2015), pp. 91–93.
41
Supreme Court, 24 March 2011, Minshu 65-2-903 and Supreme Court, 12 July 2011, Hanrei Jiho
2128-43. The quotation is taken from an English translation of the decision available from http://
www.courts.go.jp/app/hanrei_en/search? with minor modifications. For an overview of these cases,
see Okino (2012), pp. 12–13.
amount of the deduction from the security deposit set forth therein is judged to be too high in
light of the amount normally expected as the maintenance expenses for any normal wear and
tear, etc. that would be caused to the building; the amount of the rent; whether or not key
money or any other lump-sum money has been paid and received, and the amount of such
money if there is any, it is reasonable to construe that such stipulation unilaterally impairs the
interest of the lessee, a consumer, against the principle of good faith, and it is void under
Article 10 of the Consumer Contract Act, unless there are special circumstances such as
where the amount of the rent is considerably lower than the standard rent for a similar type of
building located in the vicinity of the building in question.
In effect, the court held that if the clause is expressly made available to the lessee
at the time of contract, the clause is not in violation of good faith and is thus valid,
unless the amount of deduction is excessively higher in comparison to the rent etc. In
the immediate case, the court upheld the validity of the automatic deduction clause.
A similar issue regarding “renewal fee clause” in a residential lease contract was
discussed in another Supreme Court decision in 2011.42 Renewal fees are fees that
are paid by the lessee to the lessor when the lease is renewed upon the expiration of
the prior period of lease. Typically, they are equal to 2 to 3 months’ rent. The Court
examined whether or not the renewal fee clause could be declared void under Article
10 CCA. It held that:
. . . a renewal fee clause has multiple aspects in nature, e.g. serving as replenishment or
advance payment of the rent or as the value offered for the continuation of the lease contract,
so it cannot be said that the payment of a renewal fee has no economic rationality at all. In
addition, as it is publicly known, it happens quite often in certain regions that the lessee pays
a renewal fee to the lessor upon the expiration of the period of lease. The court takes judicial
notice of the fact that in the past proceedings for judicial settlements, etc., renewal fee
clauses have not been regarded matter-of-factly as being contrary to the public order and
therefore void. Given these facts, where a renewal fee clause is stated in a written lease
contract inarguably and specifically, and a clear agreement has been made between the lessee
and the lessor on the payment of a renewal fee, one cannot find any such gap between the
lessee and the lessor in respect of the quality and quantity of the information available as well
as the bargaining power concerning the renewal fee clause, to the extent that the gap cannot
be ignored.
In consequence, it is reasonable to construe that a renewal fee clause stated in a written lease
contract inarguably and specifically does not “impair the interest of a consumer unilaterally
against the fundamental principle provided in Article 1, paragraph (2) of the Civil Code” as
set forth in Article 10 of the Consumer Contract Act, unless there are special circumstances
such as where the amount of the renewal fee is too high in light of matters such as the amount
of the rent and the period of the renewed lease contract.
Again, here the court essentially upheld the renewal clause.
42
Supreme Court, 15 July 2011, Minshu 65-2-2269. The quotation below is taken from an English
translation of the decision available from http://www.courts.go.jp/app/hanrei_en/search? with
minor modifications.
490 H. Sono
5.1 No Administrative Body Controlling Price Terms
Apart from private law schemes explained above, there are regulatory schemes, i.e.,
public law rules, that may affect price terms.
However, unlike some jurisdictions that may have administrative bodies instead
of the courts that are vested with the function of controlling price terms, that is not
the case under Japanese law. Here again, there is not coherent set of public law rules
on control of price terms.
5.2 Regulatory Price Caps
There are several regulatory rules that place caps on prices.43 The first concerns
prices of public utility such as water, electricity, gas, posts, telephones, and tariffs.
The government must authorize such pricing. These services are usually provided by
a monopoly, and thus are heavily regulated. Price of some agricultural products,
such as rice, is also regulated. The purpose is to maintain the stability and security of
the food market.
Other than this, there are also price regulations applicable in emergency situa-
tions. During the war period beginning in the late 1930s and in the post-war period,
there was an imperial ordinance that controlled price. The Price Control Ordinance
[Kakaku Toseirei] (Imperial Ordinance No. 703 of 1939) (which prohibited raising
prices) was enacted in 1939 as a response to shortage of daily necessities during the
war period. After the war, the ordinance was succeeded in 1946 by the Prices Control
Ordinance [Bukka Toseirei] (Imperial Ordinance No. 118 of 1946), which controls
price of products designated by the government. This ordinance is still in effect, but
today it only controls the price of “public baths”. In 1973, two pieces of legislation
was enacted to stabilize price in emergency situations: the “Act on Emergency
Measures for Stabilizing Living Conditions of the Public” (Act No. 121 of 1973)
and the “Act on Emergency Measures against Acts of Buying Up or Holding Back
Sales of Goods Related to Everyday Life” (Act No. 48 of 1973). They allow the
government to designate certain everyday goods that are important for the national
economy44 and to set a price cap or to order restraint of speculative market behavior
related to such designated goods in emergency situations, for example in situations
of energy shortage.
Similarly, the Rent Control Ordinance (Imperial Ordinance No. 704 of 1939) of
1939 controlled rents of land and building as a response to shortage of buildings
43
Omura (2011), p. 296.
44
In the past, products such as soy beans, soy sauce, kerosene, gasoline, cotton products, tissue
papers, toilette papers, synthetic detergents were designated. Currently, no such designation exists.
caused by destruction by war and by return of war veterans in the post war period.
This was abolished in 1986.
Both the 1939 Prices Control Ordinance and 1939 Rent Control Ordinance are
exceptional rules designed for exceptional circumstances, and have little relevance
today.
5.3 Mobile Telecommunication Contracts
One area that would seem to require regulation of price terms is the area of mobile
telecommunication contracts.
Service providers of mobile telecommunication typically employ contract terms
that bind the consumer to a 2 years contract period, in exchange of reduced monthly
fees. Colloquially known as “ninen shibari” or “2-years bind”, the current practice is
that if the consumers terminate the contract within that period, there will be a
cancellation fee of ¥9975 (which is very roughly US$100). The 2 years period will
be automatically renewed for another 2 years period unless the consumer cancels the
contract within the 25th or 26th month from the time of contract. This also had the
effect of compelling consumers to pay extra monthly fees for the 25th or 26th
months. A series of lower court decisions have held that these clauses do not violate
Articles 9 CCA (because the cancellation fee of ¥9975 does not exceed “average
loss” to the service provider) or Article 10 CCA (because the clause is not against
good faith as the cancellation fee of ¥9975 does not exceed “average loss”).45
The Ministry of General Affairs, the supervising authority of communication
services, has not taken steps to provide legal rules, but published a Report in 2015
recommending the industry to take voluntary steps to refrain from such services.46 It
further issued an administrative guidance in June 2018 requesting the three major
service providers to allow consumers to cancel the contract without paying extra fees
at the end of the 2 years period. The responses of those service providers were
cunningly lukewarm: they only added the 24th months to the period when con-
sumers may cancel the contract without paying extra fee.47
Some mobile telecommunication service providers also offer “heavy discounts”
on purchase of devices in exchange of conclusion of mobile phone service contract.
Under this arrangement, the price of the device is to be paid in monthly installments.
This makes it difficult for consumers to accurately tell the price of the device and
price of the service that they are paying. Moreover, the discount is given only if two
conditions are met. First, (1) the consumer must purchase a new device at the end of
2 years from the time of the contract (at which point the outstanding price for the first
45
For an analysis of these cases, see, Ohsawa (2013); Maruyama (2013), pp. 312–295;
Karaiskos (2016).
46
ICT Service Security Study Group (2014).
47
See e.g., Horikoshi (2018).
492 H. Sono
phone is waived, thus amounting to a discount). Secondly, (2) the consumer must
enter into another contract for 2 years. Thus this practice is colloquially known as
“yonen shibari” or “4 years bind”. Regarding this practice, the Ministry of General
Affairs issued a non-binding “Guideline on Conditions and Devices in Mobile
Services” in January 2017, recommending the industry to refrain from excessive
discounting practice. Based on this guideline, the Ministry engages in informal
regulation requesting carriers to change their practice. In June 2018, the Fair Trade
Commission (FTC) also issued a report criticizing such practice.48 In response, the
industry has responded by taking away condition (2) for discount, i.e., the contin-
uation of the contract for another 2 years.49

A question related to “control” of price terms is the question of “disclosure” of price

terms in order to make the price understandable to consumers. We turn to some
public law rules on price disclosure.
6.1 Act Against Unjustifiable Premiums and Misleading

Representations (AUPMR)
The Act against Unjustifiable Premiums and Misleading Representations (Act

No. 134 of 1962) (“AUPMR”) provides a regulatory scheme that promotes price
transparency and competition.
6.1.1 Substantive Rules
AUPMR prohibits, among others, representations of price that mislead general

consumers to the misunderstanding that the transaction is significantly advanta-
geous, i.e., cheaper, than transactions with others (Article 5(ii) AUPMR).50 As the
48
Fair Trade Commission (2018).
49
See, Horikoshi (2018).
50
Article 5(ii) AUPMR provides:
No Entrepreneur may make a Representation as provided for in any one of the following
items in connection with the transaction of goods or services which the Entrepreneur
supplies:
(ii) Any Representation by which price or any other trade terms of goods or services could
be misunderstood by general consumers to be significantly more advantageous than the
FTC used to be the original enforcing body of the AUPMR, as explained in Sect. 2.2
above, it issued a “Price Labeling Guideline” in 2000, spelling out its views on what
would constitute a misleading representation of price.51 The Consumer Affairs
Agency (“CAA”) inherited that Guideline in 2009, when it took over the role of
enforcing the AUPMR.52 The major part of the Guideline and its enforcement relates
to “double price labeling” or “fictitious pricing” practices. This is a practice in which
a retailer labels the actual price together with another fictitious higher price such as
“usual price” or “manufacturer’s suggested price”. This practice can mislead the
general public to think that he/she is purchasing the product at a significantly
advantageous price, when in reality the “usual price” or the “manufacturer’s
suggested price” has never been used.
Apart from double price labeling, there is one interesting case in 2004 in which
the FTC has issued a warning relating to representation of “bank fees”. The case
related to lack of representations of fees for foreign currency account. The banks
involved indicated that “for a deposit of ¥1,000,000, total amount of interest will be
¥ X.” However, since there will be bank fees charged both at the time of deposit and
withdrawal, the actual amount of interest that the depositor will receive will be lower
than the amount indicated if there is no change in the exchange rate. The FTC issued
a warning against the banks using such representations.53
6.1.2 Enforcement
Currently, there are two schemes to enforce the regulation. First, the CAA is in
charge of enforcing the AUPMR by “orders for action” (Article 7 AUPMR) or by
ordering to pay “surcharges” of the amount of 3% of the proceeds (Article
8 AUPMR). One interesting rule that was added in 2014 is the rule on “voluntary
refund” (Article 11 AUPMR). The basic idea of the rule is that if the business party
voluntarily refunds its customers, that amount will be deducted from the surcharge.
This rule is intended to facilitate consumer redress.
Secondly, qualified consumer organizations can bring injunction suits against
businesses engaging in misleading representations. As already explained in the Sect.
actual goods or services, or than those of other Entrepreneurs who supply the same kind
of or similar goods or services as those supplied by the relevant Entrepreneur, thereby
being likely to induce customers unjustly and to interfere with general consumers’
voluntary and rational choice-making
51
http://www.caa.go.jp/policies/policy/representation/fair_labeling/guideline/pdf/100121pre
miums_35.pdf. Accessed 16 Oct 2018.
52
By this transfer, the nature of the AUPMR has changed from competition law to consumer
protection law.
53
Omoto (2017), p. 131.
494 H. Sono
3.2.2.3, this is part of the group action that was made available under the Consumer
Contract Act since 2009.
6.2 Consumption Tax Act
Another regulation that relates to representation of price is the rules on labeling of

price in relation to consumption taxes. The Consumption Tax Act (Act No. 108 of
1988), when amended in 2004, imposed a duty on the business to label the “total
amount” inclusive of consumptions taxes when they label the price of their mer-
chandise or service (Article 63).
This rule was introduced because, some businesses labeled the price exclusive of
tax which made it difficult or troublesome for consumers to know in advance the
precise amount they must pay. Moreover, the mixture of different labeling practice
among businesses made it difficult for consumers to compare the actual price they
will pay. The revision was intended to benefit consumers.54
7 Concluding Remarks
As the discussion above reveals, control of price terms has not been an issue under
Japanese law that has been fully discussed or developed. The making of the
Consumer Contract Act in 2000 may have been a precious opportunity to turn
attention to this question, but that opportunity was missed when the majority view
considered that price terms are within the realm of freedom of contract.
However, courts have been addressing the issue relying on provisions of the
Consumer Contract Act or other law without framing the issue under the general
rubric of control of price terms. The government has also been responding to price
term issues by placing price caps (on a very limited scope of items) or regulating
price labeling. What is noteworthy in relation to the development of rules on control
of price terms is the issue of the contracting practice in mobile telecommunication
contracts. This is gaining wide public attention as well as academic attention, and
may become a trigger for the development of rules on control of price terms in Japan.
Acknowledgment This work was supported by JSPS KAKENHI Grant Number JP16K13326.
54
When the rate for consumption taxes was raised from 5% to 8% in 2013, Shohizei Tenka Taisaku
Tokubetsusochiho [Act on Special Measures concerning Passing of Consumption Taxes] (Act
No. 41 of 2013) was also enacted. Among others, it prohibits labeling such as those indicating
that consumption tax is not passed on the price, or that the amount of consumption tax will be
discounted (Article 6). This is a temporary legislation effective until March 2021.
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Form Contracts in the Netherlands:
Exclusion of Clauses Pertaining
to the Core of the Contract
Ewoud Hondius
Abstract In the 1970s, most European countries adopted legislation on unfair

contract terms. Clauses pertaining to the core of the contract were usually exempted
from this control. The fear of a return to the ancient iustum pretium doctrine was
behind this. Not every country has adopted this exception. The Nordic states, for
example, have declined to do so. This paper will briefly study the Nordic system to
highlight that excluding the price clauses is not a necessity. It will then focus on
giving a closer look at the Dutch system of control. The freedom of contracts
principle, as well as the Dutch control of both unfair contract terms and price
terms will be presented. The most important Dutch cases will also be studied.
1 Introduction: A Bit of History
On 1 April 1976, the German Gesetz zur Regelung des Rechts der Allgemeinen
Geschäftsbedingungen1 was promulgated. This Act, later incorporated in the
Bürgerliches Gesetzbuch,2 may be seen as a watershed in the development of the
regulation of unfair contract terms in Europe. After 1976, almost all EU jurisdictions
adopted legislation on unfair contract terms.3 Those which declined to do so, were
forced to enact regulation by the Directive 93/13/EEC on unfair contract terms.4
Although the Directive 93/13/EEC at first glance appears to cover all contract
terms, in both B2C contracts and B2B contracts, some exclusions were made. The
1
Act of 9 December 1976, Bundesgesetzblatt I, p. 3317, in force as of 1 April 1977.
2
As of 1 January 2002, Para 305-310 BGB.
3
See Hondius (1978b), Unfair terms in consumer contracts, p. 283.
4
95/29.
E. Hondius (*)
Utrecht University, Faculty of Law, Utrecht, Netherlands
e-mail: E.H.Hondius@uu.nl

https://doi.org/10.1007/978-3-030-23057-9_19
498 E. Hondius
one which will be dealt with in this paper is the exclusion of clauses pertaining to the
core of the contract. Because it was feared that an introduction of controlling such
terms would in fact mean a return to iustum pretium,5 legislation both on the
European and national level ruled out control of such terms. Not in all jurisdictions.
Scandinavia this time is the odd man—or men—out. Does this mean that the Nordic
countries have returned to iustum pretium? As we will see later, this is not the case.
But before considering—and advocating—the Nordic system, this paper will begin
with giving a closer look at the Dutch control system.
First, in line with the questionnaire submitted by the general reporters,6 a general
overview of Dutch control of unfair contract terms will be presented (1). This will be
preceded by some observations as to the paradigm of the freedom of contract (2).
The paper will then turn to the control of price terms (3). The Dutch system will be
set out in some detail, including leading cases (4), lower courts (5) and specific
trades and industries (6). It will also be compared with the Nordic system (7), to be
capped off with some conclusions (8).
2 Freedom of Contract and Protection of the Weaker Party
In the Netherlands, contract law is governed by the 1992 Civil Code.7 Following the
German example, contracts are qualified as legal acts (‘rechtshandelingen’), which
are regulated in book 3. Book 6 contains some specific rules for contracts, including
a regulation of unfair contract terms.8 The regulation of the latter was inspired by the
German AGB-Gesetz,9 as it then was called. Later, where appropriate, it was brought
in line with Directive 93/13/EEC. Freedom of contract is still the paradigm of Dutch
contract law,10 although according to an occasional author, both in the Netherlands11
and in other jurisdictions,12 protecting the weaker party should be allowed the same
status. Unlike most European countries, the Netherlands have no constitutional court
which could control the application of freedom of contract.13 A bill to introduce
5
There still remain some jurisdictions in Europe, such as Catalonia and the Channel Islands, where
at least until recently courts were empowered to adapt contract prices to market value. In the
Netherlands this iustum pretium doctrine has never played a major role. See Van Loo (2013), p. 341.
6
See Atamer (2017), pp. 624–660.
7
Hartkamp (2016), pp. 171–199, De Laat (2016), Hijma (2016), Van Wechem (2007).
8
See Loos (2018), pp. 1–58, Pavillon (2011), pp. 67–136, The division of contract rules in two
different books has recently been criticised Hondius (2017), pp. 77–81.
9
Gesetz zur Regelung des Rechts der Allgemeinen Geschäftsbedingungen (1976), renumbered
Paragraphs 305–310 Bürgerliches Gesetzbuch in 2001. See Appenzeller (2017), p. 347.
10
Asser/Hartkamp & Sieburgh 6-III, 2014/458-513.
11
Hondius (1998), pp. 201–227.
12
Hartkamp (2016), pp. 171–199.
13
Cherednychenko (2007), p. 575.
judicial review has been pending for some time,14 without any prospect of speedy
acceptance.
This part aims at giving an overview on judicial—and administrative—control of

standard contract terms in the Netherlands. As was observed above, control of
standard contract terms was introduced by the legislature in 1992. Before, it was
the judiciary which controlled standard contract terms. It did so through various
means: (a) controlling whether or not standard terms had been incorporated into the
contract; (b) interpreting unclear contract terms; (c) applying a reasonableness test.
Legislative control in the Netherlands closely resembles the German model,15 at
least in theory. There is a general clause with the following content.
Article 6:233
A term in general terms and conditions may be nullified
a. If it is unreasonably onerous to the other party, taking into consideration the nature and
the further content of the contract, the manner in which the terms and conditions were
established, the mutually apparent interests of the parties and the other circumstances of
the case; or
b. If the user has not given the other party a reasonable opportunity to take note of the
general terms and conditions’.16
The general clause is elaborated upon in a black list and a grey list. The general
clause applies to all contracts, including B2B contracts. The two lists only apply to
B2C contracts. A third list, partially overlapping with domestic legislation, is
provided by the Directive 93/13/EEC. In the Netherlands, the list in the annex of
this Directive is also called ‘the blue list’. It is sometimes held not to be directly
applicable, since the two others are supposed to have transposed the blue list into
Dutch law’
Articles 6:240–243 Dutch Civil Code contain actions for an injunction
(Unterlassungs—and Widerrufsanspruch) along the lines of the German law. With
a large number of standard contract terms in use, one would expect a plethora of
court decisions. And yes indeed, Germany may boast of such number. Not so the
Netherlands, where the injuction is rarely applied. What instead will happen in the
Netherlands is in fact that trade and industry on the one side and consumer organi-
sations on the other enter into negotiations, which usually result in a compromise.
This has the consequence that group or collective actions, although allowed by law,
are rare.
14
Private bill, introduced by the former Member of Parliament Femke Halsema (Green Party).
15
Fervers and Gsell (2019).
16
Translation by Warendorf et al. (2013), p. 1301.
500 E. Hondius
The instrument of a directive allows member states some leeway to adapt the text
to be implemented to existing law. The Netherlands used this option to provide
avoidance as a sanction for unfair contract terms. When in the Oceano case,17 the
CJEU stated that the court could—and in later cases should—look into the nature of
contract terms on its own motion, this caused quite a shock among Dutch courts.
Dutch judges convened a working Group which came up with a number of sugges-
tions to be followed nation-wide.18 The Dutch legislature then considered it unnec-
essary to change the law.19
4 Price Clause
When the Dutch legislation on unfair contract terms was adopted, there was some
fear that courts would intervene to control prices and other clauses pertaining to the
core of the contract. Ever since the drafting of a new Civil Code in the Netherlands a
iustum pretium rule had strictly been rejected. This led to the following exception in
art. 6:231 Dutch Civil Code:
In this section:
(a) ‘general terms and conditions’ mean one or more terms drafted for inclusion in a number
of contracts, with the exception of terms involving the essential obligations, insofar as
the latter terms have been couched in clear and understandable language.
The Dutch provision closely resembles Article 4 (2) Directive 93/13/EEC20 and
has given rise to quite some case law, which will be dealt with in the following
paragraphs.
It should be mentioned that there also is the possibility of administrative control
of unfair contract terms, to be exercised by the Autoriteit Consument en Markt
(ACM - Consumer and Market Authority). The ACM is the successor of the
Consumentenautoriteit (Consumer Authority) which controlled consumer law from
2007 to 2013. Administrative control of consumer law arrived late in the Netherlands
17
CJEU Judgment of 27 June 2000, Océano Grupo Editorial and Salvat Editores, C-240/98, EU:
C:2000:346.
18
Landelijk overleg vakinhoud civiel en kanton II, November 2014. A new edition of the recom-
mendation was prepared in 2018.
19
See also Heesakkers/Voets, Hoge Raad 13 September 2013, ECLI:NL:HR:2013:691.
20
In the Proposal of the 11 October 2011 for a Regulation of the European Parliament and of the
Council on a common European sales Law, it is likewise provided: ‘Art. 80 Exclusions from
unfairness test: (. . .) (2.) Section 2 does not apply to the definition of the main subject matter of
the contract, or to the appropriateness of the price to be paid in so far as the trader has complied with
the duty of transparency set out in Article 82. (3.) Section 3 does not apply to the definition of the
main subject matter of the contract or to the appropriateness of the price to be paid’.
and the only reason it finally did arrive was Directive 2009/22/EC on injunctions for
the protection of consumer’s interests, which provides that national consumer
agencies should co-operate in fighting unfair contract terms.21 As of 2014, the
ACM is charged with the control of unfair contract terms. So far it has mainly
exercised control of the black list and the issue of price clauses has not arisen.22 But
in his Leyden PhD thesis, C.A. Hage signals a growing divergence between private
law as applied by the ACM and applied by the courts.23
5 Leading Cases
The three leading cases in the Netherlands are Assoud, Weevers and Lindorff.
In Assoud, an organiser of lotteries had denied a claim from a participant on the
basis of her contract terms. The case turned on the interpretation of Art. 6:231 under
(a) Civil Code and Article 4 (2) Directive 93/13/EEC. The Hoge Raad (Dutch
Supreme Court) decided that the notion of core clause should be interpreted in a
strict sense. By way of hard and fast rule, it may be assumed that core clauses overlap
with the essentials of a contract. In order to determine this, it is not relevant whether
or not the clause bears an element held important by one or both parties, but whether
it is of such fundamental importance that the contract would not have been con-
cluded without it.24
In Weevers,25 the Hoge Raad repeated the Assoud decision almost verbatim.
The third case is Lindorff.26 This was one of the first decisions where the Hoge
Raad used its newly introduced competence to give a ruling as to a prejudicial
question raised by a lower court. The case concerned a ‘free’ handy. According to
the Hoge Raad ‘the contract clause as to an all-in-price for both the acquisition of the
telephone as for the service, will as a rule be qualified as a clause which bears on the
core of the contract as envisaged in Art. 4 (2) Directive 93/13/EEC. This requires that
the clause is clear for the well informed and well-advised consumer’. The price will
usually be considered a core provision.27
21
Directive 2009/22/EC of the European Parliament and of the Council of 23 April 2009 on
injunctions for the protection of consumer’s interests, OJ 2009, L 110/30.
22
See Wessels and Pavillon (2017) pp. 469–485.
23
Hage (2017), p. 511.
24
Hoge Raad 19 September 1997, NJ 1998, 6, Assoud/De Nationale Sporttotalisator.
25
Hoge Raad 21 February 2003, NJ 2004, 567.
26
Hoge Raad 12 February 2016, ECLI:NL:HR:2016:236.
27
Conclusion Advocate-General Wissink, Hoge Raad 22 March 2013, ECLI:NL:HR:2013:
BY8275.
502 E. Hondius
6 Lower Courts
A fixed price of Hfl. 3.525 (some € 1.500) was accepted28; as were the object and
price of a lease contract29; ground rent in case of leasehold30; and lease of
securities.31
However, no core clause was accepted in the case of an exemption clause in
general conditions of a supplier of electricity32; a cashback stipulation33; lease of
securities34; the clause ‘provided the Board agrees’35; copyright36; the duration of
the contract37; franchise38; liability in case of car rental39; penalty clause in mort-
gage40; price of the mortgage.41 The latter case will be set out in some detail:
The contract contained the following clause:
4.1.4 Euribor interest
If the Euribor interest rate applies to the contract, this will be the one month Euribor tariff.
The one month Euribor tariff is established on the day preceding the last working day of the
month and will apply to the following month with a surcharge. (. . .).
The court decided that this article 4.1.4 is not a core provision as envisaged in
art. 6:231 BW. Not only does it follow from the parliamentary history that clauses
which stipulate the modalities of the contract, including the most important ones
thereof, are not core provisions, it even follows from art. 6:236 BW that only
specific—not all—possibilities for the user to raise the price will be qualified as
unfair’.
28
Kantongerecht 11 July 1995, Praktijkgids 1996, 4480.
29
Rechtbank Amsterdam 23 February 2000, LJN AA5156.
30
Rechtbank Amsterdam 3 May 2000, LJN AA5674.
31
Hof Amsterdam 14 October 2008, LJN BF8807.
32
Hof ’s-Gravenhage 27 June 1996, NTBR 1996, p. 190.
33
Rechtbank Arnhem 19 May 2004, LJN AQ5066.
34
Rechtbank Amsterdam 12 July 2006, LJN AY3780.
35
Rechtbank Zwolle 19 October 2005, LJN AU5011.
36
Hof’s-Gravenhage 28 September 2006, LJN AY9089.
37
Kantongerecht Lelystad 4 October 2006, LJN AY9541.
38
Rechtbank Arnhem 18 April 2007, LJN BA5581.
39
Hof Leeuwarden 16 April 2008, LJN BC9764.
40
Rechtbank’s-Hertogenbosch 12 October 2011, LJN BT7310.
41
Rechtbank Amsterdam 20 September 2012, LJN BX7984.
7 Specific Trades and Industries
7.1 Insurance
It is especially with regard to insurance contracts that the core exclusion has been
relevant. As the nineteenth and twentieth recitals in the preamble of Directive 93/13/
EEC already expresses:
Whereas, for the purposes of this Directive, assessment of unfair character shall not be made
of terms which describe the main subject matter of the contract nor the quality/price ratio of
the goods or services supplied; whereas the main subject matter of the contract and the price/
quality ratio may nevertheless be taken into account in assessing the fairness of other terms;
whereas it follows, inter alia, that in insurance contracts, the terms which clearly define or
circumscribe the insured risk and the insurer’s liability shall not be subject to such assess-
ment since these restrictions are taken into account in calculating the premium paid by the
consumer.
Clauses in insurance contracts are often qualified as core clauses by case law42
and in legal writings.43 Rare are the cases in which a core clause was not accepted.44
7.2 Telecom
Re telecom contracts, reference may be made to the Lindorff case mentioned

above.45
7.3 Energy
Likewise, for energy contracts reference may be made to the Consumentenbond

case.46
42
Rechtbank’s-Hertogenbosch 9 February 2005, LJN AS6165; Hof Arnhem 28 August 2007, LJN
BB4389; Rechtbank Amsterdam 3 February 2010, LJN BM6992; Hof Leeuwarden 3 August 2010,
LJN BN3280; Hof Amsterdam 19 June 2006, LJN BW9637; Hof Amsterdam 30 September 2008,
LJN BG2107; Hof’s.
43
Vriesendorp-van Seumeren (2002), pp. 177–208.
44
Rechtbank Rotterdam 31 August 2005, LJN AU1838.
45
Hoge Raad 12 February 2016, ECLI:NL:HR:2016:236.
46
Hof’s-Gravenhage 27 June 1996, NTBR 1996, p. 190; See Hoge Raad 21 September 2007, ECLI:
NL:HR:2007:BA7627 exemption clause in contract terms of supplier of energy.
504 E. Hondius
8 The Nordic Example
Not all jurisdictions include an exclusion for price clauses. A group of such
jurisdictions is the Nordic Group.47 In 1915, Sweden adopted its Contract Law.48
According to an unofficial translation, Par. 36 of this Act, in my translation, reads as
follows:
Section 36 of the Contracts Act
A contract term or condition may be modified or set aside if the term or condition is
unreasonable having regard to the contents of the agreement, the circumstances prevailing
at the time the agreement was concluded, subsequent events and other circumstances. Where
a term is of such importance to the contract that it would be unreasonable to demand the
continued enforceability of the remainder of the contract with its terms unchanged, the
contract may be modified in other respects, or may be set aside in its entirety.
When examining the applicability of the provisions of the first paragraph, particular attention
shall be paid to the need to protect those parties who, in their capacity as consumers or other-
wise, are in an inferior position within the contractual relationship.
The first and second paragraphs apply mutatis mutandis to conditions in legal documents
other than contracts.
The law is not specifically applicable to unfair contract terms, but to contract
terms in general. But what interests us, is that it does not provide an exclusion for
price clauses. Has the absence of such exclusion hindered Swedish commercial law?
Not so, if one overlooks Swedish case-law—and that of other Nordic nations, which
have the same or similar legislation in force, although it is generally held that the law
does apply to B2B contracts as well.49
9 Conclusions
Under unfair contract law, the exclusion of price clauses is firmly entrenched.50
Voices in legal writing advocating introduction of laesio enormis in present Dutch
law are not loud.51 But the Nordic example shows that the exclusion is not necessary.
Legislation may well do without it. This does not mean that courts should not
distinguish between price and other clauses. But they may do so on the basis of
the general test rule.
47
Other member states which have not taken over the core clause exclusion are mentioned in COM
(2000) 248 final, p. 15.
48
Lag (1915:218) om avtal och andra rättshandlingar p förmögenhetsrättends område.
49
Lau Hansen (2005), pp. 267–279.
50
Wessels and Pavillon (2017), p. 885.
51
The exception is Van Loo (2013), p. 341. See Hondius (1978a), p. 956; Hartkamp (2016), p. 195.
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(4):624–660
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Financial transactions. Sellier, European Law Publishers, Utrecht, p 575
De Laat S (2016) Naar zwarte, grijze en blauwe lijsten in het arbeidsrecht. Wolters Kluwer, Utrecht
Fervers M, Gsell B (2019) Control of price related terms in standard form contract in Germany. In
Atamer YM, Pichonnaz P (eds) Control of price related terms in standard form contracts.
Springer, Cham, pp X-XX
Hage CA (2017) Handhaving van privaatrecht door toezichthouders. Wolters Kluwer, Leiden, p
511
Hartkamp AS (2016) Chapter 10. Law of obligations. In: Chorus J, Hondius E, Voermans W (eds)
Introduction to Dutch law, 5th edn. Wolters Kluwer, Deventer, pp 171–199
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Hondius E (1978a) Standaardvoorwaarden, PhD. Wolters Kluwer, Deventer, p 956
Hondius E (1978b) Unfair terms in consumer contracts. Molengraaff Instituut voor Privaatrecht,
Utrecht, p 283
Hondius E (1998) Freedom of contract and constitutional law in the Netherlands. In: Mordechai
Rabello A, Sarcevic P (eds) Freedom of contract and constitutional law. Hebrew University,
Jerusalem, pp 201–227
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Vijftig weeffouten in het BW. Ars Aequi, Nijmege, pp 77–81
Lau Hansen J (2005) Anvendensen af Aftalelovens §36 på vedtaegter/U 1998.281 H (BYG). In:
Flodgren B et al (eds) Avtalslagen 90 år/Aktuell nordisk rättspraxis. Norstedt Juridik AB,
Stockholm, pp 267–279
Loos M (2018) Algemene voorwaarden, 3rd edn. Boom, The Hague, p 493
Pavillon CMDS (2011) Open normen in het Europees consumentenrecht: de oneerlijkheidsnorm in
vergelijkend perspectief. Kluwer, Groningen
Van Loo IH (2013) Vernietiging van overeenkomsten op grond van laesio enormis. Dwaling of
misbruik van omstandigheden. Brave New Books, Rotterdam, p 341
Van Wechem THM (2007) Toepasselijkheid van algemene voorwaarden. Wolters Kluwer,
Deventer
Vriesendorp-van Seumeren RM (2002) Algemene voorwaarden en verzekeringsrecht. Wolters
Kluwer, Deventer, pp 177–208
Warendorf H, Thomas R, Curry-Sumner I (eds) (2013) The Civil Code of the Netherlands. Wolters
Kluwer, Alphen aan den Rijn, p 1301
Wessels B, Pavillon CMDS (2017) Collectieve toetsing. In: Wessels B, Jongeneel RHC (eds)
Algemene voorwaarden. Wolters Kluwer, Deventer, pp 469–485
Form Contracts in Romania
Adriana Almăşan and Lucian Bercea
Abstract This contribution seeks to analyse the regime of control of the price
related terms in standard form contracts under Romanian law. First, it highlights
the relevant status of freedom of contract for the control of standard contract terms
and presents the general and sectorial regulatory provisions promoting price trans-
parency and competition, as well as authorizing the control of price terms under
Romanian Law. Against this background, the report describes the judicial control of
standard contract price terms in Romanian courts, under the new Romanian Civil
Code (focusing on laesio enormis and hardship) and under the special regulations on
business-to-consumer contracts (with a particular interest in the unfair terms CJEU
case-law originated from Romania and the peculiar datio in solutum mechanism
related to credit agreements).
1 Introduction. Freedom of Contract Under

Romanian Law
The Romanian economy is a free market economy, based on free enterprise, free
trade and fair competition.1 Romania has been a member of the European Union
since 2007 and was granted the status of a functioning market economy by the
European Commission in 2004. The Romanian legal system accepts freedom of
contract as a rule, and all standard economic rules of a liberal market economy
correspondingly apply. However, the question whether rules of liberal market
1
Article 135 Constitution of Romania (1991).
A. Almăşan (*)
University of Bucharest, Faculty of Law, Department of Private Law, Bucharest, Romania
e-mail: adriana.almasan@drept.unibuc.ro
L. Bercea (*)
West University of Timișoara, Faculty of Law, Department of Private Law, Timișoara, Romania
e-mail: lucian.bercea@e-uvt.ro

https://doi.org/10.1007/978-3-030-23057-9_20
508 A. Almăşan and L. Bercea
economy are indeed applied cannot be correctly answered by taking into consider-
ation only the law in force, but also the law in action, as the mere existence of the
legal framework of a liberal market economy does not imply that the regulations are
always applied in practice. A thorough analysis of the understanding of free market
rules among Romanian judges, prosecutors, lawyers, and legal scholars has not yet
been carried out. As a general rule, Romanian courts are reluctant to rely solely on
principles and to express opinions on the functioning of the free market economy
and the way in which free market economy rules should apply to contracts, and tend
to relate strictly to the positive law in force.
The new Romanian Civil Code,2 which entered into force on 1 October 2011,
establishes freedom of contract as a principle: ‘Parties are free to enter any contracts
and to establish their content, within the limits imposed by law, public policy and the
good morals.’3 A valid contract has the power of a legal rule for its parties and shall
be modified or shall cease only by the will of the parties or by any other means
authorized by law.4 Legal limits can be found, exempli gratia, in the form of a
general interdiction for a person to dispose of its property free of charge in case of
that person’s insolvability.5
The Constitutional Court of Romania6 ruled that the freedom of contract is not a
fundamental freedom: ‘contractual freedom can be capitalized only within the legal
framework, by observing reasonable limits imposed by the need to protect legitimate
public and private interests; when exercised beyond this framework, without any
hindrances, any freedom loses its legitimacy and tends to convert into anarchy’;
freedom of contract does not belong, ‘despite of an apparent terminological identity,
to the category of fundamental rights and freedoms, in their constitutional expres-
sion.’7 However, Romanian courts, including the High Court of Cassation and
Justice,8 as supreme court, tend to generally protect the freedom of contract and
do not interfere with it.9
With regard to the freedom to set the price in an agreement, in both business-to-
business (B2B) and business-to-consumer (B2C) contracts, the general applicable
rules give a large range of options for the parties, who are free to agree on the
contractual price and are not legally constrained to ensure a perfect equilibrium of
the values of their obligations.10 A contract is concluded whenever the parties reach
2
In Romanian: Codul civil român (Romanian Cc).
3
Article 1169 Romanian Cc.
4
Article 1270(1) Romanian Cc.
5
Article 12(2) Romanian CC.
6
In Romanian: Curtea Constituțională a României (CCR).
7
CCR, Decision n 356/2005.
8
In Romanian: Înalta Curte de Casație și Justiție (ICCJ).
9
Exempli gratia, ICCJ, Decision n 542/2016; ICCJ, Decision n 3/2017 [cases published on
internet].
10
Vasilescu (2012), p. 361. More generally, for formation of contracts, see Almășan (2013), for
formation of consumer contracts see Goicovici (2006), Vasilescu (2006), and Piperea (2018); for
Control of Price Related Terms in Standard Form Contracts in Romania 509
a ‘sufficient agreement’11 over the essential elements of the contract,12 such as the
goods and their price in a sale contract.
The new Romanian Civil Code generalises the concept of ‘price’13 for any
contractual monetary obligation14 and sets general rules regarding the price as
main object of the contract.15 The parties may agree on the price terms either by
fixing the price in the national or in a foreign currency, or by setting the criteria for
determining the price (such as a market reference factor or index), or by appointing a
third party to determine it.16 There are general rules aimed at saving the validity of a
B2B contract, in case the parties fail to set a price or criteria to clearly determine the
price when they negotiated the agreement: a B2B contract is presumed to be
referring to the market price for the same product or service in comparable circum-
stances, or, if such a price cannot be determined, to a reasonable price.17 Addition-
ally, there are special rules applicable to certain categories of agreements, such as the
rule aimed at saving the validity of a sale contract, in case the parties fail to set the
price or the criteria to clearly determine it when they negotiated the contract18: the
court is entitled to complete the contract on the basis of the market conditions and
practices referred to within the contract or on the basis of the usual price terms and
conditions of the seller.19 The parties may also appoint a third party to determine the
price20; should the third party refuse to accept the appointment or to act, or its choice
is manifestly unreasonable, the court shall also complete the contract at the request of
the interested party21; the action should be filed within 1 year after the conclusion of
the contract.22 On the other hand, there are special rules aimed at invalidating the
sale contract when the price is fictitious (set out without the intention to be paid) or
derisory (so disproportionate to the value of the goods that it is obvious the parties
had no intention to conclude a sale).23 These special rules are applicable, as a matter
of principle, to both B2B and B2C contracts, unless otherwise provided by law.
price setting in a contract see Dincă (2013) and Chirică (2017); for the currency of the price see
Bercea (2017b); for an empirical analysis of the loan price see Rizoiu (2010).
11
Pop et al. (2015), p. 49. In Romanian: acord suficient.
12
13
In Romanian: preț.
14
Vasilescu (2012), p. 358.
15
Generally, for the Romanian law perspective on the concept of main object of the contract, see
Dincă (2013), p. 14; Pop et al. (2015), p. 14; Chirică (2017), p. 42; Nicolae (2018), p. 187;
particularly for B2C contracts, Gherghe and Rizoiu (2018), p. 255.
16
Dincă (2013), p. 91.
17
18
19
Pop et al. (2015), pp. 49 and 90.
20
21
22
Dincă (2013), p. 93.
23
2 Control of Standard Contract Terms Under Romanian

Law. General Overview
Principles governing the conclusion of contracts include, on one hand, contractual

freedom and, on the other hand, the obligation for the contractual parties to act in
good faith.24 Contractual freedom, regarded in theory as a public order legal
provision, does not however prevent abusive practices at the conclusion of a
contract, in the absence of supporting sanctioning legal provisions. Potentially
unintelligible, unclear, unfair or excessive price terms are the result of the asymmet-
ric bargaining power that renders, most of the times, one party vulnerable to the
other’s discretion, which is a common circumstance in standard contracts. Standard
contracts are the very expression of the imbalance of the parties’ input at drafting
contracts.25
Provisions of the new Romanian Civil Code acknowledge the existence of
adhesion contracts,26 where the adherent party has the alternative to either accept
or not, in whole, the draft contract proposed by the other party.27 These contracts are
the typical framework for standard terms.28 However, there is no reference in the
Romanian Civil Code to the concept of ‘standard contract’29; the concept of ‘stan-
dard term’30 is the only explicit reference to standardization of contracts. Addition-
ally, there is no generally applicable rule that creates a pre-emptive instrument
against the potentially unfair adhesion contract, which may be used by an authority
in order to re-balance this type of agreement. The judicial control of pricing is
performed only ex post, in exceptional situations, and is based on other legal
provisions than those on contracts of adhesion.
As a matter of principle, in the Romanian legal system judicial control of standard
contract terms applies, to different extents, to both B2B and B2C contracts, based on
the general provisions of the new Romanian Civil Code regarding standard terms
and on the special regulations applying to consumer contracts; the latter shall prevail
over the former in case of B2C contracts.31
Standard terms are terms previously drafted by one party (or on its behalf, at its
request) in order to be generally and repeatedly used and which are included in the
contract without having been negotiated with the other party.32 However, negotiated
24
25
Bercea (2015b), pp. 68–75.
26
In Romanian: contract de adeziune.
27
28
Pop et al. (2015), p. 91.
29
In Romanian: contract standard.
30
In Romanian: clauză standard.
31
32
terms of an agreement shall prevail over standard terms.33 In case both parties use
standard terms and do not reach an agreement upon them (the ‘battle of the forms’
hypothesis), the contract shall be concluded on the basis of the terms agreed upon
and of any standard terms similar in substance, except for the case one party notifies
the other, either before concluding the contract or immediately afterwards, that its
intention is not to be bound by such a contract.34
Uncommon (surprising) standard terms do not have any effect in favour of the
drafting party or against the other party if the other party does not expressly accept
them in writing.35 These terms include ancillary standard terms which provide, to the
benefit of the drafting party, the right to unilaterally terminate the contract, to
suspend the performance of its own contractual duties or which provide, to the
detriment of the other party, the loss of rights or of the benefit of the deadline, the
limitation of the right to raise objections, the limitation of the freedom to contract
with other persons, the tacit renewal of the contract, the applicable law, rules on
arbitration, or which derogate from provisions regarding jurisdiction of the courts.36
The judicial control of unfair standard terms in B2C contracts is based on the
framework created by Directive 93/13/EEC on unfair contract terms37 and its
corresponding national Act no. 193/2000 on unfair terms in contracts concluded
with consumers. According to this regulation, a contractual term which has not been
individually negotiated with the consumer shall be regarded as unfair if, contrary
to the requirement of good faith, it causes a significant imbalance in the parties’
rights and obligations arising under the contract, to the detriment of the consumer.38
A term shall be regarded as not individually negotiated where it has been drafted in
advance and the consumer has not been able to influence the substance of the
term, particularly in the context of a pre-formulated standard contract39 or general
purchase terms used by professionals on the market of the respective product or
service. The list of unfair terms set out in the Annex to Act no. 193/2000 is to a great
extent identical to the one entailed by the Annex to Directive 93/13/EEC, and is
non-exhaustive; however, it has been transposed as a black list, not as a grey one.
The national regulation also refers to the core terms control: assessment of the unfair
nature of the terms shall relate neither to the definition of the main subject matter of
the contract nor to the adequacy of the price and remuneration, on the one hand, as
against the services or goods supplies in exchange, on the other, in so far as these
terms are in plain intelligible language. The notable exception refers only to the
33
34
35
36
Almășan (2014), pp. 134–144.
37
95/29.
38
Article 4(1) Act n 193/2000.
39
Article 4(2) Act n 193/2000.
terms that are not drafted in plain intelligible language (in a clear and comprehen-
sible manner).40
The substantive effect of the unfairness of a term is radical in the Romanian legal
system: the unfair term is null and void, shall be excluded from the contract, and
shall have no effect on the consumer.41 The contract is maintained if its performance
is still possible. If the contract cannot be performed, the court is entitled to terminate
it, unless the termination is detrimental to the consumer, in which case the relevant
dispositive legal rule, if it exists, replaces the unfair term.
As a general procedural rule, court decisions have an inter partes effect under the
Romanian Civil Procedure Code.42 By exception, the court can order the seller or the
service provider to change all standard contracts and to eliminate the unfair terms
from the contracts used in relation with consumers,43 at the request of the Romanian
National Authority for Consumer Protection44 or of consumer associations.45 This is
the equivalent of a sui generis collective action, with an erga omnes effect, in favour
of all consumers who concluded the same standard contract. The collective action is
not based on an opt-in or opt-out mechanism. The court decision in a collective
action does not prejudice the right of individual consumers to file a complaint against
professionals with regard to the same unfair term; the erga omnes effect is limited to
the court decisions that are favourable for the consumers.

Under Romanian Law
3.1 Special Provisions Related to the Judicial Control of Price

Terms
The Romanian Civil Code gives courts the competence to control price terms in
standard contracts in exceptional situations (such as laesio enormis, hardship, etc.),
implying a major (ex ante, pre-existent, or ex post, unexpectedly supervened)
imbalance between the price and the other essential obligations.
A general rule, applicable in principle to any contract, including standard con-
tracts, gives the court the power to restore contractual balance in case of laesio
enormis,46 a situation in which one party, taking advantage of the state of need, the
40
Article 4(6) Act n 193/2000.
41
Article 12(4) Act n 193/2000.
42
In Romanian: Codul de procedură civilă român (Romanian Cpc).
43
Article 13(1) n Act 193/2000.
44
In Romanian Autoritatea Națională pentru Protecția Consumatorilor (ANPC).
45
Exempli gratia, Bucharest Court of Appeal, Decision n 445/2017, ANPC v Banca Comercială
Română [case published on internet].
46
In Romanian: leziune.
lack of experience or the lack of knowledge of the other party, stipulates, in its favour
or for another person, a benefit of considerably higher value than the value of its own
obligation, at the time of conclusion of the contract.47 The existence of laesio
enormis as a major imbalance between the product or service and its price is
evaluated according to the nature and purpose of the contract.48 The victim of laesio
enormis may request, at its choice, either the annulment of the contract or the
reduction of its obligations by the value of the damages to which it would be
entitled.49 The action for annulment is admissible only if the damage exceeds half
of the value of the counterparty’s performance at the time the contract was con-
cluded; this imbalance must persist until the date of the annulment request.50 In all
cases, the court may uphold the contract if the other party fairly offers a reduction of
its own claim or, when appropriate, an increase in its own obligation.51 These
general provisions give courts the power to reduce the obligations of a contracting
party that received a benefit that is too small in comparison with the benefit received
by the other contracting party. The courts can also increase the value of the
obligation of the other contracting party, adapting the contract, which in this case
is upheld and considered valid. Consequently, courts can adapt the price of a contract
on the grounds of laesio enormis, either by reducing the price, if it is too high, or by
increasing it, if it is too low, on the condition that the ‘half-value imbalance’ test is
ascertained. Nevertheless, case law indicates that this rule has a very limited
applicability in practice.
Another general rule, also applicable in principle to any contract, including
standard contracts, gives the court the power to restore contractual balance in case
of a change in circumstances (hardship52) unexpectedly supervened during the
performance of the contract. The Draft Common Frame of Reference (DCFR) and
the Principles of European Contract Law (PECL) substantially inspired this rule of
the Romanian Civil Code.53 As a matter of principle, the parties are required to
perform their obligations, even if the performance has become more onerous either
because of the increase in the cost of fulfilling their obligation or because of the
decrease in the value of the consideration.54 However, if the performance of the
contract becomes excessively onerous due to an exceptional change in the circum-
stances that would make it manifestly unfair to order the debtor to fulfil its obliga-
tion, the court may order either the adaptation of the contract as to fairly distribute
between the parties the losses and benefits resulting from the change of circum-
stances, or the termination of the contract at the time and under the conditions it
47
48
49
50
51
52
In Romanian: impreviziune.
53
Pop et al. (2015), p. 124.
54
establishes.55 This judicial intervention in the contract is applicable only if: (1) the
change of circumstances occurred after the conclusion of the contract; (2) the change
of circumstances and the extent thereof have not been and could not reasonably have
been taken into account by the debtor at the time of the conclusion of the contract;
(3) the debtor did not assume the risk of the change of circumstances and could not
reasonably be considered to have assumed that risk; (4) the debtor has attempted,
within a reasonable time and in good faith, to negotiate the reasonable and equitable
adjustment of the contract.56
The judicial control of unfair price terms in B2C contracts, based on Directive
93/13/EEC and on Act no. 193/2000 on unfair terms in contracts concluded with
consumers, generated a very consistent case-law mainly related to (1) unjustified
charges in consumer credit contracts (such as the ‘risk charge’), and to (2) the banks’
right to unilaterally and discretionarily change the interest rate, without any corre-
lation to a market index.57 Although courts are apparently not allowed to evaluate
the potential unfairness of a contractual term if that term is associated with the main
object of the contract, such as the price of the product or service,58 Romanian courts
extensively apply the judicial control in case contractual terms regarding the main
object of the contract (including price related terms) are not drafted clearly and
comprehensibly, closely following the evolution of CJEU case law on transparency
of price terms. The prohibitive effect of this rule is considered as being limited to the
hypothesis of complete transparency of the terms related to the main object of the
contract, including the terms setting the price or a method to determine it. The courts
have extensively used the power to review the terms related to the main object of the
contract in case of lack of transparency, whenever the term does not allow the
consumer to evaluate the economic consequences of the contract.
3.2 Judicial Control of Price Terms Beyond the Express

Legal Rules
Under the former Romanian Civil Code of 1864, there was no express legal
authorization for the judicial control of price terms in the exceptional situation of
hardship. However, some courts, based on the theory of hardship and especially on
the grounds of good faith, accepted to adapt the performance of imbalanced con-
tracts, mainly due to the monetary depreciation of the 1990s.
55
56
57
Exempli gratia, ICCJ, Decision n 316/2016, regarding the unfair character of a standard term that
allows the bank to unilaterally and discretionarily change the ‘variable interest rate indicated at the
bank’s offices’ [case published on internet].
58
Article 4(6) Act n 193/2000.
In the context of an evolving case law on consumer credit contracts, related to

unfair terms and aiming at the stabilization of foreign currency exchange rates
against the Romanian national currency via the conversion of foreign currency
loans, the Constitutional Court of Romania found ex post in 2016 that theory of
hardship had been applicable under the former Romanian Civil Code of 1864,59
expressly referring to on-going litigations. This break-through decision relates to a
recent and original datio in solutum regulation applicable to certain B2C contracts,
as a (late) reaction to the financial crisis and the subsequent economic distress that
prevented consumers from continuing payment of their loan instalments.60 Acting as
an exception to the general provisions on datio in solutum provided in the Romanian
Civil Code, Act no. 77/2016 regulates the possibility for the consumer to terminate
the credit agreement by transferring property of the mortgaged real estate to the
creditor. The Constitutional Court of Romania decided, however, that the regulation
should be interpreted as also implicitly requiring the analysis of the special condi-
tions incident for hardship, including for the agreements concluded under the former
Romanian Civil Code.61 Therefore, this datio in solutum remedy actually focuses on
the evolution in contract performance disrupted by a change in circumstances to the
detriment of the debtor, and does not address the formation of price terms directly.
The effect of the special regulation is, however, an indirect ex post judicial control of
prices, by assessing the contractual balance during the performance of the contract.
The special conditions for this datio in solutum related to a consumer credit
agreement secured by a mortgage restricts the scope of this judicial mechanism of
indirect price control.62
3.3 Distinctions Between Core Terms on Prices and Price-

Related Terms from the Unfair Terms Perspective
The distinction made by Romanian courts between core terms on prices and price-
related terms, in addition to the differentiation between core terms and ancillary
59
CCR, Decision n 623/2016.
60
Bercea (2016), pp. 19–53; Bercea (2017a), pp. 24–51.
61
These conditions are provided by Article 1271 Romanian Cc. The case law following the decision
of the Constitutional Court of Romania stated that the hardship legal conditions should be assessed
on a case-by-case basis, the fact that a loan was linked to Swiss franc, which was subject to drastic
variations against Romanian leu being alone insufficient for an overall assessment (Argeș Tribunal,
Decision n 3211/2017, Bucharest Tribunal, Decision n 4451/2017, Bucharest First Court Instance
of 4th District, Sentence n 7037/2017) [cases published on the internet].
62
For commentaries on this special datio in solutum remedy, see Stoica (2016); Nicolae and
Popa (2017).
terms, is unclear. However, the core terms on prices are the most important appli-
cation field for this differentiation.63
In the context of the application of Romanian national law in various consumer
credit cases related to the judicial control of unfair price terms in B2C contracts and
especially of the significant case law related to remuneration in consumer credit
contracts (interests, charges, and fees), there is a consistent CJEU case law linked to
price terms of the loan agreements, generated by the requests of the Romanian courts
for preliminary rulings (Volksbank România,64 Matei,65 Bucura,66 Andriciuc,67
Lupean,68 etc.).
A notable decision of 2015, in Matei, explains the transparency requirement
regarding the terms in the credit agreements which relate to the ‘main subject-
matter of the contract’ as not referring exclusively to the informative (preventive)
transparency described in Kásler,69 but also to a new justificative (explanatory)
standard of transparency. The case concerned unfair terms in a consumer credit
contract (1) providing for a ‘risk charge’ applied by the bank without a real
consideration and (2) authorising the latter to alter the rate of interest unilaterally
under certain conditions. According to the Court, Article 4(2) Directive 93/13/EEC
must be interpreted as meaning that ‘main subject-matter of the contract’ and
‘adequacy of the price and remuneration, on the one hand, as against the services
or goods supplies in exchange, on the other’ do not, in principle, cover these two
types of terms in the credit agreements. Interestingly, the Court departs itself from its
own reasoning in the 2014 decision of Kásler, stating in Matei that the transparency
requirement implies not only that the loan agreement sets out transparently the
‘economic consequences’ of the term, but also the ‘reasons’ justifying every price
or remuneration term. The Court annihilates the immunity that the annual percentage
rate of charge (‘APR’) index should provide to all elements of the credit remuner-
ation (interest, charges, etc.) and allows the national judge to deconstruct the APR
into its constitutive elements and to assess the unfairness of each price-related
ancillary term. This approach towards transparency in consumer credit agreements
is debatable, as it denies the transparency function of the APR, despite its original
role of a single integrative financial index.70 The rationale behind this decision was
63
For an extensive analysis of unfair term control under Romanian law, see Popa (2004),
pp. 195 et seq.; Gherghe and Rizoiu (2018), pp. 242–272; see also Goicovici (2006), pp. 74–80;
Piperea (2018), pp. 340–405.
64
CJEU Judgment of 12 July 2012, Volksbank România, C-602/10, EU:C:2012:443.
65
CJEU Judgment of 26 February 2015, Matei, C-143/13, EU:C:2015:127.
66
CJEU Judgment of 9 July 2015, Bucura, C-348-14, EU:C:2015:447.
67
CJEU Judgment of 20 September 2017, Andriciuc and others, C-186/16, EU:2017:703.
68
CJEU Judgment of 22 February 2018, Lupean and Lupean, C-119/17, EU:C:2018:193.
69
CJEU Judgment of 30 April 2014, Kásler and Káslerné Rábai, C-26/13, EU:2014:282. For the
relevance of the decision in the Romanian consumer protection case law, see Bercea (2014),
pp. 32–48.
70
Apparently departing from its own ruling in CJEU Judgment of 16 November 2010, Pohotovosť,
C-76/10, EU:C:2010:685, in which the Court stated that ‘the failure to mention the APR in the
the Court’s intention to preserve its coherence in separating core terms from ancil-
lary terms. The national case law followed this ruling of the Court.71
A more recent decision, from 2017, Andriciuc, further explains the transparency
requirements regarding the terms in credit agreements which relate to the ‘main
subject-matter of the contract’, in case of loan agreements denominated in a foreign
currency, creating a predictive (prospective) transparency standard.72 The Court
ruled that article 4(2) Directive 93/13/EEC must be interpreted as meaning that the
concept of ‘main subject matter of the contract’ covers a non-negotiated term,
incorporated into a loan agreement denominated in a foreign currency and according
to which the loan must be repaid in the same foreign currency as that in which it was
contracted, as that term lays down an essential obligation characterizing that con-
tract. Also, article 4(2) Directive 93/13/EEC must be interpreted as meaning that the
transparency standard requires that a term under which the loan must be repaid in the
same foreign currency as that in which it was contracted must be understood by the
consumer both at the formal and grammatical level, and also in terms of its actual
effects, so that the ‘average consumer’ would be aware both of the possibility of a
rise or fall in the value of the foreign currency in which the loan was taken out, and
would also be able to assess the potentially significant economic consequences of
such a term with regard to his financial obligations. Finally, the most innovative part
of the decision is the ruling that article 3(1) Directive 93/13/EEC must be interpreted
as meaning that the assessment of the unfairness of a contractual term must be made
by reference to the time of conclusion of the contract at issue, taking into account all
of the circumstances ‘which could have been known to the bank at that time’
(in particular of the expertise and knowledge of the bank with regard to the possible
variations in the exchange rate and the risks inherent in taking out a loan in a foreign
currency), and which were such as to affect the future performance of that contract.
This argument creates a predictive (prospective) transparency standard, which would
generate practical difficulties for the national judge who will have to resort to an
expert’s opinion on the level of knowledge of a diligent and prudent bank. The
rationale behind this decision could be the Court’s intention to produce a shift in the
standard of proof: as the consumer is not in a position to prove the actual level of
knowledge of the bank at the time of conclusion of the contract (as a condition to
prove that the bank failed to give the consumer all the information available at that
time), the ruling of the Court indirectly requires an expert’s opinion on the adequate
level of knowledge of a bank. The national case law following this decision is
inconsistent: some courts opted for consumer-oriented solutions, other courts—for
solutions based on the fact that it would be unreasonable for the bank to be required
credit agreement at issue, the mention of the APR being essential information in the context of
Directive 87/102, may be a decisive factor in the assessment by a national court of whether a term of
a credit agreement concerning the cost of that credit in which no such mention is made is written in
plain, intelligible language within the meaning of Article 4 Directive 93/13/EEC’.
71
Exempli gratia, ICCJ, Decision n 451/2017 [case published on internet].
72
For the Romanian legal context of Andriciuc, see Bercea (2016), pp. 19–53; Neamț (2016),
pp. 108 et seq.; Bercea (2017a), pp. 24–51.
to inform the consumer, when the credit agreement is concluded, of the occurrence
of subsequent events or developments which it could not have anticipated, such as a
large change in the rate of exchange between the Romanian leu and the Swiss
franc.73
3.4 The Administrative Body Invested with the Control

of Price Terms
There is an administrative body (Romanian National Authority for Consumer

Protection74) invested with the power to control the activity of professionals in
relation to consumers, enabled to apply administrative sanctions if consumer pro-
tection regulations are not observed. However, this authority does not have jurisdic-
tional powers, except for those related to alternative dispute resolution in consumer
contracts (Government Ordinance no. 38/2015, which transposes Directive 2013/11/
EU on alternative dispute resolution in consumer contracts75). A special body was
established for alternative dispute resolution in banking (Centre for Alternative
Dispute Resolution in Banking76), in order to create an alternative extrajudicial
route (in the form of conciliation or of mediation, promoting solutions that may be
different from the ones resulting from the applicable substantive law) for the
consistent litigation on banking consumer contracts.77

Under Romanian Law
In the Romanian legal system there are a number of regulations directly related to
price terms, either by setting the maximum limits for prices, or by limiting the
services that can be charged. These regulations relate to interest rates in civil and
commercial relations or have a sectorial application (banking, energy, communica-
tions, insurance, etc.).
73
For consumer-oriented decisions, see, inter alia, Cluj Court of Appeal, Decision n 620/2016
[case published on the internet]. The High Court of Cassation and Justice, as supreme court, has
itself an inconsistent case law in this matter.
74
In Romanian: Autoritatea Națională pentru Protecția Consumatorilor (ANPC).
75
Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on
alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/
2004 and Directive 2009/22/EC, OJ 2013, L 165/63.
76
In Romanian: Centrul de Soluționare Alternativă a Litigiilor în Domeniul Bancar (CSALB).
77
Bercea (2015a), pp. 35–45.
The relevant legislation in the field of interest rate and the default interest rate
(Government Ordinance no. 13/2011 regarding the legal interest and default interest
rate for monetary obligations) provides that the legal remuneration interest rate is set
at the reference interest rate of the National Bank of Romania, which is the monetary
policy interest rate of the central bank78 and that the default penalty interest rate is set
at the reference interest rate plus 4 percentage points,79 while in B2B contracts and in
contractual relations between professionals and (public) contracting authorities, the
level is the reference interest rate plus 8 percentage points.80 However, in case a
contract is not related to the exploitation of a business enterprise, the legal interest
rate shall be reduced by 20%. In case a relationship between the parties entails a
foreign element, if Romanian law is applicable and the payment is due in a foreign
currency, the legal interest is 6% per year.81 In relationships that are not related to the
exploitation of a business enterprise, the interest cannot exceed the legal interest rate
by more than 50% per year82; the sanction for not observing this rule is the invalidity
of the term, and the creditor will not even be entitled to the legal interest rate.
Romania has a consistent regulation on specific remuneration in consumer credit
agreements. The special rules applicable to consumer credit contracts in Emergency
Government Ordinance no. 50/2010, transposing Directive 2008/48/EC on credit
agreements for consumers,83 expressly forbid a series of fees and charges, and
correlatively expressly provide the fees and charges that banks are allowed to
practice84: (1) it is forbidden to increase the level of fees, tariffs and bank charges,
except for the costs imposed by the legislation; (2) it is forbidden to introduce and
collect new fees, tariffs or any other bank charges, except for the specific costs of
additional products and services expressly requested by the consumer, not stipulated
in the contract or which were not offered to consumers at the time of conclusion;
(3) it is forbidden to collect a charge for cash payment of the loan instalments,
regardless of whether the payment is made by the holder or by another person; (4) it
is forbidden to collect a charge for the amounts drawn from the loan; (5) it is
forbidden to charge a fee, a tariff, a bank charge or any other cost, if the consumer
wants to change the maturity date of the rates; (6) charges are forbidden in situations
where consumers require a change of collateral, provided that the consumer pays all
the costs associated with the establishment and assessment of the new guarantees.85
The regulation also limits the number of services that the bank can charge: (1) for
the loan granted, the creditor may only charge: a file analysis charge, a credit
78
Article 3(1) Government Ordinance n 13/2011.
79
80
81
Article 4 Government Ordinance n 13/2011.
82
83
84
Articles 34 and 35 Emergency Government Ordinance n 50/2010.
85
Article 35 Government Emergency Ordinance n 50/2010.
administration charge or current account management charge, a compensation in

case of early repayment, insurance costs and, as the case may be, penalties, other
costs charged by third parties, as well as a single charge for services provided at the
consumer’s request; (2) the loan file analysis charge will be set in a fixed amount, the
same amount being charged to all consumers with the same type of loan within the
same credit institution; (3) the administration fee is charged for the monitoring/
recording/carrying out of operations by the lender for the purpose of using/repaying
the credit granted to the consumer. If this charge is calculated as a percentage, it will
be applied to the current credit balance.86 In case of variable interest rates, there must
be a fixed element and a variable one (EURIBOR/ROBOR/LIBOR etc.), indepen-
dent from the credit institution. The penalty interest rate should be a fixed percentage
that cannot be higher than the regular interest rate plus 3 percentage points (or 2
percentage points in case the default of the debtor is caused by unemployment,
reduction of salary, etc.). The early repayment compensation is limited to 1% in case
the period between the repayment date and the date agreed for the termination of the
contract is over a year and 0.5% in case this period does not exceed 1 year.87
There is a particularly relevant CJEU case law linked to the transposition of the
Directive 2008/48/EC into Romanian law with regard to the level of credit consumer
protection, which is higher than the level playing field ensured by this Directive. The
first important CJEU decision related to Romanian consumer protection in credit
agreements, Volksbank România, ruled that national law may establish a higher level
of consumer protection than the Directive 2008/48/EC, in the sense that the Directive
does not preclude a national measure designed to transpose it (1) from including in
its material scope credit agreements concerning the grant of credit secured by
immovable property, even though such agreements are expressly excluded from
the material scope of the Directive, (2) from defining its temporal scope so that the
measure also applies to credit agreements which are excluded from the material
scope of that Directive, and (3) from imposing on credit institutions obligations not
provided for by the Directive as regards the types of charges that they may levy in
connection with consumer credit agreements falling within the scope of that measure
and from prohibiting credit institutions from levying certain bank charges.
There is significant relevant legislation with sectorial application in energy,
communications, insurance, etc. For instance, in the field of energy, the sectorial
regulation (Law no. 123/2012 regarding electricity and natural gas, which aims to
ensure the transparency of tariffs and stipulates the rule that the supply of electricity
by the last-resort supplier is made at established tariffs/prices approved according to
the regulations issued by the competent authority, the National Energy Regulatory
Authority88) sets price caps mostly in the area of contracts between last resort
suppliers and household customers, and also sets limits for the fees charged for the
connection to the electricity network and tariffs for electricity transmission, system
86
Article 36 Government Emergency Ordinance n 50/2010.
87
For commentaries on these specific provisions, see Goicovici (2014).
88
In Romanian: Autoritatea Națională de Reglementare în Domeniul Energiei (ANRE).
and distribution services, acquisition of network, etc. Some communication services,

under the supervision of the competent authority (National Authority for the Admin-
istration and Regulation of Communications89), are also regulated in regard to the
maximal applicable tariffs (interconnections at fixed ending, initiated at fixed point,
transit, interconnections at mobile ending, auxiliary, etc.), focusing on interconnec-
tivity accessibility. The relevant legislation applying to insurance contracts, under
the supervision of the competent authority (Financial Supervision Authority90),
stipulates the possibility of setting price caps and formulas for calculation of
insurance tariffs for contracts insuring liability for vehicle accidents.

Transparency and Competition Under Romanian Law
5.1 Regulations Promoting Price Transparency
There are several special disclosure regulations promoting price transparency under
Romanian law.
The general applicable rule in B2C contracts is that sellers must inform con-
sumers on the final price of the product or service, give them all of the information
and technical documents which are necessary,91 and indicate prices and tariffs in a
clearly visible and unequivocal manner, easily readable, either by marking, labelling
or displaying.92 The purpose of product labelling is to offer consumers necessary,
sufficient, verifiable and easy to compare information, so that they may choose those
products that correspond to their needs and financial possibilities, and are informed
about possible risks they may be exposed to. Information on product labels shall be
written in Romanian, irrespective of the country of origin and of the presentation in
other languages. Information shall be visible, readable and printed in such a manner
that deletion or fading is impossible.
In banking, the relevant example for promoting price transparency is the annual
percentage rate of charge (APR—DAE93) applicable to consumer loan contracts.94
On the other hand, Directive 2014/92/EU on the comparability of fees related to
89
In Romanian: Autoritatea Naţională pentru Administrare şi Reglementare în Comunicaţii
(ANCOM).
90
In Romanian: Autoritatea de Supraveghere Financiară (ASF).
91
Article 54 Act n 296/2004 (Romanian Consumer Code).
92
Article 65 Act n 296/2004.
93
In Romanian: dobânda anuală efectivă.
94
Articles 72–76 Government Emergency Ordinance n 50/2010.
payment accounts95 was recently transposed into national law,96 and a website
comparing fees charged by payment service providers is administered by the
National Authority for Consumer Protection (ANPC).97
5.2 Control of Prices by Specific Competition Law

Instruments
The protection of competition in the Romanian market is the main task of the
Competition Council,98 an autonomous administrative authority regulated by Act
no. 21/1996 on competition. The Competition Council enforces national and
European Union regulations on competition. At the same time, the Competition
Council has the role of a national contact authority on state aid between the European
Commission, on one hand, and the public institutions, state aid suppliers and
beneficiaries, on the other hand. The Competition Council has two main functions:
a preventive function, involving market supervision, and a corrective one, aimed at
developing a normal competitive environment.
The two tiers of protection include the legislation against unfair trading practices
and the antitrust regulations.
The Romanian regulation on unfair competition (Act no. 11/1991 on unfair
competition) sanctions unfair trading practices on a national level, hence enabling
a legal instrument for protection of the direct competitors, and, secondarily, con-
sumers as well. This legislation has, however, a negligible effect on pricing policies
and price control and its relatively recent amendment,99 even if abundantly revising
the initial form, has no impact regarding pricing. Consequently, general legal pro-
visions on unfair commercial practices in B2B relations do not offer specific control
of standard contract terms on prices.
Instead, the Directive 2005/29/EC on unfair commercial practices100 has been
transposed into the Romanian legislation by Act no. 363/2007 on combatting unfair
business-to-consumer commercial practices, which contains some provisions
95
comparability of fees related to payment accounts, payment account switching and access to
96
Act n 258/2017 on the comparability of fees related to payment accounts, payment account
switching and access to payment accounts with basic features.
97
A table of comparison is available at www.anpc.gov.ro.
98
In Romanian: Consiliul Concurenței.
99
Government Ordinance n 12/2014.
100
Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005
of the Council, OJ 2005, L 149/22.
regarding unfair selling practices in B2C contracts, such as practices aimed to

substantially alter consumers’ economic behaviour, or contrary to professional
diligence, including (either omissive or commissive) misleading and aggressive
advertising techniques. This regulation expressly provides the clear representation
of the total price among the criteria determining unfair practice in relation to the
consumers.
Year 1996 marks the moment of the first major competition provisions that
include pricing related provisions. Act no. 21/1996 regulates antitrust, by prohibiting
agreements between undertakings, decisions by associations of undertakings and
concerted practices to directly or indirectly fix purchase or selling prices or any other
trading conditions,101 as well as abuse of dominant position by directly or indirectly
imposing unfair purchase or selling prices or other unfair trading conditions.102 In
fact, the Romanian legislator followed the model set by articles 101 and 102 TFEU
(former articles 81 and 82), which were largely inspired by the US Sherman Act.
These legal provisions prohibit both collusion on fixed prices and establishing
maximal and minimal thresholds on prices. The only exception allowed by the
secondary legislation issued in the application of this regulation concerns fixing
maximal prices, where the agreement merely provides a recommendation bearing no
enforcing powers and no sanctions to the undertaking that is not observing the price
indication. Similarly, the application of both excessive and dumping prices is
prohibited, under the condition that the undertaking holds a dominant position on
the relevant market. Act no. 21/1996 also indirectly regulates ancillary prices, as the
prohibition of price fixing includes other contractual elements that determine the
overall pricing.
The control applied to pricing is performed on an administrative level by the
national authority in competition. The Competition Council is empowered with
investigation prerogatives and, further to conducting inquiries, it may apply fines
in amount of 0.5–10% of the undertaking’s turnover in the year prior to that of fining
and imposes other corrective measures to the undertakings’ market behaviour. The
Competition Council’s case law shows that fixing prices also has the effect of setting
barriers against entering the market.103
The control carried out by the national competition authority is performed ex post,
and there is no legal provision apt to prevent illicit conduct in a direct manner. The
sanctions for price alignment have however a deterrent effect that serves the pre-
vention function.
Although the main beneficiaries of competition regulations are the competitors in
the relevant market, most provisions indirectly serve consumers as well. Consumers
meet the condition of having interest for filing a complaint with the national
101
Article 5(1)(a) Act n 21/1996.
102
Article 6(a) Act n 21/1996.
103
Competition Council, Decision n 58/2012 (upheld by the judicial courts), ruling that the
National Union of Judicial Officers, by fixing minimal tax for admission, established a discrimina-
tory excessive fee.
competition authority, being directly affected by the fixed prices (nonetheless, not
for dumping prices) or by abusive prices. However, the administrative procedure
ensued in case the investigation is started triggers no specific relief for the consumer,
aside from the immediate cessation of illicit behaviour.
Competition Council decisions are subject to judicial review at the Bucharest
Court of Appeal, and the judicial award may be appealed at the High Court of
Cassation and Justice. Even though competent courts have broad prerogatives in
assessing the legality of the national authority’s decisions, including the possibility
to look into the merits of the care, jurisprudence shows, however, that the review is
limited to procedural aspects, or, in few cases, to analysing circumstantial condi-
tions. The case law of both competent courts shows in fact no intervention of the
court over the administrative authority’s assessment on the very existence of price
fixing or abusive pricing.104 Whenever it did look into the merits of the case, the
High Court of Justice and Cassation merely reduced the amount of the fine.
Another tier of measures related to collusion on prices or abusive prices is the
action for damages afforded to the victims both as follow-on and as stand-alone
actions.
The follow-on action may be filed in court, pursuant to the sanctioning decision
issued by the Competition Council remaining final. The action falls in the general
category of civil actions that require the claimant to provide sufficient evidence for
identifying the offender, the illicit act, the damage, the connection between the last
two elements, and for the fact that the illicit behaviour was result of at least
negligence. Even though some of the conditions are eased by Competition Council
decisions holding, inter alia, the offending character of the undertaking and the illicit
character of its behaviour, the action filing still bears some challenges resulting from
insufficient case law and the lack of predictability, the length of trial (that may take
more than 3 years), judicial taxes and ancillary costs. In fact, this type of actions
remains rarely chosen by victims.
The stand-alone action is equally availed to victims105; however, it entails
additional challenges, including the proof of illicit behaviour and causality between
the offence and the damage incurred. Usual defences used by vendors in court
consist of invoking general market conditions or misconduct in the victim
company’s management. The stand-alone actions have an even lower success rate
for such arguments, possibly due to the reluctance of judges to apply competition
law provisions.
A recent incentive for the increase of case law in this type of action resulted
from Government Emergency Ordinance no. 39/2017 on actions for damages,
implementing Directive 2014/104/EU on certain rules governing actions for
104
Inter alia, ICCJ, Decision n 1756/2015; ICCJ, Decision n 2280/2015; ICCJ, Decision n 5157/
2012; ICCJ, Decision n 4230/2012; ICCJ, Decision n 2702/2015 [cases published on internet].
105
Article 66(1) Act n 21/1996.
damages.106 The impact of the new legislation is still to be awaited, due to the short
lapse of time since its enforcement. There is, however, little room for optimism, in
the absence of an adequate legal instrument for class actions in these matters. The
class action remains a theoretical possibility in Romania, considering its insufficient
regulation. The actions for damages in competition require that the multiple claim-
ants are legally allied and represented by an association or that the action is promoted
by a non-governmental organization, this condition creating an important burden
when filing such claims.107
There are several deficiencies in the protection provided by competition law rules
when using the administrative procedure, the judicial review (regarding administra-
tive awards or actions for damages) or even the criminal law provisions incriminat-
ing price fixing. The first challenge is the lengthy procedure of any of the three
mechanisms developed to stop the infringement of the law and to grant damages.
The costs entailed by civil trials, resulted not only from the judicial tax calculated as
a percentage of the claim’s value, but also from the administering of evidence (the
most relevant being the expert reports defining the relevant market) and representa-
tion fees (necessary for judicial procedure, due to the complexity of the trial) are an
additional problem for the victims. Victims are forced to consider the low success
rate of the complaints lodged with the Competition Council and of the actions filed in
court, and the perspective of ruining the relations with the abusive price seller or
service provider, a risk that is specific for small enterprises rather than for con-
sumers, and this assessment has a very dissuasive effect.
The specific conditions to be met by fixing the prices or by practicing abusive
prices in competition regulations, such as the necessity to prove the existence of
collusion, respectively the market power, allow only a small part of situations of
inequitable term prices to be covered.
In effect, the standard terms on prices are overburdening not only for the
consumer, but also for the small companies, the latter under a derisory protection
by competition law. The Romanian legislator displays insignificant concern for the
small and medium businesses that are exposed to unethical pricing in standard
contracts, while sellers and suppliers hold a superior bargaining power. The limita-
tions in the applicability of competition rules leave this category outside the scope of
the law. Unless the abusive seller holds a large market share, or the collusion
between undertakings tends to affect the relevant market in whole or a significant
part of the relevant market, the administrative authorities are not enabled to open
inquiries and the judicial courts do not award damages for the victims on competition
law grounds.
106
Directive 2014/104/EU of the European Parliament and of the Council of 26 November on
certain rules governing actions for damages under national law for infringements of the competition
law provisions of the Member States and of the European Union, OJ 2014, L 349/1.
107
Article 37 Romanian Cpc, setting the general principle, without establishing the specific condi-
tions; Article 66(6) Act n 21/1996, providing the requirement that the action is filed by an
association.
Other issues that require creative coordination between the remedies challenge
the applicability of competition law. Incidents during the administrative investiga-
tion such as the settlement procedure, the application of leniency or the commitment
program may be deemed effective regarding the decrease or cessation of enforcing
inequitable prices, but their impact on recovering damages by the victims is not fully
determined, hence generating inconsistency in practice.
Competition law remedies for unfair prices not only operate ex post, but also have
limited application to the infringements found by the administrative or the judicial
authority.108 The Competition Council orders impose fines on the investigated
companies, but its decisions are not applicable to similar behaviours of other sellers,
in the absence of a new investigation, or an extension of the same investigation. The
courts grant awards solely to the claimants whereas third parties may not benefit
from the precedence of case law, due to the fact that the Romanian legal system is a
continental one and is grounded on the direct application of law, without recognizing
the binding nature of legal precedent. Judicial awards pertaining to a standard
contract bear no effects to other similarly or even identically drafted standard
contracts of another seller or provider.
In practice, the most frequent cases of price abuse in contract terms are found in
the commercial or industrial lease. As the shopping and business centres, the
industrial or logistic parks are not deemed to hold a dominant position on the market
of space rentals, especially in large cities, in the absence of proven collusion between
the lessors, the pricing follows the market conditions, the scarcity of certain types of
spaces enabling discretionary, cost-unrelated rent. Similar to the prices applied in
banking services, the prices for rent accumulate various ancillary services increasing
the total amount charged to the client. Despite this phenomenon, the scarcity of case
law in courts confirms the victims’ reluctance to seek relief.
In addition to imposing fines on the undertakings infringing competition law,
there is a broad spectrum of measures availed by Romanian law to the competition
authority to adjust market behaviour. Moreover, all contract terms contrary to
competition law are null and void by law. The standard terms on prices are also
influenced indirectly by the behavioural measures within the commitment proce-
dures related to the economic concentration process. Some of the measures may
include freezing the prices applied in standard contracts, further to the acquisition or
merger operation. Despite the prerogatives the authority possesses, the legal instru-
ments provide inadequate protection against abuse. As an example, the competition
authority provides no guarantee against market abuse, by allowing the economic
concentration of two operators in an oligopolistic market, thus reducing all of the
participants to two major undertakings. It is possible that, after the lapse of the
commitments period, the price terms may suffer alterations harmful for the clients
and the relevant market, in general.
108
In Romania, only the decisions issued by the Constitutional Court and certain decisions issued by
the High Court of Cassation and Justice in the general application of law have general applicability.
Also, the monopolistic relevant markets do not provide a realistic and efficient
model of administrating price formation in standard contracts, such as the state
monopoly in various sectors,109 or other restricted economy sectors having state-
owned companies in various forms of organization as sole operators. In these
markets, the price terms are subject to state regulation based on index formulas or
in reference to another product or service. Despite the advantages of a cost based,
fair, predictable, generally applicable price, this type of standardization is incom-
patible with the free market. It follows that excessive control cannot set the princi-
ples for standard contract price terms.
Consequently, the abuse in determining standard contract prices is such a com-
mon phenomenon in practice, that statistics of its extent cannot be realistically
extracted from the administrative and judicial records. As case law is so divergent,
indication of the infringement rate is difficult, and legislation is far from having
general applicability, it follows that traditional legal protection is inefficient, and it
becomes necessary that innovative measures be taken in order to address unfair
prices in Romania.
The Competition Council, in association with the National Authority for Con-
sumer Protection and other non-governmental organizations, launched a web plat-
form in 2016, ‘Prices Monitor’, where prices applied by the most relevant retailers
for the most usual products are displayed daily. The project is an attempt to influence
the pricing policies of common consumer goods by inducing transparency and
reciprocal control between the competitors and is limited to certain consumer
goods. The list of goods was established on the basis of studies conducted by AC
Nielsen Romania. This project aims to increase competition in the market and assist
consumers in identifying the lowest price provider of the products they are searching
for. The project is actually still in its pilot stage, being applicable only in Bucharest
and its surrounding areas. The platform is a free of charge service provided by the
national competition authority and enables consumers to search using as criterion
either the cheapest or the most sold products, at their own choice.
This instrument has very limited applicability and bears no sanctioning mecha-
nisms, hence reaching out to the behavioural economics and giving the consumer a
decisive role in striking the right balance in pricing applicable for several consumer
goods. This tool being rather new, it cannot provide an effective criterion for
assessment of the evolution of prices. Nonetheless, as the judicial control does not
provide an effective protection against overpricing for many categories of goods and
services, from the perspective of competition law, any alternative measure inducing
similar effects is welcome.
Price transparency has consistently shown its vulnerabilities as a reliable tool for
lowering prices. In this sense, the application of the Directive 2014/24/EU on public
procurement,110 provided an excellent example, due to the requirement for the
Article 2 Act n 31/1996 on monopoly.

109
110
public procurement and repealing Directive 2004/18/EC, OJ 2014, L 94/65.
conclusion of contracts to be grounded, inter alia, on a transparent procedure and the

lowest price offered by the bidders. The backlash generated by poor quality of the
purchased goods and services, offered by the bidders in order to compensate the
diminishing of prices, raises the question whether transparency is sufficient in order
to establish similar mechanisms for standard contract pricing.
The relation between the price and the product or service quality is another
sensitive issue capable to influence decisively the legal solutions for fair pricing.
As previously explained when referring to the ‘Price Monitor’ and the public
biddings, when establishing clients’ purchasing behaviour, the price criterion is
often set in balance with the quality criterion. In some cases, the effect in compe-
tition law is radical to the extent of setting different relevant markets for apparently
similar products or services (watches, cosmetics, transport services, etc.). There-
fore, inferior quality represents an indirect way of setting higher prices for the same
product or service, while maintaining the price of the initially higher quality
product or service.
Nonetheless, there is a general trend of decrease in quality, especially for con-
sumer goods and services, a practical consequence that is not combated by legal
instruments. In Romania, the Competition Council’s and the courts’ case-law is not
concerned by quality issues when establishing fair pricing, and the complexity of
adding this aspect to the burden of proof is considered by the claimants when
mitigating judicial costs. In effect, the quality of products and services not only
raises judicial costs but also lengthens trial duration. The clients seeking high quality
products and services will be less influenced by the price.
In a society based on internet communication, the increase of competition may
result from various non-legal instruments. Many websites that generate searches
following various criteria, including the price, or the comparison between products
(sold either in shops or online) operate in Romania. By increasing the online
assistance in identifying the best prices, not only consumers, but also small busi-
nesses have the opportunity to enhance their awareness in market behaviour.
Other informational tools are not as effective, such as the annual reports issued
by the Competition Council detailing information on the market structure and the
behaviour within the market for several economy sectors selected according to
economy dynamics and vulnerabilities noticed in the authority’s sector market
inquiries. Regrettably, the reports are not available on a large scale and few of the
consumers practically benefit from the publishing. The reports issued by the
National Authority on Consumer Protection have however, a larger addressability,
and its studies tend to be more efficiently disseminated than the ones of the
competition authority, including the review of price terms in standard contracts.
In conclusion, Romania has not regulated measures enabling an ex ante control
on price formation in standard contracts and the indirect non-legal measures do not
generate an efficient deterring effect to various price terms mechanisms, including
complex, waterfall, conditional, hidden, etc.
6 Final Remarks
In the Romanian legal system, as well as in some other European Union member
states, there are numerous challenges for the efficient control of price terms in
standard contracts.
The general practice for the sellers and service providers in B2C contracts to
highlight the benefits and remain silent regarding the risks entailed by the onerous
options available to the client, such as price terms (especially ancillary price-related
terms), raises supplementary challenges. The sellers and service providers showed
capability in enhancing the innovative techniques applied at establishing price terms
in standard contracts, especially in main consumer goods markets, rendering pricing
more complex and misleading for their clients.
General measures, such as the Romanian Civil Code requirement that some of the
standard contractual terms be valid upon the condition of express, written consent of
the debtor, have no direct effect on pricing, as the limitative list of surprising terms
does not refer to core price terms. Soft ex ante measures, based on the increase of
competition and price transparency, have not yet proven preventive efficiency. The
bulk of the control measures on pricing operate ex post and require judicial review
(either with regard to the validity of the contract, or to its performance). The
Romanian case law on unfair price terms, including both core terms on price and
price-related terms, is very consistent.
The dynamics of the consumers’ economic behaviour acts as an obstacle against
the applicability of legal protection at the conclusion of standard contracts.
The consumers’ lack of interest for the pre-contractual information process when
concluding important contracts, such as bank housing loans, has not been counter-
balanced by the stricter conditions imposed on banks in the past years. However, the
judicial interpretation in B2C credit agreements efficiently controls unfair price
terms on the basis of transparency requirements, according to which the consumer
contract must set out transparently the economic consequences of the term and the
reasons justifying every element of the remuneration. Some recent legislative mea-
sures aimed at granting relief to the consumers in overburdening standard contracts,
on the grounds of datio in solutum and hardship. These measures are not related to
the fairness of price formation, but to impediments in the performance of the
obligation due to a change in circumstances (and are, fundamentally, generated by
the economic crisis), rendering a non-specific protection against overpricing
imposed in standard contracts.
Not least, the B2B agreements benefit from inferior protection against abuse in
standard contract prices. Except from the protection availed by competition law,
with limited application, as it regards price fixing or abusive pricing, both requiring
specific conditions to be met, the party holding an inferior bargaining power remains
at the discretion of the party imposing its standard terms.
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Freedom of Contract in Respect of Price
Terms in Russian Law: With a Special
Focus on Price Terms in Standard Form
Contracts
Artyom G. Karapetov and Andrey M. Shirvindt
Abstract Control of price-related terms in either standard form contracts or B2C

contracts has hardly become topical in Russia. This is true for legislature and
judiciary as well as for academia.
Apart from price regulation for carriage by rail, energy supply, public utility
services, compulsory automobile liability insurance, etc. as well as a general prohi-
bition against setting different prices for different customers of the same category in
contracts having particular social significance (‘public contracts’), regulatory inter-
ventions providing for such control are rare, and they do not seem to be based on a
clear and coherent general model or idea.
The courts remain reluctant so far to police price-related terms even though the
Russian law provides for an array of tools that might be used for this purpose.
The only domain in which control of price-related terms has gained careful
attention from the legislature and judiciary is consumer credit.
In this contribution Sects. 1–3 has been drafted by Artyom G. Karapetov and Sects. 4–5 by Andrey
M. Shirvindt.
A. G. Karapetov (*)
M-LOGOS Law Institute, Moscow, Russia
Higher School of Economics, Moscow, Russia
e-mail: postmaster@m-logos.ru
A. M. Shirvindt (*)
Lomonosov Moscow State University, Faculty of Law, Moscow, Russia
Private Law Research Centre under the President of the Russian Federation named after
S.S. Alexeev, Moscow, Russia

https://doi.org/10.1007/978-3-030-23057-9_21
532 A. G. Karapetov and A. M. Shirvindt
Abbreviations
Constitutional Court The Constitutional Court of the Russian

Federation
Consumer Rights Agency The Federal Agency for Control in the
Sphere of Consumer Rights Protection
and Human Welfare
Higher Commercial Court The Higher Commercial (‘Arbitrazh’)
Court of the Russian Federation
(abolished with effect from August
6, 2014)
Information Letter N146 The Information Letter of the
Presidium of the Higher Commercial
Court of the Russian Federation of
September 13, 2011 N146
Plenum Resolution N16 The Resolution of the Plenum of the
Higher Commercial Court Plenum ‘On
Freedom of Contract and Its Limits’ of
March 14, 2014 N16
Russian Civil Code The Civil Code of the Russian
Federation (Part I came into force on
January 1, 1995)
Russian Consumer Credit Act The Federal Law ‘On Consumer Credit
(Loans)’ of December 21, 2013 N353-
ФЗ
Russian Consumer Rights Protection Act The Law of the Russian Federation ‘On
Consumer Rights Protection’ of
February 7, 1992 N2300-1
Supreme Court The Supreme Court of the Russian
Federation

of Contract in Russian Law
The history of Russian law over the past 150 years regarding freedom of contract can
be divided into three phases.
During the first phase extending from the middle of the nineteenth century until
1917, as a market economy and capitalism were developing in the Russian Empire,
the degree of contractual freedom gradually increased.
In the course of the second phase that took place after the Revolution of 1917 and,
specifically, after establishment of the planned economy and abolishment of the
market economy by the end of 1920s, the scope of contractual freedom was
drastically limited. Contractual relationships among enterprises, as well as between
Freedom of Contract in Respect of Price Terms in Russian Law: With a. . . 533
enterprises and citizens, were regulated by means of planning and administrative

tools, and prices were determined by government authorities. With regard to the
political and ideological environment, the idea that ‘whatever is not explicitly
permitted is prohibited’ prevailed in academic literature.1
The third phase started in the 1990s. Following the collapse of the USSR and the
return to the market economy model in the Russian Federation, the paradigm
changed again and the principle of freedom of contract was again proclaimed as a
basic principle of civil law.
In other words, the principle of freedom of contract in Russia followed a path of
rise-fall-revival.
The 1993 Constitution of the Russian Federation (ss 8, 34 and 35) established
economic freedom as well as the right of all individuals to freely use their abilities
and freely use privately owned property. The Constitutional Court of the Russian
Federation (hereinafter—‘Constitutional Court’) reached the conclusion on the basis
of these provisions of the Constitution that the idea of freedom of contract also had a
constitutional dimension.2 Hence, the Constitutional Court often uses the concept of
‘constitutional freedom of contract’ in its rulings.
Part one of the Civil Code of the Russian Federation (hereinafter—“Russian Civil
Code”), which came into force in 1995, established the principle of freedom of
contract as one of the basic principles of civil law (s 1 Russian Civil Code);
additionally, it described this principle in s 421, which concretely established:
(1) the parties’ right to freely conclude contracts (except for cases specifically
provided for in the law), (2) the parties’ right to freely determine the terms of their
contracts if these terms do not violate the mandatory rules of law, and (3) the parties’
right to conclude innominate and mixed contracts.
Over time, a consensus appeared in academia and judicial practice that everything
should be considered permitted that is not explicitly prohibited or that should not be
prohibited because of some meaningful policy argument.3
In the ruling of the Constitutional Court of January 28, 2010 [N2-П] it was stated
that: ‘the freedom of entrepreneurial activity and the freedom of contracts by virtue
of s 55(3) of the Constitution of the Russian Federation may be limited by a federal
law, but only to the extent to which this is necessary in order to protect the
foundations of the constitutional order, good morals, health, rights and legitimate
interests of others, or the provision of the country’s defense and the state security.’
The Higher Commercial Court of the Russian Federation (hereinafter—“Higher
Commercial Court”), which until 2014 was the highest court within the system of
Russian commercial courts, defines the same idea in a sufficiently detailed manner:
1
For example, Ivan S. Pereterskij wrote in the late 1920s: ‘If the bourgeois civil law proceeds from
the principle “everything which is not forbidden is allowed”, the Soviet civil law is more consistent
with a general rule based on the contrary thesis: “whatever is not permitted is prohibited”’
(Pereterskij 1929, p. 16).
2
The rulings of the Constitutional Court of February 23, 1999 [N4-П], of October 27, 2015 [N28-П]
and many others.
3
In more detail, see: Karapetov and Savel’ev (2012), pp. 23–94.
‘The principle of freedom of contract is a fundamental civil law principle and the
foundation for organizing present-day market turnover, and its restrictions may be
permitted only in limited cases in order to protect the interests and economic
expectations of third parties, the weaker party to a contract (consumers), public
policy or good morals, or interests of the society as a whole’.4
The Supreme Court of the Russian Federation (hereinafter—“Supreme Court”),
which is the highest court within the system of courts of general jurisdiction, and
since 2014 also the highest court for the system of commercial courts, also recog-
nizes the constitutional meaning of the principle of freedom of contract.5 As rightly
noted in one of the Court’s rulings, ‘the civil law method of regulation is consistent
with the principle that “everything which is not forbidden is allowed”’.6
The Russian Civil Code and other statutes in the area of civil law attempt to block
ex ante some abuses of contractual freedom by means of establishing mandatory
rules, and they also let the courts control contracts with the help of traditional tools of
ex post judicial control that are familiar to many European legal systems: the
prohibition of abuse of right (s 10 Russian Civil Code), the nullity of transactions
contradicting the foundations of public order and good morals (s 169 Russian Civil
Code), the voidability of usurious legal transactions entered into by one of the parties
being in economic distress (s 179 Russian Civil Code), the reduction of excessive
penalties (s 333 Russian Civil Code), the exclusion of unfair terms in an adhesion
contract (s 428 Russian Civil Code), and others.
But here, within what has been described as the third—“revival”—phase of the
history of the idea of contractual freedom in Russian law, a distinction should be
made between two periods.
The first period (1991–2014) is characterized by (practically) full implementation
of the idea of contractual freedom in relation to price terms. Prices for the majority of
goods, works, or services ceased to be regulated ex ante (beyond the scope of some
specific spheres, such as operations of natural monopolies), and the ex post judicial
control of price fairness was almost completely absent (except for prices of monop-
olists). But at the same time, in this phase the freedom to stipulate the ancillary terms
of the contract, i.e. terms which do not characterize the price and the subject matter
of the transaction, was significantly restricted. There were two reasons for this.
First, up until 2014, the courts assumed that all civil law rules regulating the rights
and obligations of the parties to a contract are mandatory a priori, unless the
respective statutory provision itself explicitly states a right of the parties to derogate
from them in their contract. Russia is a country having a codified civil law; there are
thousands of Civil Code rules and other laws that govern contracts and obligations,
in general, as well as specific types of contracts, in particular. The majority of these
rules not dealing with the contract price—but regulating in a detailed manner issues
4
The ruling of the Presidium of the Higher Commercial Court of November 5, 2013 [N9738/13].
5
The rulings of the Supreme Court of May 29, 2012 [N80-В12-2], of April 7, 2009 [N 21B09-1]
and of February 18, 2009 [N21-B09-1].
6
The ruling of the Presidium of the Supreme Court of June 14, 2004 [N8пв04].
of performance, security rights, termination of obligations, contractual liability and

other contractual remedies, as well as issues on the conclusion, performance, and
termination of certain types of contracts (sale, services, lease, loans, etc.)—do not
directly specify a right of the parties to agree otherwise. Accordingly, based on the
approach established in the depths of the Soviet era regarding the interpretation of
civil law rules, all such rules were unequivocally recognized as being mandatory.
Thus, the freedom of the parties to deviate from them was not recognized, and all
deviations were inevitably and ‘automatically’ recognized as null and void. This
resulted in a situation in which the degree of statutory regulation of contractual
relations associated with the ancillary elements of a contract (performance, termina-
tion, remedies, etc.) was very high.
Secondly, the courts quite often allowed themselves to annul certain ancillary
terms of the contract, even when such terms did not violate any mandatory rule, if
such terms seemed unfair or simply substandard. In the area of consumer contracts
such control has been and continues to be quite strong and relies on s 16 Consumer
Rights Protection Act, which the courts began to interpret as granting them the full
right to recognize as null and void any unfair term of a consumer contract. Outside
the B2C area, courts nullifying specific terms as a rule did not claim that they were
enforcing any rule of the Russian Civil Code that delegates them an ex post control
over the content of the contract. Instead, the courts simply identified such terms as
null and void and declared them to be ‘contrary to the legislation’, without specify-
ing any particular rule that had been violated.
This situation began to draw protest in the academic community and among
practicing lawyers. There was a growing voice to step aside from the Soviet model of
interpreting all rules of the law of contracts and obligations as mandatory without
assessing their purposes. Additionally, arguments were made in favor of a more
transparent and flexible ex post control of the fairness of B2B contracts that had been
concluded under an inequality of bargaining power.7
March 14, 2014 may be considered as the starting date of the second period
within the “revival” phase in the history of contractual freedom in Russia. On that
date the Plenum of the Higher Commercial Court issued Resolution N16 ‘On
Freedom of Contract and Its Limits’.8 Here, the Higher Commercial Court required
that the commercial courts give up on the old methodology for interpreting the rules
of the law of contracts and obligations. Now, where the rules regulating contractual
rights and obligations do not include a direct indication of the parties’ right to agree
7
Rozenberg (2011), p. 58; Komarov (2011), pp. 120–128; Sadikov (2001), pp. 4–9.
8
The publication of such abstract quasi-legislative guidelines, which can be issued by the highest
courts and which are formally binding for the lower courts, is a feature of the post-Soviet law. Such
resolutions look like full-fledged thematic statutes and often contain dozens and sometimes even
over a hundred ‘clarifications’ on a particular issue, many of which fill gaps in the laws or provide
interpretations of statutory provisions (sometimes even contra legem). The Russian law as it is
today is very hard to imagine without dozens of such resolutions on various aspects of private law.
In fact, precisely this quasi-legislation of the highest courts is the main driving force of the
development of the Russian law in the private law sphere.
otherwise, this does not attest automatically to the mandatory nature of the rule. The
court’s conclusion on the mandatory or dispositive nature of the rule (where it does
not contain a direct indication of its nature) should be based on a teleological
(purposive) interpretation. Besides that, the Higher Commercial Court has tried to
revive in this Resolution the practice of using ex post tools to control contractual
freedom and combat unfair terms in cases where a stronger party to a B2B contract
has abused its bargaining power (for details cf. Part II).9
This Resolution was accepted with enthusiasm by a considerable part of the
academic community. But at the same time it was criticized by more conservative
colleagues for deviating from the existing practice of formal interpretation of the law
and for giving courts broad discretion in interpreting the law.10 Over those few years
that have passed since 2014, the lower commercial courts have gradually been trying
to work out the practice of purposive interpretation of the law and to become
accustomed to living in a world in which most of the rules of the law of contracts
and obligations—which previously were unequivocally mandatory and which
restricted the freedom of contract ex ante—now, possibly, are different. Also, step-
by-step the practice of ex post judicial restriction of unfair terms in B2B contracts is
developing. This is not to say that there currently are no problems in this area. Some
courts have characterized as mandatory rules of the Russian Civil Code which, upon
further purposive interpretation, should have been recognized as dispositive. The
mechanisms of an ex post annulment of unfair terms of contracts that have been
explained to the courts in the Resolution have not yet been actively used.11 But, in
general, there is some movement towards the normal functioning of contractual
freedom for a country with a market economy, one that should be based on a broad
freedom of contract ex ante (especially in the B2B sphere) and that should feature the
courts combating specific abuses of contractual freedom ex post.
This characterizes the practice of commercial courts resolving disputes in the
B2B area, for which the above-mentioned Resolution of the Higher Commercial
Court has been and remains mandatory. However, in Russia there is also a second
system of courts—the courts of general jurisdiction—which resolve civil disputes
that are not purely commercial (for C2C and B2C transactions). This system of
courts has ignored this Resolution and has continued to operate within the old
“Soviet” paradigm.
In summer 2014, the Higher Commercial Court was abolished, and its functions
as the highest court in the commercial court system were transferred to the Supreme
Court, which now heads the systems of the commercial courts and the courts of
general jurisdiction. The Commercial Disputes Collegium of the Supreme Court,
which reviews the decisions of the commercial courts, continues to apply the
Resolution ‘On Freedom of Contract and Its Limits’ and rejects the ‘automatic’
9
For a detailed commentary on this Resolution see: Karapetov and Bevzenko (2014), pp. 4–97.
10
Vitrjanskij (2018), pp. 301–304.
11
Karapetov and Fetisova (2015), pp. 146–191.
interpretation of all the rules of contract law and the law of obligations as mandatory,
instead adhering to a purposive interpretation of such rules, and is generally more
cautious in respect of the limitation of freedom of contract.12 Meanwhile, the Civil-
Law Disputes Collegium of the Supreme Court, which reviews the decisions of the
courts of general jurisdiction, continues to ignore the Resolution, and the courts of
general jurisdiction ignore it as well.
Accordingly, nowadays in Russia, a peculiar dualism has evolved in applying the
same rules regarding the law of contracts and obligations. In the area of B2B
contracts, we see a shift to a paradigm featuring broad ex ante freedom of contract.
In the area of С2С and B2C contracts, the old Soviet methodology still prevails.
But here one should observe that all these ex ante and ex post control tools in
Russia have been applied and are applied basically in relation to non-price, ancillary
contract terms. The freedom to set prices is considered a fundamental idea, and this
applies to B2B, C2C and B2C transactions. There are only a small number of
exceptions.
First, as has been noted already, there are some specific types of business for
which prices are regulated (e.g. railway tariffs).
Secondly, the Act ‘On Protection of Competition’ permits the Federal Antitrust
Agency to combat abuses of companies that have a dominant position in a given
market. Among other things, the Law allows the Federal Antitrust Agency to combat
the setting of monopolistically high and monopolistically low prices (ss 6 and 7 of
the Act). But these restrictions exclusively relate to companies with a dominant
position in the market. Criteria for recognizing a company as dominant in the market
are provided in s 5 of the Act. It is presumed that the company is dominant if it
claims more than 50% of the market for a particular product, work, or service, but
there are a number of other criteria and presumptions. If the company is recognized
as dominant, its prices can be regulated by antitrust law tools.
Thirdly, Russian law establishes a certain ex ante control over the amount of
interest under loan and credit agreements.13 Where such limits are not applicable,
courts sometimes impose a judicial cap.14
Fourthly, there are some other legislative restrictions on the freedom of price,
which will be discussed in Sect. 4 of this chapter.
As for the rest, the parties enjoy almost unlimited contractual freedom with regard
to price. Regarding certain rare cases where the courts do try to combat abuses on an
ex post basis, see Sect. 3 of this chapter.
12
The rulings of the Supreme Court of October 27, 2015 [N305-ЭС15-6784], of March 29, 2016
[N306-ЭС15-16624], and of August 25, 2016 [N301-ЭС 16-4469].
13
See Sect. 4 of this chapter.
14

Terms
In Russia, there are two general mechanisms for controlling standard contract terms:
s 16 Russian Consumer Rights Protection Act and s 428 Russian Civil Code.
2.1 Consumer Protection
Section 16(1) Consumer Rights Protection Act declares as null and void any terms of
a consumer contract which impair the consumer’s position as compared to those
rights that are afforded him or her in consumer legislation.15 In other words, this rule,
under its literal meaning, declares all consumer legislation rules regulating the
content of contractual relations to be half-mandatory: they may not be deviated
from contractually to the detriment of the consumer’s interests, but a contract may
derogate from them in favor of the consumer. However, as early as the 1990s the
courts developed a somewhat different practice for implementing this rule. They
began to identify a legislative basis supporting their right to recognize as null and
void any terms of a consumer contract that seemed unfair to the court.16 With that,
the courts in such cases rarely employ the notion of an ‘unfair term’ and hardly ever
elaborate on this concept; instead, they simply declare such terms as null and void
and as being contrary to s 16(1) Consumer Rights Protection Act.
The situation has remained as such to present day.
This tool is used by the courts of general jurisdiction resolving contractual
disputes and by commercial courts considering disputes involving an entrepreneur
and alleging the violation of rights of consumers. If the court detects an unfair term
within the framework of such a dispute, the court declares it null and void under s
16 Russian Consumer Rights Protection Act. In this regard, a consumer may file a
suit independently, asking the court to declare any given unfair term as null and void.
One can say that a consumer in Russia is in this manner protected against the
attempts of a business to incorporate into a transaction any unusual and clearly
unfair terms.
However, this tool does not apply to the contract price. Here, an almost unlimited
freedom of contract prevails in relation to consumer contracts. The courts interfere
rarely and only in cases where abuses have taken place in setting the price so as to
prevent a consumer from determining the proposed price adequately. Perhaps the
15
For more detail see: Širvindt (2013), pp. 5–51; Karapetov and Savel’ev (2012), pp. 376–387.
16
The rulings of the Supreme Court of April 14, 2015 [N78-ГК15-3], of December 23, 2014
[N80-КГ14-9]; para 3 of Information Letter N146; the resolutions of the Presidium of the Higher
Commercial Court of November 17, 2009 [N8274/09], of March 2, 2010 [N7171/09], and of
February 14, 2012 [N12416/11].
only case when this happens relates to credit agreements in the course of determining
various fees and compound interest.17
Russian law does not recognize consumer class actions as a protection tool
against unfair terms. At the same time, the Consumer Rights Protection Act does
empower consumers to appeal to a special governmental agency—the Federal
Agency for Control in the Sphere of Consumer Rights Protection and Human
Welfare (Rospotrebnadzor). In response to the claims of consumers or even on its
own initiative, after having identified violations during regular or extraordinary
inspections of companies, the Agency may instruct the company to amend the
terms of consumer contracts which the company uses in its operations, and it may
impose administrative fines for consumer rights violations.18 Additionally, the
Agency may by means of a judicial procedure require a company to refrain from
violating the rights of consumers.19 Additionally, private non-profit organizations on
consumer rights protection are authorized to apply to the court to protect consumers’
rights.20
The Agency fulfills its functions rather intensively and often levies administrative
penalties against companies for imposing illegal and even unfair terms on con-
sumers, which according to s 16 Russian Consumer Rights Protection Act are null
and void, and it directs companies to stop including such terms in their contracts.
Russian Law does not create any ‘gray’ lists of potentially unfair terms in B2C
contracts. A ‘black’ list is similarly missing; however, its function is fulfilled by
numerous rules of the Russian Consumer Rights Protection Act as well as by a
number of other consumer acts (the Joint Investment in Housing Construction Act,21
the Russian Consumer Credit Act, etc.), which in a sufficiently detailed manner
regulate contractual relations in the area of B2C transactions. All these rules
specifying rights and obligations of parties to a contract are considered by virtue
of s 16 Russian Consumer Rights Protection Act as half-mandatory and do not
permit deviations that serve to impair consumer rights, thus effectively acting as
implicit bans on including many types of terms into the contract.
17
18
S 40 Russian Consumer Rights Protection Act.
19
20
21
The Federal Law of December 30, 2004 N214-ФЗ.
2.2 B2B Transactions
2.2.1 General Remarks
Here, s 428 Russian Civil Code represents a mechanism for combating unfair terms
in an adhesion contract.22 Presently, the law permits appeals for judicial protection
against unfair contractual terms pursuant to s 428 Russian Civil Code with regard to
a contract of adhesion, this being granted both to consumers and companies. But
consumers, in reality, do not use this opportunity since it is sufficient for them to use
the above-described mechanism specified in s 16 Russian Consumer Rights
Protection Act.
However, in the not-distant past the Civil Code forbade businesses from making
use of s 428 Russian Civil Code in their favor. Consequently, s 428 Russian Civil
Code was not used for a long time: consumers did not need it and for businesses
access to it was blocked. The situation has changed only recently. Initially, during
the period of 2011–2014, the Higher Commercial Court recognized in a number of
its abstract, quasi-legislative acts that businesses could potentially make use of s
428 Russian Civil Code contra legem (para 9 of the Plenum Resolution N16; para
2 of the Information Letter of the Presidium of the Higher Commercial Court of
September 13, 2011, N147). Ultimately, full access to s 428 Russian Civil Code was
opened for business companies and individual entrepreneurs when, in 2015, the
relevant prohibition was excluded from this section as part of the reform of the
Russian Civil Code. Accordingly, now a party to a B2B contract can also take
advantage of this ex post control tool.
2.2.2 Substantive Scope
Prior to 2015, s 428 Russian Civil Code envisaged protection from unfair terms
exclusively with regard to adhesion contracts. These are contracts which are con-
cluded on standard terms proposed by one of the parties which the other party has to
accept without a chance for negotiation.
Adhesion contracts triggered many scholarly debates, and they were understood
in different ways by courts. For example, some lower courts believed that the
presence in a contract of some individually negotiated terms prevents a contract
from being qualified as an adhesion contract. Others thought that a contract may be
recognized as an adhesion contract only if negotiations are prohibited under the law:
the fact that one of the parties has as a matter of reality no chance to hold personal
negotiations and faces a ‘take-it-or-leave-it’ situation was considered by such courts
as insufficient for recognizing a contract as an adhesion contract. However, in 2011
and 2014 the Higher Commercial Court in its abstract acts (the Information Letters
of the Presidium of the Higher Commercial Court of September 13, 2011, N146 and
22
For more detail see: Karapetov and Savel’ev (2012), pp. 302–363; Savel’ev (2010), pp. 13–75.
N147, as well as Plenum Resolution N16) has changed this approach. Currently, the
presence of separate individually-agreed-upon terms in the contract does not exclude
the possibility of applying s 428 Russian Civil Code to other standard terms. Further,
it has been established that defining a contract as an adhesion contract is a matter of
assessing an actual and not a legal opportunity of holding individual negotiations on
standard terms. In essence, these explanations have shifted the emphasis of s 428 -
Russian Civil Code from the concept of an adhesion contract to the concept of
standard terms.
But the law has gone even further. As part of a 2015 reform, s 428 Russian Civil
Code has been supplemented by a provision according to which the control mech-
anism established in this section is applicable not only to contracts concluded on
standard terms, but also to any other contracts, when due to an obvious inequality of
bargaining power one of the parties was deprived of a real opportunity to hold
negotiations on the terms proposed by the other party. In fact, a pattern similar to the
American institution of unconscionability has penetrated into Russian law: in the
event of an inequality of bargaining power, the weaker party may combat unfair
contract terms imposed on it.
In 2014, even prior to the time when this reform came into force, the Higher
Commercial Court determined in para 10 of Plenum Resolution N16 that, in
assessing the inequality of bargaining power, the court ‘should find out whether
adhesion to the proposed terms was involuntary and, additionally, take into account
the level of professionalism of the parties in the relevant sphere, the competition in
the relevant market, the fact whether the party to the adhesion contract has a real
opportunity to negotiate or conclude a similar contract with third parties on different
terms, etc.’
Accordingly, even in situations where the contract has not been based on standard
terms, the weaker party to the contract (including B2B contracts) may count on
protection from unfair terms.
But the concept of inequality of bargaining power is still rather controversial.
Some are ready to identify an inequality of bargaining power in B2B contracts only
in extreme cases, where one of the parties to the contract had no meaningful choice
due to the market power of the other party and low market competition. So if the
party had a real opportunity to find other partner with a chance to avoid such unfair
terms, but didn’t use it, the first party is not considered to be a weaker party. Others
think that the refusal of one party to negotiate proposed terms (‘take it or leave it’
model of contracting) is sufficient to find inequality of bargaining power. The case
law on this issue is not settled yet.
2.2.3 Concept of Unfair Terms
Section 428 Russian Civil Code put under the court’s ex post control terms which,
although not in conflict with the law and other legal acts, (1) deprive the party to
whom these terms have been directed of the rights usually granted under contracts of
this type, (2) exclude or limit the liability of the party offering the terms, or (3) are
otherwise explicitly burdensome and which the party, based on its reasonably
understood interests, would not have accepted if it had the opportunity to participate
in formulating the terms of the contract.
This definition is surely imperfect. In Plenum Resolution N16 (para 9), a better
concept has been adopted as compared to this casuistic legislative definition, namely
the notion of ‘unfair contractual terms’. The Higher Commercial Court declares such
terms as ‘terms that are explicitly burdensome to one of the parties and that
significantly disrupt the balance of interests of the parties’.
The Higher Commercial Court directs courts to assess a debatable term in
conjunction with all the terms of the contract. In other words, the term is not assessed
abstractly but in the context of the contract as a whole.
2.2.4 The Control Mechanism
Section 428 of the Russian Civil Code establishes an extremely poor tool to combat
unfair terms. The party that accepted unfair terms should file a claim with the court to
amend the contract. Until 2015, this model had an exclusively prospective effect,
that is, the existence of the unfair term prior to a court decision coming into force was
not put in question. In Russia, judicial disputes are considered quickly (in the case of
an appeal and cassation, taking usually from 6 months to a year). Nevertheless, the
purely prospective model for changing the contract seemed very inconvenient.
Therefore, within the framework of the Russian Civil Code reform of 2015, it was
specified in s 428 Russian Civil Code that a court’s decision to amend the contract
has a retrospective effect: the contract is considered amended ex tunc.
But such regime is also rather inconvenient since it places the burden on the
weaker party to initiate preventive legal proceedings in order to exclude an unfair
term from the contract.
In this regard, Plenum Resolution N16 (para 9), of 2014, stated that where a
contract is not amended and an unfair term is not deleted from it, the right of the
stronger party to refer to such terms in a dispute with the weaker party may be
blocked pursuant to s 10 Russian Civil Code, pursuant to which the court may refuse
to honor the right in cases of abuse.
2.2.5 Court Practice
Following publication of Plenum Resolution N16 in 2014 and the reform of s

428 Russian Civil Code in 2015, the attempts of commercial parties to free them-
selves from unfair terms in B2B contracts have become more frequent. However, not
a single case of this nature has reached the Supreme Court so far. Hence, the practice
of the Supreme Court on specific cases cannot be cited. The picture which may be
observed in lower courts is as follows: courts rather rarely protect business corpo-
rations and individual entrepreneurs from unfair terms. As a rule, the chances for
success are wholly absent if the weaker party cannot prove in court that he or she
tried during negotiations to oppose unfair terms offered to him or her. But even if this
test is met, it is rare that attempts to secure protection from unfair terms are
successful. As a rule, the lower commercial courts either do not recognize a business
corporation as a weaker party or refuse to consider the terms as unfair, with the
courts generally taking a tough stance and sticking to the opinion that the business
company or individual entrepreneur acted at their own risk, accepted the proposed
terms voluntarily, and is not worthy of paternalistic protection from the courts.
However, this is not to say that there are no cases of successful application of s
428 Russian Civil Code in lower courts.

Terms
Outside the legislation on the protection of competition, which permits the Federal
Antitrust Agency to restrain monopolistically high and monopolistically low prices
that are quoted by dominant companies in the market, there are no special instru-
ments for an ex post judicial control of pricing freedom in the area of B2C and in
B2B or C2C deals.
Section 428 Russian Civil Code, covering adhesion contracts and contracts made
with a weaker party in regards to the contract price, is almost never applied in
practice. Section 16 of the Consumer Rights Protection Act is also only rarely used
to control prices in consumer contracts.
However, the Russian Civil Code contains a series of general ex post control
tools, which in some instances may limit the freedom of contract in cases of abuse in
respect of the contract price. However, these tools are extraordinary remedies for
exceptional cases, and they have little relevance for mass transactions carried out on
standard terms.
First, under s 179 Russian Civil Code on usury contracts concluded in situation of
economic distress: ‘a transaction on extremely unprofitable terms that a person had
to carry out as a result of a concurrence of difficult circumstances, which the other
party took advantage of. . . may be invalidated by the court on the claim of the
victim’. A typical example is a contract entered into on an extremely overstated or
understated price due to a concurrence of difficult circumstances (e.g. illness).
Sometimes C2C transactions are invalidated on these grounds.23 But s 179 Russian
Civil Code is, in actual practice, almost never applied to B2B transactions. In its
Information Letter of December 10, 2013 N162 (para 11), the Presidium of the
Higher Commercial Court tried to push the lower commercial courts to a more
neutral attitude regarding the applicability of s 179 Russian Civil Code to B2B
transactions, but generally the courts continued to reject claims that, on such a basis,
seek the annulment of a transaction. Recently, also the Supreme Court has
23
The ruling of the Supreme Court of May 23, 2017 [N19-КГ17-10].
demonstrated an obvious unwillingness to apply this provision to purely commercial

transactions.24
Secondly, s 174(2) Russian Civil Code, which entered into force on September
1, 2013, allows a party to challenge a transaction carried out by an agent on terms
that are obviously disadvantageous to the principal, if the disadvantageousness was
obvious to the counterparty when the transaction was made (that is, it was obvious to
the counterparty that the agent exercised his or her powers to the detriment of the
principal). Court practice25 has shown that the apparent disadvantageousness of a
transaction is presumed if its price differs several times from the ordinary market
level. The opposite may be proved by the party seeking to keep the contract. This
tool, in some ways similar to the old laesio enormis doctrine, is currently often used
as a basis for combating an agent’s abuse of his or her authority, and it is, factually, a
tool for restricting the freedom of contract. Indirectly, such a tool may be used to
annul transactions carried out on abnormal price terms.
Thirdly, s 169 Russian Civil Code, declaring as null and void transactions that
violate the foundation of good morals and public order, is usually not used in a
situation when the purported abnormality refers to the contract price. But in cases
where the courts deal with clearly fraudulent contracts agreed to on absolutely
atypical terms (e.g. when real estate is sold at a price many times beyond the market
value), they sometimes declare the transaction null and void by referring to the
prohibition of abuse of rights in s 10 Russian Civil Code.26
Fourthly, another example where the ban on the abuse of rights forms the basis for
declaring a transaction as null and void due to an abnormality in the price terms is the
annulment of transactions (outside of bankruptcy proceedings) where the contract
has been entered into by a debtor to the detriment of a specific creditor in order to
block foreclosure on the debtor’s property (e.g. selling his or her own apartment to a
relative at a token price or conveying it as a gift). Such examples are rather numerous
in the case law.27
Fifthly, the legislation establishes specific interest rate ceilings for consumer
credit contracts and loans extended to the consumers by microfinance organizations.
Beginning in summer 2018, such ceilings on interest rates have been introduced with
regard to C2C loans.28 But previously, with regard to some types of loans there were
no statutory limits. In such cases the courts, as a rule, refrained from restricting the
freedom of contract, even if the annual interest rate exceeded 500%—and in one case
even 700% (rulings of the Judicial Collegium for Civil Cases of the Supreme Court
24
The ruling of the Supreme Court of October 16, 2016 [N305-ЭС16-9313].
25
Para 93 of the Resolution of the Plenum of the Supreme Court of June 23, 2015, N25.
26
The Resolution of the Presidium of the Higher Commercial Court of May 20, 2008 [N15756/07].
27
The rulings of the Supreme Court of April 18, 2017 [N77-КГ17-7], of February 28, 2017
[N32-КГ16-30], of September 20, 2016 [N49-КГ16-18], of August 9, 2016 [N21-КГ16-6], of
March 29, 2016 [N5-КГ16-28], of June 14, 2016 [N52-КГ16-4], of December 1, 2015 [N4-КГ15-
54], of December 8, 2015 [N5-КГ15-179], of December 8, 2015 [N34-КГ15-16], and of June
13, 2017 [N301-ЭС16-20128].
28
dated June 6, 2017 [N37-КГ17-6] and January 31, 2017 [N37-КГ16-18]). But
sometimes in particularly egregious cases the courts decided to restrict the freedom
of contract based on the impermissibility of an abuse of right and reduced unjustly
high usury interest rates. Hence, in its ruling of February 28, 2017, N16-KГ17-1, the
Supreme Court found illegitimate interest charged at a rate exceeding 500% per
annum, under which the amount of interest for the 3-year period exceeded the size of
debt by more than 15 times. Another example is the Ruling of the Judicial Collegium
for Civil Cases of the Supreme Court, dated August 22, 2017 N 7-КГ17-4: here the
Court, in a situation of non-applicability of any statutory cap, curbed an extremely
high interest rate in a microfinance loan based on an interpretation of the contract,
thereby restricting the application period of this rate to the agreed term of the loan
and using the average credit rate for the period of delay.
Besides the instances mentioned above, there have been only sporadic cases when
the courts have inserted themselves in the area of price freedom. Perhaps the only
sphere in which the courts were more regularly active regarding the control of price
terms was in the area of credit relations prior to the appearance of the Consumer
Credit Act in 2014. In the Information Letter of the Higher Commercial Court
Presidium of September 13, 2011 N147, the court held illegitimate certain additional
bank fees inserted in credit agreements. Additionally, para 3 of Information Letter
N146 explained that terms charging compound interest in consumer credit relations
will be declared null and void.
Additionally, it should be noted that s 10 Russian Consumer Rights Protection
Act requires that a business corporation or individual entrepreneur should provide
necessary and accurate information on a timely basis to consumers as regards the
goods (or works or services) to ensure that a consumer can make a correct choice (the
require disclosure includes information on the price of goods, works. or services).
Theoretically, this provision can be used in order to annul transactions in a situation
where the price terms have been expressed so vaguely and obscurely that a consumer
has not been given a chance to make a proper choice. A consumer who has received
inaccurate or unclear information on the price may, by virtue of s 12 Russian
Consumer Rights Protection Act, withdraw from the contract concluded and claim
compensation of losses. In addition, the Consumer Rights Agency may impose an
administrative fine on the business corporation (or individual entrepreneur).
Apart from price regulation for carriage by rail, energy supply, public utility
services, compulsory automobile liability insurance, etc. as well as a general prohi-
bition against setting different prices for different customers of the same category in
contracts having particular social significance (‘public contracts’), regulatory inter-
ventions providing for a control of price-related terms in either standard form
contracts or B2C contracts have hardly become an issue in Russia. There are certain
provisions on price-related terms, but they do not seem to be based on a clear and
coherent general model or idea, and they enjoy little attention from academia. An
overwhelming majority of these provisions concern B2C contracts (and not standard
form contracts) and only rarely (by chance?) extend to B2B contracts.
The main element of the set of rules in question is the right of the consumer to
clear information about the contract price, as acknowledged by the Russian Con-
sumer Rights Protection Act as early as 1992. The legislature and the courts impose
some requirements for how such information should be submitted to the consumer
and how the respective contract terms should be framed in order to ensure that the
consumer accepts the price offer with her or his eyes open. Although the law
stipulates expressly that the information about goods and services is to enable the
consumer to choose them correctly,29 neither the vast bulk of relevant secondary
legislation nor the case law draws the conclusion that prices of different goods and
services must be comparable.
Consumer credit is the only domain in which the control of price-related terms
has gained careful attention from the legislature. A legislative response to the
explosive growth of this area of the economy—followed by an increase in litigation
involving contract terms that provided for questionable fees or additional services, or
that forced the consumer to purchase insurance—had been put on the agenda by the
mid-2000s. The lengthy preparatory work resulted in the Russian Consumer Credit
Act that entered into force on July 1, 2014.30 Yet, as there had been a long wait until
the law was finally adopted and in light of an acute request for court guidelines, the
Higher Commercial Court in 2011 issued non-binding but nevertheless strongly
influential recommendations to the lower commercial courts in regard to consumer
credit cases, particularly and predominantly those concerning unfair price-related
contract terms.31 The legislature subsequently adhered to many of these
recommendations.
The control of price-related contract terms is one of the main issues of the Russian
Consumer Credit Act. After having taken into consideration the case law and foreign
experiences (EU law being one of the main sources of inspiration), the legislature
introduced a variety of means for achieving such a control. Banks and other creditors
were obliged to (1) inform the consumer about the total cost of credit, (2) warn the
consumer about the risks of using variable interest rates, and (3) draw the consumer’s
attention to the fact that he or she was late in making payments. Caps on interest rates
and penalties were set, and some fees were banned. The drafters enunciated several
purposes as being behind the new rules, e.g. to fight hidden fees and interest rates
29
S 10(1) Russian Consumer Rights Protection Act 1992.
30
For an overview of the preparatory work, legislative history, and the main justifications
cf. Aksakov (2014), pp. 7–18; Ivanov and Ščerbakova (2014), pp. 322–324; and the Explanatory
Note to the first bill of 2007 (http://sozd.parlament.gov.ru/download/7CA331EC-81B0-4C3F-
86BC-DF3B2F6EBF15).
31
Information Letter N146.
and price partitioning and to achieve comparability of credit offers, which presum-
ably would foster competition between different banks.32
Besides this, various specific rules providing for a control of price-related terms in
B2C contracts are strewn across Russian legislation.
In policing price terms in B2C contracts, the courts are very reluctant to go
beyond the statutory framework. The Consumer Rights Agency tends to claim
unlawfulness of only those standard contract terms that are illegal and not just
unfair.33
In assessing the following overview of statutory provisions on the control of
price-related terms, one should bear in mind that the Russian consumer enjoys a
general right to withdraw from a service or work contract at any time reimbursing
only the expenses—but not any damages—incurred by the supplier.34 This manda-
tory rule makes it impossible to contractually oblige the consumer to pay anything
extra for withdrawal, whether in the form of a penalty or a fee.35
4.1 The Control of Prices of Particular Services: Interest

Rates
Credit agreements are the only sphere where the legislature has been continuously
active in providing for a control over price terms in the strict sense. Various
instruments have been introduced by statutes to cap interest rates in one way or
another:
As of June 1, 2018, the courts are empowered to reduce usurious interest rates in
contracts between a natural person and a person who does not professionally engage
in consumer crediting if the contractually set rate is more than twice the rate usual in
similar cases and thus overburdens the debtor.36
The interest accrued is capped for microcredit to natural persons: the interest may
only accrue until it reaches three times the capital, or twice this amount if the debtor
is late in making payments and thus exposed to penalties as well.37
The total cost of credit for consumers is capped: it may not exceed the respective
mid-market rate by more than one-third or 365% p.a. depending on which is lower.
In addition, the daily interest rate may not exceed 365% p.a.38
32
Cf. n 30 above.
33
Kratenko (2016), pp. 69–79.
34
S 32 Russian Consumer Rights Protection Act, s 782(1) Russian Civil Code.
35
Cf. e.g. the ruling of the Supreme Court of May 24 [2016 N4-КГ16-9] (included into an Overview
of the Supreme Court case law by the Supreme Court Presidium on December 12, 2016); para 12 of
Information Letter N146.
36
S 809(5) Russian Civil Code.
37
SS 12(1)(9), 12.1(1) of the Federal Law of July 2, 2010 N151-ФЗ ‘On Microfinance Activities
and Microfinance Companies’.
38
S 5(23), 6(11) Russian Consumer Credit Act.
The consumer is mandatorily entitled to early repayment and may not be obliged
to pay interest for future periods in cases where he or she makes use of this right.39
Compound interest (interest on interest) has been banned, first by the courts and
then by the legislature, and it may not be imposed in either B2C or C2C contracts,
with an exception for deposits made by natural persons with banks.40
4.2 The Control of Prices for Particular Additional Services
Prices for additional services (charges or fees) have become subject to regulatory
intervention in many spheres. The legislature has adopted several different forms of
control over such contract terms:
Some services must be rendered free of charge. Thus, no payment may be
requested for providing to a consumer certain information or accepting certain
information from him or her (telecom41 and internet services,42 consumer credit),43
for switching from one billing plan to another (telecom44 and internet services),45 for
account maintenance or for setting up either a consumer credit account (insofar as it
is being used to perform obligations under the consumer credit contract)46 or for
some other services47;
There are instances where the legislature has expressly prohibited charging any
fees for performing duties imposed by law (consumer credit),48 but the courts do not
39
SS 809(4), 810(2) Russian Civil Code, s 11(2-4, 6) Russian Consumer Credit Act. In fact, this
solution is consistent with the general rule allowing the consumer to withdraw from a service or
work contract at any time and to reimburse only the expenses incurred by the supplier (see Sect. 4 of
this chapter in fine). For a case where it has been derived from the general rule in respect of an old
contract, cf. the ruling of the Supreme Court of February 10, 2015 [N89-КГ14-5].
40
S 317.1(2) Russian Civil Code, in force since June 1, 2015. Cf. also para 3 of Information
Letter N146.
41
Para 12 of the Resolution of the Government of the Russian Federation of December 9, 2014
N1342.
42
Paras 11 and 12 of the Resolution of the Government of the Russian Federation of September
10, 2007 N575.
43
S 10(5)(5) Russian Consumer Credit Act.
44
N1342.
45
Para 50 of the Resolution of the Government of the Russian Federation of September
10, 2007 N575.
46
S 5(17) Russian Consumer Credit Act.
47
S 7(3) Russian Consumer Credit Act: application processing and creditworthiness assessment;
paras 10 and 72 of the Resolution of the Government of the Russian Federation of December
9, 2014 N1342: emergency calls and changing long-distance providers.
48
seem to need clarifications of this kind and tend to apply this approach as a general
rule49;
Prohibited as well are any fees for services that in fact benefit the creditor itself
and are of no value for the consumer (consumer credit50)51;
The prices for some additional services are capped (in consumer credit contracts,
only actual expenses may be charged for document copies; a maximum of approx-
imately $1.50 may be charged for switching between cell phone providers)52;
There are also provisions prescribing that some service fees may be charged only
once (access to telecom,53 internet,54 and television and radio services).55
49
Paras 10, 12 and 14 of Information Letter N146.
50
S 5(19) Russian Consumer Credit Act. The Consumer Rights Protection Agency and the courts
have already started to apply the provision and to sort out specific fees and charges as unlawful, see
rulings of the Commercial Court of the Volga District of May 18, 2017 [NФ06-20098/2017] and of
January 19, 2017 [NФ06-16317/2016]; of the 2nd Commercial Appellate Court of February 8, 2017
[N02АП-10646/2016]; of the 4th Commercial Appellate Court of March 23, 2016 [N04АП-6686/
2015]; of the 8th Commercial Appellate Court of February 10, 2016 [N08АП-15151/2015];
appellate rulings of the Sverdlovsk Oblast Court of March 28, 2017 in case N33-4643/2017; of
the Stavropol Krai Court of June 29, 2016 in case N33-4611/2016, of September 4, 2015 in case
N33-6142/2015, and of September 4, 2015 in case N33-6140/2015; of the Omsk Oblast Court of
December 30, 2015 in case N33-9955/2015; and of the Supreme Court of the Republic of Buryatia
of October 26, 2015 in case N33-3982/2015.
51
This rule is inspired by an approach developed by the Higher Commercial Court, which has
recommended to the courts to examine whether a particular fee to be paid to the bank by the client
according to a credit contract qualifies as the price of a separate service, i.e. an activity of the bank
that brings a benefit to the client different from the credit itself. Should this not be the case, the
courts have been recommended to determine whether the fee may be seen as a credit price. If not,
the respective term must be declared invalid (para 4 of Information Letter of the Higher Commercial
Court Presidium of September 13, 2011 N147). These recommendations were made for B2B credit
contracts. Taking into account the special rules about the total credit cost for the consumer that must
be indicated in the contract, this approach may not be automatically extended to consumer credit.
52
S 5(5) Russian Consumer Credit Act: banks may not charge for document copies more than actual
expenses for their production; paras 32 and 117 of the Resolution of the Government of the Russian
Federation of December 9, 2014 N1342: charges for the transfer of a cell phone number from one
provider to another may not exceed approx. $ 1.50.
53
N1342.
54
Para 33 of the Resolution of the Government of the Russian Federation of September
10, 2007 N575.
55
Para 31 of the Resolution of the Government of the Russian Federation of December
22, 2006 N785.
4.3 Prohibition Against Making the Purchase of a Good or

a Service by a Consumer Dependent on the Purchase
of Another Good or Service
The Russian Consumer Rights Protection Act has set a general ban on goods or
services purchases that are dependent on the purchase of another good or service.56
Beyond that, it is prohibited for the supplier to render additional services without the
consumer’s consent.57 These general rules are frequently repeated and specified with
regard to certain particular situations in statutes and secondary legislation.58
Thus, it is prohibited to oblige the consumer through standard terms of a
consumer credit contract to enter other contracts or to avail him- or herself of
additional services from the creditor or third parties. Some terms of this kind are
entirely banned,59 while others must be negotiated individually.60 Moreover, it is
necessary that the consumer accede to the latter ones by a special written declara-
tion.61 Following case law and banking practices,62 the legislature has as regards
supplemental insurance imposed a duty on the creditor to make the consumer an
alternative credit offer for a commensurate amount and period with no insurance as a
prerequisite.63
According to the case law, the consumer’s right to a free choice of goods and
services is complied with if the consumer has an option to enter the contract with or
without additional services. Building on this, the courts have developed a rule that
the consumer is to be informed about the price of each particular service sepa-
rately.64 At the same time, in an absolute majority of cases the courts oversee the
observance of these rules merely formally: they are considered as complied with if,
at the time of contract conclusion, the consumer has confirmed in writing that he or
56
S 16(2). According to the Higher Commercial Court the prohibition concerns mainly paid goods
and services (para 9 of Information Letter N146).
57
S 16(3) Consumer Rights Protection Act.
58
S 8(2) of the Federal Law of July 19, 2007 N196-ФЗ ‘On Pawnbrokers’; para 16 of the Resolution
of the Government of the Russian Federation of July 18, 2007 N452 (tourist services); paras 22 and
23 of the Resolution of the Government of the Russian Federation of December 22, 2006 N785
(television and radio); paras 25, 29, and 31 of the Resolution of the Government of the Russian
Federation of September 10, 2007 N575 (internet).
59
S 5(13)(3) Russian Consumer Credit Act: consumer credit contracts may not impose a duty on the
consumer to avail him- or herself of paid third-party services in order to perform the consumer’s
obligations under the credit contract.
60
S 5(7 and 9) Russian Consumer Credit Act. See Sect. 5.2 of this chapter.
61
SS 5(18), 7(2) Russian Consumer Credit Act.
62
Para 8 of Information Letter N146. See on that: Ivanov and Ščerbakova (2014), p. 449.
63
64
Cf. e.g. appellate rulings of the Supreme Court of the Republic of Bashkortostan of June 22, 2017
in case N33-12927/2017 and of May 30, 2017 in case N33-9712/2017; of the Chelyabinsk Oblast
Court of June 6, 2017 in case N11-7200/2017. But see the appellate ruling of the Sverdlovsk Oblast
Court of March 17, 2017 in case N33-4499/2017.
she had a choice and deliberately opted for a contract with additional services and
that the purchase of one good or service was not made dependent on purchase of
another good or service. When these requirements are met, the courts usually refrain
from scrutinizing the substance of the contract. If, for instance, a consumer expressly
consents to additional paid services and insurance when entering a credit contract
and confirms that these supplementary agreements were not prerequisites for receiv-
ing a loan, the courts refuse to control the respective contract terms. As a result,
consumers only rarely succeed in challenging contract terms providing for such
additional paid services.65
A study of case law suggests that professionals (especially banks) who deal with
consumers are apt to formally keep up with the standards set by the legislature and
the courts with help of artful paperwork, which needs only a consumer’s signature
on it to make the contract immune to challenge even when it includes expensive
additional services that are hardly attractive or useful for the consumer.66
4.4 Control of Adjustment Clauses
There is a general statutory ban on clauses allowing a supplier to unilaterally alter the
terms of a B2C contract. The supplier can be entitled to such a right only as a matter
of law.67 The legislature has repeated and specified this rule with regard to certain
particular situations. Thus, it is, for example, prohibited for banks and microfinance
companies to unilaterally raise the interest rates and fees set by a contract with a
65
The courts of general jurisdiction that are competent for disputes between consumers and
suppliers are in an overwhelming majority of cases reluctant to declare the controversial term
invalid. By contrast, the commercial courts that deal with disputes between suppliers and the
Consumer Rights Protection Agency are in an absolute majority of these cases reluctant to overrule
Agency decisions qualifying a term on additional services as illegal. Cf. e.g. the rulings of the 17th
Commercial Appellate Court of February 8, 2017 [N17АП-19811/2016-АКу]; of the Commercial
Court of the Volga District of May 18, 2017 [NФ06-20098/2017]; of the Commercial Court of the
Volga-Vyatka District of December 23, 2014 [NФ01-5177/2014]; of the Federal Commercial Court
of the Volga-Vyatka District of March 14, 2014 in case NА31-2067/2013; of the Commercial Court
of the Urals District of May 22, 2017 [NФ09-1409/17], of December 16, 2016 [NФ09-10457/16]
and of March 11, 2016 [NФ09-656/16]. Usually the commercial courts point out that the bank was
not able to provide evidence that it had offered the consumer an alternative credit without a duty to
enter an insurance contract.
66
Cf. e.g. the appellate rulings of the Sverdlovsk Oblast Court of March 21, 2017 in case N33-4790/
2017 (a credit of 452,000 rubles and ‘additional services’ for 162,000 rubles) and of April 26, 2017
in case N33-5783/2017 (the consumer has not in fact availed himself of a single additional service
from those he paid for).
67
S 310(2) Russian Civil Code. Despite inconsistency in the relevant statutory provisions and a long
period of court hesitation, the above interpretation may now be seen as the prevailing view
(cf. Savel’ev 2014, pp. 309–313).
consumer or to unilaterally introduce new fees.68 Moreover, there is a provision that

interest rates may only be reduced and fees and penalties may only be reduced or
cancelled if such reduction or cancellation does not lead to an increase in the
financial burden on the consumer.69
The courts and the Consumer Rights Agency assume therefore that it is imper-
missible for a supplier to be contractually entitled to unilaterally alter the price terms
in a B2C contract.70 Effective are only price terms that are based on a variable
beyond the supplier’s control.71 This approach is statutorily entrenched in the area of
consumer credit. In this case it is also required that the values of the variable are
published in a generally accessible source of information on a regular basis.72
The law stipulates that the prices in B2C contracts are to be expressed in rubles.73
They sometimes argue that this constitutes a general prohibition against shifting
currency risks to the consumer through currency clauses.74 At the same time, foreign
currency credits are neither illegal nor rare.
In 1996, the Russian Civil Code, introduced a general rule for every lease (with
no restriction to B2C contracts), according to which the rent may not be altered more
frequently than once a year.75 The wording of the rule is so ambiguous and the
respective case law so inconsistent76 that its role as a tool for price-term control
should not be overestimated. It attests, however, to the fact that the Russian
legislature felt the need to control price-related terms—in lease agreements at
least—as early as the mid-1990s. On the other hand, not even in the case of
68
S 29(3 and 4) of the Federal Law of December 2, 1990 N395-1 ‘On Banks and Banking
Activities’; s 12(1)(5) of the Federal Law of July 2, 2010 N151-ФЗ ‘On Microfinance Activities
and Microfinance Companies’.
69
70
Cf. e.g. para 17 of the Resolution of the Plenum of the Supreme Court of June 27, 2017 N22; the
rulings of the Commercial Court of the Volga District of May 18, 2017 [NФ06-20098/2017] and of
October 16, 2015 [NФ06-606/2015]; of the Federal Commercial Court of the Urals District of June
27, 2012 [NФ09-4511/12]; of the Federal Commercial Court of September 19, 2011 in case NА56-
60101/2010; the appellate ruling of the Moscow City Court of March 10, 2015 in case N33-4972;
cf. also the appellate ruling of the Moscow City Court of January 20, 2014 in case N33-1341, where
the impermissibility of the unilateral price changes by the supplier is derived from the statutory
provision obliging the supplier to indicate in the contract the full (or inclusive) price of the tourist
product.
71
Cf. e.g. paras 5 and 13 of Information Letter N146.
72
S 9(1 and 2) Russian Consumer Credit Act.
73
S 10(2) Russian Consumer Rights Protection Act; s 10(2) of the Federal Law of November
24, 1996 N132-ФЗ ‘On the Principles of Tourist Activities in the Russian Federation’ and para 7 of
the Resolution of the Government of the Russian Federation of July 18, 2007 N452.
74
Cf. e.g. as regards tourist services: Gusjatnikova and Zinov’eva (2009). Cf. also the appellate
ruling of the Perm Krai Court of October 14, 2015 in case N33-10835/2015.
75
S 614(3).
76
Representing one of the latest (and most surprising) turns of the story, a binding recommendation
of the Higher Commercial Court was issued stating that the rule applies only to unilateral alterations
of the rent, while leaving alterations by party agreement intact (the Resolution of the Plenum of the
Higher Commercial Court of January 25, 2013 N13).
residential leases has any further price-term control come to the legislature’s atten-
tion. There might be several reasons for this. First, due to the mass privatization of
residential property in the 1990s and 2000s, housing needs are largely met by means
of private property ownership rather than with a lease contract. Secondly,
low-income citizens enjoy the privilege of leasing apartments from the state for an
official fixed price. Thirdly, the C2C rental market seems to remain invisible to the
legal system to a very large extent: so as to avoid taxes, contractual parties prefer to
enter only short-term (less than a year) agreements, which are not subject to land
registration, and they are reluctant to litigate disputes.
4.5 Mandatory Rules on Imputation of Payments
For consumer credit contracts, the imputation of payments that are made by the
consumer is prescribed by law. If the consumer makes a payment, the amount of
which is not sufficient to discharge all his debts, the payment discharges first the
outstanding interest, then the outstanding principal, then the penalties, then the
current interest, then the current principal, and finally all the other debts.77
According to the binding recommendations of the Russian Supreme Court, no
contract of any nature (whether B2C, C2C, or B2B) may provide that penalties are
discharged before the (outstanding?) interest and principal.78
4.6 Caps on Penalties
Late payment penalties are in some cases capped (consumer credit79—with different
caps depending on whether interest continues to accrue) or even fixed by law (public
utility contracts,80 joint investment contracts for housing construction).81
77
S 5(20) Russian Consumer Credit Act; para 37 of the Resolution of the Plenum of the Supreme
Court of November 22, 2016 N54. That this rule came as a reaction to actual banking practices can
be seen from case law (cf. e.g. the ruling of the Federal Commercial Court of the Central District of
March 20, 2013 in case NА48-2779/2012).
78
Para 37 of the Resolution of the Plenum of the Supreme Court of November 22, 2016 N54.
79
80
S 155(14 and 14.1) Russian Housing Code of December 29, 2004 N188-ФЗ; para 159 of the
Resolution of the Government of the Russian Federation of May 6, 2011 N354; para 38 of the
Resolution of the Plenum of the Supreme Court of June 27, 2017 N22; para 61 of the Resolution of
the Plenum of the Supreme Court of March 24, 2016 N7.
81
S 5(6) of the Federal Law of December 30, 2004 N214-ФЗ; ruling of the Federal Commercial
Court of the Urals District of October 31, 2012 [NФ09-10256/12].

5.1 Consumer’s Right to Clear Information About

the Contract Price
Since 1992, consumers have enjoyed a right to obtain necessary and accurate
information about goods and services as well as about the producers and sellers
thereof in an instructive and accessible manner.82 As regards information about
goods and services, the law specifies that it must be furnished in a timely manner and
must enable the consumer to make a correct choice.83
This general clause of the Russian Consumer Rights Protection Act84 is put into
effect by means of various statutes and secondary legislation fixing specific require-
ments as to the substance of the required information and the manner in which it is to
be furnished to the consumer. These rules have been repeated many times and
specified with regard to certain particular situations, such as retail sale,85 work
contracts,86 tourist services,87 telecom services,88 television and radio services,89
internet services,90 consumer credit,91 pawnbroker loans,92 microcredit,93 ATM
payments,94 electronic payments,95 and some other forms of payments.96
82
Preamble, s 8 Russian Consumer Rights Protection Act; cf. also ss 495, 732 Russian Civil Code.
83
S 10(1) Russian Consumer Rights Protection Act.
84
SS 9 and 10.
85
Paras 11, 16, 19, 34, 41, and others of the Resolution of the Government of the Russian Federation
of January 19, 1998 N55.
86
S 732(1) Russian Civil Code.
87
S 10(2) of the Federal Law of November 24, 1996 N132-ФЗ ‘On the Principles of Tourist
Activities in the Russian Federation’ and para 7 of the Resolution of the Government of the Russian
Federation of July 18, 2007 N452.
88
Paras 17 and 23 of the Resolution of the Government of the Russian Federation of December
9, 2014 N1342.
89
Paras 9 and 11 of the Resolution of the Government of the Russian Federation of December
22, 2006 N785.
90
Paras 14, 22, 23, and 26 of the Resolution of the Government of the Russian Federation of
September 10, 2007 N575.
91
S 10(2) Russian Consumer Rights Protection Act, ss 5(4 and 9), 6(1), 7(15), and 9 Russian
Consumer Credit Act.
92
S 7(3 and 5) of the Federal Law of July 19, 2007 N196-ФЗ ‘On Pawnbrokers’.
93
SS 9(2)(3), 10(1)(2), 12(1)(9), and 12.1(3) of the Federal Law of July 2, 2010 N151-ФЗ ‘On
Microfinance Activities and Microfinance Companies’.
94
S 29(5) of the Federal Law of December 2, 1990 N395-1 ‘On Banks and Banking Activities’.
95
SS 5(12)(1 and 2), 7(25)(5), 10(13), 13(7)(3), 13(9), 14(15)(5), and 14(16) of the Federal Law of
June 27, 2011 N161-ФЗ ‘On the National Payment System’.
96
SS 4(13)(5) and 6(1)(1) of the Federal Law of June 3, 2009 N103-ФЗ.
The predominant part of litigation dealing with information duties of the supplier
concerns information about the price. The courts apply and develop the statutory
provisions97 without going beyond their purpose, which guarantees that consumers
obtain accurate and comprehensible information about the price.
It is a recent trend of Russian legislation that the supplier is obliged to inform the
consumer about the full price of goods or services before conclusion of the contract:
Since 2007 the consumer has had a right to information about the full
(or inclusive) price of a tourist product expressed in rubles98; no case law of
importance has emerged so far.99
In 2007 a rule was introduced into the Russian Consumer Rights Protection Act
pursuant to which a consumer who obtains credit in any form has to be informed
about the amount of the credit, the full sum to be paid, and the repayment plan.100 In
2013, due to the adoption of the Russian Consumer Credit Act the scope of this rule
was narrowed down to deferred payments and payments by installments.101
The Russian Consumer Credit Act has provided a detailed set of rules in regard to
the right of the consumer to information about the total cost of the credit. The statute
presents a formula for the calculation of the total cost,102 lists of charges that are to
be included in103 or excluded from it,104 assumptions for the calculation of the total
cost,105 and the manner in which the consumer is to be informed about the total cost
(in a square frame of a certain size in the right upper corner of the first page of the
contract, prior to the table with individual contract terms, in black capital letters on a
white background, and so on).106 Considering that the total cost of the credit does not
include, inter alia, penalties and charges for which the amount and payment periods
97
Cf. the resolutions of the Commercial Court of the East Siberia District of February 27, 2017
[NФ02-14/2017] (too small a print) and of the Commercial Court of the Far East District of
September 28, 2015 [NФ03-3998/2015] (the information about the fee-less manners of payment
must be given in the contract and not just on a website).
98
S 10(2) of the Federal Law of November 24, 1996 N132-ФЗ ‘On the Principles of Tourist
Activities in the Russian Federation’ and para 7 of the Resolution of the Government of the Russian
Federation of July 18, 2007 N452.
99
But see the appellate ruling of the Moscow City Court of January 20, 2014 in case N33-1341,
where the rule is construed as prohibiting terms that allow the supplier to change the price if the
situation changes.
100
S 10(2) Russian Consumer Rights Protection Act as prior to the amendment through the Federal
Law of October 25, 2007 N 234-ФЗ. To justify the changes the Explanatory Note has pointed out
that the consumer does not always receive accurate and comprehensible information about the credit
terms and conditions and the total sum to be paid (http://sozd.parlament.gov.ru/download/
9F6549FA-6D4B-442D-8D62-A7A51A9D40C9).
101
S 10(2) Russian Consumer Rights Protection Act as after the amendment through the Federal
Law of December 21, 2013 N363-ФЗ.
102
S 6(2-2.2) Russian Consumer Credit Act.
103
104
105
106
will depend on decisions or behavior of the debtor,107 the total cost of the credit
announced to the consumer will not always correspond to the real cost, and the banks
still retain some leeway in contract formulation, which might be used to exploit
bounded rationality and other well-known characteristics of consumer behavior.108
For consumer credit, the law prescribes a special form in which ‘individual
contract terms’109—including price-related terms—must be presented: in a standard
table beginning on the first page of the contract in a clear, easy-to-read print.110 The
use of the uniform table is obviously supposed to facilitate comparability across
different credit products.
The statutory provisions, under which the prices of goods or services in B2C
contracts must be expressed in rubles,111 are often construed by the courts and the
Consumer Rights Agency as a prohibition against using formulas in price terms
(expressed as a percentage of a sum of money or as the ruble equivalent of a foreign
currency sum) that would require the consumer to make final calculations by him- or
herself.112
5.2 A Prohibition Against Determining the Price in ‘Standard

Contract Terms’
As regards consumer credit, in 2014 the law created a distinction between ‘standard’
and ‘individual contract terms’ and fixed a list of terms that must be negotiated
individually.113 There are many price-related terms among them, such as terms
concerning interest rates or the way variable interest rates are determined, duties of
the consumer to enter other contracts, and additional paid services.
107
S 6(5)(2 and 3) Russian Consumer Credit Act.
108
Savel’ev (2014), pp. 265–266.
109
See Sect. 5.2 of this chapter.
110
111
S 10(2) Russian Consumer Rights Protection Act; S 10(2) of the Federal Law of November
24, 1996 N132-ФЗ ‘On the Principles of Tourist Activities in the Russian Federation’ and para 7 of
the Resolution of the Government of the Russian Federation of July 18, 2007 N452.
112
Cf. e.g. the rulings of the Commercial Court of the North Caucasus District of May 5, 2017
[NФ08-2751/2017]; the rulings of the Federal Commercial Court of the Urals District of June
27, 2012 [NФ09-4511/12] and of October 30, 2006 [NФ09-8854/06-С1]; and the appellate rulings
of the Stavropol Krai Court of September 4, 2015 in case N33-6142/2015 and of September 4, 2015
in case N33-6140/2015.
113
SS 5(1-3, 6-7, 9-12), 13(2) Russian Consumer Credit Act.
The law expressly exempts individually negotiated terms from the scope of the
general rules on judicial control of adhesion contracts,114 stressing that other terms
are subject to such control.115
This novel approach, being in clear conflict with the realities of how credit
contracts are concluded, has faced harsh criticism in academic literature.116 A
study of case law reveals that the ‘individual contract terms’ are usually approved
by senior executives of banks and preprinted in the same manner as the ‘standard
terms’. The consumer has actually no say in the drafting of these ‘individual contract
terms’; neither is he or she offered a choice over particular terms.
Since these terms are not in fact individually negotiated, it is legitimate to control
such terms in accordance with the rules on adhesion contracts, notwithstanding the
abovementioned statutory provision.117 There have been cases in which the Con-
sumer Rights Agency, enjoying support from the courts, has held banks liable for
violation of the rules on ‘individual contract terms’, pointing out that the banks have
incorporated them in preprinted standard forms. It has been repeatedly stressed that
the way the standard forms are framed has made it impossible for consumers to
negotiate specific terms, to make choices, or to agree or disagree with particular
provisions.118 (It is to be understood, however, that the banks might easily cope with
this problem by including in their standard ‘individual terms’ special boxes that are
to be ticked or filled-in by the consumer exactly as directed by the bank officer. One
may even hypothesize that measures of this kind have already been adopted).
Most of the few known attempts of consumers to challenge ‘individual contract
terms’ that were allegedly not individually negotiated and unfair have failed.119 At
the same time the courts dismissing the consumers’ claims have remarked that the
law does not prohibit concluding consumer credit contracts in the form of an
adhesion contract and that, should this be the case, the contracts are subject to the
114
S 428 Russian Civil Code.
115
S 5(2) Russian Consumer Credit Act. It is hard to say, whether this provision embraces s 428
(3) Russian Civil Code, which has radically changed after the Russian Consumer Credit Act entered
into force. In its current version this subsection allows for application of the adhesion contract
control mechanisms (s 428(2) Russian Civil Code) to the terms of contracts which, although not
qualifying as adhesion contracts, have been concluded in a situation featuring a blatant imbalance in
bargaining power.
116
Kukuškin (2014), pp. 52–57; P’jankova (2016), pp. 361–362; Savel’ev (2014), p. 289;
Grišaev (2015).
117
Savel’ev (2014), p. 289.
118
Cf. e.g. the rulings of the Commercial Court of the East Siberia District of June 6, 2016 [NФ02-
2803/2016]; the 3rd Commercial Appellate Court of May 11, 2016 in case NА33-28611/2015, of
January 20, 2016 in case NА33-21082/2015, and of December 14, 2015 in case NА33-12896/2015;
the 10th Commercial Appellate Court of January 18, 2017 [N10АП-17392/2016] and of November
28, 2016 [N10АП-15113/2016]; the 12th Commercial Appellate Court of March 5, 2017
[N12АП-1347/2017]; and the 18th Commercial Appellate Court of July 7, 2017 in case NА07-
24554/2016.
119
But see the appellate ruling of the Krasnoyarsk Krai Court of May 30, 2016 in case N33-6854/
2016.
relevant control (s 428 Russian Civil Code).120 However, it should be noted that,
taking into account the general reluctance of the courts to police B2C contracts with
help of the adhesion contract rules,121 the practical relevance of these remarks in
particular court decisions should not be overestimated.
5.3 The Duty to Warn the Consumer About the Risks

Attached to Certain Price-Related Terms
A creditor is obliged by law to warn the consumer (1) that his or her expenses in
rubles may be higher than expected since the applicable variable interest rate or the
exchange rate in cases of foreign currency credits may rise and (2) that the past
behavior of rates may not be taken as a guarantee for their future behavior.122
5.4 The Duty to Inform the Consumer About Price Changes

and About a Consumer’s Delay in Making Payments
The creditor in consumer credit contracts is obliged by law to provide certain

information to the consumer after the contract has been concluded. To a large part,
this relates to the price of credit or payments. The most salient duties of this kind are
the duties to inform the consumer in the following regards:
First, the consumer is to be informed about changes in the variable interest rate
within 7 days after they have become effective and about the total credit cost,
calculated on the basis of the new value of the interest rate, as well as about a new
repayment plan.123
Secondly, in cases of a partial early repayment, the creditor must be advised in
regards to the total credit cost, if the total has been affected by the early repayment,
as well as regarding the new repayment plan.124
120
The appellate rulings of the Moscow City Court of July 12, 2017 in case N33-27082/2017 and оf
July 12, 2017 in case N33-27070/2017; the Voronezh Oblast Court of January 12, 2017 in case
N33-161/2017.
121
See Sect. 2.2 of this chapter.
122
SS 5(4)(17) and 9(3) Russian Consumer Credit Act.
123
124
S 11(8) Russian Consumer Credit Act. Additionally, s 5(16) Russian Consumer Credit Act
imposes a duty on a creditor who has reduced an interest rate or reduced or cancelled a fee or a
penalty to inform the consumer about the changes.
Thirdly, the consumer is to be informed of his or her delays in making payments

within 7 days after they occur.125
The introduction of the first two duties has not met with much enthusiasm in
academic literature.126
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history of drafting and adopting the law]. In: Ivanov OM, Ščerbakova MA (eds) Kommentarij k
Federal’nomu zakonu ‘O potrebitel’skom kredite (zajme)’ [A commentary on the Federal Law
‘On Consumer Credit (Loan)’]. Statut, Moscow, pp 7–18
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kredite (zajme)’ [A commentary on the Federal Law ‘On Consumer Credit (Loan)’]. Statut,
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sovremennom zakonodatel’stve i sudebnoj praktike [Development of the main ideas of the Civil
Code of Russia in modern legislation and case law]. Statut, Moscow, pp 106–129
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kredite (zajme)’ [On some problematic aspects of the new Federal Law ‘On Consumer Credit
(Loans)’]. Pravo i èkonomika [Law Econ] 5:52–57
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commentary]. Ûridičeskoe izdatel’stvo NKÛ RSFSR [Legal Publishing House of the People’s
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standard term contract]. In: Rožkova MA (ed) Svoboda dogovora [Freedom of contract]. Statut,
Moscow, pp 353–363
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[The reform of Russian Civil Legislation: interim results]. Statut, Moscow
Form Contracts in Singapore
Wee Ling Loo
Abstract Singapore embraces ‘free market’ principles and the associated principle
of ‘freedom of contract.’ Nevertheless, there are controls over contractual unfairness,
be it procedural or substantive unfairness. This report provides an overview of the
existing controls, focusing on the controls over contract terms in Singapore. Most of
these controls, whether ex-ante legislative or administrative ones, or ex-post judicial
ones, do not specifically target standard form contracts, B2C or B2B contracts, or
even price terms. Where price or price related terms are concerned, the Singapore
government relies mainly on ex-ante legislative (and administrative) rather than
ex-post judicial control. Even then, it makes light use of ex-ante regulation to limit
price terms, preferring to let price terms be regulated by market forces, with
legislation or administrative regulations compelling disclosure in specific sectors
of industries, while encouraging self-regulatory initiatives in others.
1 Introduction
This paper examines the existing controls of standard form contracts in business to
consumer (B2C) and business to business (B2B) contracts in Singapore, whether
through legal (judicial or legislative/administrative) or other means. In particular, the
paper examines the existing controls for regulating price related terms in those
contracts, and the mode and degree of control exercised. Three preliminary points
should be noted: first, as will become apparent, much of the existing controls on
contractual unfairness in Singapore are applied without specifically targeting stan-
dard form contracts, B2C or B2B contracts, or even price terms. Second, this paper
provides a general overview of controls of contract terms including price-related
terms, and does not purport to be comprehensive. Third, in relation to controls of
price-related terms in particular, the paper will focus attention on the transactions
highlighted in the questionnaire (that is, contracts where standard contract terms are
W. L. Loo (*)
Singapore Management University, School of Law, Singapore, Singapore
e-mail: wlloo@smu.edu.sg

https://doi.org/10.1007/978-3-030-23057-9_22
562 W. L. Loo
widely used such as consumer and small business credit contracts, insurance con-
tracts, banking contracts and contracts for telecommunication and subscription TV
services).
At the outset, it is necessary to clarify what are considered ‘standard form
contracts’ or ‘standard contract terms’ under Singapore law. In this regard, the
Singapore apex court’s explanation in Koh Lin Yee v Terrestrial Pte Ltd1 (‘Koh
Lin Yee’) of the phrase ‘written standard terms of business’ in s 3(1) of the Singapore
Unfair Contract Terms Act2 (UCTA) is apposite. Essentially, the Singapore Court of
Appeal adopted3 the English High Court’s definition of the same phrase in a then-
identical provision in the UK Unfair Contract Terms Act,4 in Hadley Design
Associates Ltd v The Lord Mayor and Citizens of the City of Westminster.5 The
phrase was defined as follows:
. . . a set of terms in written form existing prior to the making of the agreement which was
intended to be adopted more or less automatically in respect of all transactions of a particular
type without any significant opportunity for negotiations.
The Singapore High Court in Kay Lim Construction & Trading Pte Ltd v Soon
Douglas (Pte) Ltd & Anor6 also considered the routine use of particular written terms
by the proffering party to be evidence of those terms constituting that party’s written
standard terms of business. Thus characterised, many B2C contracts could be
instances where the consumer contracted on the standard form contract of the
business. For example, consumers typically have to contract on the pre-existing
written standard terms of banks in respect of banking services, or those of a
telecommunications company in respect of the provision of telephone lines or
internet services without much, or more usually, any opportunity to negotiate the
terms. There would also be B2B contracts where a small business contracts on the
written standard terms of a bigger business in similar circumstances, given their
weaker bargaining position.7
This paper is structured as follows: Sect. 2 considers Singapore’s acceptance of
the principle of freedom of contract—the historical background and present day
1
Koh Lin Yee v Terrestrial Pte Ltd [2015] 2 SLR 497.
2
Cap 396, 1994 Rev Ed (Singapore).
3
See Koh Lin Yee v Terrestrial Pte Ltd [2015] 2 SLR 497, [24]; see also the Singapore High Court
decision that adopted the same definition: Holland Leedon Pte Ltd (in liquidation) v C&P Transport
Pte Ltd [2013] SGHC 281, [230].
4
(c 50) (UK). Singapore adopted the 12 November 1993 version of the UK Act (with minor
modifications) via the Singapore Application of English Law Act (Cap 7A, 1994 Rev Ed): see s
4(1)(a), s 4(2) and the First Schedule. The UK provision was amended in 2015 leaving the provision
intact except for a reference to dealing as ‘consumer’: see UK Consumer Rights Act 2015 (c 15),
Schedule 4, para 5(1) & (2).
5
Hadley Design Associates Ltd v The Lord Mayor and Citizens of the City of Westminster [2003]
EWHC 1617 (TCC), [78].
6
Kay Lim Construction & Trading Pte Ltd v Soon Douglas Pte Ltd & Anor [2013] 1 SLR 1, [87].
7
For example, the Singapore High Court referred to this possibility, obiter, in Jurong Port Pte Ltd v
Huationg Inland Transport Service Pte Ltd [2009] 4 SLR(R) 53 (‘Jurong Port’), [19].
Control of Price Related Terms in Standard Form Contracts in Singapore 563
position, and briefly, the scope of the principle, including whether contracting parties
have freedom to set the price terms. Section 3 will provide a general overview of the
judicial and legislative controls over B2C/B2B standard form contracts or standard
contract terms while Sects. 4 and 5 examine, respectively, the judicial and legislative
(and administrative) regulation of the price related terms in particular contracts.
Section 6 will then highlight any control, legal or otherwise, that promotes price
transparency and competition. Section 7 concludes with some observations on the
overall approach to the regulation of price related terms in Singapore. Given word
constraints, this paper will not venture into a discussion of the relative merits of
judicial or regulatory controls of price terms or of any alternative methods.
2 Principle of Freedom of Contract in Singapore
The Singapore government embraces free market principles. To the extent that
preservation of ‘freedom of contract’ is necessary for the realization of free market
ideals, it is an axiom of public policy in Singapore. Thus, the Singapore Ministry of
Trade and Industry stated on its website that, ‘[a]s far as possible, the government
does not intervene in the economic decisions of firms, unless overriding social or
political concerns prevail.’8 Further, in line with its commitment to free market
principles, the Singapore government enacted the Competition Act9 in 2004 to
provide for the establishment of the Competition Commission of Singapore. The
Commission’s role is to ensure well-functioning markets by promoting healthy
competition practices and discouraging anti-competitive ones, in order to create
and preserve free choice among consumers and businesses.10 The Commission
was renamed the Competition and Consumer Commission of Singapore when, in
April 2018, it took on the additional role as the administering body of the Consumer
Protection (Fair Trading) Act provisions.11
2.1 Historical Background to Present Day Position
Singapore’s embrace of free market economic principles, and the closely connected
principle of freedom of contract as a general principle of contract law, can be traced
to its historical roots. Indeed, in 1819, Sir Thomas Stamford Raffles of the British
8
See the Singapore Ministry of Trade and Industry, MTI Insights, Free Market System, 5 July
2005 at https://www.mti.gov.sg/MTIInsights/Pages/Free%20Market%20System.aspx (last accessed
14 September 2018). The website has since been revamped.
9
Cap 50B, 2006 Rev Ed (Singapore).
10
See https://www.cccs.gov.sg/about-cccs (last accessed 5 July 2019).
11
See s 68 of the Enterprise Singapore Board Act 2018 (No 10 of 2018).
564 W. L. Loo
East India Company founded Singapore and established it as a free port for trade,
following laissez-faire principles.12 To appreciate the influence of English law on
Singapore law (including its contract law), a brief historical account of the devel-
opment of Singapore law is necessary.
Following a period of ‘legal chaos’ from its founding to 1826,13 English law was
introduced into Singapore via the Second Charter of Justice.14 The decision of R v
Willans15 was regarded to have interpreted the Second Charter as introducing
English law (statutes, common law and equitable principles) that were in force in
1826, subject to suitability and modification in light of local circumstances.16
Continuous reception of English commercial law into Singapore occurred through
s 5 of the Civil Law Ordinance of 187817 (subsequently the Civil Law Act).18 In
essence, s 5 provided for legal issues that arose in Singapore, of a commercial19
nature (either generally or pertaining to certain specified categories) to be decided
according to the law prevailing in England at the corresponding period, unless local
provision existed under Singapore law at the time.20 However, difficulties with the
interpretation of s 5 and the ensuing uncertainties in application21 led to its repeal by
the Singapore Parliament via the Application of English Law Act (AELA)22 in 1993.
Apart from eliminating uncertainties, the AELA also clarified the application of
English law in Singapore. Section 3(1) provided that English common law and
equitable principles that were a part of Singapore law immediately before
12 November 1993 continued to be a part of local law, subject to suitability and
modifications required by local circumstances.23 Section 4(1) provided for an
exhaustive list of English statutes to apply or continue to apply in Singapore, with
necessary modifications, while s 4(2) made clear, with respect to English commer-
cial statutes, that the versions in force on 12 November 1993 were the ones that
applied in Singapore.24 Significantly, the AELA’s provision of a cut-off date
12
Turnbull (2009), pp. 19–50; see also Phang (1990), pp. 22–24.
13
Phang (1990), pp. 34–37.
14
Letters Patent establishing the Court of Judicature at Prince of Wales’ Island, Singapore and
Malacca dated 27 November 1826 made under the authority of Act 6 Geo 4, c 85.
15
R v Willans (1858) 3 Ky 16.
16
Phang (1990), pp. 37–39.
17
Originally, s 6 of the Singapore Civil Law Ordinance 1878 (No 4 of 1878).
18
19
The word ‘mercantile’ was used in the section.
20
A 1979 amendment subjected the received English commercial law to ‘modifications and
adaptations as the circumstances of Singapore may require’: see Singapore Civil Law (Amendment
No 2) Act (Act 24 of 1979). See also s 5(3)(a) of the Singapore Civil Law Act (Cap 43, 1988 Rev
Ed).
21
For academic literature discussing the difficulties, see, e.g. Phang (1990), pp. 42–48.
22
Cap 7A, 1994 Rev Ed (Singapore), s 6(1).
23
AELA (n 22), s 3.
24
AELA (n 22), s 4 refers to the First Schedule that lists thirteen English commercial statutes and
3 imperial statutes.
(12 November 1993) for the application of English law, together with other govern-
ment initiatives,25 set the stage for an autochthonous development of Singapore law
from then on.
Where Singapore contract law is concerned, a study26 observed that there had
been ‘an overwhelming reliance on English case law’ with a ‘bare restatement of the
English position’ in most of the local court decisions from 1819 to 1959, and
that local contract law ‘appear[ed] to be premised upon the classical notion of
freedom of contract.’27 The trend was noted to continue into 1990.28 Notably, this
phenomenon corresponded with the period when the development of general prin-
ciples of English contract law was strongly influenced by the laissez-faire philoso-
phy from about 1770 to 1870.29 From 1870 to 1980, there was a waning of
enthusiasm for ‘freedom of contract’ in the UK due to rising awareness of the
problem of externalities and the lack of true freedom in contracting among con-
sumers or businesses.30 However, the UK dealt with these concerns mostly through
legal developments outside of the general law of contract, for example, through tort
law, or legislative regulation of specific categories of contracts.31 From 1980, the
UK experienced a resurgence of support for ‘freedom of contract’ though not to its
previous levels.32
From the 1990s, although Singapore’s efforts towards legal autochthony began in
earnest,33 the Singapore courts continued to affirm the primacy of ‘freedom of
contract’ as a basic contractual principle. This is unsurprising for various reasons.
First, in the pursuit of legal autochthony, Singapore courts were careful to depart
from English law based only on rationality rather than for its own sake.34 Second, as
a leading textbook on Singapore contract law observed, ‘much of Singapore contract
law is consistent with the prevailing English law. In the sphere of trade and
25
These included the abolition of appeals to the Judicial Committee of the Privy Council sitting in
London making the Singapore Court of Appeal the apex court (see Singapore Judicial Committee
(Repeal) Act 1994 (Act 2 of 1994)); and the issue of Practice Statement (Judicial Precedent) [1994]
SGCA 148 allowing the Singapore Court of Appeal to depart from its prior decisions on an
exceptional basis.
26
See Phang (1990) who undertook a study of the development of Singapore Contract law from
1819 to 1990.
27
Phang (1990), pp. 63 and 81 and cases cited in footnote 410, viz Chasseriau v Mathieu & Co
(1858) 1 Ky 117, 118; and WE Maxwell v Chettyapah Chetty (1868) 1 Ky 201, 202.
28
Phang (1990), pp. 97–99.
29
See Smith (2005), pp. 9–11.
30
The latter being caused either by a lack of choice as to whom to contract with (e.g., in the case of
monopolies) or the terms to contract on (e.g., in the case where standard contract terms were used
across the industry by the supplier of goods or services), or the inability to exercise real choice
where the consumer or business could not understand what the contractual terms provide.
31
Smith (2005), pp. 11–16.
32
Smith (2005), pp. 16–20.
33
See generally, Goh and Tan (2011).
34
Phang (2012), paras 02.078 and 02.084–02.085 (and accompanying footnotes).
566 W. L. Loo
commerce—which contract law is predominantly concerned with—such uniformity

is no bad thing.’35 Finally, such an approach supports the prevailing economic policy
of Singapore. In Alliance Concrete Singapore Pte Ltd v Sato Kogyo (S) Pte Ltd, the
Singapore apex court stated thus36:
It is axiomatic that the courts should – as far as it is possible – endeavour to uphold the
validity of contracts and ensure that they are performed according to their terms. Put simply,
sanctity of contract is the norm. This is only to be expected, lest the idea of freedom of
contract degenerate into an instrument of abuse which would (in turn) engender
unpredictability and chaos not only in the transactional context but in the wider society
as well.
2.2 Scope
As mentioned, the Singapore government does not interfere with the economic
decisions of businesses unless there are overriding social or political concerns. As
such, judicial and legislative (and administrative) restraints on ‘freedom of contract’
exist. Section 3 will highlight some of the judicial and legislative controls over
contract terms, which are examples of restraints over ‘freedom of contract’.
2.3 Freedom to Set the Contract Price
The freedom to set the contract price is encapsulated in the common law doctrine of
consideration, an essential element in the formation of contract in Singapore.37 An
important aspect of it—that consideration must be sufficient but need not be ade-
quate—allows contracting parties, acting voluntarily, the freedom to set their own
contract price.38 The legal stance of not requiring consideration to be adequate
means that the Singapore courts will not ‘police’ or scrutinise the comparative
fairness of the bargain between the contracting parties. In the absence of legislatively
or administratively prescribed limits,39 and judicial restraints, the court’s task is
35
Phang (2012), paras 02.083–02.085.
36
Alliance Concrete Singapore Pte Ltd v Sato Kogyo Pte Ltd [2014] 3 SLR 857, [30].
37
See Gay Choon Ing v Loh Sze Ti Terence Peter & anor appeal [2009] SLR(R) 332 (‘Gay Choon
Ing’), [64].
38
See e.g., Singapore Court of Appeal decisions in Gay Choon Ing (n 37), [86] and Wong Fook
Heng v Amixco Asia Pte Ltd [1992] 1 SLR(R) 654, [23]. See also Singapore High Court decisions in
S Pacific Resources Ltd v Tomolugen Holdings Ltd [2016] 3 SLR 1049, [17] and Tan Eck Hong v
Maxz Universal Development Group Pte Ltd [2012] SGHC 240, [59].
39
There are prescribed limits in certain categories of contracts, see, e.g., Singapore Moneylenders
Act (Cap 188, 2010 Rev Ed), s 22, read with Moneylenders Rules 2009 (S 72/2009) Rules 11, 12 &
12A.
merely to ascertain the intention of the contracting parties, albeit objectively, and
give effect to it.
3 Control of Standard Form Contracts or Standard

Contract Terms: An Overview
As mentioned, much of the controls that exist apply without specifically targeting
standard contract terms, or B2C or B2B contracts. In this section, whether the
controls described specifically target such terms or contracts and the inter partes
effect of these controls will be indicated. As a preliminary, it should be noted that
Singapore law does not specify any ‘black’ or ‘grey’ list of unfair terms and there are
no registers where unfair terms are listed. Although rarely invoked, class actions in
the appropriate case are permitted under the Singapore Rules of Court by way of a
representative action under Order 15 rule 12.40 More recently, the Singapore Court
of Appeal, in Koh Chong Chiah & Ors v Treasure Resort Pte Ltd,41 has indicated
that the threshold requirements for a representative action would be applied broadly
and flexibly,42 bearing in mind that the provision is ‘a facilitative provision for the
efficient and speedy administration of justice.’43 In addition, court judgments only
bind the parties to the proceedings.
3.1 Judicial Control
In this section, only the more direct judicial controls over the contents of a contract or
particular terms are discussed. Singapore courts can control which contracts to
uphold or defeat on the basis of procedural fairness, that is, whether vitiating factors
(such as mistake, misrepresentation, duress, undue influence and unconscionabil-
ity)44 affected the fairness of the process by which the contracts were entered into.
These will not be elaborated here, except to note that the doctrine of unconsciona-
bility is applied narrowly in Singapore.45
Broadly, courts can control the contents of a contract or particular contract terms
via:
40
GN No S 71/1996, Rev Ed 2014 (Singapore), Order 15 Rule 12.
41
Koh Chong Chiah & Ors v Treasure Resort Pte Ltd [2013] 4 SLR 1204 (‘Koh Chong Chiah’).
42
See Koh Chong Chiah (n 41), [32].
43
See Koh Chong Chiah (n 41), [86].
44
Phang (2012), chapters 10–12.
45
See BOM v BOK & anor appeal [2019] 1 SLR 349, [142].
568 W. L. Loo
(i) the rule of incorporation, that is, a term must be incorporated into the contract
before the court will even begin to assess if it can be enforced against a party to
the contract46;
(ii) the ‘contra proferentem’ rule of interpretation of ambiguous terms in a contract
in general47;
(iii) the application of the guidelines in Canada Steamship Lines Ltd v The King
[1952] AC 192 to the interpretation of clauses that purport to exclude, limit or
provide an indemnity against negligence liability48;
(iv) the vitiating factor of illegality pertaining to restraint of trade clauses49;
(v) the law on incapacity of minors which limit the enforceability of non-beneficial
contracts of employment, education or training or other analogous ones against
the minor50;
(vi) judicial scrutiny over ‘liquidated damages clauses’51 and clauses providing for
forfeiture of purported ‘deposits’ that are unreasonable as earnest money,52
under the rule against penalties; and
(vii) judicial implication of terms in law53 into the contract.
The judicial controls listed above apply, regardless of whether the contract
concerned is a standard form one, or a B2C or B2B contract. These controls are
thus available to protect consumers and businesses alike. However, the relative
vulnerability (whether in terms of age, lower bargaining power, sophistication or
knowledge in business matters) of the party subjected to the term(s) is, apart from
general notions of justice and public interests, relevant in the exercise of these
controls in the appropriate case.
46
See, e.g., R1 International Pte Ltd v Lonstroff AG [2015] 1 SLR 521 (‘R1 International’).
47
See Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd
[2008] 3 SLR(R) 1029 (‘Zurich Insurance’), [131].
48
See Marina Centre Holdings Pte Ltd v Pars Carpet Gallery Pte Ltd [1997] 2 SLR(R) 897
(‘Marina Centre’).
49
Phang (2012), paras 13.159–13.222.
50
Phang (2012), para 09.007.
51
Phang (2012), paras 23.009–23.020. See also Allplus Holdings Pte Ltd & Ors v Phoon Wui Nyen
(Pan Weiyuan) [2016] SGHC 144 (‘Allplus’), [37]; Xia Zhengyan v Geng Changqing [2015] 3 SLR
732 (‘Xia Zhengyan’), [77]–[78].
52
See Hon Chin Kong v Yip Fook Mun & Anor [2018] 3 SLR 534 (‘Hon Chin Kong’), [132] and
[134].
53
Phang (2012), paras 06.066–06.069.
3.1.1 Rules of Incorporation and ‘Contra Proferentem’,

and the ‘Canada Steamship Guidelines’
The rules of incorporation54 and ‘contra proferentem’ interpretation of terms55 apply

to all contract terms, but have been particularly useful judicial tools to control the use
of exclusion or limitation of liability clauses. Such clauses have been held not to be
part of the contract if reasonable notice of their existence was not given before or at
the time the contract is concluded,56 or even if notice is given in a timely manner,
they do not appear in a document in which the counterparty would expect to find
contract terms.57 Those that appear or are referred to in an unsigned contractual
document but are onerous or unusual in nature, would not be incorporated unless
they have been specifically drawn to the attention of the counterparty (e.g., through
the use of bold font, printed in red ink, with a red hand pointing to it).58 Those that
appear or are referred to in a signed document would be incorporated, whether or not
the counterparty had read the clause59—this is the case even if the clause is onerous
or unusual as long as the document contained a clear incorporating clause.60 An
exception to the signature rule is where the scope of the clause had been
misrepresented to the counterparty at the time of contracting.61
The ‘contra proferentem’ rule is applied to interpret ambiguous terms strictly
against the proferens, and has been invoked especially when the proferens sought to
exclude negligence liability.62 Indeed, the Singapore Court of Appeal63 has adopted
54
See, e.g., R1 International (n 46).
55
See Zurich Insurance (n 47), [131].
56
See Parker v South Eastern Railway Co [1877] 2 CPD 416 (exclusion clause on the back of a
ticket was not incorporated because it was not reasonably brought to the notice of the customer); see
also Olley v Marlborough Court Ltd [1949] 1 KB 532 (where notice of the clause was given after
the contract was concluded), applied in the Singapore case of Trans-Link Exhibition Forwarding
Pte Ltd v Wadkin Robinson Asia Pte Ltd [1996] 1 SLR(R) 424, [18].
57
Chapelton v Barry UDC [1940] 1 KB 532 (exclusion clause on the back of a ticket was not
incorporated because the ticket was in the nature of a receipt, a document which the customer would
not have expected the terms of a contract to appear).
58
J Spurling Ltd v Bradshaw [1956] 1 WLR 461 (the ‘red-hand rule’) applied in Interfoto Picture
Library Ltd v Stiletto Visual Programmes Ltd [1989] 1 QB 433, which was in turn applied by the
Singapore High Court in Hakko Products Pte Ltd v Danzas (Singapore) Pte Ltd [1999] 1 SLR
(R) 651, [46]–[49].
59
L’Estrange v F Graucob, Limited [1934] 2 KB 394.
60
Press Automation Technology Pte Ltd v Trans-Link Exhibition Forwarding Pte Ltd [2003] 1 SLR
(R) 712, [39]. In this case, the exclusion clause did not appear in the contract document itself, but
the document contained a clear, legible clause in bold which stated that the “All business is only
transacted in accordance with the . . . (SFFA) Standard Trading Conditions. Copy is available upon
application.” The claimant did not ask for and was not provided with copies of the SFFA conditions.
61
Curtis v Chemical Cleaning & Dyeing Co [1951] 1 KB 805.
62
See, e.g., Sunlight Mercantile Pte Ltd & Anor v Ever Lucky Shipping Co Ltd [2004] 1 SLR
(R) 171, [20]–[21].
63
Marina Centre (n 48).
570 W. L. Loo
the “Canada Steamship guidelines” (laid down by the Privy Council on appeal from
the Supreme Court of Canada) that prescribe a strict three-step approach to the
interpretation of clauses relied upon to exclude, limit or be indemnified against
negligence liability. The Singapore courts take a contextual approach to the appli-
cation of these guidelines, and thus relevant factors including the status of the
counterparty (whether a consumer or a business), the counterparty’s level of business
sophistication and bargaining power, and whether the contracting parties had delib-
erately allocated risks and liabilities, would be considered.64 The guidelines have
been useful for judicial control of such clauses, especially where they are not subject
to any legislative control (for example, indemnity clauses in B2B contracts).65
3.1.2 Doctrine of Illegality
Under the doctrine of illegality, courts could scrutinise clauses in restraint of trade
(ROT). An ROT clause in say, an employment contract, would be void and
unenforceable if it fails to satisfy any of the following requirements66:
– it protects a legitimate interest of the employer;
– it is reasonable as between the contracting parties in terms of the scope, duration
or geographical area of restraint; and
– it is reasonable in the interest of the public.
Whether the clause is a standard contract term may be of relevance in this inquiry.
The fact that the ROT clause is contained in the employer’s standard form contract
that is used for all employees ‘irrespective of the type of work they did . . . or the
level of information that they had access to’ would be a factor considered in deciding
its reasonableness.67 Using identical ROT clauses as a standard contract term for all
employees indiscriminately in this way may lead to the inference that the ‘true
purpose of the clauses [is] the restraint of competition rather than the protection of
legitimate interests’68 and are therefore unreasonable. Judicial scrutiny over ROT
clauses would be more rigorous where they appear in employment contracts than in
sale of business contracts because of the greater inequality of bargaining power in
the employment context.69
64
Loo (2016).
65
See, e.g., CST Cleaning & Trading Pte Ltd v National Parks Board [2009] 1 SLR(R) 55 and
Jurong Port (n 7).
66
See Smile Inc Dental Surgeons Pte Ltd v Lui Andrew Stewart [2012] 4 SLR 308 (‘Smile’), [19].
67
See, e.g., Buckman Laboratories (Asia) Pte Ltd v Lee Wei Hoong [1999] 1 SLR(R) 205
(‘Buckman’), [10] and [26].
68
See Buckman (n 67), [26].
69
See Smile (n 66), [20].
3.1.3 Incapacity of Minors
In relation to minors’ contracts of employment, education or training, or other

analogous ones, the courts could scrutinise the terms and hold the contract binding
on the minor only if they, on balance, are beneficial to the minor.70 Thus, minors can
be released from their obligations under contracts containing terms that are onerous
or unfairly one-sided in favour of the adult party.71 The judicial control exercised in
this instance is to protect a minor who did not understand the implications of entering
into the contract on the particular terms.
3.1.4 Rule Against Penalty Clauses
‘Liquidated damages’ clauses are also subject to judicial scrutiny under the rule
against penalty clauses. Such control is based on public policy grounds to prevent
oppression of the party subject to the clause (the counterparty), by forcing perfor-
mance and deterring breach.72 The scope of the scrutiny is limited to terms that
purport to provide for the sum of compensation due upon the breach of particular
term or terms by the counterparty.73 A clause that operates as a ‘penalty’ (and not a
genuine pre-estimate of loss) will be unenforceable.74 To determine if the clause is a
penalty, recent legal developments appear to apply different considerations
depending on whether the clause is a ‘straightforward damages clause’ inserted
with the proferens’ interest in compensation in mind, or whether the proferens had
legitimate interests other than compensation. For the former, relevant factors include
whether the sum stipulated is ‘extravagant and unconscionable in comparison with
the greatest loss that could reasonably or proved to have followed from the breach’.75
For the latter, the question is whether the clause imposes on the counterparty a
detriment that is ‘out of all proportion to [the proferens’] legitimate interest’ in the
performance of the counterparty’s primary obligations.76 In both these tests, and
especially the second, it is relevant whether the contract was negotiated, whether the
counter party was a business person with comparable bargaining power, or had the
benefit of legal advice.77 It should be noted that even if the clause is rendered
70
Phang (2012), para 09.007 and authority cited therein.
71
Phang (2012), para 09.008 and authority cited therein.
72
See Allplus (n 51), [30].
73
See Allplus (n 51), [15].
74
See Allplus (n 51), [30]; Xia Zhengyan (n 51), [77]–[82].
75
See iTronic Holdings Pte Ltd v Tan Swee Leon & anor suit [2016] 3 SLR 663, [176]; see also
Leiman, Ricardo & Anor v Noble Resources Ltd & Anor [2018] SGHC 16 (‘Leiman’), [213].
76
See Leiman (n 75), [195]–[201].
77
See Leiman (n 75), [212].
572 W. L. Loo
unenforceable, a claim can still be made against the party in breach for unliquidated
damages.78
The rule against penalty clauses does not apply to terms providing for ‘true’
(forfeitable) deposits, that is, reasonable sums (in the sense of being customary or
moderate) paid as earnest money to ensure performance of a contract.79 A term
providing for a right to forfeit a sum that is too excessive to be considered a true
deposit would be subject to the penalty rule.80 Judicial control is therefore exercised
on what are considered true deposits (which are not recoverable by the party in
breach)81 and what are not. In this regard, the court assesses whether the sum in
question is reasonable as earnest money, based on the conventional or customary
practices in the relevant transaction and/or any other relevant factual circum-
stances.82 If the sum is not a ‘true deposit’, it is considered an advance or part
payment by the party in breach. This is usually recoverable in restitution subject to
the innocent party’s right of set-off for damages, and a term that provides for their
forfeiture will be controlled by the rule against penalties.83
3.1.5 Implied Terms in Law
Courts can also imply a term in law into a contract, on the basis of ‘justice and
fairness’ or public policy grounds.84 However, such terms are non-mandatory in that
the contracting parties are free, by way of an express term, to exclude them from
their contract.85 This is thus not a significant mode of control. For example, if a term
is implied in law to give effect to a public policy to protect a perceived weaker party
in a transaction, such protection would be weak as the term can be excluded. On the
other hand, imposing a need on the ‘stronger’ party to expressly exclude the implied
term would force the ‘stronger’ party to explicitly state what they are imposing on
78
Phang (2012), para 23.020.
79
See Hon Chin Kong (n 52), [123]–[128].
80
See Hon Chin Kong (n 52), [132] and [134].
81
Unless the court’s equitable jurisdiction for relief against forfeiture can be invoked. However,
Singapore law currently only recognises such relief in the context of contracts concerning interests
in land: see Hon Chin Kong (n 52), [143](e).
82
See Hon Chin Kong (n 52), [107], [109] and [143](d).
83
See Hon Chin Kong (n 52), [143](b) and (f).
84
See, e.g., Jet Holding Ltd & Ors v Cooper Cameron (Singapore) Pte Ltd & Anor & or appeals
[2006] 3 SLR(R) 769 (‘Jet Holding’), [90]–[92]; Chua Choon Cheng & Ors v Allgreen Properties
Ltd & anor appeal [2009] 3 SLR(R) 724 (‘Chua Choon Cheng’), [68]. For example, in Jet Holding
at [89] & [92], the Singapore Court of Appeal, on the basis of fairness and justice, implied a term in
law to the effect that the business contracting parties owed each other a duty to ‘take reasonable care
in the performance of the respective parts of the contract they had entered into’ in a sub-contract for
the refurbishment of a vessel’s slip joint.
85
See Chua Choon Cheng (n 84), [69].
the ‘weaker’ party.86 Nevertheless, Singapore courts often reiterate the need to imply
terms in law with much circumspection because once a term is implied in law, it
would be implied in all future contracts of the same type.87
3.2 Legislative or Administrative Control
In Singapore, legislative or administrative controls on contents of contracts and

particular contract terms take the following forms:
(i) the Singapore Competition Act’s prohibition of businesses’ entry into anti-
competitive agreements (under s 34), of businesses’ abuse of dominant posi-
tions in particular markets (under s 47), and of business mergers or acquisitions
that lead to a substantial lessening of competition (under s 54). Although these
prohibitions mainly control particular understandings, agreements or contracts,
they could result in the control or restriction of particular terms. For example,
the prohibition of predatory pricing terms by a business in a dominant position
within a market to drive competitors out of the market, or of other contract
terms (exclusive dealing or tying clauses) that place trading parties at a com-
petitive disadvantage.88
(ii) the Singapore Consumer Protection (Fair Trading) Act89 that allows small
consumers90 who have been subjected to errant traders’ unfair practices, for
example, contract terms that are ‘harsh, oppressive or excessively one-sided so
as to be unconscionable’,91 to initiate court action for remedies that could
include orders for the restitution of their money, property or other consider-
ation,92 and orders varying the contract between the supplier and the
consumer93;
(iii) legislation regulating the contents of contracts via mandatory94 or
non-mandatory95 prescribed or implied terms, or by prohibiting certain types
of terms96 and subjecting others to a requirement of reasonableness97; and
86
See Smith (2005), p. 163.
87
See, e.g., Chua Choon Cheng (n 84), [69].
88
Competition Act (n 9), s 47(1) and (2)(a) and (c).
89
Cap 52A, 2009 Rev Ed (CPFTA).
90
CPFTA (n 89), s 6(2) read with 6(6) limits a consumer’s claim to a subject matter valued at not
more than SGD30,000 or compensation not exceeding that amount.
91
CPFTA (n 89), s 4(d) read with Schedule 2, clause 11.
92
CPFTA (n 89), s 7(4)(a).
93
CPFTA (n 89), s 7(4)(e).
94
See, e.g., Singapore Employment Act (Cap 91, 2009 Rev Ed), s 8.
95
See, e.g., Singapore Carriage of Goods by Sea Act (Cap 33 1998 Rev Ed), s 3(1) read with The
Schedule, Art IV cf. Art VI.
96
See, e.g., UCTA (n 2), s 2(1).
97
See, e.g., UCTA (n 2), ss 2(2) and 3(2).
574 W. L. Loo
(iv) legislation or administrative regulations imposing disclosure requirements on

the goods or services supplier in order to subject certain contract terms to the
competitive forces of the market and ensure an informed customer.98
The Competition Act provisions require no further explanation. This section will
expand upon the specific consumer protection legislation described in (ii), before
providing some details of the legislative controls in (iii). The controls described in
(iv) will be considered in Sect. 6.
3.2.1 Consumer Protection (Fair Trading) Act
The Consumer Protection (Fair Trading) Act (CPFTA) empowers consumers who
have been subjected to unfair trade practices listed in Schedule 2 of the Act to initiate
court action against the errant trader.99 In respect of most unfair practices, the
possible court-ordered remedies are as already mentioned above, with the monetary
compensation currently capped at SGD30,000.100 The claim can be brought before
the usual civil courts. However, the Small Claims Tribunal provides a lower cost and
speedier option for an informal resolution of consumer disputes, without the involve-
ment of lawyers.101 Claims can be brought before the Tribunal if they do not exceed
SGD10,000. If both the claimant and defendant consent, the Tribunal can hear
claims up to a maximum of SGD20,000.102 In respect of certain consumer contracts
involving direct sales, long-term holiday products, and time-share or time-share
related accommodation, the Act provides for a cooling-off period by giving the
consumer a right of cancellation of the contract. Such right is usually exercisable
within 5 days (excluding Saturdays, Sundays and public holidays) after entry into the
transaction, or receipt of a product information notice, or receipt of such other
statutorily required information or the technical means of access to such
information.103
The Act seeks to control a trader’s acts of procedural unfairness in inducing
consumer transactions, and is not so much concerned to directly control contract
terms or price terms. The provision of a cooling off period for consumer contracts
involving direct sales, long-term holiday products, and time-share or time-share
related accommodation, is an instance where the Act seeks to ensure procedural
fairness. Another instance is where the Act makes it an unfair practice to charge ‘a
price for goods or services that is substantially higher than an estimate provided to
98
See, e.g., Singapore Hire-Purchase Act (Cap 125, 2014 Rev Ed), s 3(1)-(2). See also Singapore,
Parliamentary Debates, 21 September 2004, vol 78 at col 703 & 705 (Mr Lim Hng Kiang).
99
CPFTA (n 89), s 6(1).
100
CPFTA (n 89), s 6(6).
101
Small Claims Tribunals Act (Cap 308, 1998 Rev Ed) (SCTA), ss 22 and 23.
102
See SCTA (n 101), s 5.
103
See CPFTA (n 89), s 11 and Consumer Protection (fair Trading) (Cancellation of Contracts)
Regulations No S65 2009, s 2 definition of ‘regulated contract’, and ss 3B and 4.
the consumer, except where the consumer has expressly agreed to the higher price in
advance’.104 Most of the listed unfair practices concern a trader’s misleading or
deceptive omissions or representations about direct or ancillary aspects of the goods
or services being sold or supplied (including their price), the use of undue pressure or
influence, bait and switch tactics to induce a transaction, or fine print to mislead the
consumer.105 The unfair practice concerning harsh and unconscionable contract
terms is an exception to the general thrust of the Act.
The Act empowers specified bodies, the Consumer Association of Singapore and
the Singapore Tourism Board, to invite errant traders to enter into voluntary agree-
ments to cease and refrain from committing unfair practices.106 The specified bodies
may initiate such invitation if it has reasonable grounds to believe that a trader has or
is engaging in an unfair practice, or is likely to so engage, usually upon complaint by
affected consumers. Terms for compensation of affected consumers could be
included in the agreements.107 However, if the trader breaches the agreement, the
consumers are left to pursue legal action for compensation on their own, in reliance
on the breach.108 In the past, the same specified bodies were empowered, in the
interest of the consuming public, to seek court declarations that errant traders had
committed unfair practices and obtain injunctions to restrain the practices.109
Affected consumers can rely on the court declaration in their legal proceedings for
compensation.110 Unfortunately, the specified bodies were hampered in their efforts
to seek the court orders as they did not have investigatory powers to gather evidence
against the errant trader, and any proposed court application must first be endorsed
by an Injunctions Proposal Review Panel (IPRP).111
Amendments passed in 2016112 abolished the IPRP and the need for the IPRP’s
endorsement of injunction applications. They provided for the appointment of a new
administering body (which has now been replaced by the Competition and Con-
sumer Commission of Singapore), that was conferred with new investigatory powers
to enable timely evidence-gathering and injunction applications against egregious
traders. The amendments also enhanced the court’s powers to, among others, permit
injunctive relief against complicit individuals (rather than just the errant business
entity), and enable monitoring of parties under injunction for compliance with court
orders.113 However, the Act still does not impose any criminal sanction or civil
pecuniary penalty for unfair practices and has been criticized, inter alia, as lacking
104
CPFTA (n 89), Schedule 2 Clause 8.
105
CPFTA (n 89), Schedule 2 Clauses 1–7, 9, 12, 14, 16–20.
106
CPFTA (n 89), s 8(1).
107
CPFTA (n 89), s 8(3)(a).
108
CPFTA (n 89), s 8(6).
109
See previous CPFTA (effective from 31 July 2009), s 9(1).
110
See previous CPFTA (n 109), s 9(6); current CPFTA (n 89), s 9(14).
111
See previous CPFTA (n 109), s 9(4).
112
Consumer Protection (Fair Trading) (Amendment) Act 2016 (Singapore, Act 25 of 2016).
113
See CPFTA (Amendment) Act 2016 (n 112), ss 4, 5 and 8.
576 W. L. Loo
teeth for effective deterrence.114 This aside, s 13(1) of the Act specifically prohibits a
trader from inserting a term to contract out of the Act’s provisions. Terms that have
the effect of a consumer waiving or releasing any right, benefit or protection under
the Act are rendered void.115
3.2.2 Other Legislative Controls
Moving on to other legislative controls that regulate the contents of contracts, it is

noted once again that they may or may not specifically target standard form contracts
or B2C/B2B contracts. Where they do, this will be highlighted in the course of
explanation. Generally, there are three modes of regulation, namely:
• By supplementing the express terms of certain categories of contracts with
implied ones;
• By prescribing terms for certain categories of contract; and
• By regulating the use of particular terms in a contract.
3.2.2.1 Control via Supplementing Express Terms with Implied Terms
This form of control applies without distinguishing between contracts in a standard

form and those that are not. However, controls for B2C contracts are stronger than
those levied on B2B contracts in recognition of the greater vulnerability of con-
sumers relative to businesses.
The Sale of Goods Act116 (SOGA), Hire-Purchase Act117 (HPA) and Supply of
Goods Act118 (SUGA) in Singapore imply terms into contracts of sale, hire-pur-
chase119 or supply of goods, respectively. The implied terms impose on the seller,
owner, or supplier obligations as to title,120 conformity with description and/or
114
See Loo and Ong (2017).
115
CPFTA (n 89), s 13(1).
116
117
See n 98.
118
119
Under HPA (n 98), s 2, the Act only applies to ‘regulated agreements’, i.e. hire-purchase or
conditional sale agreements that relate to consumer goods not exceeding SGD20,000 (inclusive of
goods and services tax) and motor vehicles not exceeding SGD55,000 (inclusive of goods and
services tax, import and excise duty but exclusive of cost of certificate of entitlement for trans-
actions on or after 15 July 1994). The Act does not apply to any ‘agreement in which the hirer is
engaged in the trade or business of selling goods of the same nature or description as the goods
comprised in the agreement.’
120
SOGA (n 116), s 12; HPA (n 98), s 6; SUGA (n 118), s 2.
sample,121 quality,122 and fitness123 pertaining to the goods involved. Additionally,

the SUGA implies a term into contracts of hire of goods that the supplier has the right
to transfer possession of the goods.124
In these three contract categories, terms relating to conformity with description
and/or sample are not only implied into B2C or B2B contracts but to C2C or C2B
contracts as well,125 provided they fall within the scope of the relevant statute.126
Obligations as to quality and fitness, however, are only implied into B2C and B2B
contracts.127 Additionally, the terms implied into B2C contracts are mandatory ones
in that the seller, owner or supplier is not allowed to contract out of them.128 On the
other hand, in B2B contracts, while the implied obligation as to title and/or right to
transfer possession are mandatory,129 the other implied terms are non-mandatory as
the seller, owner or supplier may exclude these obligations by way of an express
term.130 However, to be effective, the term must satisfy the requirement of reason-
ableness under the Singapore UCTA.131
3.2.2.2 Control via Prescribing Terms for Certain Contract Categories
Some legislation not only controls the contents of contracts but also seek to ensure
procedural fairness in the making of the contracts. For example, the Pawnbrokers
Act,132 HPA133 and Moneylenders Act134 were enacted to protect certain
121
SOGA (n 116), ss 13 & 15; HPA (n 98), ss 6A & 6C; SUGA (n 118), ss 8 & 10.
122
SOGA (n 116), s 14(2); HPA (n 98), s 6B(2); SUGA (n 118), s 9(2).
123
SOGA (n 116), s 14(3); HPA (n 98), s 6B(6); SUGA (n 118), s 9(4).
124
SUGA (n 118), s 7.
125
For example, in the SOGA, s 12 merely states that ‘In a contract of sale . . . there is an implied
condition on the part of the seller that in the case of a sale he has a right to sell the goods . . .’
Compared to the wording of SOGA s 14(2) which states that ‘Where the seller sells goods in the
course of a business, there is an implied condition that the goods supplied . . . are of satisfactory
quality.’ [emphasis mine].
126
For example, the HPA was conceived as a consumer protection statute and likely applies only to
B2C contracts given the limited scope of the regulated agreements.
127
See n 122 and 123.
128
Singapore UCTA (n 2), s 6(1)(a) & (2)(a) read with SOGA (n 116), s 55; UCTA s 6(1)(b) & (2)
(b) read with HPA (n 98), s 6E; UCTA, s 7(2) & (3A) read with SUGA (n 118), s 11(1) & (2).
129
UCTA (n 2), s 6(1)(a) read with SOGA (n 116), s 55; UCTA s 6(1)(b) read with HPA (n 98), s
6E; UCTA, s 7(3A) read with SUGA (n 118), s 11(1) & (2).
130
UCTA (n 2), s 6(3) read with SOGA (n 116), s 55; UCTA s 6(3) read with HPA (n 98), s 6E;
UCTA s 7(3) read with SUGA (n 118), s 11(1) & (2).
131
UCTA (n 2), s 6(3) & 7(3) read with s 11(1) & (2), and Second Schedule.
132
Pawnbrokers Act 2015 (No 2 of 2015).
133
See n 98.
134
578 W. L. Loo
disadvantaged or vulnerable groups from exploitation by a ‘stronger party’135 and

typically impose mandatorily prescribed terms as well as a mandatory format for the
contract. The HPA was conceived as a consumer protection statute, while the
Pawnbrokers Act and Moneylenders Act seek to protect vulnerable borrowers
(consumers or small businesses) who are usually ineligible for financing from the
usual sources, from being taken advantage of by these alternative credit providers.
Under the Pawnbrokers Act, a pawnbroker is required to issue a pawn ticket that
must include prescribed terms in the prescribed format. In this regard, Rule 12 of the
Pawnbrokers Rules136 lists the particulars (terms) that must be stated on the pawn
ticket, including the language in which they are to be listed.137 Failure to comply
with this requirement renders the loan agreement voidable.138 The Act also pre-
scribes the profits and fees permitted.139 A loan agreement is void to the extent the
profits earned on the loan or the fees charged exceed the prescribed limits.140 Any
term that attempts to modify or exclude the requirements of the Act will be void.141
Under the HPA, the regulated agreement142 must comply with mandatory
requirements pertaining to form (be in clear and legible handwriting or print of a
minimum of font size 10, in the English language, and signed by all parties)143 and
content (stipulated terms and details of the transaction).144 Failure to comply renders
the following unenforceable: (1) the hire-purchase agreement; (2) any contract of
guarantee relating to the agreement; (3) any security furnished by the hirer in respect
of sums payable under the hire-purchase agreement, or by a guarantor in respect of
sums payable under the contract of guarantee; and (4) any right to recover goods
from the hirer.145
This is the case unless the court sees fit to dispense with any of the requirements,
with conditions imposed, where the hirer is not prejudiced and it is just and equitable
to do so.146 Under the Act, prescribed limits on term charges may be imposed in
respect of any goods or class of goods.147 If the owner charges in excess of the
prescribed limits, the hirer may treat the agreement as void or have his liability
reduced by issuing a signed notice in writing to the owner.148 Currently, however, no
135
See, e.g., Singapore Parliamentary debates on the Hire-Purchase Bill when it was first intro-
duced: Singapore, Parliamentary Debates, 1 August 1968, vol 27 at col 802 (Mr EW Barker).
136
Singapore Pawnbrokers Rules (S142/2015).
137
Pawnbrokers Act (n 132), s 49(2).
138
139
Pawnbrokers Act (n 132), s 50(1) read with the Second Schedule.
140
141
Pawnbrokers Act (n 132), s 69.
142
See n 119 on definition of regulated agreements.
143
HPA (n 98), s 3(3)(a) read with s 47(1)–(2); s 3(b).
144
HPA (n 98), s 3(3)(c)–(e) read with the Second Schedule.
145
HPA (n 98), s 5(1) read with s 47(3); s 5(2).
146
HPA (n 98), s 5(3).
147
HPA (n 98), s 29(1).
148
HPA (n 98), s 29(2).
limits have been prescribed after the revocation in 2004 of previously prescribed
limits.149 The HPA empowers the court to reopen any transactions that appear harsh
and unconscionable or where it deems it just, in order to provide relief.150 The relief
granted includes setting aside, wholly or in part, the loan agreement or security
given, or to revise or alter the terms of the same.151 Any term attempting to exclude,
modify or restrict the protections given to the hirer under the Act is void and of no
effect.152
Under the Moneylenders Act, the contract of loan and guarantee or security given
are unenforceable and money lent by the moneylender is unrecoverable unless a note
of the contract of loan in the prescribed form is signed by the parties to the
contract.153 The prescribed form is specified by Rule 10 of the Moneylenders
Rules, which includes all the prescribed terms and conditions, and particulars of
the loan.154 The Rules further require that the loan repayment terms provide for
payments in equal installments at equal intervals of time.155
Only prescribed types or amounts of fees, costs, charges and expenses (including
legal costs) may be imposed by the licensed-moneylender.156 Charges other than
permitted fees will not be recoverable from the borrower or any surety.157 In this
regard, the Moneylenders Rules allow fewer types of fees to be levied on B2C
loans,158 imposes a cap on the aggregate amount of the fees charged,159 as well as
limit the maximum interest rate chargeable on the principal sum of the loan and the
late payment fee to 4% per month.160 In contrast, more types of fees may be charged
in respect of B2B loans161 and no limit is placed on the aggregate amount of the fees
149
Previous prescribed limits have been revoked: see Hire-Purchase (Terms Charges) (Revocation)
Regulations 2004 (No S 679 of 2004) (Singapore).
150
HPA (n 98), s 32(1).
151
HPA (n 98), s 32(2).
152
HPA (n 98), s 33.
153
Moneylenders Act (n 134), s 20(1)(a).
154
Moneylenders Rules 2009 (No S72/2009) Singapore, Rule 10 read with Form 1 in the Schedule.
155
Moneylenders Rules (n 154), Rule 10A.
156
Moneylenders Act (n 134), s 22(1).
157
Moneylenders Act (n 134), s 22(2)(a).
158
Moneylenders Rules (n 154), Rule 12(1) permits fees to be charged for:
a) late repayment of either the principal or interest that do not exceed SGD60 per month;
b) the grant of the loan that do not exceed 10% of the principal;
c) legal costs incurred for recovery of the loan as may be ordered by the court.
159
Moneylenders Rules (n 154), Rule 12A.
160
Moneylenders Rules (n 154), Rule 11 read with rule 12B.
161
Moneylenders Rules (n 154), Rule 12(2) permits fees to be charged:
a) for every occasion of late payment or principal or interest
b) for each occasion of variation of the terms of the loan at the borrower’s request
c) for every occasion on which the borrower’s cheque is dishonoured by the bank when presented
by the licensed moneylender;
580 W. L. Loo
charged.162 The Rules also restrict the making of unsecured loans to Singapore
borrowers who do not meet certain minimum requirements of income or assets,163 as
well as restrict the unsecured loan amount.164 Similar to the HPA, the Moneylenders
Act empowers the court to reopen the loan transaction if the court finds that the
interest or late interest charged was excessive and determines the transaction to be
unconscionable or substantially unfair.165 The court’s powers in such an event
include setting aside either wholly or in part, and to revise or alter, any guarantee
or security given on the contract of the loan.166
3.2.2.3 Control via Regulation of Specific Terms in Contracts
In Singapore, the UCTA is the principal legislation that controls terms that exclude
or limit liability and indemnity clauses. It regulates by either prohibiting the use of
such terms or subjecting them to a test of reasonableness.167 The factors taken into
account in assessing ‘reasonableness’ include, the relative bargaining position of the
parties; whether the customer received an inducement to accept the clause; and
whether the customer knew or ought reasonably have known of the existence and
extent of coverage of the clause.168 The Singapore Misrepresentation Act also
regulates terms that exclude or limit liability arising from misrepresentation by
requiring such terms to meet the test of reasonableness under the UCTA.169 The
UCTA regulation mainly applies to B2C or B2B contracts.170 On the other hand, the
Misrepresentation Act regulation is not limited to such.
In respect of B2B contracts, clauses that exclude or limit contractual liability are
only regulated if they appear in the proferens’ written standard terms.171 If the
clauses are not found in the proferens’ standard form contract, then they would not
d) for every unsuccessful payment via GIRO by the borrower;

e) for early redemption (whether full or partial), or for early termination of the loan contract
(whether as a result of default or redemption or otherwise); and
f) for legal costs incurred for recovery of the loan as may be ordered by the court.
162
Moneylenders Rules (n 154), Rule 12B.
163
Moneylenders Rules (n 154), Rule 19(1).
164
Moneylenders Rules (n 154), rule 20(1).
165
Moneylenders Act (n 134), s 23(1)–(2).
166
Moneylenders Act (n 134), s 23(3)(b).
167
See, e.g., UCTA (n 2), where terms that exclude or restrict liability for death or personal injury
resulting from negligence are prohibited (s 2(1)) while terms that exclude or restrict negligence
liability for other loss or damage may be allowed if they satisfy the requirement of reasonableness
(s 2(2)).
168
UCTA (n 2), s 11(2) and Schedule 2, guidelines (a)–(c).
169
UCTA (n 2), s 3.
170
UCTA (n 2), s 1(3) provides for the regulating sections to apply only to ‘business liability’.
171
UCTA (n 2), s 3(1).
be regulated unless they exclude or restrict negligence liability172 or liability for

breach of terms implied into contracts for the supply of goods.173 Indemnity clauses
in B2B contracts are not regulated under the UCTA. In respect of B2C contracts,
indemnity clauses174 and terms that exclude or limit negligence175 or contractual
liability,176 or liability for breach of terms implied into contracts for the supply of
goods177 are regulated. This applies whether or not they are found in standard form
contracts.
However, certain types of contracts are outside the purview of the UCTA
altogether.178 These include: insurance contracts; contracts relating to the creation,
transfer and termination of an interest in land, or of a right or interest in intellectual
property, and all international contracts for the supply of goods.179 The UCTA also
regulates certain types of contracts selectively—like contracts for the hire of a ship or
for carriage of goods by ship—by subjecting all such B2C contracts to regulation,
while B2B contracts are only regulated if they contain terms that exclude negligence
liability that result in death or personal injury.180 In employment contracts, the
UCTA only regulates terms that exclude or limit an employer’s negligence liability
vis-à-vis their employees.181 The UCTA also does not regulate contracts where, in
the absence of an express Singapore choice of law clause, the law of other countries
would have been the governing law of the contract.182
Apart from the UCTA, certain terms in specific types of B2C or B2B contracts,
whether in standard form or not, are subject to regulation. For example, s 3(2) of the
SOGA provides that minors only need to pay a ‘reasonable’ price in return for
necessaries’.183 Price terms are regulated in certain contracts providing for essential
services, for example, in the case of public transportation,184 postal services,185 and
172
UCTA (n 2), s 2 regulates clauses that exclude or restrict negligence liability without differen-
tiating between B2C or B2B contracts and without making any reference to standard form contracts.
173
See n 129–131 and discussion in accompanying text. UCTA (n 2), ss 6 and 7 also regulate terms
that exclude or restrict liability for breach of terms implied by the common law in sale or supply of
goods contracts not governed by the SOGA, HPA and SUGA.
174
See UCTA (n 2), s 4 which subjects the clause to the test of reasonableness.
175
See n 172.
176
See UCTA (n 2), s 3(1).
177
See n 128 and accompanying text.
178
UCTA (n 2), s 1(2) and First Schedule ss 1(a)–(e).
179
UCTA (n 2), s 26.
180
UCTA (n 2), s 1(2) and First Schedule ss 2–3.
181
UCTA (n 2), s 1(2) and First Schedule s 4.
182
UCTA (n 2), s 27(1).
183
SOGA (n 116), s 3(2).
184
Bus, taxi and train fares are regulated by the Public Transport Council through price caps set
using a fare adjustment formula: see Public Transport Council Act (Cap 259B, 2012 Rev Ed), s 4
(1); see also Phang (2013).
185
Prices, tariffs, charges for postal services are determined and approved by the Info-
communications Media Development Authority that has been appointed as the Postal Authority:
582 W. L. Loo
water.186 The Singapore electricity/energy market was fully liberalised as of

May 2019, but consumers who choose to continue buying electricity from the
existing supplier (SP Group) would do so at a regulated price set by the Energy
Market Authority.187
4 Price Terms in Standard Contract Terms: Judicial

Control
As already mentioned in Sect. 2, the doctrine of consideration merely requires that

consideration furnished by parties to the contract be sufficient, not adequate. Thus
parties acting freely and voluntarily, have the freedom to set their price terms without
any judicial intervention. Any judicial control would depend on whether the controls
mentioned in Sect. 3.1 would have an impact on price or price related terms.
5 Price Terms in Standard Contract Terms: Legislative/

Administrative Control
There is limited legislative or administrative regulation of price terms. The controls

occur mainly in specific contexts such as in relation to the prevention of unfair
competition (e.g., prohibition of price-fixing or predatory pricing under the Compe-
tition Act), the protection of the small consumer (albeit indirectly under the Con-
sumer Protection (Fair Trading) Act), the control of prices for some essential
services, and protection of vulnerable parties in consumer or small business credit,
or other transactions, regulated by the Pawnbrokers Act, HPA, Moneylenders Act,
and SOGA respectively. These controls have already been mentioned in Sect. 3.2
above.
Aside from these, there is also regulation of price terms in relation to telecom-
munications and subscription television contracts, in which standard form contracts
are widely used. Controls on price terms are imposed on the service providers
through Codes of Practice.188 The Codes, despite being deemed as non-legislative
see Postal Services Act (Cap 237A, 2000 Rev Ed), ss 3(1) and 3A(1)(g); and Postal Competition
Code 2017, para 4, on Duty of Dominant Licensees to provide basic letter services on just,
reasonable and non-discriminatory terms.
186
Water prices are set by the Public Utilities Board: see Public Utilities Act (Cap 261, 2002 Rev
Ed), s 20.
187
See https://www.ema.gov.sg/Electricity_Consumers.aspx; see also Electricity Act (Cap 89A,
2002 Rev Ed), s 22.
188
Telecommunications Act (Cap 323, 2000 Rev Ed), s 26(1) and Code of Practice for Competition
in the Provision of Telecommunication Services 2012 (Telecom Code of Practice); Info-
communications Media Development Authority Act (No 22 of 2016) (IMDA), s 61(1) read with
in nature,189 impose legal duties190 on the service providers in respect of the types of
charges that are permitted. Sanctions for failure to comply could include financial
penalties, and criminal fines, or imprisonment for failure to comply with orders or
directions to, among others, cease infringement of the said duties.191
For example, in respect of subscription television services, the provider is obliged
to offer options of service contracts that are shorter than 12 months.192 The provider
is also prohibited from charging the subscriber:
• For unsolicited services or equipment193;
• Excessive early termination fees where subscribers have committed to a mini-
mum contract period in exchange for discounts194;
• Early termination fees in cases where the provider has acted unreasonably such as
where the provider sought to unilaterally increase the subscription fee or cease
providing any material channel or other content195; and
• Excessive subscription fees where a service within a bundle of services has been
terminated.196
In respect of telecommunication services, the service provider is prohibited from
charging the customer:
• Disproportionate early termination charges where customers have committed to a
minimum contract period in exchange for discounts.197 Advisory guidelines limit
such contract periods to no more than 24 months to prevent the consumer from
being hindered from switching service providers for too long and provide illus-
trations on how the early termination charges should be calculated.198
Media Development Authority of Singapore Act—Code of Practice for Market Conduct (S148/
2010) (Media Market Conduct Code). The Telecommunications Act provides the Info-
Communications Media Development Authority with powers that include the power to issue
directions and codes of practices: see IMDA s 100(a). The Media Market Conduct Code that was
issued under the now repealed Media Development Authority of Singapore Act remains in force
and is deemed to have been issued by Info-Communications Media Development Authority: see
IMDA s 90.
189
See Telecommunications Act (n 188), s 26(1); IMDA (n 188), s 61(9).
190
See Telecom Code of Practice (n 188), para 1.3; Media Market Conduct Code (n 188), para 1.3.
191
See Telecommunications Act (n 188), s 8 read with Telecom Code of Practice (n 188), paras
11.4.4–11.4.5; IMDA (n 188), s 66 read with Media Market Conduct Code (n 188), para 10.6.5.
192
Media Market Conduct Code (n 188), para 3.2B.
193
Media Market Conduct Code (n 188), para 3.4.2.
194
Media Market Conduct Code (n 188), para 3.5.
195
Media Market Conduct Code (n 188), para 3.5A.
196
Media Market Conduct Code (n 188), para 3.5B.
197
Telecom Code of Practice (n 188), para 3.2.3.
198
Advisory Guidelines on Contract Period and Early Termination Charges for Telecommunication
Services Offered to End Users at https://www.imda.gov.sg/~/media/imda/files/regulation%20licens
ing%20and%20consultations/codes%20of%20practice%20and%20guidelines/11%20cpetcg.pdf?
la¼en (last accessed 5 July 2019).
584 W. L. Loo
• For unsolicited services199; and

• For services supplied on a free trial basis until after the end of the free trial
period.200
Although Singapore has a Price Control Act,201 it is rarely invoked and the
Singapore government has made it clear in Parliament that it does not apply to
bank charges because the government prefers to leave such regulation to market
forces.202 Notably, the Singapore government makes light use of legislative controls
of price terms where possible. For example, although the HPA allows limits to be
imposed on term charges for regulated hire-purchase transactions, previously pre-
scribed limits have been revoked since 2004 in favour of leaving the charges to
market forces.203
6 Price Terms in Standard Contract Terms: Controls

Requiring Disclosure to Promote Price Transparency
and Competition
The Singapore government generally prefers to subject price terms to market forces.
In limited contexts, legislation or administrative regulation is used to compel
disclosure of price terms so that they can be subjected to market forces. The
government largely encourages industry self-regulation or extra-legal initiatives in
most situations, to promote pricing transparency, even in industries where standard
form contracts are typically used. Examples of these are highlighted in the sections
below.
6.1 Legislative or Administrative Measures to Compel

Disclosure
6.1.1 Hire-Purchase Act, Moneylenders Act
In the specific contexts of the Hire-Purchase Act and Moneylenders Act, there are
provisions to compel disclosure of charges to potential customers to enable them to
make informed decisions. For example, under the HPA, before a regulated
199
200
201
Which had only been applied to control the prices of rice and pigs, see Singapore, Parliamentary
Debates, 19 November 1997, vol 67 at col 1889 (Mr Lee Yock Suan).
202
Singapore, Parliamentary Debates, 9 May 2000, vol 72 at col 148 (Mr Lee Hsien Loong).
203
See n 149. See also Singapore, Parliamentary Debates, 21 September 2004, vol. 78 at col
706 (Mr Lim Hng Kiang).
agreement is entered into, the owner must give a written statement containing
specific details on, among others, the applied and effective interest rates, total
interest, and any other relevant fees and charges, and the number, frequency and
amount of instalment payments to the prospective hirer.204 Similarly, under the
Moneylenders Act, before the grant of a loan, the moneylender must inform the
borrower, in writing, of certain prescribed terms and conditions of the loan,205 obtain
the prospective borrower’s signature, and his acknowledgement in writing of such
notification.206 In this regard, the Moneylenders Rules specifies the information to
be notified which includes the nominal interest rate for the loan or late payment of
principal and interest, any other relevant fees, how they would be computed and
charged, and the frequency, number, and amount of instalment payments.207
6.1.2 Administrative Codes for Telecommunication and Subscription

TV Services
In relation to telecommunication services, the relevant Code expressly states that208:

Market forces are generally far more effective than regulation in promoting consumer
welfare. Competitive markets are most likely to provide consumers with a wide choice of
services at just and reasonable prices. Therefore, to the extent that markets or market
segments are competitive, [IMDA] will place primary reliance on private negotiations and
industry self-regulation, subject to minimum requirements designed to protect consumers
and prevent anti-competitive conduct.
In relation to media services, the Code prioritised reliance to the extent feasible on
industry self-regulation but recognised that regulation is necessary because, among
others, the level of competition in the Singapore’s media industry is limited.209
Thus, the respective Codes impose duties of disclosure on the relevant service
providers. In relation to subscription television services, there is a duty to publish
information relating to the subscription service ‘in a timely manner and in a form and
manner that ensures that the information is current, accessible and easy to under-
stand.’210 The details to publish include a description of the service, the subscription
fee, the terms and conditions, including any discount or promotion applicable, the
applicable period of discount or promotion and the charges that apply thereafter, and
if any term may be unilaterally varied by the provider.211 The provider is also
obliged to draw the potential subscriber’s attention to certain critical terms before
204
HPA (n 98), s 3(1) read with Schedule 2.
205
206
207
Moneylender Rules (n 154), Rule 8.
208
Media Market Conduct Code (n 188), para 1.51.
209
Telecom Code of Practice (n 188), paras 1.61–1.62.
210
Media Market Conduct Code (n 188), para 3.2A.
211
Media Market Conduct Code (n 188), para 3.2A(a).
586 W. L. Loo
contracting.212 These include the subscription fee payable and the payment date,
particulars of the service provided whether on a continuous, promotional or free trial
basis, and the subscription fee payable upon the expiry of the minimum service
period, promotional or free trial period.213 The critical information must be
published in an accurate, clear and easy to understand summary, and the provider
must obtain and keep evidence of the Subscriber’s confirmation that the Subscriber
has read and understood the Critical Information Summary.214 The Code also
obliges the provider to provide accurate, timely and clear statements of charges,215
and prescribes periods within which notice of any intended cessation of channel,
material content or business, or change in subscription service must be given to the
subscriber.216
Similarly, in relation to telecommunication services, the relevant Code obliges
service providers to, prior to contracting with a subscriber, disclose the prices, terms
and conditions of service, including whether it is provided on a free-trial basis.217
The provider must also publish the same details of its standard services to the public
in a manner that is ‘readily available, current and easy-to-understand.’218 The Code
requires mandatory contractual provisions to be included in the service contract.219
These include specifications on: the billing period; the provider’s commitment to
provide clear and accurate bills; comprehensive statement of prices, terms and
conditions of service; that unsolicited services will not be charged; and the pro-
cedures to contest charges.220
6.1.3 Insurance Act
In relation to insurance contracts, pre-contract disclosure obligations are placed on

insurance intermediaries legislatively.221 Failure to comply attracts criminal convic-
tion, with fines and/or imprisonment.222 The details to disclose include the name of
the insurer, the intermediary’s relationship with the insurer, the premium charged,
and such other information as the Monetary Authority of Singapore (‘MAS’) should
prescribe. With respect to accident and health policies or life policies that provide
accident and health benefits, the MAS has issued directions requiring mandatory
212
Media Market Conduct Code (n 188), para 3.2D.
213
Media Market Conduct Code (n 188), para 3.2D(a).
214
Media Market Conduct Code (n 188), para 3.2D(b).
215
Media Market Conduct Code (n 188), para 3.4.1.
216
Media Market Conduct Code (n 188), para 3.5C.
217
218
219
Telecom Code of Practice (n 188), para 3.3.
220
Telecom Code of Practice (n 188), paras 3.3.1–3.3.7.
221
Singapore Insurance Act (Cap142, 2002 Rev Ed), s 35P(1).
222
Insurance Act (n 221), s 35P(2A).
disclosures by the intermediary. These include information on the remuneration the

intermediary will receive for providing advice or arranging the insurance contract,223
the policy owner’s contractual rights and obligations,224 the benefits and risks of the
policy,225 the right to a free-look period to reconsider the purchase,226 claim or
termination procedures, any warnings, and exclusions or disclaimers.227 The inter-
mediary is also obliged to furnish a benefit illustration, if any, and to explain the
content.228 Non-mandatory requirements include avoidance of jargon or technical
terms in explanation and that sufficient information be provided to help potential
insureds make an informed decision.229 Failure to comply with the mandatory
requirements in MAS’s directions would similarly attract criminal conviction, with
fines and/or imprisonment.230
6.2 Extra-Legal Initiatives
6.2.1 Insurance Products
To increase price transparency and enable informed decision-making, the Direct

Purchase Initiative,231 (DPI) and the Web Aggregator for Life Insurance Products232
(otherwise known as compareFIRST) were launched in 2015.233 These are extra-
legal initiatives, with the latter jointly taken by the Consumer Association of
Singapore, the MAS, the Life Insurance Association of Singapore, and Moneysense.
The DPI comprises simple life insurance products with standardised features that
consumers can purchase directly from life insurance companies without financial
advice and at cheaper premiums since no commissions are charged. The other
initiative, compareFIRST, is a web-portal where consumers can compare the pre-
miums and features of similar life-insurance products offered by different life
223
Disclosure and Advisory Process Requirements for Accident and Health Insurance Products,
MAS 120 dated 30 January 2004 (last revised 30 October 2015) (MAS Notice 120) para 15.
224
MAS Notice 120 (n 223), para 17(c).
225
MAS Notice 120 (n 223), para 17(d)–(e).
226
MAS Notice 120 (n 223), para 17(f).
227
MAS Notice 120 (n 223), para 17(g)–(h).
228
MAS Notice 120 (n 223), para 18.
229
MAS Notice 120 (n 223), para 52.
230
MAS Notice 120 (n 223), para 51 read with the Insurance Act (n 221), s 55(2).
231
See https://www.moneysense.gov.sg/articles/2018/10/buying-direct-purchase-insurance (last
accessed 5 July 2019).
232
See http://www.comparefirst.sg/wap/webAggregatorEvent.action (last accessed 5 July 2019).
233
MAS Annual Report for 2014–2015 on Financial Advisory Industry Review, at pp. 48–49, at
https://www.mas.gov.sg/annual_reports/annual20142015/Annual%20Report.pdf (last accessed
5 July 2019).
588 W. L. Loo
insurance companies in Singapore before approaching any insurance company to

purchase a product.
6.2.2 Banking Services
The MAS does not control price terms like bank charges or interest rates.234 Instead
of imposing limits on price terms for banking services, the MAS encourages greater
transparency by banks so that the customer can make a more informed decision in
the use of the banks’ services.235 The FAQs on Rates and Charges for Consumer
Banking of the Association of Banks in Singapore (ABS) reiterates this in the
following236:
ABS does not control interest rates and bank charges. Banks are free to set their
own rates and charges, and do so in a competitive marketplace. Customers have a
wide choice of banks and are encouraged to shop around for the best deal.
Instead, ABS engages in extra-legal industry initiatives to enhance transparency
for the benefit of the bank customers. For example, ABS encouraged banks to issue
the Product Highlight Sheet to consolidate the various fees that credit cardholders
can expect in a reader-friendly format, which can be made available on card
application forms, online or on the back of card statements.237 The ABS’s Code of
Practice for Banks—Credit Cards obliges banks to disclose terms and conditions,
interest rates, and other fees and charges to potential customers with detailed
specifications on how this should be done in the sales and marketing process.238
ABS’s Code of Advertising Practice for Banks provides guidelines that require
banks to, among others, ensure that their advertisements for interest-bearing deposit
accounts and loan products disclose the Effective Interest Rate (EIR) next to the
Applied Rate with equal prominence rather than hide the EIR in fine print or in the
234
See ‘Letter to Forum: Response to Concerns about Interest Rates and Bank Charges’ 20 May
1998 at https://www.mas.gov.sg/news/media-releases/1998/response-to-concerns-about-interest-
rates-and-bank-charges-20-may-1998 (last accessed 5 July 2019).
235
See, e.g., ‘Response to “Hidden charges in credit card transactions”—ST Forum, 15 May 2014’
at https://www.mas.gov.sg/news/letters-to-editor/2014/response-to-hidden-charges-in-credit-card-
transactions (last accessed 5 July 2019).
236
See https://www.abs.org.sg/consumer-banking/consumers/rates-charges (last accessed 5 July
2019), FAQ no 6.
237
Marissa Lee, Sunday Times pp 29–30, ‘Banks improve transparency of credit card charges’
26 October 2014 at http://www.moneysense.gov.sg/~/media/Moneysense/News%20and%
20Events/Media%20Articles/Sunday%20Times/Banks%20improve%20transparency%20of%
20credit%20card%20charges%20the%20sunday%20times.pdf (last accessed 14 September 2018).
The website has since been revamped.
238
ABS Code of Practice for Banks—Credit Cards at https://www.abs.org.sg/docs/library/
codeofbankingpractice_creditcards.pdf (last accessed 5 July 2019), para 2(a).
terms and conditions.239 The Code also requires banks’ advertising materials to
abide by relevant laws and regulatory guidelines, and for banks to institute systems,
policies, and procedures to ensure compliance.240
Other ABS-issued Codes, like the Code of Consumer Banking Practice,241 and
the Code of Banking Practice for Small Businesses,242 state the banks’ commitment
to, inter alia, act reasonably and fairly in its dealings with the customer and its
commitment to transparency so that the customer can make informed decisions.
Among others, the Code of Consumer Banking Practice advises customers:
• Of their right to request for a Customer Information Sheet in respect of loans243;
• Of their right to disclosures on the use of home loan board rates, how they are
benchmarked and the basis for changes in rates over time244; and
• That their bank would provide details on the fees and charges levied and notify
them about any change in the basis on which the fees and charges are
determined.245
The Code of Banking Practice for Small Businesses advises customers that their
bank will, inter alia:
• Provide information on the nominal and effective interest rates for loans, the
method of calculation, basis and frequency of repayments, as well as notify them
of any change in interest rates246; and
• Provide information on fees and charges levied for any service and product, as
well as notify them of changes to such charges.247
6.2.3 Advertising Standards Generally
More generally, extra-legal measures are available to ensure price transparency

through the Singapore Code of Advertising Practice248 (SCAP). The Code is issued
by the Advertising Standards Authority of Singapore (ASAS) to regulate local
239
ABS Code of Advertising Practice for Banks (ABS Advertising Code) at https://www.abs.org.
sg/docs/library/code-of-advertising-practice-for-banks_june2010.pdf (last accessed 5 July 2019),
para 6.
240
ABS Advertising Code (n 239), para 7.
241
ABS Code of Consumer Banking Practice (ABS Consumer Code) at https://abs.org.sg/docs/
library/code-of-consumer-banking-practice.pdf (last accessed 5 July 2019).
242
ABS Code of Banking Practice for Small Businesses (ABS Small Business Code) at https://
www.abs.org.sg/docs/library/codeofbankingpractice_smallbiz.pdf (last accessed 5 July 2019).
243
ABS Consumer Code (n 241), paras 11(a)(ii), (c)(ii) & 12(d).
244
ABS Consumer Code (n 241), para 11(b)(ii).
245
ABS Consumer Code (n 241), para 13.
246
ABS Small Business Code (n 242), para 11(a).
247
ABS Small Business Code (n 242), para 12(a).
248 rd
3 Edn, February 2008.
590 W. L. Loo
advertising249 in order to protect consumers.250 In particular, in relation to price

terms, the guidelines require advertisements to be presented truthfully, so as not to
‘mislead consumers about the price of goods or services’251 or cause them to
‘underestimate the actual total price to be paid’.252 The guidelines go into some
detail including requiring the price of parts of a product not included in the quoted
price to be stated with equal prominence as the quoted price,253 and where a product
is advertised as ‘free’, that any incidental costs that would have to be incurred in the
acquisition of the product be stated clearly.254 In the event of non-compliance,
ASAS has the power to request an advertiser or advertising agency to ‘amend or
withdraw any advertisement’,255 or hold back the non-compliant advertisement until
it has been amended,256 or to request Media Owners to impose sanctions on the
violators by ‘withdrawal of facilities, rights or services from parties concerned’
within permitted legal boundaries.257
7 Conclusion
Where price related terms are concerned, it is evident that the Singapore government
relies on legislative and administrative controls rather than judicial ones, and even
then, makes light use of ex-ante regulation as a means of limiting price terms. Such
control is utilised only in circumstances in which it is necessary to protect perceived
weaker parties, in the provision of certain essential services or where competition in
the market is limited. The government prefers the control of price terms to be
regulated by market forces, with legislation or administrative regulations compelling
disclosure in specific sectors of industries, while encouraging self-regulatory initia-
tives in others. So far, efforts by the government, industry and consumer organisa-
tions to provide a comparison website of products and services is limited to life
insurance products. However, efforts by private enterprises to provide comparison
websites help to improve ease of comparison and price transparency for the con-
sumer.258 Nevertheless, more can be done to help the consumer make informed
249
SCAP (n 248), p. 5, para 1.2.
250
SCAP (n 248), p. 8, para 1.8.
251
SCAP (n 248), p. 11, para 5.1(c).
252
SCAP (n 248), p. 12, para 5.1(d).
253
SCAP (n 248), p. 16, para 5.3.
254
SCAP (n 248), p. 17, para 7.1.
255
SCAP (n 248), p. 5, para 4.1.
256
SCAP (n 248), p. 5, para 4.1.
257
SCAP (n 248), p. 5, para 4.2.
258
See, e.g., iMoney Group (at http://www.imoney-group.com/ (last accessed 5 July 2019)) that
provides comparison websites for financial and broadband services in South East Asia;
EnjoyCompare (http://www.enjoycompare.com/ (last accessed 5 July 2019)) that provides a
decisions in choosing between products and service providers. For example, in

respect of subscription television or telecommunications services contracts, con-
sumers will benefit from disclosures on product-use information regularly during the
contract period and at the contract conclusion to help them decide whether to switch
providers. At present, there is neither legal nor extra-legal compulsion to provide
such information. However, plans are underway to harmonise regulation of the
telecommunication and media (subscription TV) providers with a converged com-
petition code that would, among others, require both to provide minimum billing
information to increase transparency and prevent billing disputes.259 Such transpar-
ency would also provide helpful product-use information to the consumer.
References
Goh Y, Tan P (2011) An empirical study on the development of Singapore law. Singapore Acad
Law J 23:176
Loo WL (2016) The application of the Morton Principles in Canada Steamship Lines Ltd v The
King in Singapore Reconsidered. Aust J Asian Law 17(1):1–20, Article 4
Loo WL, Ong EI (2017) The 2016 amendments to Singapore’s Consumer Protection (Fair Trading)
Act – a missed opportunity. Univ Tasmania Law Rev 36(2):15–48
Phang ABL (1990) The development of Singapore law. Butterworths, Singapore
Phang ABL (ed) (2012) The law of contract in Singapore. Academy Publishing, Singapore
Phang SY (2013) Affordable fares, sustainable public transport. The Fare Review Mechanism
Committee Report, pp 1–86, Research Collection School of Economics. https://ink.library.smu.
edu.sg/soe_research/2012
Smith SA (2005) Atiyah’s introduction to the law of contract, 6th edn. Oxford University Press
Turnbull CM (2009) A history of modern Singapore, 1819–2005, 3rd edn. National University of
Singapore Press, Singapore
comparison website for financial and travel related products and services; PricePanda (http://www.
pricepanda.com.sg (last accessed 5 July 2019)) that provides a price comparison website for latest
gadgets and other products in South East Asia.
259
See Consultation Paper on A Converged Competition Code for the Media and Telecommunica-
tion Markets 20 February 2019, at https://www.imda.gov.sg/-/media/imda/files/regulation-licens
ing-and-consultations/consultations/open-for-public-comments/consultation-on-proposed-con
verged-competition-code/imda-public-consultation-on-proposed-converged-competition-code.pdf
(last accessed 5 July 2019), para 6.31.
Form Contracts in Slovenia
Damjan Možina
Abstract In Slovenian Law of standard contracts terms in B2C contracts, the terms
relating to the main subject matter of the contract or the adequacy of the price and
remuneration (“core terms”) are exempt from judicial fairness assessment insofar as
they are in plain intelligible language. In a number of pending cases relating to credit
contracts in Swiss Francs, the fairness assessment of the foreign currency clauses
depends on the question whether these clauses are in plain intelligible language. In a
recent case the Supreme Court assessed the fairness of a term which, although it
influenced the price, did not belong to “core terms”. In another case, the Court
assessed the fairness of the price calculation mechanism. The Slovenian Obligations
Code contains a possibility to avoid the contract due to laesio enormis—a particular
form of mistake. However, in most cases, the courts reject such claims as they
consider the mistake of a party with regard to the price/value to be inexcusable. A
contract can be also found usurious and thus, null and void, where, in addition to
significant imbalance, a party one party has knowingly exploited a difficult situation
of the other party the result of which was an imbalanced contract.
1 Introduction
Slovenia is a small and a very young country in Central Europe. It proclaimed

independence from the former Socialist Federal Republic of Yugoslavia in 1991. In
the same year, Slovenia adopted a new constitution which, inter alia, established
conditions for the development of a market economy and free entrepreneurship.1
1
The possibility to found a private company, was introduced already shortly before the disintegra-
tion of Yugoslavia, in 1989. Before that, only State owned companies were allowed, with the
exception of small craftsmen with up to five employees in certain branches. The process of
privatization of State owned companies is not entirely finished yet. The State still owns large
D. Možina (*)
University of Ljubljana, Faculty of Law, Ljubljana, Slovenia
e-mail: damjan.mozina@pf.uni-lj.si

https://doi.org/10.1007/978-3-030-23057-9_23
594 D. Možina
Slovenia joined the European Union in 2004 and the Monetary Union (EURO)
in 2007.

of Contract
Formally, freedom of contract already existed in Yugoslavia.2 However, as gaining

profit from private investments was limited in the socialist society, only state owned
companies were allowed to exist. As the entrepreneurship was not free, the freedom
of contract was, in effect, limited.
In Slovenia, freedom of contract is guaranteed indirectly by the Constitution,
together with free entrepreneurship, right to property and personality rights, which
are directly protected.3 Freedom of contract is thus a constitutional category: the
State must refrain from disproportionate limitations of the freedom of contract.4 Of
course, a number of mandatory provisions exist, limiting the freedom of contract in
the name the principle of social state, protecting the weaker party or public interest.
In the field of classical contract law (leaving aside such areas as Labour law and
Antidiscrimination law), mandatory provisions are particularly characteristic for
consumer contract law, but they also exist in the general contract law.
In the general contract law of Slovenia Obligations Code there are two different
concepts of contractual fairness. The first is the concept of Laesio enormis (excessive
deprivation) and the second is the concept of usurious contract. The Slovenian
Obligations code (2002)5 is almost entirely made of provisions of the former
Yugoslav Act on Obligations (1978).
A party may avoid a reciprocal contract due to laesio enormis (excessive depri-
vation) if, at the time of conclusion, there was a gross disparity between the
obligations of the parties and if the deprived party did not know and was not
expected to know about the “true value” of goods or services contracted for (Art.
118 Obligations Code). Thus, laesio enormis is a special case of mistake (mistake in
value/price). As under the general rules on mistake (Art. 46 Obligations Code), the
fact that the party did not know the true value of the goods or services must be
excusable. The two elements of Laesio enormis are thus the significant imbalance
parts of shares in the (private) economy, particularly in insurance and banking sector. E.g. the total
book value of the directly-owned state portfolio is EUR 8.8 bn, or just over 24% of GDP in 2011,
see: Georgieva and Riquelme (2013), p. 2.
2
See Art. 10 of the Yugoslav Obligations Act, Official Journal of SFR Yugoslavia Nr. 29/78, 39/85,
45/89, 57/89.
3
See Art. 33 (Right to property) and Art. 74 (Free entrepreneurship), Constitution of the Republic of
Slovenia, Official Journal 1/1991.
4
See e.g. Constitutional Court, judgement from 6 October 1004, Nr. U-I-202/93.
5
Obligations Code (“Obligacijski zakonik”), Official Journal 83/2001, 40/2007.
Control of Price Related Terms in Standard Form Contracts in Slovenia 595
(gross disparity) of the obligations of the parties and excusable mistake of the
deprived party. The laesio enormis is a court-based remedy; a party must file a
claim and only the court can dissolve the contract. A claim may only be filed within
1 year after conclusion of contract.6 If the court finds that the conditions are met, it
dissolves the contract with the effect ab initio (ex tunc). Aleatory contracts
(i.e. contracts in which the obligations of the parties depend on uncertain future
events) and contracts concluded by way of auctions are exempt from laesio
enormis.7 However, the review of case-law shows that the cases of successfully
avoided contracts due to laesio enormis are very rare.8 Very often, the courts reject
the claims because the mistake of the party is not excusable, i.e. because the deprived
party should have had better knowledge of the value or the market prices.9
A contract is usurious and thus null and void if a party wilfully exploits a difficult
situation of the other party (inexperience, hardship, light-mindedness or dependence)
to get the other party to agree to a an obligation which is clearly disproportionate
to the first party’s obligation (Art. 119 Obligations Code). Thus, the usury is a
combination of two elements: the significant imbalance of contractual obligations
(the so-called objective element) and the wilful exploitation of limited negotiation
capability of the other party (the so-called subjective element).10 As usury is sanc-
tioned by nullity, the court must initiate the assessment of usury on its own motion
(ex officio), as long as it has enough factual grounds. There is a modification with
regard to the general consequences of nullity. Whereas in general, courts don’t have a
right to modify invalid contractual provisions (or entire null contracts), they have
such a right with regard to usurious contracts: they may “adjust the contract to a fair
amount”.11 The right of the deprived party to ask for adjustment expires in 5 years
after conclusion.12 In some cases the courts have held contracts to be usurious.13 In
6
See Art. 118 (2) Obligations Code.
7
See Art. 118 (5) Obligations Code. Furthermore, contract containing a “pretium affectionis”
(contract where a party pays a higher price for goods because of their sentimental value) are also
exempt from review.
8
A sole example of successful challenging relates to an agreement between heirs about the division
of heritage, based on the expert evaluation, which was later found to be manifestly wrong, see
Supreme Court, II Ips 576/1998 from 27.10.1999.
9
See, e.g. Higher Court of Ljubljana, VSL II Cp 2928/2012 from 17.4.2013 at nr. 12; or Higher
Court of Celje, II Cp 2928/2012 from 17.4.2014.
10
See, e.g. decisions of the Supreme Court of Slovenia, Nos. II Ips 231/2015 of 6 Apr. 2017, and II
Ips 123/2014 of 21 Jan.2016. See also Juhart in: Juhart, Plavšak (eds.), OZ s komentarjem I., GV
Založba, Ljubljana 2003, p. 625.
11
See Art. 119 (3) Obligations Code. This provision is subject to criticism as it interferes with the
agreement of the parties. A consequence of an immoral contract can only be its invalidity and not
“forcing” the parties into a deal which they otherwise would not have concluded. See: J. Cepec,
Oderuštvo, Podjetje in delo 1/2012, p. 96.
12
Art. 119 (5) Obligations Code.
13
See e.g. Supreme Court of Slovenia, II Ips 231/2015 from 6.4.2017; II Ips 123/2014 from
23.1.2016.
596 D. Možina
several of them, the issue at stake was high interest, excessive costs and excessive
default interest in loan agreements.14
In one of these cases, the Supreme Court discussed the consequences of unfair
(null) agreements on interest in loan agreements; it held, that only the interest rate
above the prescribed maximum is null; the contract continues with the highest
interest rate allowed, as nullity of agreement on interest rate (and, consequently, of
the whole loan agreement) should only be used as ultima ratio, i.e. the contract
should remain in force, if possible.15
The Obligations Act also contains a special provision on usurious interest in Art.
377: if the contractual interest rate or the agreed interest rate for default is more than
50% higher than the default interest rate prescribed by the law, it is presumed to be
usurious; however, a party may prove that it did not use the difficult situation of the
opposing party or that such interest is not disproportionate to its own obligation.16
The presumption does not apply in commercial contracts (B2B).
The consumer credit law contains a further limitation on interest in loan agree-
ments: maximum allowed annual percentage rate of charge (APRC: interest rate and
all other cost of credit, expressed as an annual percentage of the total amount of
credit) in the amount of 200% above the last average APRC for consumer credit,
published by the Bank of Slovenia.17 It only applies to non-banking institutions as
lenders. If a contract stipulates a higher APRC, the maximum allowed APRC
applies.18
The courts dealt with abuses in loan contracts. In a handful of cases they based the
nullity of loan contracts not on usury or on exceeding the maximum allowed interest
rate (as, at the time, there was no such regulation for the agreement in question), but
held such contracts to be immoral. For example, the Supreme Court held that a
clause in a loan contract between natural persons according to which the borrower
owes in addition to interest a payment equal to 60% of the principal, is “clearly
immoral”.19 Furthermore, a line of cases from the time before the adoption of the
Consumer Credit Act in the year 2000, where consumers entered loan agreements in
the form of “sale-and-lease-back” operations. In a sale-and-lease-back operation, a
loan is given to a consumer in a following way: the consumer sells his house to the
lender and receives the payment (i.e. the loan). The consumer continues to use the
house. By the same contract, the consumer agrees to buy the house back and to pay
the price in monthly instalments (i.e. loan instalments). Once the “price” (i.e. the
loan plus the price of financing) is paid back, the property is transferred back to the
consumer in the land register. The problem is, however, the situation that arises in
14
See e.g. Supreme Court of Slovenia, II Ips 597/1994 from 15.5.1996; High Court of Maribor, I Cp
1417/2014 from 24.3.2015.
15
Supreme Court of Slovenia, II Ips 131/2010 from 17.1.2013.
16
See e.g. High Court of Ljubljana, VSL I Cp 2975/2011 from 30.4.2012; VSL II Cp 5072014 from
23.4.2014; VSL I Cpg 108/2017 from 7.6.2017.
17
See Art. 26 Consumer Credit Act, Official Journal, 77/16.
18
Art. 26 Consumer Credit Act, Official Journal, 77/16.
19
See e.g. Supreme Court of Slovenia, II Ips 409/2004 from 7.4.2005.
case of consumer’s default: the lender simply keeps the house, which, as a rule, is
worth much more than the loan. The courts found this situation to be contrary to the
prohibition of the so called lex commisoria (i.e. that a pledge shall be forfeited to the
creditor if a loan is not repaid) and held such contracts for null and void.20
3 General Information on Control of Standard Contract

Terms
3.1 Introduction
The possibility of judicial control of “contractual terms, determined by one of the

parties” was introduced already by the Yugoslav Act on Obligations in 1978.21 The
regulation was of general nature, i.e. it was not limited to B2C contracts. The notion
of consumer was not known in the Yugoslav law of obligations. However, the
judicial control of standard contract terms was not well developed in Yugoslavia.
Most relevant issues remained unresolved by the case-law. Only 12 years after the
adoption of the Act on Obligations, Yugoslavia started to fall apart, after a decade of
deep crisis, including a crisis of the legal system. However, the Act on Obligations
continued to be applied by the court in the independent Slovenia. In 2001, the
provisions on judicial control of the standard terms was transferred from the Obli-
gations Act to the Slovenian Obligations Code (Arts. 120 and 121).
In B2B contracts the provisions on unfair terms in the Obligations Code (Arts.
120–121) remain applicable. The courts have applied the provisions in B2B con-
tracts with regard to different issues, in particular with regard to the question whether
a particular general contract term became a part of the contract, above all in cases
where a party (e.g. an insurance company) changed its general terms after conclusion
of contract.22 The cases where fairness of a particular terms was reviewed, are rare.23
In the publicly available case law there aren’t any cases where a court would find a
term in a B2B contract unfair. Henceforth the discussion will focus on standard
contract terms in B2C contracts.
In 1998, Slovenia adopted a Consumer Protection Act,24 which brought about a
new regulation of judicial control of standard contract terms in B2C contracts in
20
21
According to Art. 142–143 Act on Obligations (1978) the general conditions become part of the
contract only if they were known or should have been known to the other party. Contractual terms,
which are “contrary to the purpose of a contract” or to “good commercial practices” are null. A court
may also “reject the use of” other “unjust” or “too severe” terms. Furthermore, in case of doubt,
contractual terms, provided by one party, are to be interpreted to the benefit of the other party (Art.
100 Obligations Act).
22
See e.g. Supreme Court of Slovenia, II Ips 299/2011 from 2.7.2013; High Court of Ljubljana, I
Cpg 45/2013 from 29.5.2014.
23
E.g. High Court of Ljubljana, II Cp 895/2010 from 5.5.2010; II Cp 585/2009 from 1.7.2009.
24
Zakon o varstvu potrošnikov, Official Journal 20/98 (with subsequent changes).
598 D. Možina
Arts. 22–24. The purpose was to implement the Directive 93/13/EEC on unfair
contract terms.25
Slovenia now has two rather uncoordinated regimes on the judicial control of
standard contract terms. The regulation in Consumer Protection Act is applicable
to B2C contracts, whereas Arts. 120 and 121 of the Obligations Code remain
applicable to B2B and (theoretically) to C2C contracts. However, in spite of the
fact that Slovenia is a member of the EU since 2004, this area of contract law in
Slovenia is still relatively underdeveloped. The courts have applied the said pro-
visions in a relatively small number of cases. Legal literature on the subject is
scarce. Most of the cases concerned the general terms in insurance contracts,
particularly in mandatory motor liability insurance contracts. Only recently the
courts have started to mention the Directive 93/13/EEC and the case-law of the
CJEU. This development is connected to the case-law on credit agreements in
foreign currency.
It should be noted that the control of standard contracts is not only the task of the
courts in Slovenia. The Market Inspectors have jurisdiction for some decisions in the
field of consumer protection—they may e.g. prohibit sale of goods and services
based on unfair terms and impose a fine but they may not annul the contract.26
Administrative court has jurisdiction over complaints against the decrees of the
Market Inspectorate (after their review by the second instance body—the ministry
of economic affairs). Court decisions and decisions of market inspectors only have
an inter partes effect.
3.2 Definition of Standard Contract Terms in B2C Contracts
The Consumer Protection Act contains no reference to non-individually-negotiated-

clauses from the Directive 93/13/EEC, but refers only to “contractual terms, deter-
mined by the business, in particular those in the form of a formulary contract or
general terms of operation”.27
3.3 Incorporation
An order for the standard terms to become a part of contract, the consumer must
be “acquainted” with their entire wording at the time of conclusion.28 However,
25
95/29.
26
Art. 70–73 Consumer Protection Act.
27
See Art. 22 (1) Consumer Protection Act.
28
Art. 22 (2) Consumer Protection Act.
it is presumed that the consumer is acquainted with the standard contract terms
if the business made an explicit reference to them and they were easily access-
ible to the consumer (Art. 22 (3) Consumer Protection Act). The explicit refer-
ence to standard contract terms may be seen as a particular pre-contractual
duty of the business to raise awareness of the consumer with regard to standard
terms.
3.4 Transparency and Interpretation of Standard Contract

Terms
The standard contract terms must be clear and understandable (Art. 22 (4) Consumer
Protection Act).29 However, the Consumer Protection Act does not prescribe any
other sanction for the breach of this duty than the duty to interpret unclear terms to
the benefit of the consumer, i.e. the contra proferentem rule (Art. 22 (5) Consumer
Protection Act). Some authors suggest that an unclear and not understandable
standard contract term does not become part of the contract.30 Some courts seem
to have taken this approach, too,31 others tried to solve the issue by the contra-
proferentem-interpretation.32 In the context of the “core terms” in the sense of Art.
4 (2) Directive 93/13/EEC (the provision which Slovenia had not transferred) the
Supreme Court held that the consequence of an unclear “core term” is that it is not
exempt from judicial review.33 The Court thus interpreted the Consumer Protection
Act in accordance with Art. 4 (2) Directive 93/13/EEC.
3.5 Substantive Judicial Control
The general clause from Art. 3 (1) Directive 93/13/EEC was transferred into
Slovenian law in a rather peculiar way. While the clause in Art. 3 (1) Directive
93/13/EEC is composed of two elements—contrariety to good faith and significant
imbalance in rights and obligations to the detriment of the consumer—the Slovenian
Consumer Protection Acts, while prescribing nullity for “unfair terms”, does not, in
fact, define unfairness. It establishes a presumption, that a term is unfair, if it either
29
Art. 22 (4) Consumer Protection Act.
30
Andrić (2003), p. 19.
31
High Court of Ljubljana, VSL II Cp 1518/2015 from 15.7.2015. However, the judgement is not
clear on the issue. In this case, the standard terms were unclear on the issue of calculating damages
in the event of termination of contract. As the Court could not review the calculation of amount, it
referred the case back to the Court of the first instance.
32
See High Court of Ljubljana, VSL II Cp 143/2009 from 15.4.2009.
33
Supreme Court of Slovenia, II Ips 201/2017 from 7.5.2018. Nr. 26.
600 D. Možina
(a) causes significant imbalance in the rights and obligations of the parties to the
detriment of the consumer, or (b) contravenes the good faith principle, or (c) causes
the performance of contract unjustifiably to be detrimental to the consumer, or
(d) causes the performance of contract essentially different of what the consumer
had reasonably expected it to be.34 In theory, this means that unfairness of a clause
could be based on either good faith violation or significant imbalance or, in case of
deviations from reasonable expectations of the consumer (surprising term), perhaps
even just on the fact that the contract clause was different from expectations. There
is, however, no case law to support this. The courts nevertheless interpret Art. 23 and
24 of the Consumer Protection Act in the sense of Art. 3 (1) Directive 93/13/EEC
i.e. significant imbalance to the detriment of the consumer contrary to good faith.35
Art. 24 (3) Consumer Protection Act contains a list of examples of contractual
terms which might be unfair (a so called grey list). However, these terms are not
unfair per se; the general clause of Arts. 23 and 24 Consumer Protection Act must
still be applied.36
Art. 4 (2) Directive 93/13/EEC, exempting the “core terms”, i.e. definition of the
main subject matter of the contract or the adequacy of price, from fairness review
insofar as they are in plain intelligible language, was not transposed into Slovenian
law. It seems that this was a result of a legislator’s mistake, as the intention to
transfer the exemption was clearly expressed,37 but the provision disappeared from
the final version of the Act. However, as already noted, the Supreme Court interprets
the provision in the sense of Art. 4 (2) Directive 93/13/EEC, i.e. that the “core terms”
are exempt from judicial fairness review if they are in plain intelligible language.
3.6 Consequences of Unfairness
An unfair standard contract term is null and void.38 The contract continues to exist if
it is capable of existing without the null term.39 The court cannot adapt the unfair
contract term.40 If the whole contract is null, the parties must return to each other
what they have received under the contract or reimburse the value.41 They must also
reimburse the benefit gained by having had the object of the contract.42
34
See Art. 24 (1) Consumer Protection Act.
35
See Supreme Court of Slovenia, II Ips 201/2017 from 7.5.2018, Nr. 28.
36
See e.g. Administrative Court, II U 41/2013 from 6.11.2013.
37
See Parliamentary Reporter, Nr. 92/2001, pp. 47 and 54.
38
Art. 23 (2) Consumer protection Act.
39
40
41
42
4 Judicial Control of Price Terms in Standard Terms

Contract
The courts do not generally asses the fairness of the price terms, as these are exempt
from judicial control if they are clear and intelligible. However, in some cases the
courts nevertheless assessed standard terms indirectly relating to price.
Recently the Supreme Court has assessed the fairness of a standard clause in a
B2C contract.43 The consumer had entrusted a business with a collection of debt.
The contract provided for a one-time payment for “case studying and preparation”
the so called starting cost in the amount of 10% from the value of the claim (plus
tax). After the successful collection of debt, the consumer should pay commission in
the amount of 10% of the amount collected. However, in this case the debt was not
collected as the consumer had withdrawn from the contract after the business had
sent only one reminder to the debtor. The business claimed the agreed starting cost
(2400 EUR). The Supreme Court pointed out, that in a “normal” case i.e. if the debt
is collected the agreed remuneration not unfair. However, the Court considered that
the agreed payment produced “unfair results” in the case of consumer’s withdrawal
from the contract before the debt was collected. In the view of the Court, standard
contract terms should not in any case allow for unfair results. It found the term to be
unfair. It seems however that the Court did not assess the relationship between the
price and the value as such but rather the mechanism in the contract which, although
it can influence the price in a certain situation (after withdrawal), does not belong to
“core terms” and is thus not exempt from assessment. The Supreme Court had based
its decision on nullity of the term also on the breach of Attorney’s Act.
There are also cases where the courts assessed the terms regulating the calculation
of price. In one of these cases, the High Court of Ljubljana found a contractual term
on the basis of which invoices for household electricity were issued, unfair and not
binding.44 The term provided for an additional payment for users of electricity with
higher consumption. In the view of the Court, the effect of such a clause is that the
consumers with higher consumption pay (in part) the electricity of consumers with
less consumption. The Court found the clause to be unfair.
Currently there is a large number of pending cases before Slovenian courts
regarding the consumer credit agreements in Swiss francs. The foreign currency
clause in standard terms is, in principle, a core term and thereby exempt from
fairness assessment if drafted in clear and intelligible language.45 In the light of
the recent judgements of the CJEU, in particular in the case Andriciuc (C-186/16),
the transparency requirement with regard to loan agreements in foreign currency is to
be understood in a very broad sense: not just on the formal and grammatical level,
but also in the sense of its actual effects, “so that the average consumer, who is
43
Supreme Court of Slovenia, II Ips 219/2015 from 18.5.2017.
44
See High Court of Ljubljana, VSL I Cp 1816/2011 from 18.1.2012.
45
See CJEU Judgment of 20 September 2017, Andriciuc and others, C-186/16, EU:2017:703, para
35.
602 D. Možina
reasonably well informed and reasonably observant and circumspect, would be

aware both of the possibility of a rise or fall in the value of the foreign currency in
which the loan was taken out, and would also be able to assess the potentially
significant economic consequences of such a term with regard to his financial
obligations”.46 Whether the foreign currency clause was transparent enough is
decided on a case by case basis. If the courts find that the transparency requirement
was not satisfied, they will proceed with the fairness assessment of the foreign
currency clause.
Excessive pricing was also subject to procedures of the Slovenian Competition
Protection Agency. For example, the Agency found in 2007 that the banks formed an
illegal cartel and raised the provision for the use of ATM machines.47 The consumer
protection organisations called on the banks to return the money to the consumers;
however, no collective claims against the banks were initiated. Similarly, an illegal
cartel of distributers of electricity was found to be overcharging the electricity.48
Some of the prices in Slovenia remained under the control of the state after 1991,
with the main purpose of restraining inflation, which had been a characteristic of the
former Yugoslav economy, but also with a view to protecting consumers. In 1992,
approx. ¼ of all (retail) prices were controlled or regulated; in 2001, there were still
13% of such prices.49 In 2017, some prices, such as the prices of fuel (except on
highways)50 and textbooks for school children51 are still under government control.
The reason for controlling the prices of school textbooks is obvious: the protection
from abuse as the publishers of the prescribed books have a monopoly. Similarly,
with regard to oil prices, it should be noted that 88% of all gasoline stations in
Slovenia are owned by only two oil companies, one of them (with 58% market share)
being the former state oil company in which the state still owns more than 25%
shares.
Roaming charges in the EU are subject to the Regulation 2015/2120.52
46
CJEU Judgment of 20 September 2017, Andriciuc and others, C-186/16, EU:2017:703, para 35.
47
The decision was challenged by the banks and only became final after the judgmenet of the
Supreme Court of Slovenia, X Ips 70/2010 from 15.6.2010.
48
See e.g. Supreme Court of Slovenia, U 5/2008 from 30.6.2009.
49
See, e.g. Gnilšak (2003).
50
See Regulation on the pricing of certain petroleum products, Official Journal, Nr. 33/2017.
51
See Regulation on the pricing of text books, Official Journal 22/2017.
52
Regulation (EU) 2015/2120 of the European Parliament and of the Council o of 25 November
2015 laying down measures concerning open internet access and amending Directive 2002/22/EC
on universal service and users’ rights relating to electronic communications networks and services
and Regulation (EU) No 531/2012 on roaming on public mobile communications networks within
the Union, OJ 2015, L 310/1.
As already mentioned, there is a limitation on maximum interest in loan agree-

ments in the amount of 200% above the last average APRC for consumer credit,
published by the Bank of Slovenia.53 It only applies to non-banking institutions as
lenders. If a contract stipulates a higher APRC, the maximum allowed APRC
applies. This limitation seeks to prevent excessive loan interest in individual cases
rather than placing a fix cap on interest.

The Price Indication EU Directive54 was transposed in Slovenian law by the Rules
on price indication for goods and services.55 Market Inspectorate of Slovenia
supervises compliance with the regulation.
7 Conclusion
The Slovenian Obligations Code contains a possibility to avoid the contract due to
laesio enormis. However, the courts, in most cases, reject such claims as they
consider the mistake of a party with regard to the price/value to be inexcusable.
On the other hand, there are cases where courts held contracts to be usurious and
null, i.e. where one party has knowingly exploited a difficult situation of the other
party the result of which was an imbalanced contract.
Slovenian law explicitly limits the freedom of contract with regard to interest in
loan agreements: on one hand, there is a (rebuttable) presumption that the agreed
interest rate, including the interest rate for default, which is more than 50% higher
than the default interest rate prescribed by the law, is usurious, and, consequently,
void. Moreover, the consumer credit law prescribes a maximum allowed annual
percentage rate of charge (APRC) in the amount of 200% above the last average
APRC for consumer credit on the market, published by the Bank of Slovenia.
In the law of unfair standard terms in B2C contracts, the terms relating to the main
subject matter of the contract or the adequacy of the price and remuneration (“core
terms”) are exempt from judicial fairness assessment insofar as they are in plain
intelligible language. In a number of pending cases relating to credit contracts in
53
See Art. 26 Consumer Credit Act, Official Journal, 77/16.
54
80/27.
55
The original Slovenian title: “Pravilnik o načinu označevanja cen blaga in storitev”, OJ 63/99, last
amended 65/03. The Rules were adopted by the Minister of Economy.
604 D. Možina
foreign currency, the fairness assessment of the foreign currency clauses depend on
the question whether these clauses are in plain intelligible language. There are cases,
however, in which the courts found standard terms indirectly relating to price or
price calculation, as producing unfair results for the consumers and thus void.
References
Andrić A (2003) Uveljavitev direktive 93/13/EGS o nepoštenih klavzulah v potrošniških pogodbah

v pravnem sistemu RS, Pravna praksa 2/2003, p 19
Georgieva S, Riquelme DM (2013) Slovenia: state-owned and state-controlled enterprises. ECFIN
Country Rep 10(3):2
Gnilšak B (2003) Nekatere nadzorovane cene v EU in Sloveniji, Finance, 01.04.2003, p 3
Form Contracts in South Africa
Jacques du Plessis and Wiaan Visser
Abstract Many South African consumers are vulnerable to exploitation through the
abuse of non-negotiable and non-transparent price-related standard terms. The
common law of contract provides only limited relief in these circumstances. Some
potential exists for developing common-law principles, such as those relating to
when terms or their enforcement are contrary to public policy, in order to provide
greater protection against unfair price-related terms. But the prospects for such a
development are not promising, even though the South African Constitution allows
courts to develop the common law to give effect to a horizontally-applicable Bill of
Rights. By and large, the courts adopt a fairly conservative approach, which gener-
ally emphasises sanctity of contract.
However, the legislature has been quite active in creating regulatory standards,
systems and structures that deal with the control of price-related terms. Notable
examples include a general provision in the Consumer Protection Act 68 of 2008,
which determines that the price or terms of a consumer contract must not be unfair,
and other provisions which prohibit certain terms or misleading practices, or which
presume certain terms to be unfair. Unfortunately, the enforcement of consumer
legislation by statutory bodies has not been particularly strong.
Apart from these general provisions, consumers may also obtain relief against
abuse of price-related terms through relying on rules that regulate specific industries.
Thus, some success has been achieved in regulating the costs of credit and there are
also strong signs of increased intervention in the problematic area of the high costs of
electronic communication. Competition law has also proved to be effective in
combatting some exploitative practices. Ultimately, the South African experiences
indicate that rules aimed against the abuse of price-related standard terms must be
J. du Plessis (*)
Stellenbosch University, Faculty of Law, Department of Private Law, Stellenbosch,
South Africa
e-mail: jedp@sun.ac.za
W. Visser (*)
Max Planck Institute for Comparative and International Private Law, Hamburg, Germany

https://doi.org/10.1007/978-3-030-23057-9_24
606 J. du Plessis and W. Visser
backed up by effective enforcement mechanisms, especially where individual con-

sumers lack the ability to enforce their rights.

of Contract
1.1 Freedom of Contract in the South African Common Law

of Contract
The South African common law of contract, which essentially is a mixture of

uncodified Roman-Dutch law and English law,1 strongly supports freedom of
contract. The courts have, for example, confirmed that public policy favours ‘the
utmost freedom of contract’,2 and even that ‘[o]ur law considers the parties’ freedom
of contract to be sacrosanct’.3 The Constitutional Court has positioned it on consti-
tutional foundations, by recognising that freedom of contract ‘gives effect to the
central constitutional values of freedom and dignity’.4 However, the courts also
recognize that freedom of contract is not absolute, and that courts may ‘at the same
time. . .decline to enforce contractual terms that are in conflict with the constitutional
values even though the parties may have consented to them’.5
The preceding observations are very broad. How do South African courts in
practice determine whether freedom of contract or other values have the upper hand
in disputes about the recognition of contractual terms? The answer mainly lies in the
general rule of the common law that courts may declare contractual terms invalid or
refuse to enforce them on the grounds of public policy. Constitutional demands in
turn could influence the determination of what public policy requires.6 This poten-
tially important limitation on freedom of contract is discussed in more detail in Sect.
2 below, in the context of the judicial power to control standard terms.
One final observation needs to be made on freedom of contract in the common
law. It relates to the role of good faith, which some systems rely on to provide courts
the power to set aside contractual determinations, for example by adapting the
1
When referring to the South African common law, the term ‘common law’ means the non-statutory
rules derived from Roman-Dutch and English law.
2
Botha (now Griessel) v Finanscredit (Pty) Ltd 1989 (3) SA 773 (A); Sasfin (Pty) Ltd v Beukes 1989
(1) SA 1 (A) 9.
3
Makate v Vodacom Ltd 2016 (4) SA 121 (CC) [96].
4
Barkhuizen v Napier 2007 (5) SA 323 (CC) [57]; Paulsen v Slip Knot Investments 777 (Pty) Ltd
2015 (3) SA 479 (CC) [70]; Country Cloud Trading CC v MEC, Department of Infrastructure
Development 2015 (1) SA 1 (CC) [65].
5
Barkhuizen v Napier 2007 (5) SA 323 (CC) [30].
6
The Bill of Rights in the Constitution of the Republic of South Africa, 1996 operates ‘horizon-
tally’, which means also between private persons. The courts prefer to give effect to it by applying
and, if necessary, developing the common law of contract, rather than by testing the validity or
enforceability of a contractual term directly against a particular constitutional right.
Control of Price Related Terms in Standard Form Contracts in South Africa 607
contract price in case of hardship. In line with the more conservative approach set out
above, South African law does not accord good faith the status of an instrument that
parties may rely on directly to prevent enforcement of contractual terms. As it
sometimes is said, good faith is not a ‘free-floating’ principle that empowers courts
to deny enforcement if they regard it as unreasonable or unfair to do so.7 Good faith
rather is regarded as a value, which underlies and informs the law of contract, and
which requires that parties take into each other’s positions; courts could then invoke
good faith when developing specific rules or instruments of the law of contract.
1.2 Limitations on Freedom of Contract in Consumer

Legislation
The Consumer Protection Act 68 of 2008 (CPA) contains a number of provisions

that have an impact on freedom of contract.8 First, suppliers do not enjoy complete
freedom to decide with whom to contract, since they may not engage in discrimina-
tory marketing (section 8). Secondly, the CPA imposes requirements relating to the
form and readability of contracts (see sections 7 and 22). Thirdly, parties are not free
to determine the duration of the contract. For example, the duration of a fixed-term
agreement is limited to 2 years and consumers may terminate such agreements upon
20 business days’ notice before the expiry of the term, although they may be liable to
pay a cancellation penalty (section 14); consumers enjoy a 5 day cooling-off period
after direct marketing (section 16), and may cancel advance reservations bookings or
orders in certain circumstances (section 17). Fourthly, consumers are provided with
certain statutory remedies in cases of breach, irrespective of what the contract may
provide (see for example sections 19, 55–57 and 61). Finally, the CPA regulates
certain contractual terms, which in practice are typically in standard form. These are
dealt with in Sect. 2 below, together with the principles relating to the application of
the CPA. The regulation of price terms is dealt with separately at Sect. 3 below.
1.3 Limitations on Freedom of Contract in Competition Law
Freedom of contract presupposes some form of choice, but in a highly concentrated

economy, such as that of South Africa, this freedom has often been limited to the
detriment of vulnerable consumers. To combat these problems, the Competition Act9
was adopted, one of its main goals being to promote markets in which consumers
have access to and can freely select the quality and variety of goods and services they
7
See Brisley v Drotsky 2002 (4) SA 1 (SCA) [22].
8
On the interaction between the CPA and common law principles in general, see Naudé (2016a),
paras 4-18, 49.
9
89 of 1998.
desire. The main instruments established by the Act, to promote competition, are the
Competition Commission, which has to investigate, control and evaluate restrictive
practices, abuse of dominant position and mergers, the Competition Tribunal, which
in turn must adjudicate such matters, and the Competition Appeal Court. These
bodies can claim notable successes; as the Judge President of the Competition
Appeal Court, Dennis Davis, has stated,
it is unconscionable that in a country, with such startling levels of inequality as experienced
in South Africa, enterprises continue to operate in price fixing conspiracies. It is to the credit
of the Commission and the Tribunal that a significant deterrent against this practice has now
been constructed. . . . South African competition law has . . . begun to develop a competition
jurisprudence which is the envy of other developing countries facing similar challenges.10
Prominent examples of these successes are investigations that resulted in the

drastic lowering of prices of essential medicines (especially antiretroviral therapy
medicines), and the dismantling of cartels in the bread production, concrete produc-
tion and construction industries. Enquiries were also conducted into the banking
sector, which resulted in the implementation of certain reforms (see Sects. 4 and 5
below); into media companies that colluded to offer similar discounts and terms to
advertising agencies (albeit that these practices might even have benefitted con-
sumers); and into high prices charged for data services.11
The Competition Act provides for limited statutory control of prices. It prohibits a
dominant firm from charging an ‘excessive price’ to the detriment of consumers.12
An ‘excessive price’ is defined as a price for a good or service which bears no
reasonable relation to the economic value of that good or service, and which is
higher than that value.13
2.1 The Control SCT in the South African Common Law

of Contract
A limited degree of judicial control of standard contract terms is possible under the
general principles of the South African common law of contract.
First, a party may seek to escape liability by indicating that consent was absent
due to a material mistake as to the content of the contract. This typically would be the
10
Davis (2014), p. 3.
11
On media companies see ‘Dstv Media Sales Admits to Price Fixing and Agrees to a Settlement’,
Competition Commission media release dated 25-05-2017, accessible at http://www.compcom.co.
za/wp-content/uploads/2017/01/DSTV.pdf; on data service charges see Data Services Market
Enquiry Terms of Reference – August 2017 GN 849 published in GG 41054 of 18-08-2017, see
Sect. 4.1.2 below.
12
S 8(a).
13
S 1 (ix).
case when parties do not read the fine print of a standard form contract. However,
their mistake must also be reasonable (iustus), which usually would not be the case if
parties were responsible for it by not reading standard terms. If the contract is signed,
the applicable principle is caveat subscriptor (let the one who signs beware), and in
unsigned contracts or ‘ticket cases’, liability may follow if certain steps were taken to
draw the terms to the addressee’s attention.14 A party’s mistaken impression as to the
content of the contract could be reasonable if the contract contained surprising terms,
which, objectively viewed, should have been drawn to the other party’s attention.15
An alternative to the iustus error approach is to enquire whether the party seeking
enforcement reasonably relied on the other party assenting to the terms; the reliance
on assent may be unreasonable if the other party would not have expected these
terms to form part of the contract.16
Secondly, when interpreting standard terms, the courts may, as a last resort, apply
the contra proferentem rule, whereby in cases of doubt, terms in a written document
are to be interpreted against the person who drafted it.17
Thirdly, as indicated in the previous section, courts have the power to declare
contractual terms invalid or to refuse to enforce terms on the grounds of public
policy. However, courts exercise this power sparingly. This is illustrated by the locus
classicus, Barkhuizen v Napier.18 An insurer denied liability by relying on a term
that barred the insured from instituting action more than 90 days after the insurer
rejected a claim; the insured in turn argued that this clause violated the constitutional
right to access to the courts. The Constitutional Court enquired whether either the
term itself or its enforcement in the circumstances was contrary to public policy. In
this enquiry it took into account the competing demands of freedom of contract and
the constitutional right to access to the courts. Ultimately, the majority upheld the
validity of the clause and denied the claim; in this instance, public policy required
that freedom of contract prevailed over the countervailing right of access to the court.
The avenues for escape listed above generally apply to exemption clauses that
restrict or limit liability arising from various grounds, for example if consent is
obtained by way of misrepresentation, or if the other party commits breach. Thus, a
party may escape liability if the exemption clause is surprising—for example if a car
dealership advertises a car to be of a particular vintage, but fails to draw the
purchaser’s attention to a clause which deprives the purchaser of the claim if the
car is actually older.19 An ambiguous exemption clause could be interpreted nar-
rowly not to cover the facts of the particular case; this would be permissible under
the contra proferentem rule. A court could also decline to enforce the clause on
14
See Durban’s Water Wonderland (Pty) Ltd v Botha 1999 (1) SA 982 (SCA); Van Huyssteen et al.
(2016), pp. 293–294.
15
See Afrox Healthcare Bpk v Strydom 2002 (6) SA 21 (SCA) 41–42.
16
See Constantia Insurance Co Ltd v Compusource (Pty) Ltd 2005 (4) SA 345 (SCA).
17
Van Huyssteen et al. (2016), p. 302.
18
2007 (5) SA 323 (CC).
19
Du Toit v Atkinsons Motors Bpk 1985 (2) SA 893 (A).
public policy grounds, for example if a party acted fraudulently, or deliberately

breached the contract.20
However, these grounds only provide limited relief. For example, in Afrox
Healthcare Bpk v Strydom21 a private hospital was allowed to rely on such a clause
to escape liability when a patient suffered serious physical harm due to the nursing
staff’s negligence in treating him; this virtually equates to allowing the hospital to
avoid being liable for the very obligation it undertook to perform. This decision
elicited considerable criticism, but such a party could now rely on the CPA, which
provides greater protection than the common law against a variety of potentially
unfair contract terms, including some typical exemption clauses. It is to these pro-
visions that we will now turn.
2.2 Statutory Control of SCT
The CPA contains a number of provisions that allow for the control of SCT. This
control is not limited to terms contained in standard form documents, but in practice
this is of course the way in which suppliers generally present these terms. Before
considering the specific forms of control, the general ambit of the CPA briefly must
be considered.
In essence, the CPA applies where a ‘transaction’ (this includes a contract)
‘occurs’ within South Africa between a supplier and a consumer for the supply of
goods or services in the ordinary course of business and for consideration.22 The
term ‘consumer’ is defined broadly to include all natural persons, as well as juristic
persons with an asset value or annual turnover below a threshold value (currently
R2,000,000).23 The B2B/B2C distinction is therefore conceptually rather difficult to
adopt in the context of the CPA, since it defines a consumer (C) to include natural
persons as well as small businesses conducted by juristic persons.
As far as the actual control of SCT is concerned, a distinction can again be drawn
between relief based on problems with the formation of the contract, problems with
its interpretation, and problems with its substance or content. These will be consid-
ered in turn.
First, at the formation or procedural level, section 49(1) of the CPA requires that
certain notices to consumers or provisions of consumer contracts must be drawn to
the attention of a consumer in a certain way; they must be in plain language, must be
20
Van Huyssteen et al. (2016), pp. 290–291.
21
2002 (6) SA 21 (SCA).
22
See s 5(1), read with the definition of a ‘transaction’ in s 1. A number of transactions are excluded
from the CPA, for example some credit agreements (which are covered by the NCA) and employ-
ment contracts.
23
See the definition of a ‘consumer’ in s 1, read with s 5(2)(b). The State can be a supplier but not a
consumer (s 5(2)(a)).
likely to attract the consumer’s attention, and the consumer must have the opportu-
nity to receive and comprehend them.24 These types of notices or provisions are
essentially exemption clauses, assumption of risk clauses, indemnity clauses, and
acknowledgements of facts.
Section 49(2) in turn requires written assent in cases where the notice or term
relates to risks which are unusual, unexpected or could result in serious injury or
death. If a supplier fails to take the steps required by section 49, a court may order
that the relevant notice or provision be severed from the rest of the agreement, or be
declared invalid, or it may make an order that is just and reasonable in the
circumstances.25
Apart from the general duty of notification of terms under section 49, a supplier
may be obliged, under section 41, to disclose material facts, or to correct a material
misapprehension on the side of the consumer; a failure to comply with this duty
could entitle the consumer to a range of administrative and judicial remedies.26
Section 40(1) prohibits a supplier from engaging in various forms of ‘unconscio-
nable conduct’ (including coercion, undue influence, pressure, duress or harassment,
or unfair tactics) relating to the conclusion of consumer contracts. Section 40(2) fur-
ther expressly determines that it is unconscionable for a supplier ‘knowingly to take
advantage of the fact that a consumer was substantially unable to protect the
consumer’s own interests because of physical or mental disability, illiteracy, igno-
rance, inability to understand the language of an agreement, or any other similar
factor.’ It is not apparent though, to what extent this provision would enable control
of STC. In South Africa many consumers conclude contracts while labouring under
the weaknesses listed in the latter sub-section, but they would only be protected if the
supplier actually knew about the weakness, which may be difficult to prove.
Secondly, control of SCT could also be effected through restrictive interpretation.
In this regard section 4(4) of the CPA contains a statutory version of the contra
proferentem rule, and also requires interpretation to be to the consumer’s benefit in
certain cases where there is no ambiguity. In essence, if the document diminishes the
consumer’s rights, its ambit has to be interpreted restrictively to what the consumer
could reasonably have expected.
Finally, the CPA and its regulations contain a variety of provisions that allow for
control of the actual substance or terms of a consumer contract. The cornerstone is
chapter 2 Part G of the CPA, which grants the consumer the right to fair, just and
reasonable contract terms. The following forms of protection arising from this
chapter are particularly relevant and will be considered in turn: (1) the general
prohibition of ‘unfair, unreasonable or unjust contract terms’ in section 48, (2) the
specific prohibition of certain transactions, agreements, terms or conditions in
24
For the details of how this should be done see s 49(3)–(5).
25
See s 52(4) and Naudé (2016b), para 8 on judicial confirmation being essential for the operation of
s 49; the consumer may not extra-judicially elect to rescind or escape liability under the term.
26
See Du Plessis (2017), para 29–36.
section 51 (the blacklisted terms), and (3) the presumption of unfairness of certain
terms in regulation 44 (the grey-listed terms).
2.2.1 The Statutory Control of ‘Unfair, Unreasonable or Unjust’

Contract Terms in General: Section 48
According to section 48(1)(a), a supplier must not offer to supply, supply, or enter
into an agreement to supply, any goods or service ‘(i) at a price that is unfair,
unreasonable or unjust; or (ii) on terms that are unfair, unreasonable or unjust.’ The
provisions in (i) with regard to price, and more specifically on what constitutes an
unfair price, are considered in Sect. 3 below. For the moment the focus is on what
constitutes an ‘unfair, unreasonable or unjust’ term ((ii) above), and what forms of
relief the very broad prohibitions in section 48 give rise to.
Naturally, it is a formidable challenge to determine when a term is ‘unfair,
unreasonable or unjust’. Why the legislature used these three terms, and not simply
‘unfair’27 is not clear, but this is, sadly, typical of the generally poor standard of
drafting of the CPA as a whole. Some assistance is provided by section 48(2), which
identifies certain factors that indicate when terms are ‘unfair, unjust or unreasonable’
in terms of section 48(1), but ‘without limiting the generality thereof. These factors
include28 if ‘(a) it is excessively one-sided in favour of any person other than the
consumer or other person to whom goods or services are to be supplied’; and ‘(b) the
terms of the transaction or agreement are so adverse to the consumer as to be
inequitable’.
Of these factors, only the first really adds meaning, to the extent that it shows that
mere ‘one-sidedness’ does not suffice; it has to be ‘excessive’. It is doubtful though,
whether this factor sets the bar as high as the common-law test for when a term is
contrary to public policy, and hence void or unenforceable. But, despite all these
conceptual uncertainties, there are no clear indications that this provision has given
rise to problems of overbroad interpretation, and diminished legal certainty. Perhaps
this may be because the legislature has in any event provided blacklists and grey-lists
of proscribed terms that cover many of the problematic cases, and due to the complex
avenues of relief available to consumers under the section. It is to these avenues that
we now turn.
A party may approach ‘a court’ in terms of section 52, which sets out its powers to
ensure fair and just conduct, terms and conditions. This includes the power to declare
the term unfair and to make any further order it considers just and reasonable in the
circumstances (including payment of compensation, restitution and prohibitory
relief, requiring of the supplier to cease any practice).29 In making these orders,
27
Naudé (2017c), para 1.
28
The other factors, rather confusingly include the procedural problems of the contract being
concluded due to a representation under s 41, or in certain cases where s 49 applies.
29
S 52(3).
courts are obliged, under section 52(2), to consider a host of circumstances, which
mostly relate to the manner in which the contract was concluded, and, especially
relevant in the context of SCT, includes whether there was negotiation between the
parties. However, the courts must also consider ‘the fair value of the goods or
services in question’,30 a matter of substance, to which we will return in Sect. 3
below.
In terms of the CPA, a ‘court’ includes the small claims court, magistrates’ courts
and high court, but excludes consumer courts. Crucially, according to section 69, the
consumer must first exhaust the administrative remedies provided under the CPA,
such as approaching an ‘ombud with jurisdiction’, a consumer court, an ‘alternative
dispute resolution agent’, the National Consumer Commission or the National
Consumer Tribunal. These entities have a range of powers, which include issuing
compliance notices, negotiating and concluding consent orders, awarding compen-
sation or imposing fines. However, the power to invalidate an unfair term seems to
be expressly left to the courts.
Finally, a brief remark on standing. Since section 48 also prohibits a supplier from
offering to supply goods or services on unfair terms, it enables pre-emptive, or
‘general use’ or ‘abstract’ challenges where suppliers seek to contract on these terms.
When read with section 4(1), it is apparent that parties such as consumer associations
or representatives of a class under a class action, could approach the court to raise
such a challenge, and hence prevent contracts containing such terms from being
subsequently concludes.31 It is a pity, however, that section 52, which determines
how courts can give effect to section 48, is drafted as if the dispute is only between
the supplier an individual consumer, rather than parties bringing abstract
challenges.32
2.2.2 The Statutory Prohibition of Certain Transactions, Agreements,

Terms or Conditions: Section 51 (the Blacklisted Terms)
In line with established international consumer law practice, the legislature has
declared a number of specific terms to be void. The list, simplified somewhat,33
includes:
• terms that aim to waive or restrict the consumer’s rights under the CPA, or that in
any other way contravene the Act (section 51(1)(a) and (b));
• terms purporting to exempt liability for gross negligence (section 51(1)(c));
30
S 52(2)(a).
31
Naudé (2017c), para 2.
32
Naudé (2017d), paras 4–5.
33
See the exposition in Naudé (2016c), paras 3–9.
• terms that express a false acknowledgement that no representations or warranties

were made by a supplier, or that the consumer received certain goods, services or
documents (section 51(1)(g));
• terms that require of the consumer to forfeit money to the supplier if the consumer
exercises rights under the CPA, or to forfeit money to which the supplier is not
entitled (section 51(1)(h); and
• various terms that are aimed at providing the supplier with the right to make use
of unacceptable enforcement or self-help mechanisms, such as entering the
consumer’s premises to repossess goods, or obtaining documents or means of
accessing a bank account (section 51(1)(i) and (j)).
2.2.3 The Statutory Presumption of Certain Terms To Be Unfair:

Regulation 44
In 2011, regulations were issued aimed at grey-listing certain terms, which means
presuming them to be unfair for purposes of section 48.34 The presumption can only
operate against suppliers who operate on a for-profit basis and act wholly or mainly
for purposes related to their business or profession. It therefore only binds suppliers
who are ‘businesses’ or ‘professionals’, and not, for example, associations or
societies. The presumption also can only favour ‘individual consumers’, which
means natural persons who enter into an agreement for purposes wholly unrelated
to their business or profession. Therefore, it does not protect a consumer who is a
juristic person. It has been said that this more restricted approach was adopted
because ‘South Africa is a developing country with no experience in generalised
unfair contract terms legislation’.35
The list of terms that would be presumed not to be fair and reasonable is
essentially derived from a variety of foreign sources, including the Directive
93/13/EEC on unfair contract terms,36 Australian consumer legislation, and German
provisions on standard contract terms. The list is rather unwieldy, but Naudé, who
played a key role in their adoption, has grouped them together under various main
headings, which could be paraphrased as follows37:
• exemption clauses and similar terms whereby consumers surrender existing
rights;
• terms that grant suppliers unilateral powers and rights;
• penalty clauses and similar terms;
• terms dealing with the transfer of rights and obligations;
• terms dealing with statements by the consumer and the supplier;
34
GG 34180 of 01-04-2011.
35
Naudé (2017b), para 5.
36
95/29.
37
Naudé (2017b), para 15.
• terms that make it more difficult for consumers to enforce their rights; and
• terms purporting to apply foreign law.
Naudé recently argued that some of these grey-listed terms should rather be
blacklisted,38 but it remains to be seen whether the legislature would be willing to
effect such a change.
3.1 Common Law
As indicated in the previous section, the South African common law does not
recognise a specific set of rules governing standard contract terms; the general
principles of contract apply. The prospects for judicial control of price terms under
these principles are limited.
Earlier South African law recognised the civil-law doctrine of laesio enormis,
which provided relief in certain sales contracts if one party’s performance was
double the value of the counter performance.39 However, the legislature abolished
the last vestiges of this doctrine more than half a century ago. Parties aggrieved by
price terms in STCs now have to explore other avenues of relief. In this regard, as
indicated earlier, courts may declare contractual terms invalid or refuse to enforce
them on the grounds of public policy. However, the case law does not reflect any
willingness of the courts to regard an imbalance in the respective performances as so
striking that the contract price term is branded as contrary to public policy. A second,
limited form of judicial control over a contract price applies when parties nominate a
third party to determine it; the third party must make this determination in a proper
manner, and the courts have the power to intervene if the price is manifestly unjust
and unfair.40
3.2 Statutory Law
As indicated earlier, section 48(1)(a) of the CPA prohibits a supplier from entering
into an agreement ‘(i) at a price that is unfair, unreasonable or unjust’. Although the
38
Naudé (2017e), p. 138.
39
Van Huyssteen et al. (2016), p. 310, n 482. The last legislative repeal was by way of s 25 of the
General law Amendment Act 32 of 1952; this was in reaction to Tjollo Ateljees (Eins) Bpk v Small
1949 (1) SA 856 (A), which held that the doctrine was impractical and uncertain in its application,
and out of place in the modern world (860).
40
See Hurwitz NNO v Table Bay Engineering (Pty) Ltd 1994 (3) SA 449 (C) 456; Perdikis v
Jamieson 2002 (6) SA 356 (W) [9].
provision has been on the statute books for a few years, it is still quite unclear when a
price is ‘unfair, unreasonable or unjust’. The courts have yet to pronounce defini-
tively on the matter, and there is no generally accepted academic view on it either.
Some commentators have argued that it is in the public interest that courts do not
become involved with price control, especially where the terms relating to price are
upfront and transparent.41 But ultimately the CPA must be interpreted in a manner
that gives effect to its purposes42; thus, a narrow interpretation of section 48(1)(a)(i),
which only applies it to those agreements where other forms of unfairness or
unconscionability are also present, may arguably not be in line with such purposive
interpretation.
As far as relief is concerned, it was indicated in Sect. 2 above that section 52 of
the CPA provides a ‘court’ various powers when a supplier contravenes section 48.
These provisions, read together, grant the court the right to control prices, without
distinguishing between main and ancillary price terms. It will also be recalled that
the courts that exercise these powers are obliged, in terms of section 52(2), to
consider a host of factors, and that most of them relate primarily to aspects of
procedural unfairness. Thus, a court must take into account whether a contract was
negotiated (which is typically not the case with SCT) when deciding whether a price
is unfair. In other words, the possible presence of procedural unfairness may make
the court more willing to find that a matter is substantively unfair. Particularly
relevant in the present context, are subsections 52(2)(a) and 52(2)(i), which deter-
mine that the court must take into account the fair value of the goods and services in
question, and the amount for which, and circumstances under which, the consumer
could have acquired identical or equivalent goods or services from a different
supplier respectively.43
Again, it must be pointed out that the drafting of section 52 leaves much to be
desired, inasmuch as it leaves it quite unclear what role administrative bodies other
than the courts could play in combatting unfair prices. As indicated in Sect. 2.2.1
above, consumers may conceivably obtain some form of relief in the form of consent
orders or awards of compensation from these bodies, but the power to set aside a
price term is probably reserved to the courts.
A number of key prices are regulated or administered in South African law. While
some relate to external regulation by the state of prices for goods and services
provided by private entities (for example, insurers, banks, mobile network providers
or petroleum companies), others relate to the prices set for goods and services
41
Naudé (2017a), para 5; Van Eeden (2013), p. 263.
42
S 4(2), read with ss 2 and 3.
43
Naudé (2017d), para 15.
provided by public authorities or state owned enterprises (for example the major
supplier of electricity). Studies show that these forms of regulation often proved to
be counter-productive and inefficient, especially where regulated prices do not
reflect actual costs.44 However, the current political climate is characterised by a
desire to retain these forms of control, and it is unlikely that the position would
change soon.
It may also be observed in general that the possibility that the courts would resort
to the common law of contract to exercise price control over and above the
administrative or judicial relief provided by the specific forms of regulation to be
dealt with below is extremely limited.45
4.1 Electronic Communication
The Independent Communications Authority of South Africa (ICASA),46 is the

regulatory body of the local telecommunications industry. ICASA has directly
intervened with price terms in a variety of ways.
4.1.1 Call Termination Rates
The most prominent of these is the regulation of call termination rates, perhaps more
sensibly called interconnect or interconnection rates, which are charged for carrying
calls between different mobile networks or between a mobile network and a fixed-
line service. The Call Termination Regulations of 201447 aim at the imposition and
modification of competitive conditions to remedy market failure. These regulations
prescribe the costs of call termination and compel larger licensees to charge lower
termination rates, with a view to promoting greater competition in a market domi-
nated by a few major players.48
44
See the in-depth, albeit somewhat dated National Treasury report by Storer and Teljeur (2003).
45
See Sect. 3 above on the conservative approach of the courts to interfering with price determi-
nations; the CPA allows court to invalidate unfair price terms, but the Act does not apply to credit
agreements, and more specifically the costs of credit, under the NCA (see s 5(2)(d) of the CPA);
only the goods and services subject to the credit agreement fall in the ambit of the CPA).
46
ICASA is established by the Independent Communications Authority of South Africa Act
13 of 2000.
47
GN 844 published in GG 38042 of 30-09-2014, published in terms of s 67(8) of the Electronic
Communications Act 36 of 2005.
48
A recent amendment of the regulations has reduced the prescribed costs for call termination (see
‘Amendment of the Call Termination Regulations, 2014’ GN 1016 published in GG 41943 of
28-09-2018).
4.1.2 Data Charges
To date, there are no special caps regarding data charges within the South African
regulatory framework.
In 2014 ICASA published a Notice of Public Inquiry into the State of Competi-
tion in the Information and Communications Technology Sector.49 Under the
heading ‘Convergence and the Internet’, the inquiry notes that the current focus on
voice services and termination (interconnection) rates might be a distraction, as these
rates are effectively approaching zero. The inquiry then asks whether, considering
the transition to voice calling services over the internet, the focus should not rather
be on the pricing of data charges.
In May 2018, ICASA published regulations50 to limit the ability of licensees to
allow unused data bought in bundles to expire, although ICASA has not imposed a
3-year expiry period, supported by the National Consumer Commission. The regu-
lations also compel licensees to warn consumers of the expiry of bundles at regular
intervals, and prevent consumers from being automatically charged high out-of-
bundle rates if their data is depleted.51 However, licensees have resorted to the courts
to prevent the implementation of these regulations.
The Competition Commission has published the terms of reference of a ‘data
services market enquiry’, aimed at understanding the causes of high prices for data
services, and at making recommendations that would result in these charges being
lowered.52
The Advertising Standards Authority of South Africa (ASA), an independent body
that self-regulates the marketing communications industry, also acted against mis-
leading advertising relating to the benefits associated with particular data packages.53
The ASA has been replaced by the Advertising Regulatory Board (ARB).
4.2 Pay-TV Providers
According to ICASA’s Notice of Public Inquiry into the State of Competition in the
Information and Communications Technology Sector, a lack of competition exists in
49
GN 229 published in GG 37456 of 20-03-2014.
50
‘End-user and Subscribers Service Charter Amendment Regulations’ GN 233 published in GG
41613 of 7 May 2018.
51
Reg 8B.
52
Data Services Market Enquiry Terms of Reference – August 2017 GN 849 published in GG 41054
of 18-08-2017.
53
‘MWEB fibre deal advertising misleading – ASA’ accessible at https://mybroadband.co.za/news/
fibre/273207-mweb-fibre-deal-advertising-misleading-asa.html Page consulted on August
25, 2018. In this matter a service provider advertised that consumers who subscribe to a data
package would receive a free router. The router was indeed free, but it was useless, since it was not
strong enough to support that particular package.
the subscription TV market, which results in one player, Dstv/Multichoice, almost

completely dominating the market. According to ICASA, consumers ‘locked into
Multichoice contracts are being confronted by escalating costs with no relief in
sight.’ Although ICASA convened oral hearings as part of the inquiry, it has not
taken any regulatory action to date. The Competition Commission only had limited
success in combatting price fixing by DStv, but this related to prices that DStv and
other media companies offered to advertising agencies, and not the prices it charges
for pay-TV to consumers in general.54
The governing party, the African National Congress, has issued a discussion
document stating that a new strategy is needed to encourage rival broadcasters to
compete with DStv/Multichoice, and that the pay-TV market has to be opened up.55
However, its criticism may be less motivated by the desire to combat monopoly
prices than by the concern with the party’s own views are conveyed being more
strongly to the public in what it calls the ‘battle of ideas’.
4.3 Price Caps in the Supply of Energy
4.3.1 Electricity
The National Energy Regulator (NERSA) is tasked with regulating the electricity
industry in terms of the Electricity Regulation Act (ERA).56 Section 4(a)(ii) of the
ERA obliges NERSA to regulate prices and tariffs, i.e. charges for electricity.57 No
person may, without a licence issued by NERSA, operate any generation, transmis-
sion or distribution facility, or import or export any electricity or be involved in
trading.58 NERSA may make awarding a licence subject to various conditions
including the setting and approval of prices, charges, rates and tariffs charged by a
licensee.
Eskom, a state owned enterprise, generates more than 90% of the country’s
electricity and resells it, for example, to local government authorities and private
customers.59 The further reselling of electricity is possible (for example, the owner
of a block of flats could buy bulk electricity from a licensed distributor such as a
54
See Sect. 1.3 above.
55
Communications & The Battle for Ideas – 5th National Policy Conference Policy Document –
30 June to 5 July 2017 accessible at http://www.anc.org.za/sites/default/files/National%20Policy%
20Conference%202017%20Communications_1.pdf.
56
Act 4 of 2006. NERSA was established in terms of the National Energy Regulator Act 40 of 2004.
57
For the 2017 rates see http://www.eskom.co.za/CustomerCare/TariffsAndCharges/Pages/Tariffs_
And_Charges.aspx. NERSA’s regulatory role was recently considered in National Energy Regula-
tor of South Africa v Borbet SA (Pty) Ltd [2017] 3 All SA 559 (SCA).
58
S 7(1).
59
http://www.eskom.co.za/news/Pages/Jul7.aspx.
local authority, and then resell it to tenants), but the tariff at which this electricity
may be resold is regulated.60
NERSA’s role in price regulation has important political implications. Eskom has
not sufficiently invested in electricity generation in the past, which has resulted in
drastic undersupply and blackouts (or ‘load-shedding’, as it euphemistically is
called). To overcome its difficulties, Eskom has applied for tariff increases consid-
erably above the inflation rate, but this could have devastating effects on vulnerable
consumers, and it is possible that some of these increases would simply absorb
inefficiencies.
4.3.2 Petroleum Products
Section 2(1) of the Petroleum Products Act61 grants the Minister of Minerals and
Energy a broad range of powers to regulate the supply of petroleum products. This
includes the power, under subsection 2(1)(c), to prescribe prices at which any
petroleum product may be sold, as well the conditions under which a seller may
deviate from these price. The Minister is further empowered by section 2(1)(d)(ii) to
regulate or prohibit any business practice or arrangement, which is aimed at or has
the effect of increasing, directly or indirectly these prices.
The retail prices of petrol are amended monthly by regulation.62 The regulations
determine the retail selling price according to different ‘petrol price zones’ at which
petrol may be sold. The price for petrol is determined according to the different
varieties of petrol sold at retail level, (unleaded and lead replacement petrol, of
93 and 95 octane each).
4.4 The Cost of Credit
The cost of credit is subject to extensive statutory regulation in terms of the National
Credit Act (NCA),63 which is mainly enforced by the National Credit Regulator
(NCR).64
60
See the Guidelines on Energy Resale, accessible at http://www.nersa.org.za/Admin/Document/
Editor/file/Electricity/Legislation/Methodologies%20and%20Guidelines/Guidelines%20on%
20Electricity%20Resale.pdf.
61
120 of 1977.
62
http://www.energy.gov.za/files/esources/petroleum/August2017/Petrol-Regulation.pdf.
63
34 of 2005. See ss 100–106 (which bear the heading ‘Consumer’s liability, interest, charges and
fees’) and regs 39–48 of the National Credit Regulations (GN R489 published in GG 28864 of
31-05-2006).
64
http://www.ncr.org.za/about.
4.4.1 The Types of Costs That May Be Claimed
According to section 101(1) of the NCA, a credit agreement may only require a
consumer to pay for the following:
(a) the principal debt,65
(b) an initiation fee,
(c) a service fee,
(d) interest,
(e) cost of any credit insurance,
(f) default administration charges or
(g) collection costs.
4.4.2 The Calculation of Maximum Costs That May Be Claimed
The Minister may determine a method for the calculation of the maximum rate of
interest and the maximum service and initiation fees of credit agreements.66 In the
Review of Limitations on Fees and Interest Rate Regulations of 2015,67 the Minister
made the following determinations in this regard:
Interest Rates The following maximum interest rates are prescribed:
1. on mortgage agreements: the repo rate (RR)68 plus 12% per year
2. credit facilities: the RR plus 14% per year
3. unsecured credit transactions: the RR plus 21% per year
4. developmental credit agreements: the RR plus 27% per year
5. short-term transactions: 5% per month on the first loan and 3% per month on
subsequent loans within a calendar year
6. other credit agreements: the RR plus 17% per year
7. incidental credit agreements: 2% per month
Initiation Fees Certain maximum initiation fees are prescribed for the various
transactions above.
Service Fees The maximum service fee for all agreements is R60 per month; the fee
must be charged pro-rata where the credit agreement was concluded during the
course of the month.
65
According to s 102(1) NCA, a credit provider may in certain instances include certain fees or
charges in the amount of the principal debt, to the extent that they are applicable to the goods that
are the subject of the agreement. Where the credit provider provides the service in question directly
without paying a charge to a third party, subs 102(2)(c)(ii) determines that the charge under subs
(1) may not exceed the fair market value of the service contemplated.
66
S 105(1) NCA.
67
68
This is the rate at which private sector banks borrow from the South African Reserve Bank; it
currently is 6.75%. See https://www.resbank.co.za/Research/Rates/Pages/CurrentMarketRates.aspx.
4.4.3 Caps Placed on the Cost of Credit Insurance
Section 106(8) of the NCA empowers the Minister of Trade and Industry to prescribe
the limit in respect of the cost of credit insurance that a credit provider may charge a
consumer.69 The Technical Report on the Consumer Credit Insurance Market in
South Africa, released in 2014 by the Financial Services Board and the National
Treasury, highlighted several problems in the existing policy and regulatory frame-
work in the credit insurance sector. These problems include a lack of transparency in
the total cost of credit due to the bundling of fees and the inclusion of add-on
products, as well as high premiums across the sector. Regulating the price of
consumer credit insurance was identified as one of the possible focus areas for
regulatory action. The Report proposes regulating the premium rate, interest rate,
and total cost of credit in the industry. However, no new regulations have been
published in terms of section 106(8).
Section 106(1)(a) of the NCA determines that a credit provider may require a
consumer to maintain ‘credit life insurance70 not exceeding, at any time during the
life of the credit agreement, the total of the consumer’s outstanding obligations to the
credit provider in terms of their agreement’. Pursuant to powers granted under the
NCA,71 the Minister of Trade and Industry published the Credit Life Insurance
Regulations.72 According to regulation 3(1), the cost that a credit provider may
charge a consumer in relation to credit life insurance referred to in section 106(1)(a),
including the cost of any commission, fees or expenses in relation to that insurance,
may not exceed certain maximum limits per life insured. These amounts must be
calculated either on the deferred amount at the inception of the credit agreement or
on the deferred amount from time to time under the credit agreement. These
maximum costs include the cost of any commission, fees or expenses in relation to
the insurance. Depending on the sub-sector involved (for example mortgage agree-
ments, and various other credit agreements), the maximum prescribed costs per
month of credit life insurance is either R2 or R4.50 per R1000 of the deferred
amount.
Subsection 106(2)(b) determines that a credit provider must not offer to provide,
or demand that the consumer purchase credit insurance at an ‘unreasonable cost’,
having regard to the actual risk and liabilities involved in the credit agreement. It is
unclear what constitutes an unreasonable cost, especially considering the inclusion
of section 106(8) of the Act, as well as the abovementioned regulations, which have
already prescribed maximum costs. This section could potentially lead to the price of
69
See s 106(8) of the NCA.
70
Credit life insurance is defined in s 1 as ‘cover payable in the event of a consumer’s death,
disability, terminal illness, unemployment, or other insurable risk that is likely to impair the
consumer’s ability to earn an income or meet the obligations under a credit agreement.’
71
S 171(1) of the NCA.
72
credit life insurance being deemed unreasonable, even though it falls within the
maximum costs prescribed in terms of these provisions.
4.5 Banking Costs and Fees
In line with the principle of freedom of contract, the point of departure is that the
prices that banks charge for their services are a matter of agreement between banks
and their clients. Although the South African Reserve Bank is tasked with bank
regulation and supervision in general,73 it does not engage in price control.
However, as indicated in Sect. 1 above, the Competition Commission in 2008
conducted an enquiry into the banking sector,74 inter alia, to establish whether bank
fees were too high. The enquiry found that since it could not ‘pin down the
relationship between costs and prices’, and since there is ‘complex cross-
subsidisation between multiple products and services in the banking industry,’ it
could not identify ‘all the particular instances where the level of prices charged by
banks would constitute an abuse that warrants (or could be effectively addressed by)
intervention on the part of the competition or regulatory authorities’.
Nonetheless, specific recommendations were made regarding penalty fees (for
example introducing a cap by regulation on debit order dishonour fees)75 and ‘off-
us’ ATM transactions’ (for example changing the way in which fees are charged
where the bank issuing a card differs from the bank which provides an ATM
service).76 These specific forms of regulation have not been implemented (perhaps
because the legal basis for doing so was doubtful), but the banks have responded by
introducing certain reforms in a 2012 revision of the Code of Banking Practice, for
example on the disclosure of fees (see Sect. 5 below).77
More pro-active regulation may, however, follow from the proposed ‘twin peaks’
model for financial services regulation, contained in the Financial Sector Regulation
Act 9 of 2017. In essence, under this model, the South African Reserve Bank
focusses on ensuring the financial soundness of financial institutions, whereas a
new entity, the Financial Sector Conduct Authority (FSCA), protects consumers in
regulating the market conduct of these institutions.78 It remains to be seen, though, to
73
The South African Reserve Bank may monitor the activities of banking institutions in terms of the
Banks Act 94 of 1990 or Mutual Banks Act 124 of 1993.
74
See the Banking Enquiry Report to the Competition Commissioner by the Enquiry Panel
accessible at http://www.compcom.co.za/banking-enquiry/.
75
Banking Enquiry Report (n 74 above) chapter 4
76
Banking Enquiry Report (n 74 above) chapter 5.
77
Hawthorne et al. (2014).
78
Up to now, no entity generally oversaw the market conduct of the retail banking sector. The
Financial Services Board (FSB) only regulated the non-banking financial sector (for example
insurers; as indicated in Sect. 4.1 above). Under the ‘twin peaks’ model, FSB has been transformed
into the FSCA.
what extent the FSCA would be able to directly affect pricing in the financial
services sector. Crucially, the credit industry is still generally regulated by the
NCR under the NCA, which means the FSCA might, as opposition parties put it,
be ‘toothless’ in regulating the credit industry.79
4.6 Fees and Charges for Postal Services
Fees and charges for postal services are regulated by ICASA in terms of section 30 of
the Postal Services Act.80 The schedule of charges is updated through the Fees and
Charges for Postal Services Regulations.81 The schedule details the rates and fees
that the South African Post Offices charges for postal services.
4.7 General Caps Regarding Contractual Penalty Fees
Penalty clauses are regulated by the Conventional Penalties Act,82 which applies to
all stipulations ‘whereby it is provided that any person shall, in respect of an act or
omission in conflict with a contractual obligation, be liable to pay a sum of money or
to deliver or perform anything for the benefit of any other person, . . . either by way of
a penalty or as liquidated damages’. According to section 3, a court may reduce a
penalty to the amount that it considers equitable if it appears to the court that the
penalty is out of proportion to the prejudice suffered by the creditor. There is,
however, no duty on the court to reduce the amount to the actual loss suffered. The
onus is on the defaulting party to prove that the penalty is out of proportion, but
penalty clauses falling under the CPA are presumed to be unfair (see Sect. 3 above).83
4.8 General Limitations on the Bundling of Goods

and Services
Section 13(1) of the CPA generally prevents a supplier from unfair ‘bundling’ goods
and services by making the conclusion of an agreement to supply goods and services
79
http://www.enca.com/money/da-and-eff-oppose-financial-sector-regulation-bill.
80
124 of 1998.
81
82
15 of 1962. According to s 4, the provisions applicable to penalty clauses are also applicable to
forfeiture clauses.
83
Reg 44(r), which applies to a term that requires a consumer who fails to fulfil his or her obligation
to pay damages which significantly exceed the harm suffered by the supplier.
conditional on the consumer entering into further agreements with the supplier or
third parties. This practice limits a consumer right to choose and may result in the
consumer paying an overall higher price than otherwise would have been the case.
However, bundling is allowed under this provision if the supplier ‘(i) can show that
the convenience to the consumer in having those goods or services bundled out-
weighs the limitation of the consumer’s right to choice; (ii) can show that the
bundling of those goods or services results in economic benefit for consumers; or
(iii) offers bundled goods or services separately and at individual prices.’ In the last-
mentioned category, the consumer then in effect has the choice to ‘unbundle’ the
supplier’s offering.84

5.1 Consumer Agreements: Price Disclosure
Various consumer rights recognised by the CPA come into play in the context of
promoting price transparency, and enabling consumers to compare prices.85
First, to give effect to the consumer’s right to disclosure and information,86
section 23 of the CPA specifically deals with the disclosure of the price of goods
or services. According to section 23(3), ‘a retailer must not display any goods for
sale without displaying to the consumer a price in relation to those goods’.
Section 23(5) in turn sets out in detail when a written indication of the price,
expressed in the local currency, would amount to an adequate display of the price
of goods. Section 23(6), which has given rise to problems of application in practice,
deals with the consequences when a supplier requires a consumer to pay a higher
price than the price displayed for the goods or services.87
Secondly, price disclosure is also dealt with in the broader context of a con-
sumer’s right to fair and responsible marketing.88 Section 29, which bears the
heading ‘general standards for the marketing of goods and services’, determines
that a producer, importer, distributor, retailer or service provider must not market any
84
Van Zyl (2014), para 15.
85
In this way, the underlying purposes of the CPA of improving consumer awareness and infor-
mation and encouraging responsible and informed consumer choice and behaviour are served (see s
3(1)(e); Stoop ‘Section 22’ (Original Service, 2014) 22-2.
86
Chapter 2 Part D of the CPA. As indicated earlier, certain general formal requirements regarding
the language used in contracts, and the way notices are displayed partly give effect to this right (see
Sect. 1 above; s 22 CPA).
87
See Consumer Goods and Services Ombud Advisory Note 2 – Incorrect Pricing (26 July 2013)
accessible at http://cgso.org.za/dl/cgso%20advisory%20note%20%20incorrect%20pricing.pdf?
87ab66&87ab66.
88
Chapter 2 Part E of the CPA.
goods or services ‘(b) in a manner that is misleading, fraudulent or deceptive in any

way, including in respect of. . . (iii) . . .the price at which the goods may be supplied,
or the existence of or relationship of the price to any previous price or competitor’s
price for comparable or similar goods or services’.
Finally, the right of the consumer to fair and honest dealing is also relevant in the
context of price disclosure. Sections 40 and 41 respectively seek to combat ‘uncon-
scionable conduct’ and ‘false, misleading or deceptive representations’. Under
section 41(3)(f) it is considered to be a false, misleading or deceptive representation
to falsely state, imply, or fail to correct the apparent misapprehension on the part of
the consumer that a specific price advantage exists in relation to a product.89
As indicated earlier, consumers are expected to resort to administrative remedies
before approaching the courts for relief under the CPA.90 However, consumers’
common-law remedies remain intact, which means they may directly approach the
courts to the extent that any form of proscribed conduct above violates the common
law, for example by amounting to actionable misrepresentation regarding the price
of goods or services.
5.2 Credit Agreements: Disclosure of the Cost of Credit

and Statements of Comparative Credit Costs
5.2.1 Disclosure of Costs of Credit in Advertisements
The National Credit Regulations91 contain various provisions aimed at regulating the
manner in which the cost of credit has to be disclosed in credit advertisements.
Regulation 21(3) for example determines (with certain exceptions) that if a credit
advertisement discloses a monthly instalment, or any other cost of credit, the
advertisement must also include (a) the instalment amount (b) the number of
instalments (c) the total amount of all instalments, including interest, fees and
compulsory insurance, (d) the interest rate and (e) any residual or final amount
payable. Sub-regulation 21(7) determines further that if any advertisement contains
wording such as ‘cheap credit’ or other words to the same effect, specific information
must be disclosed on the cost of credit as set out in sub-regulations 21(2) and (3).
5.2.2 Statements of Comparative Credit Costs
Section 76 of the NCA governs credit advertising practices. Section 76(4)

(d) determines that advertisements for the availability of credit, or goods purchased
89
Du Plessis (2017), para 23.
90
See Sect. 2.2.1 above.
91
GN R489 published in GG 28864 of 31-05-2006.
on credit, may contain a statement of comparative credit costs to the extent permitted
by any applicable law or industry code of conduct, but any such statement must also:
(1) show costs for each alternative being compared; (2) show rates of interest and all
other costs of credit for each alternative; (3) be set out in the prescribed manner and
form; and (4) be accompanied by the prescribed cautions or warnings concerning the
use of such comparative statements.92
5.2.3 Credit Insurance
In terms of regulation 33(1) of the National Credit Regulations, a credit provider

who proposes a particular policy of credit insurance to the consumer in terms of
section 106(4) has to disclose to the consumer certain information in the prescribed
form set out in the NCA. This information includes the cost of the insurance for
which the consumer is liable, any additional fees, commission, remuneration or
benefit payable, as well as the premium payable.
5.3 Banking Agreements: Banks’ Duties to Disclose Charges

and Fees
The banking industry’s Code of Banking Practice is a voluntary code containing

minimum standards for service and conduct that individual and small business
clients can expect from their banks.93 The Code contains a number of undertakings
to disclose information on charges and fees, including notice of intended changes in
charges and fees. By undertaking to make these disclosures, the banking sector may
have avoided more direct regulation of the actual amount of charges and fees they
could charge; as indicated in Sect. 4 above, the regulatory authorities have thus far
generally avoided such intervention, but this approach may change with the adoption
of the new ‘twin peaks’ model.
The Code of Advertising Practice of the Advertising Regulatory Board (ARB) of
South Africa states, with regard to interest rates payable to bank customers, that ‘any
reference to the interest rates applicable to a financial product shall always be
directly followed by the description “per annum” or “per year”’.94
92
Further requirements are set out in the National Credit Regulations reg 21(4).
93
http://www.banking.org.za/docs/default-source/default-document-library/code-of-banking-prac
tice-2012.pdf?sfvrsn¼10. On the duties of disclosure, including of fees and costs, applicable to
authorised financial services providers see s 7 of the General Code of Conduct for Authorised
Financial Services Providers and their Representatives, issued under s 15 of the Financial Advisory
and Intermediary Services Act 37 of 2002.
94
See para 11.5 of section III of the ARB Code of Advertising Practice, accessible at http://arb.org.
za/codes-html
5.4 Electronic Communication: Licensees’ Duties to Disclose

Terms, Including Fees, Costs and Rates
In 2016 ICASA issued the End-User and Subscriber Service Charter Regulations,95
which apply to the licensees of electronic communications network services or
electronic communication services (these licensees include mobile network and
internet service providers). According to regulation 4, these licensees and their
agents must inform the end-user (the consumer) at the point of sale and prior to
the conclusion of the contract of various terms and conditions. These include:
‘(i) deposit; (ii) the connection fee; (iii) administrative fees; (iv) insurance costs;
(v) in and out-of-bundle rates; (vi) hardware costs; (vii) the possibility of tariff
changes during the contract term; (viii) rules for early termination of a contract
prior to expiry of the contract term; (ix) rules for the carryover of voice minutes and
data; and (x) fair usage policies.’96
As far as the contentious issue of roaming costs is concerned, the regulations
require disclosure of all applicable charges, roaming networks available, and a
summary of the terms and conditions for consumers roaming internationally.97
Detailed itemized billing clearly setting out (unbundling) the various charges appli-
cable is also required on request for post-paid users.98
In 2016 ICASA issued a Code of Conduct for Premium Rated Services.99 The
definition of these services is quite technical, but it essentially includes subscription
services provided by way of special (SMS) numbers or short codes, charged at a
higher rate than normal; an example would be a subscription service that provides
access to adult content. The Code aims at protecting consumers against unexpected
charges. Thus, the costs for premium rated services must be clearly conveyed to
end-users and potential end-users to enable them to make informed decisions before
the use of these services.100 Premium rated services provided by means of a voice
call must have a clear announcement on the cost of the service per minute/per call at
the beginning of the call.101
95
GN 189 R4 published in GG 39898 of 01-04-2016, in terms of ss 4 and 69(3) of the Electronic
Communications Act 36 of 2005.
96
Similar requirements apply to special promotions (see reg 5(2)).
97
Reg 6(1).
98
Reg 8(1).
99
GN 1376 published in GG 40402 of 4-11-2016. The South African Wireless Application Service
Providers’ Association (WASPA), whose members provide premium rated services, has updated its
code of conduct to reflect these changes (see https://waspa.org.za/coc/15-0/).
100
Reg 6(10).
101
Reg 6(1).
5.5 Price Comparison
While some of the forms of regulation above would make it easier for consumers to
understand and compare pricing, it is less apparent that such comparison is actively
promoted by way of regulation. Thus, comparison of the costs of different consumer
products displayed on shelves is not aided by compulsory requiring disclosure of
price per unit (for example per 100 g). However, various private websites enable
consumers to compare prices, for example the prices of vehicles,102 mobile ser-
vices,103 air travel and car rental, and consumer goods in general.104
5.6 The Relationship Between Price Disclosure Regulation

and Judicial Price Control
As indicated earlier, South African law has almost no practice of judicial price
control by applying a general reasonableness or fairness standard; while it possible
under the CPA to control prices with reference to such a standard, the case law does
not reflect that it has an effect in practice. Therefore, consumers may have greater
opportunities for relief by claiming that contracts are procedurally tainted through
showing that a supplier made a misrepresentation as to price in terms of the common
law, or did not comply with a duty to disclose imposed by regulation. As far as
judicial price control based on regulations governing specific industries is
concerned, it would be a matter of interpretation to determine the relationship
between this form of relief, and remedies that flow from regulations that require
disclosure.
References
Davis D (2014) Foreword: The Competition Appeal Court. In: 15 years of competition enforcement
– a people’s account. Booklet produced for the Eighth Annual Competition Conference,
Pretoria, September 2014, pp 2–3
Du Plessis J (2017) Section 41. In: Naudé T, Eiselen S (eds) Commentary on the Consumer
Protection Act, Revision Service 2. Juta & Co (Pty) Ltd, Claremont, pp 41-1–41-19
Hawthorne R, Goga S, Sihin R, Robb G (2014) Review of the Competition Commission Banking
Enquiry. Centre for Competition, Regulation and Economic Development, Johannesburg
Naudé T (2016a) Contract. In: Naudé T, Eiselen S (eds) Commentary on the Consumer Protection
Act, Revision Service 1. Juta & Co (Pty) Ltd, Claremont, pp Contract-1–Contract-14
102
https://www.autotrader.co.za/ and https://www.cars.co.za/.
103
https://mybroadband.co.za/news/broadband/174778-south-african-mobile-data-prices-com
pared.html.
104
https://www.pricecheck.co.za/.
Naudé T (2016b) Section 49. In: Naudé T, Eiselen S (eds) Commentary on the Consumer Protection
Act, Revision Service 2. Juta & Co (Pty) Ltd, Claremont, pp 48-1–48-30
Naudé T (2016c) Section 51. In: Naudé T, Eiselen S (eds) Commentary on the Consumer Protection
Naudé T (2017a) Introduction to ss 48–52 and reg 44. In: Naudé T, Eiselen S (eds) Commentary on
the Consumer Protection Act, Revision Service 1. Juta & Co (Pty) Ltd, Claremont, pp 48-1–48-
12
Naudé T (2017b) Regulation 44. In: Naudé T, Eiselen S (eds) Commentary on the Consumer
Protection Act, Revision Service 2. Juta & Co (Pty) Ltd, Claremont, pp reg 44-1–reg 44-64
Naudé T (2017c) Section 48. In: Naudé T, Eiselen S (eds) Commentary on the Consumer Protection
Naudé T (2017d) Section 52. In: Naudé T, Eiselen S (eds) Commentary on the Consumer Protection
Naudé T (2017e) Towards augmenting the list of prohibited contract terms in the South African
Consumer Protection Act 68 of 2008. J South Afr Law 2017(1):138–148
Storer D, Teljeur E (2003) Administered Prices Executive Report. Report for National Treasury.
http://www.treasury.gov.za/publications/other/epir/Summary%20of%20sector%20reports.pdf
Van Eeden E (2013) Consumer protection law in South Africa. LexisNexis, Durban
Van Huyssteen LF, Lubbe GF, Reinecke MFB (2016) Contract general principles, 5th edn. Juta,
Claremont
Van Zyl E (2014) Section 13. In: Naudé T, Eiselen S (eds) Commentary on the Consumer
Protection Act. Juta & Co (Pty) Ltd, Claremont, 13-1–13-7
Form Contracts in Spain
Francisco de Elizalde
Abstract The control of standard terms implies a significant inroad into classic
contract theory as the fairness assessment moves from formation (procedural justice)
to the content of contracts (substantial justice). When it comes to price terms, the
challenge faces freedom of contracts and competition—two sources of undoubted
interest for academics and practitioners. The chapter aims to present the status of the
control of price related terms in Spanish law. It includes an introduction to the
validity of standard form contracts in general and an analysis of content control in
B2C contracts as the more far-reaching one. The assessment is not limited to
statutory controls. Judicial activism has been significant in this field, as case law
has defined unfairness criteria for specific types of contracts and ancillary terms.
Additionally, courts have increasingly resorted to the requirement of transparency to
control main price terms. The contours of the assessment of non-transparent terms
and its consequences are not entirely defined nor homogenous, which brings about a
relevant issue of legal certainty.
1 The Scope of Freedom of Contract
Freedom of contract is a cornerstone in Spanish law. Art 1255 Spanish Cc enshrines

the general principle according to which the contracting parties may establish any
terms deemed convenient provided that they are not contrary to (mandatory) law,
morals or public policy.1 The limitation includes prohibitions arising from the
principle of good faith.2 Within these margins, the obligations created by contracts
1
See Díez-Picazo (1991), pp. 430–432.
2
Art 7 Spanish Cc.
F. de Elizalde (*)
IE University, IE Law School, Madrid, Spain
e-mail: francisco.deelizalde@ie.edu

https://doi.org/10.1007/978-3-030-23057-9_25
632 F. de Elizalde
‘have the binding force of law’ between the parties.3 Furthermore, even the classic
limitations to freedom of contract have a much more restricted application in Spain,
compared to those of other similar legal systems (such as the French one, for
example). This is the case with laesio enormis, which is rejected as a rule (Art
1293 Spanish Cc), and only admitted under certain circumstances that affect minors
and absent persons.4
Freedom of contract was further enhanced in the 1978 Spanish Constitution,
which recognized freedom of enterprise as a right within the framework of a market
economy (Art 38). Moreover, as a Member State of the European Union, the four
freedoms of the Internal Market (goods, capital, persons and services) are binding,
with the added effect of limiting price restrictions. An autonomous administrative
body, the National Commission on Markets and Competition (Comisión Nacional
de los Mercados y la Competencia), is responsible for promoting the proper func-
tioning of markets and applying Spanish and EU competition law. Courts follow this
free market approach and, in principle, show respect and uphold contractual agree-
ments on price.5 In general, except for certain regulated sectors, prices are left to
party autonomy and competition.
The respect for freedom of contract rests on the philosophical basis of subjective
fairness, according to which the parties alone determine the adequacy of the price
given in exchange for a product or service as well as the ancillary contractual terms,
with the limitations arising from mandatory law. For that to occur, the agreement
should be intentional and free—invalidity for defects of consent (mistake, misrep-
resentation, duress, etc.) aiming to secure that contract formation is fair. The control
of standard terms implies a significant inroad into classic contract theory as the
fairness assessment moves from formation (procedural justice) to the content of
contracts (substantial justice). When it comes to price terms, control challenges
market competition, in addition to freedom of contract.
The chapter aims to present the status of the control of price related terms in
Spanish law. It includes an introduction to the validity of standard form contracts in
general and an analysis of content control in B2C contracts as the more far-reaching
one. The assessment is not limited to statutory controls. Judicial activism has been
significant in this field, as case law has defined unfairness criteria for specific types
of contracts and ancillary terms. Additionally, courts have increasingly resorted to a
general requirement of transparency to control main price terms, on the margins of
specific legal obligations. The chapter addresses both of them.
3
Art 1091 Spanish Cc.
4
Art 1291 Spanish Cc. Although some regional systems of private law in Spain, such as that of
Catalonia or Navarre have a broader recognition of laesio (Arts 499–507 of the Fuero Nuevo in
Navarre; Arts 321–325 of the old Compilación catalana and Arts 621-45 to 621-48 of the Catalan
Civil Code, the validity of which has been challenged in court, and is currently under the review of
the Spanish Constitutional Court, Recurso de inconstitucionalidad 2557-2017).
5
Among many others, STS 10 May 2001 (ES:TS:2001:3809).
Control of Price Related Terms in Standard Form Contracts in Spain 633
2 Legal Framework for the Control of Standard Terms
The Standard Contract Terms Act,6 which applies to both B2B and B2C contracts
(Art 2), provides the general framework for the incorporation of terms into standard
form contracts. The law establishes that, for a term to be incorporated, the adherent
to the contract should be aware of its existence. Additionally, the term should be
transparent, clear, concrete and plain (Art 5). The Supreme Court has interpreted
these requirements to mean grammatical (not substantive) transparency of standard
terms.7
A general content control is absent from the Standard Contract Terms Act.8 This
is restricted to B2C contracts9 and its origin was the transposition of the Directive
93/13/EEC on unfair contract terms10 into Spanish law. Therefore, the substantive
review of standard terms is currently found in the Consumer Protection Act (Arts
82–91).11 This means that Spanish law has adopted the theory of abuse of power in
the control of standard terms according to which the unfairness assessment is
justified by the weakness of consumers vis-à-vis businesses or professionals.12 The
ordinary consequence for an unfair term is the invalidity of the clause if the contract
can continue to exist without it.13
Art 82.1 Consumer Protection Act, which is drafted in a very similar way to Art 3
(1) Directive 93/13/EEC, contains the rule that considers as unfair those terms not
individually negotiated which, against good faith, cause a significant imbalance in
the parties’ rights and obligations arising under the contract to the detriment of the
consumer. Apart from this rule, Articles 85–90 Consumer Protection Act establish a
detailed list of terms, which ‘in any case’ would be unfair.14 A literal reading of this
commandment could lead to the conclusion that the Consumer Protection Act has
only created ‘black lists’ of terms, which are necessarily deemed unfair. However,
this understanding is heavily contested. A great number of the listed terms require a
judicial assessment of their factual and legal background, as a result of which, certain
6
Ley 7/1998, de 13 de abril, sobre Condiciones Generales de la Contratación, BOE nr 89 of 14 April
1998 (Standard Contract Terms Act).
7
STS 3 June 2016 (ES:TS:2016:2550).
8
Miquel (2002), p. 433.
9
Art 8 Standard Contract Terms Act.
10
95/29.
11
Real Decreto Legislativo 1/2007, de 16 de noviembre, por el que se aprueba el texto refundido de
la Ley General para la Defensa de los Consumidores y Usuarios y otras leyes complementarias,
BOE nr 287 of 30 November 2007 (Consumer Protection Act).
12
In respect of this policy approach, see Micklitz (2008), pp. 33–34.
13
Art 83 Consumer Protection Act.
14
Arts 82.4 et seq. Consumer Protection Act.
634 F. de Elizalde
clauses could be declared valid even though listed.15 Therefore, it seems more
accurate to say that the Consumer Protection Act has both grey and black lists.16
Following individual or collective actions, courts determine the unfairness of
terms.17 Through collective redress it is possible to obtain an injunction to cease the
use of unfair terms as well as a compensation for the damage caused. However, the
exact effect of collective actions is difficult to determine, especially in respect of
third parties. The Spanish collective redress system is extremely complex and its
contours are still being heavily shaped by case law. As a rule, the Civil Procedure
Act allows courts to extend to third parties (on a case by case basis) the effects of
decisions rendered in collective proceedings.18
However, in Sales Sinués19 the CJEU limited this possibility by deciding that a
collective action could not impede consumers from bringing an individual complaint
(not even the same claim, although individually, against the same party is restricted)
as this would affect the right to an effective and adequate protection in the sense of
the Directive. The CJEU was dealing with pendency, the logical procedural stage
prior to res judicata, and the defence was brought by banks that had been sued in
both collective and individual proceedings. Sales Sinués proved to be a great
challenge to the third party effect of collective actions, the fate of which seems to
have been decided by the lack of possibility to ‘opt out’ in the Spanish collective
redress system (which was declared contrary to Art 7 Directive 93/13/EEC).20
Following Sales Sinués, the Spanish Supreme Court has been seriously qualifying
the third party effect of collective proceedings, at least in the context of B2C
contracts. Although it is early to draw a conclusion, for the time being the Supreme
Court has not extended the effects of decisions rendered in collective proceedings to
third parties if the judgment was not favourable to the consumer.21
Finally, the Consumer Protection Act also empowers notaries and public regis-
tries (land and company) to control those terms, which have been declared unfair and
the judgment has been recorded in the public Registry for Standard Contract Terms
15
For example, Art 86.3 Consumer Protection Act lists as unfair the assignment of the contract to a
third party, by the business, only if it is capable of diminishing the rights of the consumer.
16
Cámara Lapuente (2011), pp. 832–834.
17
In the context of unfair terms, Art 12 Standard Contract Terms Act. In general, Art 11 Civil
Procedure Act.
18
Art 221.1.2ª Ley 1/2000, de 7 de enero, de Enjuiciamiento Civil, BOE nr 7 of 8 January 2000
(Civil Procedure Act). See Tapia Fernández (2011), pp. 1090–1094; Armenta Deu (2013),
pp. 90–93.
19
CJEU Judgment of 29 November 2016, Sales Sinués, C-381/14 and C-385/14, EU:C:2016:252.
20
CJEU Judgment of 29 November 2016, Sales Sinués, C-381/14 and C-385/14, EU:C:2016:252,
paras 37, 39 and 43.
21
SSTS 24 February 2017 (ES:TS:2017:477), 25 May 2017 (ES:TS:2017:2016) and 6 June 2017
(ES:TS:2017:2249) do not extend the effects that were not entirely favourable to consumers. STS
8 June 2017 (ES:TS:2017:2244), instead, considers that the favourable effects should be extended
to individual proceedings.
(Registro de Condiciones Generales de la Contratación).22 However, as both

notaries and public registries are obliged to control the legality of every document
under their intervention, and an unfair term is null and void, it has been argued that
this control should also reach the assessment of every unfair term, even those not
registered or against which no judicial ruling has been rendered.23
3 General Aspects Concerning the Judicial Review of Price

Related Terms
3.1 On the Possibility of Judicial Review in Contract Law
As a rule, Spanish law does not allow courts to review the price established in a
contract. Revision is only admitted if mandatory law fixes the price (a restricted
exception in the context of a market economy) or if a certain provision, also of
mandatory law, empowers courts to control the price. The latter is also a rarity and
only an old statute (albeit still in force) that forbids abusive interest rates in the
context of exploitation allows for this.24
However, judicial review can occur indirectly by the application of general tools
from contract law such as the general principle of good faith or the vices of
consent.25 These are not aimed to control any gross disparity among performances
but, rather, to protect the adherent’s reasonable reliance on the price offered and his
capacity to compare it with others in the market. The control of incorporation, a test
particular to standard form contracts,26 is also a way to prevent the application of
clauses that have not been (grammatically) understood by the adherent. In the
application of the tools abovementioned, and mostly depending on the term being
a main one or not,27 the court would be entitled to adapt the contract (although
limitations apply in B2C contracts following the CJEU case Banco Español).28
Hence, the price could be indirectly revised.
These are the ways in which a court can control price terms in all standard form
contracts. With the exception of the incorporation test, they do not differ from the
22
Art 84 Consumer Protection Act. This Registry is voluntary for businesses who may register their
standard form contracts (Art 11 Standard Contracts Act). Additionally, it keeps record of judicial
decisions against standard terms. Its use has been heavily debated and has, in practice, no influence
on judicial rulings.
23
Miquel (2011), pp. 774–781.
24
Ley de 23 de julio de 1908, de la usura, Gaceta Oficial 24 July 1908 (Usury Act).
25
In respect of incidental fraud and non-transparent standard terms see Pantaleón Prieto (2017).
26
Arts 5 and 7 Standard Contract Terms Act.
27
Art 10.2 Standard Contract Terms Act.
28
CJEU Judgment of 14 June 2012, Banco Español de Crédito, C-618/10, EU:C:2012:349, para 73.
Banco Español made clear that a national court cannot fill in the gap that is left by an unfair term that
is declared ‘non-binding’ (Art 6 Directive 93/13/EEC).
636 F. de Elizalde
general controls applicable to negotiated contracts. However, a special regime

applies to B2C standard form contracts, by virtue of the Directive 93/13/EEC,
which, as mentioned, is largely found in the Consumer Protection Act (Arts 80–91).
3.2 The Control of Standard Form B2C Contracts
The judicial review of standard-form B2C contracts is particular and far reaching as
it controls the substantive transparency and the fairness of terms. Art 82 Consumer
Protection Act follows Art 3 Directive 93/13/EEC in declaring that a term is unfair if,
contrary to the requirement of good faith, it causes a significant imbalance in the
parties’ rights and obligations under the contract, to the detriment of the consumer.
The law makes no distinction between main and ancillary price terms. Art 4
(2) Directive 93/13/EEC, which impedes the assessment of transparent terms that
relate to the definition of the main subject matter of the contract or to the adequacy of
the price of the goods or services given in exchange, has not been transposed into
Spanish law. This has given place to misinterpretations as to whether main price
terms may be reviewed in Spain. Taking into consideration that the Directive 93/13/
EEC is a Directive that seeks minimum harmonization (Art 8 Directive 93/13/EEC),
Member States could decide to raise the level of consumer protection by allowing
control of the so-called29 ‘essential obligations under the contract’.
The first draft of the statute that was meant to incorporate the Directive into
Spanish Law exempted the essential obligations of the parties from judicial review,
following Art 4(2) Directive 93/13/EEC, insofar they were drafted in plain intelli-
gible language—the requirement of transparency. However, during the legislative
process, the draft was amended and the final version did not have an equivalent to
Art 4(2) Directive 93/13/EEC.30
Thus, in the case Caja de Ahorros, the CJEU affirmed that: ‘in the Spanish legal
system, as the Tribunal Supremo states, a national court may, in all circumstances,
assess, in a dispute concerning a contract concluded between a seller or supplier and
a consumer, the unfairness of a term which was not individually negotiated and
which relates to, inter alia, the main subject-matter of the contract, even in the case
where that term was drawn up in advance by the seller or supplier in plain,
intelligible language’.31 This was not the most extended understanding at the time
in Spanish contract law. In the judgment of 9 May 2013,32 the Spanish Supreme
29
This is a controversial historical term that the CJEU has adopted in respect of the Directive 93/13/
EEC. See CJEU Judgment of 3 June 2010, Caja de Ahorros y Monte de Piedad de Madrid, C-484/
08, EU:C:2010:309, para 34; CJEU Judgment of 30 April 2014, Kásler and Káslerné Rábai, C-26/
13, EU:2014:282, para 46; CJEU Judgment of 20 September 2017, Andriciuc and others, C-186/16,
EU:2017:703, para 35.
30
Alfaro (2002), pp. 129–130.
31
CJEU Caja de Ahorros (n 29), para 42.
32
STS 9 May 2013, ES:TS:2013:1916.
Court clarified that the assessment of the terms, which contained the essential
obligations of the parties, was impeded if they were transparent.
Therefore, it is currently not controverted that the exemption from judicial review
of main price terms, as enshrined in Art 4(2) Directive 93/13/EEC, is the rule in
Spain. They can only be controlled if the terms are not transparent (not drafted in
plain intelligible language). If they are, the substantive economic fairness of con-
tracts is left to party autonomy and competition. In contrast, ancillary terms (includ-
ing ancillary price terms) are subject to the unfairness assessment, which aims to
control the legal balance of standard form contracts. The Supreme Court has not
established clear parameters that allow distinguishing main from ancillary price
terms. However, the criteria set out by the CJEU in Invitel,33 Kásler,34 Matei,35
Van Hove,36 and Andriciuc37 are impliedly assumed in Spanish case law.
The next section will focus on how main price terms have been reviewed by
courts, by making use of the exception laid down in Art 4(2) Directive 93/13/EEC
(transparency). In respect of ancillary price clauses, the analysis will be restricted to
the most relevant cases that directly refer to the core of the topic, leaving aside those
in which the issue at stake was only procedural in nature. Because the Consumer
Protection Act has incorporated the Directive, reference to EU law is on occasion
inevitable, with the added fact that a significant number of requests for a preliminary
ruling to the CJEU on the Directive were submitted by Spanish courts. However, a
more in-depth assessment of EU law is to be found elsewhere in this volume.38
4 Judicial Control of Main Price Terms
Art 4(2) Directive 93/13/EEC, which is applicable in Spain although not expressly
transposed, prohibits judicial review of terms that define the main subject matter of
the contract as well as the assessment of the adequacy of the price in respect of the
goods or services provided in exchange. Price clauses themselves are not included in
this rule as it refers to ‘the adequacy of the price’ in respect of the counter-
performance. However, it is evident that if a court were to assess a price clause it
would be directly affecting its relationship with the good or service received in
exchange.
The impossibility to review terms, which determine the essential obligations
of the parties under the contract is subject to the condition that they are drafted in
plain intelligible language (Art 4(2) Directive 93/13/EEC)—the requirement of
33
CJEU Judgment of 26 April 2010, Invitel, C-472/10, EU:C:2012:242, para 23.
34
CJEU Kásler (n 29), paras 57–58.
35
CJEU Judgment of 26 February 2015, Matei, C-143/13, EU:C:2015:127, paras 57 and 64.
36
CJEU Judgment of 23 April 2015, Van Hove, C-96/14, EU:C:2015:262, para 33.
37
38
Cámara Lapuente (2019).
638 F. de Elizalde
transparency. The CJEU decided that transparency has the same meaning throughout
the Directive (Arts 4(2) and 5).39 It refers to the capacity of an average consumer to
understand the legal and economic consequences of a term. Therefore, transparency
requires that a term is not only grammatically or formally clear but, also, that it may
be comprehended by consumers (substantive approach).40 This can involve an
obligation on the business to provide the information that is necessary for a con-
sumer to evaluate the consequences of a term.41
4.1 Transparency and Main Price Terms. The Doctrine

of the Supreme Court That Led to the CJEU Case
Gutiérrez Naranjo
According to Art 4(2) Directive 93/13/EEC, lack of transparency allows for judicial
review of the essential obligations of the parties. Even before the actual meaning of
transparency had been given a more definite shape by the CJEU (Kásler was a main
contributor to this end),42 the Spanish Supreme Court applied it in the most relevant
group of cases to date for Art 4(2) Directive 93/13/EEC in Spain.
All those cases shared similar facts. The Supreme Court had to do deal with floor
clauses, an extended practice in the Spanish mortgage loan market, which changed
after the Supreme Court ruled against their validity. Floor clauses set a minimum
fixed annual interest rate for variable interest rate loans (a floor), which normally
ranged from 2% to 5%. When the referral indexes (among which the EURIBOR was
the most used) plummeted below those margins, consumers could not profit from the
decline due to the existence of floor clauses. This had the effect of flooding Spanish
courts with lawsuits that, based on a variety of arguments, challenged the validity of
such terms.
In the first judgment on this topic, on 9 May 2013,43 the Spanish Supreme Court
(plenary session), in the context of a collective action brought by a consumer
association against three banking institutions, decided that floor clauses defined
the subject matter of the contract and should be treated as main price terms.
Additionally, the Supreme Court found that they fulfilled the requirements for
incorporation as standard terms (Art 7 Standard Contract Terms Act) as they were
39
CJEU Kásler (n 29), para 69; CJEU Matei (n 35), para 73.
40
CJEU Judgment of 21 March 2013, RWE Vertrieb, C-92/11, EU:C:2013:180, para 44; CJEU
Kásler (n 29), paras 71–75; CJEU Matei (n 35), para 73; CJEU Judgment of 9 July 2015, Bucura,
C-348-14, EU:C:2015:447, para 54; CJEU Andriciuc (n 29), para 45.
41
CJEU RWE Vertrieb (n 40), para 50.
42
CJEU Kásler (n 29), paras 71–75.
43
ES:TS:2013:1916.
grammatically clear and borrowers had the opportunity to become acquainted with
them. Hence, floor clauses were per se lawful. However, in the context of B2C
contracts, the Supreme Court further considered that the terms lacked substantive
transparency because consumers were not provided with sufficient information in
respect of their legal and economic consequences. Based on this, floor clauses were
declared unfair (Art 83 Consumer Protection Act).
Nevertheless, the Supreme Court decided, against clear rules of national law,44 to
restrict the consequences derived from nullifying floor clauses—namely, restitution
that follows the ex tunc effects of a term that is null and void. The reason provided
for this was that the users of floor clauses (the banking institutions) had acted in good
faith and that there was a risk of serious economic difficulties if the judgment were to
be applied retroactively—given the estimated cost of restitution of €4 billion.45 The
Supreme Court based the limitation on arguments of economic public policy and
cited the CJEU case RWE.46
This caused turmoil among consumers and judges from first instance and appeal
courts who on the one hand kept claiming restitution (the former) and on the other
continued granting it (the latter), despite the doctrine established by the Supreme
Court, which was further extended to individual cases following its judgment of
25 March 2015.47 In this ruling, the Supreme Court upheld its doctrine in the sense
that no restitution was conceded prior to 9 May 2013—the date of its first decision on
floor clauses. However, it found that, as from that judgment, banking institutions
could no longer be considered to be acting in good faith if they continued to use floor
clauses.48 Therefore, the limitation to retroactivity would not apply and so the
Supreme Court allowed for restitution of the amounts overpaid but only after the
delivery of its decision of 9 May 2013. The doctrine of the Supreme Court raised
issues of its compatibility with EU law and several requests for a preliminary ruling
were submitted to the CJEU. The European court joined three of them and decided
on this in what is now known as the case Gutiérrez Naranjo.49
44
Art 83 Consumer Protection Act and Art 1303 Spanish Civil code.
45
www.elmundo.es/economia/2016/12/21/585a81d3268e3ef0328b45a2.html. Page consulted July
25, 2017.
46
CJEU RWE Vertrieb (n 40), paras 50–64.
47
ES:TS:2015:1280.
48
For a criticism of this understanding of good faith, in the context of floor clauses, see de Elizalde
(2015), p. 186.
49
CJEU Judgment of 21 December 2017, Gutiérrez Naranjo, C-154/15, C-307/15 and C-308/15,
EU:C:2016:980. See the case note by Leskinen and de Elizalde (2018). Other two requests for a
preliminary ruling had been submitted to the CJEU on floor clauses but were withdrawn after the
decision on Gutiérrez Naranjo. These were CJEU Judgment of 23 January 2017, Rodríguez
Sánchez, C-381/15, EU:C:2017:69; and CJEU Judgment of 23 January 2017, Banco Popular
Español, C-349/15, EU:C:2017:68.
640 F. de Elizalde
4.2 The Consequence of a Lack of Transparency As Regards

the Essential Obligations of the Parties. Compatibility
of Spanish Law with EU Law
Art 4(2) Directive 93/13/EEC establishes that the assessment of the unfair nature
cannot be made for those terms that determine the essential obligations of the parties
under the contract if they are drafted in plain intelligible language. However, this
provision does not indicate the consequence of a lack of transparency in those main
terms and a simplistic a contrario reading of the article (‘if the term is not drafted in
plain intelligible language it is subject to the unfairness assessment’) is controversial.
In fact, the only consequence that the Directive provides for in the case of
non-transparent terms is enshrined in Art 5 Directive 93/13/EEC—the contra
proferentem rule. This rule is evidently applicable in cases of formal (grammatical)
lack of transparency, which may result in more than one meaning of a term.
However, it may be of little help when dealing with substantive lack of transparency,
in which the term could be grammatically clear (leading to only one possible
meaning) but, nonetheless, it prevents the consumer from understanding its legal
and economic consequences, as was the case with floor clauses.
In the first years of the Directive, a certain consensus existed that the Directive
(apart from the contra proferentem rule) did not regulate the consequences of
non-transparent terms, thus leaving the decision to the Member States.50 In fact, in
the Report from the Commission on the Implementation of the Directive, which
appraised the 5 years after the deadline for its implementation, it was recognized that
the Directive did not harmonize the sanctions derived from the infringement of
transparency.51
If this interpretation had prevailed, the decision of the Spanish Supreme Court as
to the consequences of floor clauses, which lacked transparency, should have
remained as an issue of pure national law. However, at least since 2010 the CJEU
has been treating non-transparent terms as unfair. The grounds for doing so, despite
the drafting of Directive, have not been expressed. It may be argued that since
‘unfairness’ is an autonomous Union concept, which requires a uniform interpreta-
tion by the CJEU, it is in the exercise of this interpretation that the consequences
of the lack of transparency may fall within the jurisdiction of the CJEU.
Without discussing any possible constitutional constraints, the CJEU in
Pohotovost and Pereničová, expressed that national courts could assess whether
deficiencies in the information relating to the APR (annual percentage rate of charge)
of credit agreements were likely to confer on that term an unfair nature.52 The
50
Ebers (2008), pp. 201–202; Durovic (2016), p. 179.
51
COM (2000) 248 final, “Report from the Commission on the implementation of Council Directive
93/13/EEC, of 5 April 1993, on Unfair Terms in Consumer Contracts”, pp. 18–19.
52
CJEU Judgment of 16 November 2010, Pohotovosť, C-76/10, EU:C:2010:685, para 73; CJEU
Judgment of 15 March 2012, Pereničová and Perenič, C-453/10, EU:C:2012:144, paras 44–47.
wording in the subsequent Matei case was clearer in that sense.53 However, in
Bucura, the CJEU made some headway by stating that if a term is not transparent,
a judge must assess its unfairness.54
With this background, it was not surprising that the CJEU accepted the requests
for a preliminary ruling that led to Gutiérrez Naranjo as, in its interpretation, the
consequences of a non-transparent term fall within its jurisdiction. In Gutiérrez
Naranjo, the CJEU appeared to build on Bucura (despite this case not being
cited)55 but with the peculiarity that it applied its doctrine (that courts must assess
the unfairness of non-transparent terms) to a clause relating to the definition of the
subject matter of the contract (Art 4(2) Directive 93/13/EEC), which did not seem to
be the context of Bucura.
Moreover, in Gutiérrez Naranjo the CJEU related the lack of transparency with
Art 6(1) Directive 93/13/EEC, according to which the unfair term should not be
binding on the consumer. The CJEU thus ruled that national case law (the Spanish
one), which limited the restitution effects of a term that was declared unfair to
amounts overpaid after the delivery of the decision in which the unfairness was
found (ex nunc effect, as decided by the Spanish Supreme Court on 25 March 2015),
was incompatible with Art 6(1) Directive 93/13/EEC.56
4.3 Spanish Case Law in the Aftermath of Gutiérrez Naranjo
In its decision of 24 February 2017, the Spanish Supreme Court rectified its doctrine
to bring it in line with Gutiérrez Naranjo and, hence, granted full ex tunc restitution
after a floor clause was found to be non-transparent and, thus, unfair.57 More
decisions followed this trend.58
Additionally, in a relevant shift, it could be argued that since Gutiérrez Naranjo
the Supreme Court has begun to depart from its previous understanding of how
53
CJEU Matei (n 35), para 72. The CJEU gave clear indications in the sense that the controverted
terms did not fall within Art. 4(2) Directive 93/13/EEC (para 71). However, as it is for the referring
court to verify this, the CJEU reasoned upon Art. 4(2) Directive 93/13/EEC, in case the national
court were to decide that the terms defined the subject matter of the contract or were related to the
adequacy of the price and the service given in exchange. It was in this context where transparency
was linked with unfairness.
54
CJEU Bucura (n. 40), paras 50 and 62. Although there is no official translation into English of the
case, we find ‘should’ to be an adequate translation from the French ‘est tenue de’. The Romanian
version of the judgment (the other one available) reinforces this interpretation.
55
There is no reference to Case C-348/14, Bucura, in the entire decision. However, the Advocate
General Mengozzi made reference to it in his Opinion (paras 48–49). Additionally, a footnote in the
Opinion (n 45) stated that essential obligations of the contract, if not transparent, are subject to an
unfairness assessment.
56
CJEU Gutiérrez Naranjo (n. 49), para 75.
57
ES:TS:2017:477.
58
Three SSTS of 20 April 2017 (ES:TS:2017:1498, ES:TS:2017:1499, and ES:TS:2017:1501).
642 F. de Elizalde
transparency should be assessed.59 In fact, in its seminal decision of 9 May 2013, the
Supreme Court expressed that transparency used an abstract criterion to assess the
validity of a term inserted in standard form contracts. According to this criterion, a
term would lack transparency if an average consumer could not be able to foresee its
legal and economic consequences.60
However, in the more recent decisions of 9 March 201761 and 8 June 201762 the
Supreme Court (plenary session in both cases) seemed to depart from the criterion of
the average consumer, which is intrinsically related to the abstract approach. Instead,
the Supreme Court increasingly looks to the actual consent of each particular
consumer. Therefore, transparency seems to be assessed more subjectively, on a
case-by-case basis.63 This could raise further conflicts with EU law as the CJEU has
consistently opted for the understanding of an ‘average consumer’ as the benchmark
to assess the transparency of a term.64
5 Judicial Review of Ancillary Price Terms
Unlike the assessment of the essential obligations of the parties, whose regulation
was omitted, the unfairness control of ancillary terms is expressly established in Art
82.1 Consumer Protection Act, which incorporates the rule of Art 3(1) Directive
93/13/EEC. Accordingly, standard terms that, against the requirement of good faith,
cause a significant imbalance in the parties’ rights and obligations arising under the
contract, to the detriment of the consumer, are subject to an unfairness control.
Following the Supreme Court’s interpretation of this provision, mentioned above, it
is now clear that this rule does not apply to the essential obligations of the parties.
The next sections will focus on the most relevant cases from the Spanish Supreme
Court concerning the assessment of ancillary price terms, including the general
control of default interest clauses and other costs related to mortgage loans. In all
cases the unfairness control is restricted to B2C standard form contracts.
59
60
STS 9 May 2013, ES:TS:2013:1916 [210] & [253].
61
ES:TS:2017:788.
62
ES:TS:2017:2244.
63
The Supreme Court still distinguishes the transparency control from the assessment of a vice of
consent. However, it decides that the circumstances of a particular consumer should be taken into
consideration to determine if it has understood the legal and economic consequences of the contract.
Therefore, it is not the criterion of an average consumer the lenses to analyse those circumstances
but those of the consumer-party to the contract.
64
CJEU Kásler (n 29), para 74; CJEU Andriciuc (n. 29), para 47.
5.1 General Control of Default Interest Clauses in B2C

Contracts
There is no general statutory limitation on default interest in Spain, despite some

specific rules for special types of contracts. Until recently, freedom of contract
seemed to prevail in this field.
However, the status quo changed radically after the seminal decision of the
Spanish Supreme Court of 22 April 2015 (plenary session).65 The background of
the case was a personal loan entered into by a consumer with a bank using standard
terms that contained an ordinary interest rate of 11.80% and a default interest rate of
21.80%, the latter of which was challenged. The Appeal Court had declared it unfair
and void and decided that no interest rate for default should be charged at all.66 The
Appeal Court did so based on the CJEU case Banco Español, according to which
following the invalidity of an unfair term the court cannot modify the contract by
revising the content of that term.67
The Supreme Court considered that default interest clauses were subject to an
unfairness assessment, as they constituted ancillary price terms. In particular, it
reasoned that default interest clauses fall under Art 85.6 Consumer Protection Act,
which reproduces Annex 1.e Directive 93/13/EEC, according to which a term is
unfair if it requires ‘any consumer who fails to fulfil his obligation to pay a
disproportionately high sum in compensation’.
The Supreme Court further ruled that a default interest rate on personal loans that
adds more than 2 percentage points to the ordinary (contractual) interest rate is
unfair. Thus, the challenged clause was nullified. However, unlike the Appeal Court,
the Supreme Court considered that the ordinary (contractual) interest rate should
continue to apply to the period of default. This doctrine was confirmed by the
Supreme Court decisions of 7 and 8 September 2015.68
Requests for a preliminary ruling to contest this doctrine were submitted to the
CJEU, especially as regards its compatibility with the CJEU case Banco Español.
The outcome is explained further below as it also affects default interest rates in
mortgage loans.69
65
ES:TS:2015:1723.
66
Besides a statutory interest as from the judgment, not from default.
67
CJEU Banco Español de Crédito (n. 28), para 73.
68
ES:TS:2015:3828 and ES:TS:2015:3829, respectively.
69
See Sect. 6.2.3.
644 F. de Elizalde
5.2 Clauses That Attribute Fees, Expenses and Taxes

to the Consumer
Standard terms incorporated into loan contracts have been challenged from almost
every possible angle. On one further occasion the Supreme Court had to assess the
validity of fees, expenses and taxes associated with the formation of a mortgage loan
contract, which are normally attributed to the consumer. This was the factual
background of its decision of 23 December 2015 (plenary session).70
The Supreme Court’s ruling was grounded both in the general unfairness assess-
ment rule (that a term is unfair if, contrary to good faith, it causes a significant
imbalance in the parties’ rights and obligations) and in particular unfair clauses listed
in the Consumer Protection Act.
With regard to the fees incurred in notarising and registering the loan and its
associated property right (the mortgage), the Supreme Court considered that as both
expenses benefited the bank, which is interested in securing its right ‘in rem’
(to which end the public deed and its registration are required), allocating their full
cost to the consumer created a significant imbalance in the parties’ rights and
obligations arising under the contract.
The challenged clause also attributed to the consumer any possible attorney and
court representative (Procurador) fees that may be incurred in the event of breach in
the repayment of the loan. The Supreme Court considered the term invalid in this
respect based on the general unfairness assessment control (the imbalance in the
rights and obligations of the parties) and a possible infringement of mandatory
procedural rules (basically, the ‘loser pays’ rule). In fact, it may occur that for
various reasons (the Court mentions partial victory, successful opposition by the
consumer or formal defects in the complaint), the bank might not be granted a
favourable order over the fees. Therefore, the Supreme Court established that a
clause, as the contested one, which necessarily imposes those fees on the consumer,
would create a significant imbalance in the parties’ rights and obligations.
Lastly, the Supreme Court dealt with a tax due as a result of the loan contract
(Actos Jurídicos Documentados), which is also ordinarily allocated to the consumer.
The Court considered that the bank was, at least to a certain extent, a taxable person
and, thus, established that the term was unfair as it was framed in the black listed
clause of Art 89.3.c Consumer Protection Act—it is unfair to attribute to the
consumer the payment of taxes when the taxable person is the business. This
interpretation was controversial, as another chamber of the Spanish Supreme Court
(Chamber 3, Contentious-Administrative Law) ruled that the taxable person for that
tax is the borrower (the consumer, in this case).71 In its subsequent decision of
70
ES:TS:2015:5618.
71
SSTS (3 ) 21 November 2018 (ES:TS:2018:3885), 20 January 2004 (ES:TS:2004:159), 20 June
2004 (ES:TS:2004:4976) and 31 October 2006 (ES:TS:2006:7141). See Zumaquero Gil (2018),
pp. 150–155.
15 March 2018, the Civil Chamber of the Supreme Court aligned itself with the
Contentious-Administrative Chamber as regards the taxable person. However, it
confirmed the unfairness of standard terms that allocate all concepts under this tax to
consumers as in respect of some acts (e.g. asking for copies of documents) the
taxable person could vary.72
6 Regulatory Provisions Controlling Price Terms
The statutory control of main and ancillary price terms is only sectorial and mostly
restricted to B2C contracts. This section intends to identify the most relevant ones.
6.1 Provisions Controlling Main Price Terms
An old statute that still controls main price terms is the Usury Act of 1908.73
According to its Art 1, loan contracts in which the interest rate is considerably
higher than the ‘normal’ price of money and manifestly disproportionate in the
circumstances are void.74 The control is also applicable to contracts that are similar
to loans (Art 9). In determining the ‘normal’ price of money, the Supreme Court has
relied on the information that financial entities send to the Central Bank of Spain as
regards the interest rates used in the market.75
The Usury Act applies not only to B2C but also to B2B and C2C contracts.
However, courts have been very cautious in resorting to this Act and case law is not
abundant.
6.2 Provisions Controlling Ancillary Price Terms
6.2.1 Prohibition of Round-Up Clauses
Art 87.5 Consumer Protection Act lists as unfair those standard terms which round
up the time-consumed, or round up the price of a product or service. It is a good
example of how judicial activism may, on occasion, trigger legislative reforms. In
72
ES:TS:2018:848.
73
Ley de 23 de julio de 1908, de la Usura, Gaceta Oficial 24 July 1908 (Usury act).
74
Art 1 adds more requirements but these have been considered sufficient for the rule to apply. See
STS 25 November 2015 (ES:TS:2015:4810).
75
See STS 25 November 2015 (ES:TS:2015:4810). The decision ruled that an interest rate of 24.6
per cent, which exceeded the double of the medium interest rate used in the market, was consid-
erably higher than the normal price of money.
646 F. de Elizalde
fact, this provision is the result of case law that had ruled against practices in the
parking and telephone sectors that rounded up the time consumed (in parking
contracts, rounding up to the next half hour or even hour; in mobile phone
contracts, full minutes or stretches of 30 s instead of the real time spoken). It
was also motivated by case law that had declared unfair those terms which granted
financial institutions the right to round up the variable interest rate laid down in
loan contracts, with effect from the first revision, to the following quarter of a
percentage point.76
6.2.2 Prohibition to Charge Unused Products and Services
Art 87.5 Consumer Protection Act also lists as unfair those clauses that ‘charge for
products or services not effectively used’. This prohibition may be too broad and
should be read in light of its background (the challenge of round-up clauses).77
Services that are charged by time clearly fall within this prohibition. Also, it
encompasses those services that are charged but not provided, a well-established
prohibition in banking contracts.78 However, the rule laid down in this article would
not cover those services in which the main costs are fixed, with time treated as a
marginal cost. Examples of this could be gym subscriptions or the lease of movables
or immovables, which may be lawfully charged for periods of months or days even
though they are not used all the time.79
6.2.3 Statutory Provisions Limiting Default Interest
6.2.3.1 Default Interest in Mortgage Credits and Loans
The Spanish crisis, which began in 2008, brought with it a stricter legislative and
judicial control (with an important intervention by the CJEU)80 over credits and
loans applied for the acquisition of residential property. Among these measures, Law
76
In respect of the latter, see SSTS 4 November 2010 (ES:TS:2010:6062), 29 December 2010 (ES:
TS:2010:7551), 2 March 2011 (ES:TS:2011:1244) and 11 February 2015 (ES:TS:2015:278).
Further details may be found in Cámara Lapuente (2011), pp. 881–889.
77
Cámara Lapuente (2011), p. 896.
78
Currently enshrined in Orden EHA/2899/2011, de 28 de octubre, de transparencia y protección
del cliente de servicios bancarios, BOE nr 261 of 29 October 2011. It replaced older provisions.
79
80
See, among others, CJEU Judgment of 14 March 2013, Aziz, C-415/11, EU:C:2013:164; CJEU
Judgment of 5 July 2014, Sánchez Morcillo and Abril García, C-169/14, EU:C:2014:2099; CJEU
Judgment of 21 January 2015, Unicaja Banco and Caixabank, C-482/13, C-484/13, C-485/13 and
C-487/13, EU:C:2015:21; CJEU Gutiérrez Naranjo (n 49).
1/201381 reformed the Mortgage Act (Art 114)82 in order to introduce a limitation on
default interest in mortgage-secured credits and loans intended to acquire dwellings.
The cap on default interest was set at three times the legal interest rate.
After this cap was introduced, it was uncertain whether default interest clauses,
which did not exceed the limitation, would necessarily be deemed fair. This was first
clarified by the CJEU cases Banco Bilbao and Unicaja, in which it was decided that
even if those terms fall within the threshold of Art 114.3 Mortgage Act, they are not
exempted from the general unfairness assessment (Art 3(1) Directive 93/13/EEC).83
The Spanish Supreme Court followed this reasoning in its decisions of 23 December
2015 and 18 February 2016.84
Moreover, in the subsequent ruling of 3 June 2016,85 the Supreme Court (plenary
session) extended the doctrine established in its decision of 22 April 2015,86 in
respect of default interest in personal loans, to those of mortgage loans and credits
for the acquisition of dwellings. According to this doctrine, any default interest
which exceeds the ordinary (contractual) interest rate by 2 percentage points, is
deemed unfair and void. However, the amounts in default bear the ordinary (con-
tractual) interest.
Requests for a preliminary ruling to contest this doctrine were submitted to the
CJEU, especially as regards its compatibility with the CJEU case Banco Español.
The Supreme Court itself sent a request as well.87 The CJEU joined the requests and
in the case Escobedo Cortés88 it decided that the Supreme Court’s case law was
compatible with EU law, in particular, with the Directive 93/13/EEC. The CJEU
considered that treating a default interest rate as unfair when it exceeded 2 percentage
points the ordinary rate was wholly consistent with the objective of consumer
protection of the Directive.89 As regards the consequence of declaring a default
interest rate unfair, the CJEU ruled that annulment of the default interest rate did not
bring about that of the term fixing the ordinary interest rate.90 Therefore, case law
from the Supreme Court was deemed compatible with EU law in both issues.
81
Ley 1/2013, de 14 de mayo, de medidas para reforzar la protección a los deudores hipotecarios,
reestructuración de deuda y alquiler social, BOE nr 116 of 15 May 2013 (Law 1/2013).
82
Decreto de 8 de febrero de 1946, por el que se aprueba la nueva redacción oficial de la Ley
Hipotecaria, BOE nr 58 of 27 February 1946 (Mortgage Act).
83
Respectively, CJEU Banco Bilbao Vizcaya Argentaria (BBBVA) (n 49), para 45; CJEU Unicaja
Banco and Caixabank (n 80), para 39.
84
ES:TS:2015:5618 and ES:TS:2016:626.
85
ES:TS:2016:2401.
86
See Sect. 5.1.
87
ES:TS:2017:785A.
88
CJEU Judgment of 7 August 2018, Banco Santander, C-96/16 and C-94/17, EU:C:2018:643.
89
CJEU Banco Santander (n 88), paras 69–71.
90
CJEU Banco Santander (n 88), paras 74–76.
648 F. de Elizalde
6.2.3.2 Default Interest Cap for Overdrafts
The Consumer Credit Directive allows for tacit overdrafts (overrunning) if certain
conditions are fulfilled.91 In transposing the Directive, the Spanish Consumer Credit
Act (Art 20.4) maintained a cap on default interest for overrunning that existed in the
previous law. According to it, the default interest cannot result in an APR of more
than 2.5 times the legal interest rate.92 For a long time, this cap stood alone in the
Spanish legal landscape and some questioned whether this provision could be
extended to other analogous situations—with some courts declaring in the affirma-
tive.93 The commented decision of the Supreme Court of 22 April 201594 should
bring this approach to an end. The current doctrine of the Supreme Court (that a
default interest rate is unfair if it exceeds the ordinary one by 2 percentage points)
should be considered the applicable one.95 Lastly, it is also likely that default interest
due to overrunning in consumer credit contracts (the subject matter of the statute
under analysis) could also be challenged even if they did not exceed the cap of Art
20.4, by an analogous reasoning to what has occurred in respect of Art 114.3
Mortgage Act (a cap in default interest of mortgage loans and credits).
6.2.4 Other Provisions
This section has tried to present the most relevant provisions controlling price terms
in Spanish law and their interaction with the judiciary. Other legislative provisions
do exist, such as a cap in the charge for the withdrawal of money from ATMs,96 but
their application has so far been straightforward. In addition to this, the Consumer
Protection Act has several far-reaching articles that could produce interesting case
law in the future but it is impossible to tackle these here. Moreover, legislation from
the European Union influences Spanish law. It has also affected price terms, for
example, by establishing caps to interchange fees for consumer debit and credit card
transactions97 or abolishing retail roaming charges.98
91
Art 18 of Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008
on credit agreements for consumers and repealing Council Directive 87/102/EEC, OJ 2008, L
133/66.
92
Art 20.4 of Ley 16/2011, de 24 de junio, de contratos de crédito al consumo, BOE nr 151 of
25 June 2011 (Consumer Credit Act), and Art 89.7 Consumer Protection Act.
93
See Pertíñez Vílchez (2011), pp. 815–818.
94
See Sect. 5.1.
95
See, for instance, SAP Málaga 7 February 2017, ES:AMPA:2017:174.
96
Real Decreto-ley 11/2015, de 2 de octubre, para regular las comisiones por la retirada de efectivo
en los cajeros automáticos, BOE nr 237 of 3 October 2015.
97
Arts 3 and 4 of Regulation (EU) 2015/75 of the European Parliament and of the Council of
29 April 2015 on interchange fees for card-based payment transactions, OJ 2015, L123/1.
98
Art 6a of Regulation (EU) 2015/2120 of the European Parliament and of the Council of
25 November 2015 laying down measures concerning open internet access and amending Directive

As a Member State of the European Union, Spain has incorporated the transparency
requirements that stem from EU law, which include price transparency. It has also
added more of its own.
One of the most established provisions from EU law is the duty to inform about
the APR in consumer credit contracts.99 In Spain, this requirement has been
extended to all B2C banking contracts.100 Additionally, financial institutions are
obliged to break down and inform about charges for other services.101 The duty to
provide pre-contractual information affects related services, with a specific provision
preventing price bundling.102 Consumers should also regularly receive information
about interest, taxes and charges paid during the lifetime of banking contracts.103
The Consumer Protection Act has extended price transparency to all B2C con-
tracts. According to Art 60.2.b, a business has a duty to provide pre-contractual
information (including advertising) on the full price, with a breakdown of the total,
which contains any increases or discounts that may be applicable, taxes, expenses
that may be passed on to the consumer and additional expenses for incidental
services, financing or other similar payment terms. Art. 60.2 should be
complemented by other provisions of the Consumer Protection Act (especially by
Art 20.1.c)104 and other legislative rules seeking price transparency, such as the
European Regulation 1008/2008, which prevents price partitioning in the air trans-
port sector.105
2002/22/EC on universal service and users’ rights relating to electronic communications networks
and services and Regulation (EU) No 531/2012 on roaming on public mobile communications
networks within the Union, OJ 2015, L 310/1.
99
(n.91).
100
Art 4 of Orden EHA/2899/2011 (n 78); Art 14 of Ley 2/2009, de 31 de marzo, por la que se
regula la contratación con los consumidores de préstamos o créditos hipotecarios y de servicios de
intermediación para la celebración de contratos de préstamo o crédito, BOE nr 79 of 1 April 2009.
101
Arts 3 and 7 of Order EHA/2899/2011 (n 78); Art 14 of Ley 2/2009 (n 100).
102
Art 12 of Order EHA/2899/2011 (n 78).
103
Art 8.3 of Order EHA/2899/2011 (n 78).
104
Art 20.1.c. transposed Art. 7.4.c of Directive 2005/29/EC of the European Parliament and of the
Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the
internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and
2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of
the European Parliament and of the Council, OJ 2005, L 149/22.
105
Art 23 of Regulation (EC) No 1008/2008 of the European Parliament and of the Council of
24 September 2008 on common rules for the operation of air services in the Community, OJ 2008,
L293/3. Other important pieces of EU law have not yet been transposed into Spanish law. Among
them, the Payment Accounts Directive (Directive 2014/92/EU of the European Parliament and of
the Council of 23 July 2014 on the comparability of fees related to payment accounts, payment
account switching and access to payment accounts with basic features, OJ 2014, L257/214), and the
Mortgage Credit Directive (Directive 2014/17/EU of the European Parliament and of the Council of
650 F. de Elizalde
The abovementioned provisions that promote price transparency, even if accom-

plished, have not prevented courts from applying the unfairness assessment
enshrined in the Consumer Protection Act to both main and ancillary price terms.106
8 Conclusion
The control of price related terms in Spanish law follows a twofold approach. B2B
contracts, even standard form, are largely governed by classic rules on contract
formation, with some additional requirements that stem from standardization. The
evolution in respect of them is marked by the parallel development of consent. In
contrast, B2C standard terms are framed in a special legal regime from which
judicial activism has derived far-reaching consequences, sometimes leading to
legislative reform. The interaction with EU law, including the possibility of any
court to request a preliminary ruling from the CJEU even against an established
doctrine of the Supreme Court, affects the hierarchical structure of the judiciary.
Activism of stakeholders has been fostered by the CJEU, in the way that it has
recurrently decided against the compatibility of Spanish law with Union law. All this
has resulted in a more creative approach towards B2C standard form contracts with
probable gains for justice yet also a potential hindrance to legal certainty. In any
case, Fouillée’s maxim ‘qui dit contractuel dit juste’107 has lost much of its antique
splendour.
Acknowledgements I would like to thank Sebastian Arnold for his research assistance. The paper
is a result of the research project DER 2017-84947-P funded by the Spanish Ministry of Economy,
Industry and Competitiveness.
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de Derecho Civil 5(2):149–191
Form Contracts in Switzerland—The
Control of Standard Contracts Terms:
The Swiss Approach
Thomas Probst
Abstract The Swiss legal and judicial control of price (related) terms in standard
form contracts is fairly complex. For historical reasons and partially by coincidence,
the legislator relies on a hybrid approach that combines elements of the law of
obligations and the law against unfair competition. As a result, the control of
standard contract terms lacks legislative coherence and raises challenging questions
of interpretation for legal scholars and courts.
With regard to the law of obligations, standard contract terms are subject to
control under three aspects: First, standard terms must be included in the contract by
the parties’ mutual consent. Secondly, judicial guidelines have emerged as to the
proper interpretation of standard contract terms and, thirdly, standard contract terms
must comply with Swiss mandatory law, i.e. their content must neither be unlawful
nor immoral.
As for the judicial review of standard contract terms pursuant to the law against
unfair competition, Art 8 UCA (2011) states that the “use of general terms and
conditions which, in contradiction to the principle of good faith, provide for a
substantial and unjustified disproportion between the contractual rights and obli-
gations to the detriment of the consumer” are deemed unfair. The practical bearing of
this provision, which aims at the protection of consumers, remains unclear as it
combines elements that are hard to reconcile. How and when can the use of “bad
faith” standard contract terms be justified? The answer is far from clear and case law
has not given any answer to date. Recent legal doctrine suggests that if a substantial
disproportion of contractual rights and obligations is established, the court has to
assess whether such disproportion violates the principle of good faith, i.e. whether
the contracting party having supplied the standard terms could assume in good faith
that the other party (consumer) would have accepted those terms without objection
even if they had been subject to individual negotiation. In case a substantial
disproportion of contractual rights and obligations turns out to be contrary to good
T. Probst (*)
University of Fribourg, Faculty of Law, Chair of Law of Obligations, European Private Law and
Comparative Law, Fribourg, Switzerland
e-mail: thomas.probst@unifr.ch

https://doi.org/10.1007/978-3-030-23057-9_26
654 T. Probst
faith, the presumption arises that it is also unjustified. The burden of proof falls then
on the party having supplied the (unfair) standard terms to provide conclusive
evidence that the disproportion of contractual rights and obligations is adequately
counterbalanced by concrete and material advantages granted by other contract
terms. Although Art 8 UCA (2011) does not say so, the dominant opinion considers
that unfair contract terms are null and void.
As regards the judicial control of contractual price terms, two aspects should be
kept apart: on the one hand, the question whether and, if so, to what extent price
(related) terms in standard form contracts are subject to judicial review and, on the
other hand, whether price adjustment clauses in standard form contracts are valid.
1 Introduction
The present national report explains how and to what extent price terms in standard
form contracts are subject to legislative and/or judicial control under Swiss law.
At the outset, two principles should be recalled, namely the principle of freedom of
contract, which is a fundamental pillar of Swiss private law and a key element of the
Swiss free market economy1 and the principle of pacta sunt servanda, which states that
any person2 who freely enters into a contract—whether by a real or normative
consent3—will be bound by such agreement.4 As a corollary, at least in principle, a
contracting party cannot modify contract terms later on without the other party’s
consent.5 This is not surprising. If a party to a contract could unilaterally modify the
contractual terms at its own discretion any time later, a contract would largely lose its
practical utility as it would fail to provide a reliable framework (of mutual rights and
obligations) for the parties’ future commercial or other relationship.
Nonetheless, the principle of pacta sunt servanda is not an absolute precept but
remains subject to certain restrictions because, as the case may be, a contracting
party may have a legitimate interest in unilaterally adjusting a contract term. Swiss
statutory law, in particular the Swiss Code of Obligations (Swiss CO) endorses this
approach as exemplified by certain provisions (Sect. 2.2, hereinafter).
It is also possible that the parties themselves anticipate a practical need for
adjusting their contract to a future change of circumstances. To this effect, they
may either specifically negotiate an adaptation scheme for future contract adjust-
ments or a party may unilaterally supply (and possibly even impose) a standard
clause providing for its right to modify the contract later on (Sect. 2.3, hereinafter).
1
See Art 27 Swiss Constitution; Arts 1, 19(1) Swiss CO; BGE 15 March 2010, 136/2010 I 203 cons
4.4.1.
2
Such persons may be natural persons (cf. Arts 11–16 Swiss CC) or legal entities (cf. Arts 52–56
Swiss CC).
3
Arts 1, 18 Swiss CO.
4
Arts 1, 68, 97 Swiss CO.
5
By mutual agreement, the parties may modify their contract terms any time. Cf. Art 115 Swiss CO.
Control of Price Related Terms in Standard Form Contracts in. . . 655
2 Unilateral Alteration of Contract Terms
2.1 In General
As mentioned before, statutory law may derogate from the principle of pacta sunt
servanda by empowering a contracting party to modify contract terms unilaterally
(Sect. 2.2, hereinafter). In the absence of statutory rules6 to this effect, freedom of
contract prevails and the parties are free to determine on their own whether and, if so,
under what conditions a unilateral modification of contract terms (contractual
adaptation scheme) should be allowed (Sect. 2.3, hereinafter).
Any a posteriori (unilateral) modification of contract terms—whether based on
statutory law or on a contractually agreed adaptation mechanism—can either relate
to a party’s main performance that characterises the contract in question or to some
ancillary (less essential) term that is common to other contracts as well. In the first
case, the contractual modification concerns the price or the counter-performance
therefor, whereas in the latter case some secondary contract term (e.g. place or time
of performance) will be changed. Obviously, the latter modification constitutes a less
serious derogation from the principle of pacta sunt servanda than the former.
2.2 Statutory Provisions on Unilateral Alteration of Contract

Terms
The Swiss CO contains relatively few provisions that permit a contracting party to
change contract terms unilaterally. The following examples are noted7:
– Certain statutory rules on the lease of residential and commercial premises allow
the tenant to challenge the (contractually agreed) initial rent as unfair, if the
landlord gains an excessive income from the leased property.8 Similarly, if a
landlord exercises his right to increase the rent during the lease—with effect as of
the next possible termination date of the lease—the tenant may challenge such
increase as unfair.9 In both instances, the legislator takes the view that some
limitation on pacta sunt servanda is necessary for the protection of tenants
(of residential and commercial premises) from unfair rents. In such cases, the
application of statutory law may result in a unilateral reduction of the rent
6
Such statutory rules are usually mandatory law.
7
Instances where a contracting party can claim a price reduction under the rules of warranty (for
instance, reduction of sale price [Art 205 Swiss CO], reduction of rent [Art 259d Swiss CO],
reduction of price for work [Art 368 Swiss CO]) are not considered here as in those cases the price
reduction is a legal remedy for the obligor’s failure to properly perform his contractual obligations.
8
Arts 269-269a Swiss CO.
9
Art 270b Swiss CO.
656 T. Probst
although the rent constitutes a key element of any lease that must be determined
by the parties
– Pursuant to Art 373(2) Swiss CO, a contractor who has undertaken to carry out
work for a fixed price, may ask the judge to increase the price if, subsequently,
performing his work has been seriously encumbered by unforeseeable and
extraordinary new circumstances. This statutory provision grounds on the prin-
ciple of clausula rebus sic stantibus which clause provides a more general basis
for adjusting contract terms if extraordinary and unforeseeable circumstances
have come to affect the execution of a contract to a degree that renders perfor-
mance unbearable for the obligor.10 Strictly speaking, the legal basis for this ex
post unilateral modification of contract terms resides in the principle of good
faith.11 The key argument is that it would amount to an abuse of right if a
contracting party could insist on the other party’s compliance with contractual
obligations although a fundamental change in circumstances has profoundly
undermined the contractual equilibrium after the conclusion of the contract.12
– A last example worth mentioning is Art 21 of the Swiss CO. This statutory
provision deals with the situation where a contracting party exploits the other
party’s inexperience or thoughtlessness to gain an unfair advantage from contract
terms that are excessively disadvantageous to the other party. Pursuant to the
wording of this provision, the remedy available to the aggrieved party is the
avoidance of the entire contract. However, the Swiss Federal Supreme Court has
construed Art 21 Swiss CO to include—in majore minus—also a partial avoid-
ance of the contract and, in particular, even the reduction of an excessive
contractual advantage of the exploiting party.13 Such a reduction of an excessive
contractual obligation to the legally permissible level (at least) results in a judicial
adaptation of contract terms and insofar restrains the principle of pacta sunt
servanda.
2.3 Contractual Provisions on Unilateral Alteration

of Contract Terms
When two parties enter into a long-term contract, they will often anticipate some
need for future adjustments of their contract. Accordingly, they may agree on a
contractual mechanism as to when and to what extent a unilateral modification of the
contract terms should be allowed. Depending on the circumstances, such an adap-
tation mechanism may either be the result of (more or less difficult) negotiations or it
may be incorporated—often rather discreetly—in a standard clause of general
10
BGE 24 April 2001, 127/2001 III 302 cons 5–6. – See also Art 19 OR2020.
11
Art 2 Swiss CC.
12
Kramer and Probst (2018), paras 293–295.
13
BGE 26 June 1997, 123/1997 III 292, cons 2–6.
contract terms (“boiler plate”) supplied by one of the parties as a condition precedent
to its willingness to enter into a contract.
Individually negotiated adaptation schemes are often found in (long-term) busi-
ness contracts14 but hardly ever in consumer contracts. Conversely, standard
clauses empowering a party to modify contract terms unilaterally are found likewise
in business contracts15 and consumer contracts.
3.1 The Hybrid Approach of Swiss Law
Under Swiss law, the legislative and judicial control of general contract terms in
standard form contracts is rather complex. This is due to the Swiss approach which
seeks to control standard terms by combining elements from the law of obligations
(Sect. 3.2, hereinafter) on the one side, and the law against unfair competition16 on
the other (Sect. 3.3, hereinafter). A further difficulty arises from EU law17 that
cannot reasonably be ignored by Switzerland.18
3.2 The Control of Standard Contract Terms Under the Swiss

Law of Obligations
Unlike other countries,19 Switzerland has never enacted a specific statute for the
control of standard form contracts. Therefore, the Swiss Federal Supreme Court had
to apply the general rules of the law of obligations so as to secure some control of
unfair contract terms. This judicial approach has given rise to three levels of review:
First, the requirement of the parties’ mutual consent to the standard contract terms
(Sect. 3.2.1, hereinafter). Secondly, certain judicial guidelines as to the proper
interpretation of standard contract terms (Sect. 3.2.2, hereinafter); and thirdly, the
14
Cf. for instance BGE 1 February 2016, 4A_428/2015 (para A).
15
Cf. for instance BGE 8 September 2014, 4A_234/2014, cons 3. Often times, one of the parties is a
small or medium-sized enterprise that does not have the necessary bargaining power to negotiate a
unilateral option for adapting contract terms.
16
Swiss Federal Act Against Unfair Competition 1986, Art 8.
17
Council Directive 93/13/EC of 5 April 1993 on unfair terms in consumer contracts, OJ 1993, L
95/29.
18
For further details: Probst (2016), Art 8 paras 1–4.
19
Cf. the German AGBG (Gesetz zur Regelung des Rechts der Allgemeinen
Geschäftsbedingungen) of 2 December 1976, which was later incorporated into the German BGB
(§§ 305–310 BGB). For further details: Kramer et al. (2016), paras 25 ff.
658 T. Probst
conformity of standard contract terms with Swiss mandatory law (Sect. 3.2.3,
hereinafter).
3.2.1 The Control of Consent to Standard Contract Terms
Standard Contract Terms are binding upon the parties if, and only if, the parties have
agreed that the terms form an integral part of their contract. Any consent to standard
terms (having been supplied by the other party) presupposes that the consenting
party had a fair opportunity to take note of them.20 If a party reads and understands
the standard terms made available to it before accepting them, the terms are fully
incorporated into the contract. By contrast, if a party neither reads nor understands
the standard terms before accepting them, such uninformed acceptance amounts to a
so called global incorporation.21 The distinction between full incorporation and
global incorporation of standard terms into a contract is relevant because a global
incorporation does not extend to clauses that, in good faith, are too singular or
surprising to be covered by the party’s uninformed consent.22
3.2.2 The Control as to the Interpretation of Standard Terms
As a matter of principle, standard terms—which have been fully or globally incor-

porated into a contract—are governed by the same rules of interpretation as terms
that have been individually negotiated. Nonetheless, two particular rules have
emerged from case law regarding the interpretation of standard terms. First, individ-
ually negotiated terms take precedence over conflicting standard contract terms. This
is rather evident since, otherwise, it would be pointless for the parties to negotiate
certain contractual issues in derogation from the standard terms.23 Secondly, if the
application of the classical tools of interpretation does not reveal a conclusive
meaning of a standard term, this lack of clarity will be interpreted contra
proferentem, i.e. against the party who has supplied the standard term in question.
The rationale of this rule of interpretation is fairly straightforward: a party who
supplies ambiguous standard terms should bear the risk of such uncertainty and
should not be allowed to gain any advantage thereof.24
20
21
For further details: Probst (2016), Art 8 para 156.
22
This instrument of judicial control is generally referred to as the “unusualness rule”
(“Ungewöhnlichkeitsregel”, “règle dite de l’inhabituel”) and was adopted by the Swiss Federal
Supreme Court in BGE 6 December 1983, 109/1983 II 456 cons 4–5. For more details: Probst
(2016), Art 8 paras 167–181.
23
See also Probst (2016), Art 8 para 206.
24
See also Probst (2016), Art 8 para 207.
3.2.3 The Control of the Content of Standard Contract Terms
Like any contract term, standard terms must comply with mandatory law, i.e. their
content must neither be unlawful nor immoral.25 Standard terms that fail to conform
to mandatory law have no legal effect because they are considered null and void.26
3.3 The Control of Standard Contract Terms Under the Swiss

Federal Act Against Unfair Competition (Unfair
Competition Act)
3.3.1 Historical Genesis of Art 8 Unfair Competition Act
In practice, the general rules of the law of obligations turned out to be insufficient for
providing effective protection against unfair standard terms. Therefore in 1986, the
Swiss legislator took advantage of the then pending revision of the Unfair Compe-
tition Act (hereinafter UCA) to introduce the new provision of Art 8 UCA (1986);
but unfortunately, this article failed to have any notable effect. The flaw of Art
8 UCA (1986) was that it required standard terms to be misleading for their use to
constitute an act of unfair competition. That is why, in 2011, the legislator revised
the UCA anew and adopted a modified version of Art 8 UCA (2011), which is still in
force to date.
A synoptic comparison of Art 8 UCA (1986) and Art 8 UCA (2011) reveals three
differences:
Art 8 UCA (1986) Art 8 UCA (2011)

Shall be deemed to have committed an act of Shall be deemed to have committed an act of
unfair competition, anyone who, in particular, unfair competition, anyone who in particular
makes use of pre-formulated general terms and uses general terms and conditions which, in
conditions that, to the detriment of a contracting contradiction to the principle of good faith,
party, misleadingly: provide for a substantial and unjustified dis-
(a) Deviate considerably from the statutory proportion between the contractual rights and
provisions that apply either directly or by anal- obligations to the detriment of the consumer.
ogy, or
(b) Provide for an allocation of rights and
obligations in substantial contradiction with the
nature of the contract.
25
Art 19–20 Swiss CO; for further details and provisions of mandatory law see Probst (2016),
Art 8. paras 186–203.
26
Art 20(1) Swiss CO. The argument that a standard contract term is void can be raised by a
contracting party at any time because this objection is not subject to the statute of limitations.
Moreover, a judge has to consider whether a term is void ex officio, i.e. regardless of whether or not
a party has raised this objection.
660 T. Probst
First, the requirement that the standard contract terms be misleading for their use
to constitute an act of unfair competition has been substituted by the prerequisite that
the standard terms need to be in contradiction to the principle of good faith. This
rephrased condition has a broader scope than the former did because standard terms
may be against good faith even though there is no misrepresentation involved.27
Insofar, the scope of application of the revised Art 8 UCA (2011) has been
expanded.
Secondly, Art 8 UCA (2011) does not protect anymore any contracting party but
only consumers. This implies a notable restriction of its scope of application
because, in particular, small and medium-sized enterprises are ever since excluded
from the protection against unfair standard terms under this provision.28
Thirdly, in order to decide whether the use of standard contract terms represents
an act of unfair competition, Art 8 UCA (2011) does not refer anymore to a
considerable deviation from the applicable statutory provisions nor to an allocation
of rights and obligations in material contradiction with the nature of the contract in
question. Instead, it relies on the criterion of a substantial and unjustified dispro-
portion between contractual rights and obligations. This new criterion is hard to
interpret coherently.29
3.3.2 Challenging Construction of Art 8 UCA (2011)
Art 8 UCA (2011) is difficult to construe not least so because its wording is
ill-conceived. Relying on the erroneous German text of Art 3(1) Directive 93/13/
EEC on unfair contract terms,30 the Swiss legislator has accumulated conditions that
are difficult to reconcile.31 If and when standard contract terms provide, in bad faith,
for a substantial disproportion between contractual rights and obligations, how
should such male fide conduct yet be justified?
Although Art 8 UCA (2011) entered into force on July 1, 2012, the inter-
pretation of this provision is still fraught with considerable uncertainty and the
Swiss Federal Supreme Court has not yet been able to clarify the legal situation.32
27
Typically, this is the case when a standard clause, which is abusively disadvantageous to the
customer, is couched in clear and intelligible terms. See also Probst (2013), pp. 250–251.
28
For further details: Probst (2013), pp. 252–253.
29
See Probst (2013), pp. 253–255.
30
Council Directive 93/13/EC of 5 April 1993 on unfair terms in consumer contracts, OJ 1993, L
95/29.
31
See Probst Wettbewerbsrecht und Konsumentenschutz – Ein (dis-)harmonisches Konkubinat?
(2017a), paras 61–73.
32
To date, the only decision rendered by the Swiss Federal Supreme Court was BGE of 15 July
2014, 140/2014 III 404 cons 3–4, which dealt with the issue of intertemporal application of Art
8 UCA (2011). The Court held in this case that the legal dispute (regarding the validity of a clause
providing for an automatic extension of a fitness studio contract) was governed by the old Art
8 UCA (1986). In an obiter dictum, the Court added that, under the new Art 8 UCA (2011), such
Consequently, legal doctrine has attempted to provide some guidance as, for
instance, by suggesting to apply Art 8 UCA (2011) in four steps33: At first, in
line with the rules on filling contractual lacunae as a reference basis, the judge
needs to establish whether or not one or several standard terms provide for a
disproportion between the contractual rights and obligations. Secondly, if such
disproportion exists, the judge has to determine whether or not it is substantial.
Thirdly, if there is a substantial disproportion of contractual rights and obligations,
the court is to assess whether or not such disproportion violates the principle of
good faith, i.e. whether or not the contracting party having supplied the standard
terms was entitled to assume, in good faith, that the other party would have
accepted the terms without any objection had they been subject to individual nego-
tiation. Fourthly, if the substantial disproportion of contractual rights and obli-
gations is deemed to be in contradiction to good faith, the presumption is
established that, by the same token, the disproportion is also unjustified. In this
event, the burden of proof falls on the party having supplied the (unfair) standard
terms to adduce conclusive evidence that the substantial disproportion of con-
tractual rights and obligations is adequately counterbalanced by concrete and
material advantages granted by other terms of the contract.
If the use of one or several standard contract term turns out to be an act of unfair
competition pursuant to Art 8 UCA (2011), the legal claims available to the
aggrieved (contracting) party under Art 9 UCA34 are hardly appropriate for
establishing the (in)validity of standard contract terms. In fact, Art 9 UCA aims at
safeguarding fair competition rather than at protecting consumers from unfair
contract terms. Nevertheless, according to the dominant opinion unfair contract
terms are deemed to be null and void, i.e. they are not binding upon the aggrieved
party (consumer).35
As for potential legal consequences under criminal law, it should be noted that
criminal sanctions do not apply to the use of unfair contract terms because Art
23 UCA does not mention Art 8 UCA.36
clauses would not be considered as per se invalid. – For further details Probst (2016), Art 8 paras
223–228, 324–325.
33
For further explanations: Probst (2016), Art 8 paras 293–297.
34
The following claims are provided by Art 9 UCA: request for prohibition of (imminent)
infringement; request for removal of ongoing infringement or request for establishing unlawfulness
of infringement.
35
36
Probst (2016), Art 8 para 292.
662 T. Probst
3.3.3 Action for Abstract Control by Consumer Protection

Organisations
In practice, consumers rarely take legal action against companies that use unfair
contract terms because they deem the financial risk of legal proceedings too high in
consideration of the limited benefit they would gain if they won their case.
However, pursuant to Art 10(2)(b) UCA, Swiss Consumer Protection Organi-
sations (of national or regional significance) are entitled to bring action, in their own
name, against companies that use unfair contract terms. Such legal actions aim at an
abstract control of unfair contract terms and have the advantage that, if the court
declares a standard contract clause to be unfair and prohibits its further use, that
ruling has a broader effect than a judgment rendered upon an action brought by a
single consumer.37
Despite this advantage of an abstract control of standard contract terms the hopes
put in Art 10(2b) UCA have not materialised. Mainly two reasons explain for this
unsatisfactory outcome: Firstly, the application of Art 8 UCA (2011) to legal actions
brought by Consumer Protection Organisations in pursuit of an abstract control of
standard contract terms, is a problematic undertaking since this provision has been
designed for individual claims.38 Secondly, the Consumer Protection Organisations
lack the necessary financial resources to bring promising actions against users of
unfair contract terms.39
3.3.4 Relevance of the Law of the European Union
There is no doubt that Art 8 UCA (2011) has been inspired by Art 3(1) Directive
93/13/EEC.40 Insofar, Art 8 UCA (2011) may be conceived as a unilateral (¼
autonomous) adoption of EU law by the Swiss legislator. At the same time, further
provisions of the Directive 93/13/EEC, in particular Art 4(2), have neither been
discussed nor (autonomously) adopted by the Swiss legislator.41 Consequently,
when interpreting Art 8 UCA (2011), the Swiss Federal Supreme Court is under
no (national nor international) obligation to follow case law handed down by the
CJEU on this Directive but decides at its own discretion whether or not to consider
such case law.
In practice, the Swiss Federal Supreme Court will refer to EU case law if this
helps in finding the proper interpretation of Art 8 UCA (2011). Insofar, the Swiss
37
38
For further details: Probst (2016), Art 8 para 299.
39
40
41
Federal Supreme Court may also refer to the indicative and non-exhaustive list of
potentially unfair terms of the Directive.42
4 The Judicial Control of Price (Related) Terms

in Standard Form Contracts
4.1 Recent Developments in the European Union
As a matter of principle, the definition of the main subject matter of a contract—i.e.

the good or service promised by a party in consideration of some remuneration—
appears to be outside the scope of pre-formulated standard terms since each party’s
contractual main performance needs to be defined by individual negotiations
between the parties.43 Insofar, it does not come as a surprise that Art 4(2) Directive
93/13/EEC44 exempts the “main subject matter of the contract [. . .and. . . .] the
adequacy of the price and remuneration” from judicial control. This exemption
makes sense because—in a free market economy—the objectively essential ele-
ments of a contractual agreement are to be defined by the parties themselves and
cannot be delegated to the judge’s personal discretion.
However, upon closer consideration, this approach is less straightforward than it
appears at first sight, for it relies on a theoretical distinction that is difficult to draw in
practice. Unmistakeably, there is some tension between Art 4(1) and 4(2) Directive
93/13/EEC: When Art 4(1) states that the unfairness of standard terms is assessed in
consideration of “all the other terms of the contract”, this implies that the (indi-
vidually negotiated) price or remuneration is a possible factor of that assessment.45
For example, a low purchase price may compensate for the buyer’s disadvantage
resulting from a liability waiver clause, to the effect that such clause is ultimately not
unfair under Art 3 Directive 93/13/EEC. But by the same token, Art 4(2) Directive
93/13/EEC states that the assessment of the unfair nature of standard terms does not
include the “main subject matter of the contract” nor the “adequacy of the price”.
Nevertheless, as the case may be, the adequacy of the price can play a role when a
court is to determine whether a standard clause is unfair.
42
See annex to the Directive 93/13/EC.
43
Probst, Bankgebühren und der Schutz des Kunden vor missbräuchlichen AGB (2017b),
paras 20–21.
44
This provision reads as follows: “Assessment of the unfair nature of the terms shall relate neither
to the definition of the main subject matter of the contract nor to the adequacy of the price and
remuneration, on the one hand, as against the services or goods supplies in exchange, on the other,
in so far as these terms are in plain intelligible language.”
45
See recital 19 Directive 93/13/EC (“. . . .whereas the main subject matter of the contract and the
price/quality ratio may nevertheless be taken into account in assessing the fairness of other
terms. . .”).
664 T. Probst
This incoherence helps to explain why National Courts of EU Member States

have rendered divergent judgments on the interpretation of national provisions,
which had been adopted to transpose Art 4 Directive 93/13/EEC.46 A further factor
that has favoured the emergence of incoherent case law resides in the nature of this
Directive, which does not aim at a full harmonisation of national laws (as to unfair
standard terms in consumer contracts) but merely pursues a minimum harmonisation
which allows EU Member States to adopt more stringent national provisions than
EU law does.47
Against this background, the case law of the CJEU is of interest also for Swiss
lawyers. It can be summarised as follows:
– In Kásler v Jelzálogbank, the CJEU stated that by the term ‘main subject-matter
of the contract’ Art 4(2) Directive 93/13/EEC meant to define the essential and
characteristic obligations of a contract as opposed to merely ancillary terms.
While the former terms are exempt from judicial control, the latter are not.48 With
regard to contract terms that refer to “. . .the quality/price ratio of the goods or
services”,49 the CJEU held that this category of terms is limited in scope and
precludes the judge only from examining the adequacy of the price or remuner-
ation promised for the services or goods to be supplied. The underlying rationale
for this exclusion, which should be construed restrictively, resides in the fact that
there is no legal criterion at hand that could reasonably and objectively guide such
a judicial review.50
– In Matei v SC Volksbank România SA, the CJEU held that the exemption from
judicial control pursuant to Art 4(2) Directive 93/13/EEC did not, in principle,
46
In BGHZ 13 May 2014 (XI ZR 405/12), the German Bundesgerichtshof held, first, that a standard
term charging a onetime processing fee of 1% for a loan granted by a bank to a consumer is subject
to judicial control under § 307 BGB and, secondly, that this processing fee is unfair and invalid. –
In The Office of Fair Trading v Abbey National plc & Others, [2009] UKSC 6, the English Supreme
Court dealt with the question of whether charges levied by banks for unauthorised overdrafts from
holders of personal current accounts were subject to judicial control under the Unfair Terms in
Consumer Contracts Regulations 1999 SI 1999/2083. The Court held that such overdraft charges
were not subject to judicial control under the Regulations 1999 because “there is no possible basis
on which the court can decide that some items are more essential to the contract than others” (para
39). In other words, the English Supreme Court rejected the idea of a sufficiently reliable test to
distinguish “essential” contract terms (exempt from judicial control) and “ancillary” contract terms
(subject to judicial control).
47
Art 8 EU Directive 93/13/EC (“Member States may adopt or retain the most stringent provisions
compatible with the Treaty in the area covered by this Directive, to ensure a maximum degree of
protection for the consumer.”).
48
CJEU Judgment of 30 April 2014, Kásler and Káslerné Rábai, C-26/13, EU:2014:282,
paras 49–50.
49
See recital 19 of Directive 93/13/EC.
50
CJEU Kásler (n 47), paras 54–55. – In the CJEU Judgment of 26 April 2010, Invitel, C-472/10,
EU:C:2012:242, para. 23, the Court had previously held that a standard clause providing for a
mechanism to amend the prices for the services supplied to the consumer was open to
judicial review because the exemption of Art 4(2) was not applicable.
apply to a consumer credit contract containing a standard term that permitted the
lender to alter the interest rate unilaterally as well as to ask for a ‘risk charge’.51
– In Van Hove v CNP Assurances SA, Mr. Van Hove had taken out insurance to
secure the repayment of two bank loans in the event of his incapacity to work. The
insurance terms stated that provision of cover was conditional upon the insured
person being in a state of total incapacity for work. This standard term was
challenged by Van Hove as unfair. The CJEU reaffirmed its previous position
on the construction of Art 4(2) Directive 93/13/EEC and restated that the exemp-
tion from judicial control under this provision could only apply to terms that
encompassed an essential and characteristic component of the contract in
question.52
– In the latest case of Andriciuc et al. v Banca Românească SA, the CJEU had to
deal with a standard contract term in a loan agreement according to which the
borrower had to repay his loan in the same foreign currency in which it had been
disbursed by the lending bank. Regarding the interpretation of Art 4(2) Directive
93/13/EEC, the Court distinguished the present case—on the ground that the loan
was disbursable and repayable in the same foreign currency—from Kásler v
Jelzálogbank in which case a foreign currency loan was repayable in the bor-
rower’s national currency at the selling rate of exchange applied by the lending
bank.53 Based on this distinction the CJEU concluded that—unlike a clause
regarding a loan disbursable in a foreign currency and repayable in national
currency—the clause regarding a loan that both was disbursable and repayable
in foreign currency was exempt from judicial control under the exception of Art 4
(2) Directive 93/13/EEC provided that the clause was couched in plain intelligible
language.54
The above summarised case law of the CJEU illustrates that the distinction
between standard contract terms that characterise the “main subject matter” of a
contract on the one hand, and standard terms that are of an “ancillary nature” on the
other, is a rather subtle and delicate one. Insofar, it should not surprise that opinions
differ as to whether a foreign currency clause for a loan represents a component of
the loan’s “main subject matter”, whereas a clause defining the rate of exchange
(of the foreign currency) that serves for calculating the loan repayments is an
ancillary contractual term. It is difficult to identify a conclusive test which would
allow to draw a clear line between the two fact-situations.
51
CJEU Judgment of 26 February 2015, Matei, C-143/13, EU:C:2015:127, paras 54–60, 64, 78.
52
CJEU Judgment of 23 April 2015, Van Hove, C-96/14, EU:C:2015:262, paras 33–39.
53
CJEU Judgment of 20 September 2017, Andriciuc and others, C-186/16, EU:2017:703, para 40.
54
CJEU Andriciuc and others (n 52), para 41.
666 T. Probst
4.2 Judicial Control of Price (Related) Terms in Standard

Form Contracts Under Swiss Law
What is the position of Swiss law regarding judicial control of price terms in
standard form contracts? For the sake of clarity, two aspects should be distinguished.
A first issue is whether and, if so, to what extent price(related) terms in standard
form contracts are subject to judicial review (Sect. 4.2.1, hereinafter). A second
question is whether price adjustment clauses in standard form contracts are valid
(Sect. 4.2.2, hereinafter).
4.2.1 The Control of Price (Related) Terms in Standard Form Contracts
Under Swiss law, the conclusion of a contract requires the contracting parties’
agreement on all (objectively and subjectively) essential terms. By contrast, second-
ary terms may be left open since the resulting contractual lacunae will be completed
by the applicable non-mandatory rules of the Swiss CO or by the judge.55
As a matter of principle, the price constitutes an essential term of all
non-gratuitous contracts and needs to be defined by the parties themselves. Strictly
speaking, a price agreement includes two aspects: firstly, the “an”, i.e. whether any
remuneration is owed at all, and secondly, the “quantum”, i.e. the specific amount to
be paid. As a rule, for the conclusion of a contract the parties need to agree on both
aspects. However, if the parties have agreed—under a (non-gratuitous) contract—on
the principle that a monetary consideration is owed but have not (yet) determined the
quantum to be paid, statutory law may provide that the amount will be fixed
according to the concrete circumstances.56
These considerations foster the conclusion that the obligation to pay a remuner-
ation (price as an essential contract term) has to be negotiated individually by the
contracting parties and cannot be fixed by a (unilaterally pre-formulated) standard
clause. For instance, this is the case of sale contracts,57 non-commercial loans,58
55
See Arts 1(1) in conjunction with Art 2(1) Swiss CO. Cf. also Art 1 Swiss CC. – For further
details: Probst, Bankgebühren und der Schutz des Kunden vor missbräuchlichen AGB (2017b),
paras 20–25.
56
See Art 184(3) Swiss CO, which states that the “price is deemed sufficiently determined where it
can be determined from the circumstances“. For example, if traded goods are bought by the buyer
without any indication of the purchase price, the goods are presumed to be sold at the current market
price at the time and place of performance (Art 212(1) Swiss CO). Likewise, if a loan agreement
does not stipulate the interest rate, it is presumed that the customary rate for such loans at the time
and place when the loan was received applies (Art 314 (1) Swiss CO). – By analogy, the same
rationale may apply to other contracts.
57
Art 184 Swiss CO.
58
Art 313(1) Swiss CO; cf. BGE 3 March 2010, 136/2010 III 308 cons 3.2.1.
employment contracts,59 and contracts for work.60 By contrast, the situation differs if
statutory law itself stipulates that a consideration (price, remuneration) is owed by
one of the parties. Examples are contracts for services,61 commercial loans62 and
contracts of bailment.63 In these instances, an individually negotiated price term is
not a necessary condition to the conclusion of a contract. What does this entail for the
judicial review of price (related) contract terms? The answer requires some
distinctions.
In cases where a statutory provision (Swiss CO) does not only stipulate the
principle that a party owes some consideration (price, remuneration) under a specific
type of contract but also provides the criterion to fix the amount to be paid (for
example, the “customary” price), inevitably both issues are subject to judicial review
when a dispute arises between the contracting parties on the amount to be paid by the
obligor. To resolve such a dispute, the judge will have to decide on the “if” (an) as
well as on the “how much” (quantum). More specifically, he will first decide whether
a remuneration is owed at all, and if so, he will determine the amount due by the
obligor. In this event, standard contract terms will usually not be relevant to the
determination of the price.
If the contract itself stipulates the amount to be paid—be it in form of a standard
clause or an individually negotiated term—the judge is bound to observe the
principle of freedom of contract and cannot review whether the amount stipulated
by the parties is “customary” or “adequate”. In fact, the parties are free to agree on a
remuneration that is higher than a “customary” or “adequate” price would
be. Nevertheless, the judge is entitled to review a contractual price term based on
the general rules of contract law such as the provisions on unfair advantage (gross
disparity)64 or on defects of consent (mistake, fraud, duress).65 Furthermore and
more relevant in the present context, if the amount owed by the obligor is stipulated
in a standard contract clause, the judge can review this clause pursuant to the rules
of the law of obligations that govern standard contract terms66; and if the obligor is a
59
Art 319 Swiss CO.
60
Art 363 Swiss CO.
61
Art 394(3) Swiss CO (“Remuneration is payable where agreed or customary”) [emphasis added].
See also Probst, Bankgebühren und der Schutz des Kunden vor missbräuchlichen AGB (2017b),
paras 16 and 23.
62
Art 313(2) Swiss CO (“In commercial transactions, interest is payable on fixed-term loans even
where this has not been [. . .] agreed”) [emphasis added].
63
Art 472(2) Swiss CO (“The bailee may claim remuneration only where this has been expressly
stipulated or was to be expected in the circumstances”) [emphasis added]. See also Probst,
Bankgebühren und der Schutz des Kunden vor missbräuchlichen AGB (2017b), paras 15 and 24.
64
Art 21 Swiss CO.
65
Art 23–31 Swiss CO (error, fraud and threat).
66
See supra, Sect. 3.2. For a detailed analysis of price-related standard terms in banking contracts:
Probst, Bankgebühren und der Schutz des Kunden vor missbräuchlichen AGB (2017b), paras
26–74.
668 T. Probst
consumer, the judge can also review the standard contract clause from the perspec-
tive of unfair competition on the grounds of Art 8 UCA.67
The above considerations on judicial review of price (related) terms in standard
form contracts under Swiss law explain why the case law handed down by the
English Supreme Court, the German Bundesgerichtshof and the CJEU on Art 4
(2) Directive 93/13/EEC or on the national provisions having transposed Art 4(2),68
respectively, has not had any noteworthy impact on Swiss law so far. In particular,
the controversial distinction between terms that define the “main subject matter” of a
contract on the one hand, and merely “ancillary terms” on the other, has not been the
object of significant discussion. The main reason for the lack of interest in this debate
resides in the fact that the Swiss legislator did not adopt any provision akin to Art 4
(2) Directive 93/13/EEC. Failing any autonomous incorporation of the rationale of
Art 4(2) into Swiss law, no practical need arose for looking for guidance in the case
law of the CJEU. Moreover, even though comparative law is a widely accepted
source of inspiration for Swiss legal scholars and courts,69 the above-summarised
case law has not received much attention from legal scholars nor left any traceable
marks on the Swiss Federal Supreme Court’s case law.
4.2.2 The Control of Price Adjustment Clauses in Standard Contract

Terms
Apart from the question whether and, if so, to what extent standard contract terms
may define price (related) terms and if such terms are subject to judicial control,
another matter that is more relevant to Swiss practice needs to be addressed briefly.
There is a growing tendency of commercial sellers and suppliers to include in their
standard form contracts a clause that gives them the right to alter unilaterally the
contractual terms at some later point in time (so called “contract adaptation or
adjustment clauses”). Often, such clauses extend, be it expressly or implicitly, to
price (related) terms. Under Swiss law, such clauses are subject to review under the
CO70 and the UCA.71
In the first place, the judicial review of the parties’ consent applies.72 The general
rule is that any later modification of a contract requires the parties’ (previous or
concomitant) mutual consent. If a standard clause aims at conferring upon the seller/
supplier the right to alter the contract unilaterally at his own discretion at some later
time, such a clause represents an offer to the customer that he should grant the seller/
supplier a non-defined unilateral option to modify the contract terms. Such “carte-
67
See supra, Sect. 3.3.
68
69
Cf. Art 1(3) Swiss CC.
70
71
72
See supra, Sect. 3.2.1.
blanche”-clauses are not valid because they lack a sufficiently determinable content
the customer could validly consent to.73
However, when a contract adjustment clause—couched in plain and intelligible
language—specifies under which conditions and to what extent the contract may
later be altered by the seller/supplier, such a clause can validly be agreed to by the
customer under the law of obligations. In that event, and provided that the customer
is a consumer, the review according to the rules against unfair competition (Art
8 UCA) will apply.74 Under this provision, unilateral adjustment clauses for price
(related) terms regularly involve a substantial disproportion between the contractual
rights and obligations to the detriment of the consumer because the seller/supplier is
able to increase the consumer’s obligations under the contract without the latter’s
concomitant consent.75 Consequently, the question arises whether a substantial
disproportion between the contractual rights and obligations infringes the principle
of good faith because the seller/supplier could not reasonably assume that the
consumer would have accepted the terms altered to his detriment without any
opposition if the new terms had been subject to individual negotiation. As a matter
of common rational behaviour, it is unreasonable for a consumer to accept a higher
price—or an increase of some other price related term of the contract—without
asking for any consideration in exchange. Hence, to insert a price adjustment clause
in a standard form contract that is not subject to negotiation between the contracting
parties runs counter to the principle of good faith and thus is presumably unjustified
unless the seller/supplier proves that the substantial disproportion of contractual
rights and obligations has been adequately counterbalanced by concrete and mate-
rial advantages granted to the consumer by other (favourable) terms of the
contract.76
5 Particular Statutory Provisions
Apart from the law of obligations and the law against unfair competition, further
legal bases for a judicial review of price (related) contract terms—whether related to
standard contract terms or to individually negotiated terms—may be found in
statutory provisions. For the sake of illustration, two examples are mentioned:
73
BGE 28 October 2008, 135/2008 III 10 cons 2.5; see also: Probst, Bankgebühren und der Schutz
des Kunden vor missbräuchlichen AGB (2017b), paras 48–49.
74
See supra, Sect. 3.3.2.
75
Without the contract adjustment clause, the consumer could reject the seller’s/supplier’s offer for
a modification of their contract at his free discretion. See also Probst, Bankgebühren und der Schutz
des Kunden vor missbräuchlichen AGB (2017b), para 53.
76
For further details: Probst, Bankgebühren und der Schutz des Kunden vor missbräuchlichen AGB
(2017b), para 54.
670 T. Probst
First, Art 14 of the Consumer Credit Act (CCA)77 provides for a maximum
interest rate of 15% p.a. payable by the consumer.78 This limit applies likewise to
standard contract terms and individually negotiated contract terms.
Secondly, Art 7 of the Swiss Cartel Act79 prohibits unlawful practices by a
dominant undertaking. An undertaking80 has a dominant position in a determined
market if it is able to behave to an appreciable extent independently of other market
participants.81 As a rule, such independence exists if the other market participants do
not have any reasonable alternative but to deal with the dominant undertaking.82 The
dominant position of an undertaking has to be established with regard to the relevant
market, i.e. the market in which the dominant undertaking is active by supplying or
consuming goods or services.83 This market needs to be determined substantively
(i.e. in light of the specific goods and services offered and in view of their substi-
tutability) as well as geographically (territorial area of commercial activity).84 An
unlawful practice presupposes that the dominant undertaking abuses its market posi-
tion by either hindering other undertakings from competing or by disadvantaging
trading partners.85 Pursuant to Art 7(2)(b) Cartel Act, an abuse of a dominant market
position may involve the imposition of inadequate prices or other contract terms.
Insofar, Cartel law provides a legal basis against abusive price (related) standard
terms. However, in practical operation, this avenue has not led very far because, in
most cases, no causal link can be established between the dominant market position
of an undertaking and the customer’s decision to accept the relevant standard terms
of contract. Indeed, experience shows that undertakings without any dominant
market position have no difficulty to impose standard contract terms on their
customers.86
77
Federal Act on Consumer Credits (2001), SR 221.214.1.
78
Pursuant to Art 14 CCA, the Federal Council is vested with the power to determine the applicable
maximum interest rate for consumer credits in light of the current financial market conditions. For
the year 2017, the maximum interest rate was fixed at 10% and 12% respectively depending on the
type of consumer credit (cf Art 1 of the Ordinance of the Federal Department of Justice and Police
2016, SR 221.214.111).
79
Federal Act on Cartels and Other Restrictions on Competition (1995), SR 251.
80
An “undertaking” is any supplier or buyer of goods or services that is active in commerce
regardless of the specific organizational or legal form (cf Art 2 par. 1bis Cartel Act).
81
Art 4(2) Cartel Act.
82
BGE 17 June 2003, 129/2003 II 536 cons 6.3.1.
83
Cf. Art 2(1bis) Cartel Act.
84
BGE 23 May 2013, 139/2013 II 318 cons 5.
85
Art 7(1) Cartel Act.
86
For further details: Kramer et al. (2016), paras 601–608.
6 Conclusion
Under Swiss law, the legal and judicial control of price (related) terms in standard
form contracts is rather complex. For historical reasons and, to some degree, by
coincidence, the Swiss legislator has endorsed a hybrid approach to control unfair
terms in standard form contracts, which combines elements of the law of obligations
and the law against unfair competition. The result is a system that lacks legislative
coherence and raises challenging questions of interpretation for legal scholars and
courts. As a result, the effectiveness of legal protection against unfair terms in
standard form contracts lies largely within their control.
References
Kramer EA, Probst T (2018) Obligationenrecht. Allgemeiner Teil, 3nd edn. Verlag, Basel,
paras 293–295
Kramer EA, Probst T, Perrig R (2016) Schweizerisches Recht der Allgemeinen Geschäfts-
bedingungen. Stämpfli, Bern, paras 25 ff, 601–608
Probst T (2013) In: Jung P (ed) Europäisches Privatrecht in Vielfalt geeint. Richterliche Eingriffe in
den Vertrag. Sellier European Law Publishers, München, paras 252–255
Probst T (2016) Art. 8. In: Jung P, Spitz P (eds) Handkommentar zum Bundesgesetz gegen den
unlauteren Wettbewerb. Stämpfli, Bern
Probst T (2017a) Wettbewerbsrecht und Konsumentenschutz. Ein (dis-)harmonisches Konkubinat ?
Jusletter 6 February 2017, paras 61–73
Probst T (2017b) Bankgebühren und der Schutz des Kunden vor missbräuchlichen AGB. Jusletter
24 April 2017, paras 16, 20–25, 48–49 and 54
Form Contracts in Taiwan: Control of Price
Related Terms Through the Legislator,
the Judiciary and the Administration
Ming-En Hsiang and Ting-Su Chen
Abstract This chapter first shows how the principle of freedom of contract works in
Taiwan, then discuses the control of price related terms in standard form contracts
under Taiwanese law. The control maybe due to special legislation like the Civil
Code or the Consumer Protection Act or due to judicial, or administrative interven-
tions. The special feature in Taiwan is that the competent authorities can promulgate
“Prohibited Provisions in Standard Form Contracts” to control the content of
standard form contracts. Finally, this chapter also elaborates on regulation fostering
price disclosure in Taiwan.
1 Freedom of Contract
The principle of freedom of contract was derived from individualism and liberalism
in the nineteenth century, and became the most important principle in contract law.1
Freedom of Contract means that the parties may conclude contracts to obtain rights
and obligations with mutual consent. Freedom of contract consists of our basic
contents: freedom to enter into a contract, to contract with anyone, to enter into
any content, and to conclude a contract in any way. Hence, it allows the parties to
reach agreements in any content based on their practical demands and interests. This
characteristic makes contract law vivid with flexibility and creativity.
In Taiwan, freedom of contract is not a fundamental right expressly listed in
the Constitution, but is indirectly recognized. On April 23rd 2004, Judicial Yuan
interpretation No. 576, for the first time, recognized that freedom of contract is a
fundamental right protected by the Constitution; “Freedom of contract is an essential
mechanism for individual’s self-development and self-accomplishment. It is also the
1
Wang (2014), p. 268.
M.-E. Hsiang (*) · T.-S. Chen (*)

National Taipei University, Department of Law, Taipei, Taiwan
e-mail: mehsiang@mail.ntpu.edu.tw

https://doi.org/10.1007/978-3-030-23057-9_27
674 M.-E. Hsiang and T.-S. Chen
basis for self-government of the private law. In addition that the concrete content of
the contract is protected by the Constitution under related provisions of fundamental
rights, freedom of contract itself is one of the liberties preserved by Article 22 of the
Constitution. Only when it is necessary to defend public interests may such a right be
reasonably restricted with the law,” it stated. In the same year, Judicial Yuan’s
interpretation No. 580 emphasized again that freedom of contract is protected by
the Constitution, and further it described its content as, “For the freedom of devel-
opment of individual’s personality, each person has the right to decide freely how to
take advantage of, receive benefits from and dispose the resources needed for their
livelihood, and may thus freely exchange such resources with other persons. For this
reason, the Constitution provides in Article 15 the protection of the people’s property
right; and in Article 22, the protection of the people’s freedom of contract. However,
the skills required for living is varied in degree of competency from person to person,
with the possibility to result in excessively disproportionate distribution of the
overall resources of social life. Therefore the State may certainly impose restrictions
on the freedom of contract and, furthermore, the property right of the people, by
enacting laws within the scope defined by the principle of proportionality of Article
23 of the Constitution for the purpose of reasonable distribution of resources.”
Freedom of contract is established by the parties’ mutual consent based on their
sound and freewill. Precisely, if both parties with capacity enter into a contract in
free will, in the contracting process the expression of intent is neither acting under a
mistaken or procured by fraud or duress, and the content of contract doesn’t violate
the prohibitive provision of the act and is not against public policy or morals, then
their mutual consent would bind each other.2 Accordingly, the Taiwan Supreme
Court stated in Case No. Taishentzu929, 2016, “Based on private autonomy and
freedom of contract, the parties could decide the types and contents of contracts by
themselves and they were not limited by typical contracts (nominate contract)
codified in the Taiwan civil code. When the parties conclude a contract legally
established in free will, then they should perform in compliance with its content, and
their rights and obligations in private law are also bound by the content of contract
and couldn’t be amended by any party ex post so as to comply with the principle of
Pacta sunt servanda.”
2 Contractual Justice
When both parties conclude a contract in sound and free will, its fairness, especially
regarding the exchanged objects in a bilateral contract, in principle should be
unchallengeable. Based on the principle of private autonomy and freedom of
contract, the agreement reached in contract by the parties should be respected and
not to be denied arbitrarily so as not to destroy the stability of legal order and the
2
Chen (2002), p. 51.
Control of Price Related Terms in Standard Form Contracts in Taiwan:. . . 675
safety of transactions.3 Therefore, when Taiwan Civil Code was initially enacted in
1931,4 it exceptionally empowered judges to decide the fairness of the transaction
as regulating usurious deals in article 74. “If a juridical act whereby a person
profiting by the difficulties, recklessness or inexperience of another causes to be
delivered or promised pecuniary payment to such an extent that under that circum-
stances, the transaction is obviously unfair, the court may revoke the juridical act or
reduce the payment upon the application of any interested person.”5 However, in
order to fix the unfair transitions resulting from freedom of contract, some people
lifted up their voice to argue contractual justice and requested legislation. When the
legislators amended the law of obligation in 1999, they added the regulation
regarding change of circumstances in article 227-2 and adjusted and weakened
the principle of Pacta sunt servanda. It provided, “If there is change of circum-
stances which is not predictable then after the constitution of the contract, and if the
performance of the original obligation arising there from will become obviously
unfair, the party may apply to the court for increasing or reducing his payment, or
altering the original obligation. The provision in the preceding paragraph shall
apply mutatis mutandis to the obligation not arising from the contract.”6 In addition,
in order to protect the disadvantaged group in transaction market, the customers,
Taiwan legislators enacted Consumer Protection Act in 1994; of which article 12 is
a general regulation about control of contents of standard form contracts. It adopts
the principle of reciprocity as a general criterion to decide whether a standard form
contract is fair or not.7 Afterwards, in order to comprehensively protect the disad-
vantaged group in transaction market who is lack of economic power and informa-
tion, to prevent enterprises from abusing standard form contracts, and to ensure
transaction security, the legislators amended article 247-1 to regulate the use of
standard form contracts. It is applicable not only to B2C (business to customer)
standard form contracts but also to B2B (business to business); meanwhile, judges
are asked to play a positive role in deciding whether the contents of contract is
obviously unfair.
3
Chen (2014), p. 161.
4
General Principles and Obligations of Taiwan Civil Code were promulgated in 1929, Rights In
Rem was promulgated in 1930, and Family was promulgated in 1931. The whole civil code was
established in 1931.
5
Taiwan Civil Code article 74 was succeeded from German Civil Code article 138 section 2.
6
As for the history and change of legislation of principle of change of circumstances in Taiwan,
please refer to Liu (2011), pp. 276–283.
7
See Chen (2014), p. 164. Dr. Tzu-Chiang Chen said “Taiwan Consumer Protection Act article
12 regarding of general regulation of controlling the content of standard form contracts make the
principle of objective reciprocal become the criterion to decide whether a contract is fair or not.”
3 Regulations of Standard Form Contracts
3.1 Controlling Through Legislation
3.1.1 Consumer Protection Act
As aforementioned, Taiwan Consumer Protection Act Article 12, which regulates

the content of standard form contracts, introduces the principle of reciprocity as one
of the criterions to decide the fairness of contracts. It provides that, “Any standard
terms and conditions in violation of the good faith requirements are unconscionable
to consumers, shall be rendered null and void. The use of standard contracts is
presumed unconscionable where the terms and conditions provided fall within any
of the following: 1. Where the terms and conditions of the contracts are in violation
of the principle of equality and reciprocity. 2. Where the terms and conditions of the
contracts, which are excluded by the suppletory rules are obviously contradicted to
legislative intent. 3. Where the purposes of the contracts cannot be achieved due to
the major rights or obligations of the contracts are restricted by such terms and
conditions.” And the Enforcement Rules of Consumer Protection Act Article 13 and
14 provides that, “The following factors as to the nature, purpose, other contract
clauses, trade customs and relevant matters shall be taken under consideration when
determining whether the terms and conditions of a standard contract meet the
principles of good faith and contract conscionability,” and “The standard terms
and conditions may be considered in violation of the principle of equality and
reciprocity under any of the following matters: 1. The performance and counter-
performance between the contracting parties is not reciprocal; 2. The consumer is
required to assume the risk which is beyond his control; 3. The consumer is required
to bear disproportionate damages in case of breaching the contract; or 4. Other
matters pose obvious disadvantages to the consumer.” According to these provi-
sions, breaking “the principle of reciprocity” is one of the criterions determining
“obvious unfairness” of the content of standard form contracts; and whether “the
performance and the counter-performance is obviously not reciprocal or not” is one
of the specific ways to determine whether a contract is against the principle of
reciprocity. We could infer from the mentioned provisions that when customers
and businesses concluded standard form contracts, considering quid pro quoof
contracts, the judges could review the objective value of obligation of the parties;
and if it’s deemed obviously inappropriate, the judges could declare the provision in
the standard-form contracts void. However, Professor Chun-Tang Liu assumed that
“As respecting freedom of contract, the reciprocity of contractual transaction would
be a necessary result; it is to say, contractual provisions undoubtedly can’t violate
the principle of reciprocity. The Enforcement Rules of Consumer Protection Act
article 14 provides that, ‘The standard terms and conditions may be considered in
violation of the principle of equality and reciprocity under any of the following
matters: 1. The performance and counter-performance between the contracting
parties is not reciprocal. . . .’ The performance and counter-performance between
the contracting parties should naturally keep reciprocal, but we can’t consider the
objective value of the specific performance and counter-performance, such as
goods/price or service/remuneration, as a criterion to decide its reciprocity.”8 His
opinion is based on article 4 section 2 Directive 93/13/EEC on unfair contract
terms.9,10 The given examples by scholars of violating the principle of reciprocity
didn’t refer to the value of the performance and counter-performance, instead, they
indicated to the following situations: businesses sold goods and on shelves presented
terms stating that, “With open market of free choices, no return or change after
packed and paid;” or businesses in standard form contracts make a provision such as
“Products once sold are non-refundable.”11 The judicial opinion concerned, it will be
discussed in the following.
3.1.2 Civil Law
Taiwan Civil Code article 247-1 provides that, “If a contract has been constituted
according to the provisions which were prepared by one of the parties for contracts
of the same kind, the agreements which include the following agreements and are
obviously unfair under that circumstance are void. (1) To release or to reduce the
responsibility of the party who prepared the entries of the contract. (2) To increase
the responsibility of the other party. (3) To make the other party waive his right or to
restrict the exercise of his right. (4) Other matters gravely disadvantageous to the
other party.” Although it doesn’t explicitly provide the principle of reciprocity,
scholars point out that subsection (4), “other matters gravely disadvantageous to
the other party,” includes the meaning of principle of reciprocity.
In addition, Taiwan Civil Code article 250 provides that, “If the agreed rate of
interest exceeds twenty percent (20%) per annum, the creditor shall not be entitled to
claim any interest over twenty percent (20%).” Hence, we could see that any
standard contract terms regarding interest rate should not exceed the limit.
3.2 Controlling Through the Judiciary
Whether judges could intervene in price related terms in standard contract terms in
specific cases or not, courts in Taiwan have different opinions as follows.
8
See Liu (2011), p. 145.
9
95/29.
10
See Liu (2011), p. 126.
11
Yu (2011), p. 184.
3.2.1 Judges Can Not Intervene in the Price Terms in Standard Form
Contracts
When it comes to the question whether judges could intervene in price terms agreed
by both parties, Taiwan Taipei District Court Case No. Jianshentzu 802, 1999, a case
about purchasing timeshare ownership, is worth a notice. In this case, the appellee
purchased membership of a holiday resort from the appellant, but after reading the
contract, he deemed it unfair and wanted to rescind. Whereas the appellant argued
that they concluded the standard form contract in free will, so the appellee couldn’t
rescind the contract otherwise the payment he had paid should be confiscated as
punitive damages for breaching the contract. The appellant then asked the appellee to
conclude a new contract for exchange to rescind the old one. In order to take back the
payment, the appellee entered into the new contract for another kind of membership
of the holiday resort priced 55,000 NT dollars. In court, the appellee argued that the
new standard form contract is against the principle of good faith and should be void;
for that most of its contents and provisions are of member’s obligation of paying,
while the member’s rights of usage is not definite in the new contract. As a result, the
court denied the appellee’s argument and stated that, “Whether the payment the
appellee paid is too high or not is irrelevant to Consumer Protection Act article
12 subsection 2; it is just the agreement about payment that both parties reached by
their subjective judgment.”
3.2.2 Judges Can Intervene in Price Terms in Case of Obvious

Unfairness
Taiwan High Court Case No. Shenyitzu 1127, 2016 is a case of standard form
contract regarding apartment building management. In this case, although the court
introduced the objective way to examine the equivalence of performance and
counter-performance (with the principle of objective reciprocal), still it cautiously
restrained itself from invading the parties’ will and subjective judgments. The court
held that the price agreed by both parties should be respected and that it should not
be a supervisor judging with his own values and thereby change the price terms,
which the parties reached at will. The fact of this case is that A Company and B
apartment management committee entered into a contract of building management,
based on which A Company should send staffs to the apartment to manage its affairs
and should be responsible for training and managing the staffs as well as paying their
salary, and B committee should pay A service fee 588,400 NTD every month for the
1-year service. In the contract, article 9 provided that, “B committee can’t hire staffs
A company sent to the apartment (include A company’s own employee) to offer
managing service in the apartment in any way during the contract period and half
year after termination.” If B violated it, according to article 15, A could claim
1-month service fee for compensation. Afterwards B hadn’t paid the service fee
for 2 months and A sent B a notice requiring payment in the designated period, or A
would terminate the contract. Thereafter, A terminated the contract and recalled the
staff it had assigned, while B breached article 9 and retaining the staff. Therefore, A
claimed B 1 month service fee 588,400 NTD for compensation. B argued in court
that based on Consumer Protection Act article 12 section 1, Enforcement Rules of
Consumer Protection Act article 14 subsection 2, and Civil Code article 247-1
subsection 2,the contract term pre-mentioned should be void, for that it is against
to the principle of reciprocity. The court held that, “the judicial controlling of
standard form contracts, based on the elements regulated in Enforcement Rules of
Consumer Protection Act article 14 of declaring a term void, should initiate only
when businesses abuse their advantageous position to conclude contracts with
customers and violate the principle of good faith; thereof the court could intervene
in the terms unfair to customers. Otherwise, the court should respect the agreement
the parties had reached.” “So, if the contract terms are not obviously unfair or
inappropriate, in principle they should be considered valid legally even though they
were concluded with standard contract terms. If the court examines quid pro quo of
contract terms strictly just because the way they concluded, and once the objective
value of performance and counter-performance is not equivalent, then the contract
should be declared void. This would over-intervene in the freedom of contract and
not be proper to the spirit of Civil Law.”
3.3 Controlling Through the Administration
Taiwan Consumer Protection Law Article 17 section 1 provides that, “In order to
prevent consumer disputes, protect consumer interests, and promote the fairness for
the use of standard contracts, the competent authorities at the central government
may establish mandatory or prohibitory provisions of standard contracts which
required certain industries to apply after approved by the Executive Yuan and
proclaimed by the competent authorities.” And its section 4 provides that, “Where
contract in violation of the mandatory or prohibitory provisions prescribed in the first
paragraph, shall be null and void. Whereas the validity of contract would be decided
in accordance with previous Article.” In addition, according to article 53, if the
business seriously violates Consumer Protection Law with standard form contracts,
consumer ombudsmen may file a petition for injunction in the court to discontinue or
prohibit them from using the contracts. So far, the competent authorities have
promulgated 84 Prohibitory Provisions of Standard Form Contract according to
various types of contracts and industries. Which includes education and tutoring
centers (4 categories in total), recreation and traveling (8 categories in total), cars and
houses (11 categories in total), finance and policies (9 categories in total), baby
caring and nursing home (3 categories in total), transportation and communication
(8categories in total), television entertainment (4 categories in total), computer and
electronic appliances (4categories in total), medical care and health (4 categories in
total), mortuary service (4 categories in total), voucher (19 categories in total) and
others (6 categories in total). Consequently, we could find that comparing to
controlling from legislation or judiciary, controlling from administration plays an

important and key role in regulating standard form contract terms. The reasons are,
analyzed and emphasized by some scholars, that most customers couldn’t benefit
from judicial controlling as it is applicable only to specific case, and that legislative
controlling can’t practice in real by itself without corporation from administrative
measures.12 In the following we present some prohibitory provisions of standard
form contracts for the pre-mentioned 12 types, showing the controlling intensity in
regulating price terms in standard form contracts from administration.
3.3.1 Education and Tutoring Centers
Ministry of education promulgated Mandatory Provisions to be Included in and

Prohibitory Provisions of Standard Form Contract for Learning and Traveling
Oversea on August 18, 2014 with Taiwenjiaosantzu No. 1030113897B promulga-
tion. The prohibitory provisions article 6 of standard form contract provides that,
“The contract shall not contain any agreements on that the business could charge
extra fees besides the fee they agreed.”
3.3.2 Recreation and Traveling
Sport Administration promulgated Mandatory Provisions to be Included in and

Prohibitory Provisions of Standard Form Contract for Gym on June 6 2010 with
Tiweishetzu No. 10100145763 promulgation. The prohibitory provisions article 4 of
standard form contract provides that, “The contract shall not contain any agreements
on that the business could unilaterally raise its member fees, or any fee agreed in
contract, or on any other similar agreement like these.”
3.3.3 Cars and Houses
Ministry of Interior promulgated Mandatory Provisions to be Included in and

Prohibitory Provisions of Standard Form Contract for House Leasing with
Shouzhongbanditzu No. 1051305384 promulgation on June 23, 2016. The prohib-
itory provisions article 5 of standard form contract provides that, “The parties can’t
agree on that if the taxes borne by the lessor raise after they concluded the contract,
the lessee should pay the incremental taxes.” Besides, the article 5 provides that,
“The parties can’t agree to exempt the warranty liability of the lessor when he/she
deliberately do not inform the lessee defects of the house.”
12
Huang (2015), p. 169.
3.3.4 Finance and Policies
Financial Supervisory Commission (FSC) promulgated Mandatory Provisions to be

Included in and Prohibitory Provisions of Standard Form Contract for Credit Card
July 27, 2010 with Jinguanyinhetzu No. 09930002270 promulgation. The Prohibi-
tory Provisions article 4of Standard Form Contract for Credit Card provides that,
“The contract shall not contain any provisions that include purchases made during
the current billing cycle within the current principal for the calculation of the finance
charges.” The article 5 provides that, “The contract shall not contain any provisions
that include the finance charges, annual fees, or service charges such as cash advance
fees, card loss report fees, access to a credit card receipt or late fees for the
calculation of the finance charges.” The article 6 provides that, “The contract shall
not contain any provisions for applying adjusted rate for revolving credit toward
purchases made prior to the adjustment.”
Financial Supervisory Commission (FSC) promulgated Prohibitory Provisions of
Standard Form Contract for Unsecured Consumer Loan on November 18, 2013 with
Jinguanyinhetzu No.10230003860 promulgation. The article 3 provides that, “The
contract shall not contain any agreement on higher than 20% annual interest rate for
the loan.” And the article 5 provides that, “The contract shall not contain a prepay-
ment penalty clause, unless the bank offers favorable loan conditions and restricted
payoff period at the same time.”
3.3.5 Baby Caring and Nursing Home
Ministry of Interior promulgated Mandatory Provisions to be Included in and

Prohibitory Provisions of Standard Form Contract for Nursing Home on December
31, 2003 with Neishouzhongshetzu No. 0920101801 promulgation. The prohibitory
provisions article 3 of standard form contract provides, “Then nursing fees shouldn’t
exceed the amounts competent authority appraised and fixed.” And the article
4 provides, “The contract shall not contain agreement on ‘nursing fee is weekly
billing,’ ‘nursing fees counted on half month basis, and period of less than half
month is counted as half month,’ or “nursing fees counted on one month basis, and
period of less than one month is counted as one month’ or any other similar way of
charging.”
3.3.6 Transportation and Communication
Ministry of Transportation and Communication promulgated Mandatory Provisions

to be Included in and Prohibitory Provisions of Standard Form Contract for Passen-
ger Carriage of Domestic Fixed Shipping Line on March 21, 2016 with
Jiaohangyitzu No. 10598000502 promulgation. Its prohibitory provisions article
3of standard form contract provides that, “the contract shall not contain any agree-
ment on that carrier could charge additional bill in any other way.”
3.3.7 Television Entertainment
National Communications Commission promulgated Mandatory Provisions to be

Included in and Prohibitory Provisions of Standard Form Contract for the Cable
Radio and Television System Operators and Cable Television Transmission Systems
on March 16, 2010 with Tongchuanyingtzu No. 09941011110 promulgation. The
article 16 provides that, “The contract shall not contain agreement on that the
subscription fees paid by Party B (customers) could be forfeited or any agreement
on penalty for Party B breach of contract” and the article 17 provides “The contract
shall not contain any agreement limiting Party A’s liability for defect performance or
exempting Party A from the liability”.
3.3.8 Computers and Electronic Appliances
Ministry of Economic Affairs promulgated Mandatory Provisions to be Included in

and Prohibitory Provisions of Standard Form Contract for Online Games on
December 13, 2007 with Jinggongtzu No. 0964605910 promulgation. Its prohibi-
tory provisions of standard form contract article 10 provides that “Except as pro-
vided by law, the contract shall not contain agreement on that any litigation arising
out of this contract, Party A (customers) should be liable for the attorney retainer fee
paid by Party B (businesses)”.
3.3.9 Medical Care and Health
Ministry of Health and Welfare promulgated Mandatory Provisions to be Included in

and Prohibitory Provisions of Standard Form Contract for Beauty and Slimming
Industries on August 14, 2001 with Weishushitzu No. 0900045668 promulgation.
The prohibitory provisions article 1of standard form contract provides that, “The
contract shall not contain agreement on that Party A (customers) should pay for
penalty fees and forfeit the fees have been paid before when breach the contract.”
The article 2 provides that, “The contract shall not contain agreement on that once
the customer exercise rights of member then he/she couldn’t ask for any refunds.”
The article 4 provides that, “The contract shall not contain agreement on any general
exemption terms like ‘Products are non-refundable.’ And the article 5 provides that,
“The contract shall not contain agreement on that the business could charge another
bill for added products and lessons in the contract period.”
3.3.10 Mortuary Services
Ministry of Interior promulgated amendment of Mandatory Provisions to be

Included in and Prohibitory Provisions of Standard Form Contract for
Pre-Mortuary Service (personal) on December 31, 2003 with Taineimintzu

No. 1030176408Apromulgation. Its prohibitory provisions article 3 of standard
form contract provides that, “The contract shall not contain agreement on that the
business could ask the customer for another payment in the reason of currency
devaluation or revaluation, inflation, or loss from operating trust property after
contracting contract.”
3.3.11 Vouchers and Coupons
National Communications Commission promulgated Mandatory Provisions to be

Included in and Prohibitory Provisions of Standard Form Contract for Telecommu-
nication Goods and Services on March 16, 2007 with Tongchuanyingtzu
No. 09605024040 promulgation. Its prohibitory provisions article 1of standard
form contract provides that, “The contract shall not contain agreement on expiry
date,” and the article 2, “The contract shall not contain agreement on the surplus of
voucher couldn’t use.” The article 3 provides, “The contract shall not contain
agreement on that the business could exempt from delivering goods and providing
services, or on that the business could charge another bill.”
3.3.12 Others
Consumer Protection Committee promulgated Guideline of Mandatory Provisions to

be Included in and Prohibitory Provisions of Standard Form Contract for Online
Trading on March 31, 2005 with Xiaobaofatzu No. 0940003165 promulgation. The
prohibitory provisions article 13 of standard form contract provides that, “Except as
provided by law, the contract shall not contain agreement on that any litigation
arising out of online trading, Party A (customers) should be liable for the attorney
retainer fee paid by Party B (businesses).”
In addition, legislators in Taiwan would enable administrative authorities to
establish legal orders applicable to a multiple number of non-specified persons in
order to fulfill some specific purpose.
For example, “Regulation for the Pledge and Early-Termination of Time
Deposits” is a legal order enable by The Banking Act of The Republic of China.
According to its article 5, the interest paid to deposits which are terminated before
maturity will be calculated at 80% of the bank’s published time deposit rates for the
actual deposit period or at the rate concluded by the bank and the depositor based on
the principle of fairness and equity. Otherwise, article 6 also provides that the bank
not only should express how to calculate the liquidated damages but also specially
mark out in the contract by using red color or making font bold.
Besides, we also find that in order to regulate the prices that telecom companies
could charge customers, legislators enable The National Communications Commis-
sion (NCC) to establish “Administrative Regulation Governing Tariffs of Type I
Telecommunications Enterprises” in Telecommunications Act. And article 3 and

4 provides, “Primary tariffs of dominant Type I Telecommunications Enterprises
shall be regulated by price cap and shall be subject to the following formula:
[(Pt Pt-1) Pt-1] 100% (ΔCPI X)”, “The parameters of the formula set
forth in the preceding Article shall refer to the following: 1. “Pt” refers to the rates or
amounts of tariffs following adjustment by Type I Telecommunications Enterprises
during each year of implementation. 2. “Pt-1” refers to the Tariff Rates implemented
by Type I Telecommunications Enterprises the year immediately preceding each
year of implementation. 3. “ΔCPI” refers to the most current annual rate of increase
of the consumer price index in Taiwan, as announced by the Directorate General of
Budget, Accounting and Statistics prior to each year of implementation. 4. “X” refers
to the adjustment coefficient. 5. [(Pt Pt-1) Pt-1] 100% refers to the percentage
adjustment to the tariffs.”
3.4 Interaction of Administrative and Judicial Control
Regarding the effect of pre-mentioned mandatory and prohibitory provisions of

standard form contract promulgated on the basis of Taiwan Consumer Protection
Act Article 17, the Supreme Court emphasized that the nature of “mandatory
provisions to be included in and prohibitory provisions of standard form contract”
is a “legal order” and the content of “Mandatory Provisions To Be Included In And
Prohibitory Provisions Of Standard Form Contract for Pre-construction House”
could supplement the contract about the issue of penalty of contract breaching
between parties in Taiwan Supreme Court No. Taishentzu 266, 2016, a case about
penalty of pre-construction house. Hence, the court stated that, “Since the law
authorized the competent authorities to promulgate mandatory and prohibitory
provisions of standard form contract, in other words, the promulgation is based
on the authorization of law; it could be effective to a multiple number of
non-specified persons in respect of general matters, thereby it is attributed to
“legal order” provided by Administrative Procedure Act article 150 section 1. If
content of the promulgation conforms to administrative procedure act then it
doesn’t violate Central Regulation Standard Act article 5 sub-section 2, which
providing, ‘The following objects shall be stipulated by a statute. . .2. Stipulation
concerns the rights or obligations of the people. . .’ nor article 6, ‘The objects which
shall be stipulated by a statute are not allowed to regulate under an ordinance.’
According to this, if the content of “Mandatory Provisions to Be Included in and
Prohibitory Provisions of Standard Form Contract for Pre-order House” promul-
gated by Ministry of Interior based on Consumer Protection Act article 17 on March
3, 2001 conforms to administrative procedure act, then it could supplement the
contract between the parties.”
4 Regulations Fostering Disclosure of Prices
In order to protect customers’ right to know and ensure their better understand
to terms of standard form contracts, Taiwan Consumer Protection Act article
11-1regulates the reviewing-period for customers, providing that, “Traders shall
provide a reasonable period, not longer than 30 days, for consumers to review all
contract clauses, before entering into a standard contract. The terms and conditions
adopted by traders in standard contracts made consumer waive the right prescribe in
the previous paragraph shall be invalid. Where standard terms and conditions in
violation for provisions prescribed in the first paragraph shall not constitute part of
the contract, but consumers may still propose that the terms and conditions make up
as part of the standard contract. The central competent authority may select particular
industries and proclaim the appropriate contract reviewing period with reference to
the importance of the standard terms and conditions, the coverage and complexity of
the matters related in a standard contract.”
To ensure customers understanding standard contract terms, Taiwan Supreme
Court in case No. Taishentzu 2097, 2017 insists on that traders should provide a
reasonable period for customers to review all contract clauses before they conclud-
ing a standard contract based on Taiwan Consumer Protection Act article 11-1. And
according to the article 13, traders have an obligation to express the standard terms
and conditions in full.
Besides, the “reviewing-period” is different from so called “cooling-period”. The
former protects the right of customers to understand contents of contracts “before”
they entering into contracts, the latter let customers may return the goods or rescind
the contract in cooling-period after the day they concluded contracts in some specific
situation like distance sales or door-to-door sales that customers are lack of some
information about goods or services when they enter into contracts with traders.
In addition, we also find that some administrative authorities foster the disclo-
sure and transparency of price by establishing mandatory or prohibitory provisions
of standard contracts Take mandatory provisions to be included in and prohibitory
provisions of standard form contract for credit card for example. Its mandatory
provisions article 5 section 1of the standard form contract provides that, “The
Issuer shall clearly specify in the contract the frequency of adjustment for the
methods of calculating the annual fees, various service charges, rate for revolving
credit and finance charges, late fees that are charged to the cardholder and all fees
that the cardholder may be responsible for.” (That is similar to APR in the U.S.)
And its prohibitory provisions article 1 provides that, “The contract shall not
contain any clauses on waiving contract cooling-off period by the cardholder.”
We could conclude that the competent authority especially focus on the adequate
disclosure of information regarding credits to customers, allowing them to compare
and make meaningful choice among banks in advance of entering into credit card
contracts.
5 Conclusion
From the previous discussions, we found that the principle of freedom of contract is
the basis of Taiwan Civil Code and transactions. In principle, law should respect the
agreement of parties and should adopt a subjective measure to value the reciprocity
of performance and counter-performance. However, in order to implement contrac-
tual justice, the law governs the contracts concluded in imbalance status between
businesses and customers. Whether in a legislative, judicial, or administrative
controlling way, it needs to adopt an objective measure (principle of objective
reciprocal) to adjust the terms in standard form contracts. Among these ways,
administrative control plays a key role when new goods or services come into the
market; the competent authorities should intervene positively, especially for price
terms. Besides, the competent authorities also foster price transparency and compe-
tition. For example, Mandatory Provisions to Be Included In and Prohibitory Pro-
visions of Standard Form Contract for Credit Cards provides that business shall
clearly specify in the contract the frequency of adjustment for the methods of
calculating the annual fees, various service charges, rate for revolving credit and
finance charges, late fees that are charged to the cardholder and all fees that the
cardholder may be responsible for.
References
Chen T-F (2002) Freedom of contract and control of standard form contracts. Taiwan Law Rev
91:51–62
Chen T-C (2014) Conclusion and effect of contracts. Angle Press, Taipei, p 161 and 164
Huang M-Y (2015) Practice of administrative controlling of standard form contracts-focus on
contract models and promulgations from competent authorities. Res Consum Protection
19:167–206
Liu C-T (2011) The general principle of civil code1: contract law. Chun-Tang Liu Press, Taipei, pp
126 and 151–152
Wang Z-J (2014) General principles of civil law. Ze-Jian Wang Press, Taipei, p 268
Yu C-D (2011) ‘Concept of standard form contracts and its effect’ in consumer protection
committee (CPC). Res Consum Prot 17:153–198
Form Contracts in Turkey: Judicial
Kerem Cem Sanlı
Abstract Turkish law, in accordance with the principle of “freedom of contract”,

rarely interferes with price terms, as the price is a salient element of a contractual
relation and therefore subject to competition in the market. This stance is acknowl-
edged explicitly in the legal regime for standard form contracts where the Consumer
Code excludes price terms from the unfairness analysis. However, as the findings of
behavioural economics reveal, in many contractual settings, price terms could
become incomprehensible to consumers and competition in market place may not
produce desirable outcomes. This problem is exacerbated by the fact that firms,
knowing the instances where consumers are prone to cognitive problems, are
incentivised to utilise contracts in which price terms are obscured and complicated.
Hence there is a valid ground for controlling price in standard form contracts when
prices are non-salient. Turkish consumer law recognizes this problem and provides a
provision, which enables courts to interfere with the prices terms when those terms
are non-transparent, a condition which could be construed compatibly with the
findings of behavioural sciences. However, Turkish judicial practice, which could
be characterized as enthusiastic interventionist when it comes to price control, has
ignored the transparency condition and employed its own criteria when controlling
prices. Extensive and incoherent interference with prices has created enormous
burden for judicial system and markets. Finally lawmaker has adopted explicit
provisions in the Consumer Code and has chosen to solve the problem with
regulation, which seems to be a better policy alternative.
I thank Prof. Yesim Atamer and Dilan Alma for their helpful comments.
K. C. Sanlı (*)
Istanbul Bilgi University, Faculty of Law, Istanbul, Turkey
e-mail: cem.sanli@bilgi.edu.tr

https://doi.org/10.1007/978-3-030-23057-9_28
688 K. C. Sanlı
1 Introduction
The main purpose of this report is to analyse whether Turkish law controls price
terms in standard form contracts and should that be the case to explore the conditions
under which such interference takes place. It will also be shown that, despite the
conventional wisdom that prices are best formed in the market, both Turkish courts
and regulatory institutions do interfere with price terms in standard form contracts
especially when the price turns out to be the non-salient element of the contractual
relation. Nevertheless, this interference lacks theoretical foundation, which makes
this rather delicate undertaking arbitrary and inconsistent. Economic analysis (espe-
cially the findings of behavioural economics), in our view, could improve our
understanding of the problem and may provide a proper framework for the analysis.
In this report, I shall place an emphasis on the institutional aspect of the interfer-
ence and seek to answer the question whether courts or regulatory bodies are the
better-suited institutions to control price terms. It should be underlined from the
outset that a comparative institutional analysis supports the regulatory alternative
given the informational advantages of regulatory institutions and their means of
effective enforcement. Remarkably, Turkish law seems to have evolved in line with
this proposition so that price terms are rather regulated “ex ante” by either caps or
price calculation clauses.
2 Freedom of Contract and Free Competition

2.1 General Remarks
Freedom of contract is one of the main principles of Turkish Private Law.1 This
principle entails the decision to freely enter into a contract with another person and
also to determine the terms of the contract including the price. Hence parties of a
contract can freely set the price as remuneration; paying above or below the market
price for a good or a service does not necessitate a legal interference. No matter how
unfair it is, a contract price mutually agreed upon binds the parties and has to be
honoured.
Freedom of contract is based on the idea that the parties have the best information
regarding their interests in a contractual relationship; therefore, if they freely nego-
tiate the terms of the contract, agreed terms will maximize their mutual welfare.2
1
Oğuzman and Öz (2012), p. 23; Eren (2012), pp. 300 ff.; Kocayusufpaşaoğlu (2014), pp. 501 ff.
2
However, regarding the price term, it should be emphasised that agreed price is not itself, at least in
micro level, affects welfare. Provided that it is within the contractual value range (meaning that it is
above the cost of producing the good and below the maximum value that the customer attaches to
the good, i.e. WTP.), the price only splits the value that is created by the contractual relation. Hence
high or low prices do not matter for efficiency purposes with regards to that particular contract.
Control of Price Related Terms in Standard Form Contracts in Turkey:. . . 689
If goods and services are allocated according to contractual relations, i.e. in markets,
not only parties’, but also social welfare will be maximized. A system, that allocates
resources based on contracts, i.e., “mutual consent”, is also appealing for private
autonomy, as this system respects free and autonomous will.3 These are the basic
principal arguments for supporting free competitive markets (market paradigm).
twentieth century codifications across Europe, which include Turkey, have largely
been influenced by these thoughts.
Turkey’s first modern contract law was governed in the Turkish Code of Obli-
gations (old CO) which was enacted in 1926.4 The old CO was modelled on the
Swiss Code of Obligations, which can be characterized as a liberal and free market-
oriented law. Accordingly, the old CO has the same characteristics with Swiss law
and only a handful of mandatory provisions interfere with contractual freedom. The
principle of freedom of contract was not only expressly recognized in the old CO
(Art. 20), but also protected as a basic right in the Turkish Constitution (Art. 48/1).5
The new Turkish Code of Obligation (CO), numbered 6098, which has superseded
the old CO in 2012, has remained loyal to the free market principle (Art. 26).6
However, the paradigm of a free competitive market is nothing more than an
intellectual construct and in reality, markets frequently fail.7 To start with, parties do
not always act rational and are not well informed as depicted in (neo-classical)
economic theory. Information asymmetry is ubiquitous and behavioural research
indicates that even rational people make systematic mistakes when it comes to taking
complex decisions.8 Also markets hardly fit to the perfect competition model, as
there is a natural tendency for concentration, i.e. monopolization and cartelization.
Externalities, transaction costs and opportunism (“opportunistic behaviour”)9 are
other sources of market failures. When markets fail freedom of contract creates
social costs and markets do not serve to society’s best interests. Therefore, there is a
persuasive case in favour of limiting contractual freedom. In this regard, theoreti-
cally, the mandatory rules, by minimizing the social costs of contractual freedom,
become a panacea for market economies.
However, in a market setting, due to high prices (prices above the marginal cost of producing the
good) some customer will exit from the market and that will lead to allocative inefficiency.
3
Sanlı (2007), pp. 44 ff.
4
The Turkish Code of Obligations numbered 818, Official Journal (OJ.) Dated 29.04.1926,
numbered 359.
5
According to Article 48: “Everyone has the freedom to work and conclude contracts in the field of
his/her choice. Establishment of private enterprises is free. The phrase “and privatization” was
added by the first Article of Act No. 4446 dated August 13, 1999. The State shall take measures to
ensure that private enterprises operate in accordance with national economic requirements and
social objectives and in security and stability”.
6
The Turkish Code of Obligations numbered 6098, OJ. Dated 04.02.2011, numbered 27836.
7
Sanlı (2007), pp. 51 ff.; Atamer and Sanlı (2010) pp. 17–60; Cooter and Ulen (2012), pp. 38 ff.
8
Jolls et al. (1998), pp. 1471–1550; Thaler (1980), pp. 39–60; Kahneman and Amos (1979), p. 263;
Korobkin and Ulen (2000), pp. 1053–1144.
9
Williamson (1975), p. 26; Williamson (1979), pp. 233–261.
690 K. C. Sanlı
There are no doubts that, those other values, i.e. redistribution of wealth, fairness
or justice alongside with efficiency (welfare) play a significant role in legislative and
adjudicative processes.10 Labour and rental laws are good illustrations of legislations
that are mainly driven by non-economic values or at least pluralistic value bundle.
Hence, contractual freedom is not a dogmatic principle that deserves an absolute
protection. Whenever competing values prevail, or markets do not perform well, this
freedom can be restricted. That is the case with regards to Turkish law and the
Constitution affirms this stance by announcing that: “The State shall take measures
to ensure that private enterprises operate in accordance with national economic
requirements and social objectives in security and stability” (art. 48/2). As a general
observation, the state takes these measures by enacting special legislations in areas
like e.g. consumer law, banking law, competition law, or labour law and the number
of these legislations are ever increasing. Most of these legislations are either market
or problem/relation specific. Labour law, for instance deals with the employer-
employee conflicts most of which are fairness related, whereas banking law pro-
visions are economic oriented and market specific. These provisions are enforced
either by courts or a special regulatory body, e.g. banking authority. Generally,
mandatory provisions deal with non-price elements of the contractual relationship;
therefore, that parties are typically free to set the price as they fit. For instance, even
in competition law where inflated prices are the main concern for intervention, the
Competition Authority seldom sanctions pricing behaviour.11
2.2 Rules Regarding Price Control in Turkish Contract Law
As stated above, Turkish contract law contains various mandatory provisions. It

is worth to mention that the number of these provisions has noticeably increased
10
It should be noted that I use the term “economic” in a narrow sense that is mostly coinciding with
economic efficiency. If the purpose of the legal interference is not welfare or efficiency maximizing,
it is assumed that some other non-economic aim prevails. Therefore the aim is non-economic.
Obviously, every mandatory rule in contract law has economic consequences. Wealth transfer as a
goal, for instance, can be regarded as economic. However in our usage of the term, this is a
non-economic legal policy aim.
11
There are three examples where the Turkish Competition Board, that is the decision-making body
within the Competition Authority, found infringement of unfair pricing or monopoly pricing despite
large number of complaints received every year. The first one is the Belko decision where the state
owned coal distribution and sales monopoly in Ankara charged high prices due to unproductive
operations (the decision numbered 01-17/150-39 and dated 06.04.2001) and the second one is the
Tupraş decision, where private owned refinery which has dominant position in upstream market for
fuel products charged slightly high prices to distribution companies (the decision numbered 14-03/
60-24 and dated 17.01.2014). Third one relates to an e-commerce platform, Sahibinden.com, which
is dominant in market for online platform services for renting and selling vehicles and immovable
property (18-36/584-285, reasoned decision is yet to be announced). For analysis of monopoly
pricing in a comparative perspective see Sanlı (2000), pp. 77–140.
in the CO. The provisions regarding control of standard contract terms (Art. 20–25),
capital and default interest rates (Art. 88, 120), penalty clauses (Art. 182), instalment
sales (Art. 253–263), lease contracts (Art. 299 et seq.) can be reckoned as the
principal illustrations of this “more intrusive approach” adopted by the Turkish
legislator. In line with the general feature of the Turkish legal system, however,
most of these provisions deal with non-price terms; therefore, the price terms are
rarely subject to judicial control.
Having said this, there are some exceptions to this proposition.12 One familiar
example is the laesio enormis. According to Article 28, when there is an outright
disparity between the value of parties’ performances, meaning that the contract price
is utterly below or above the market price (objective condition), the disfavoured
party can ask for a modification of the terms or invalidate the contract provided that
his/her unfavourable bargaining position has emanated from his/her inexperience,
improvidence or distress (subjective condition). However, these two conditions do
not suffice for judicial intervention. Additionally, the other party should be aware of
the vulnerable situation of the disfavoured party and act opportunistically to take
unfair advantage of his/her condition.13 Although this provision, as a general norm,
can be applied across the whole range of contracts and markets, its conditions are
extremely strict. Hence it can hardly be deemed as a general price restriction rule.
A better example is found in Article 88 of the new CO, which concerns capital
interest rates. According to that article, the contractual capital interest rate cannot be
fixed 50% above the default interest rate, which is determined by a special code
governing capital and default interest rates for TRY and for foreign currency debts.14
For instance, the official interest rate for 2018 is 9%, thus parties cannot determine a
capital interest rate above 13.5%. Should they agree on a rate above this limit, the
agreement will be automatically void, and the legal maximum rate will supersede the
contracted rate.15
Another example can be given from lease contracts. Terms of lease contracts in
relation to immovable property16 are subject to mandatory rules of the CO as long as
12
It should be noted that general restrictive provisions of the contract law, i.e. mistake (Art. 31/5),
misrepresentation (Art. 36), incapacity (Civil Code, Art. 15), may also be applied to invalidate the
price terms of a contractual relation.
13
Kocayusufpaşaoğlu (2014) pp. 478 ff.; Oğuzman and Öz (2012), pp. 135 ff.
14
Act No: 3095, OJ. Numbered 18610, dated 4.12.1984.
15
However, precise scope of application of this rule is highly controversial as various other laws
include special provisions with regards to capital interest rates. For instance, the new Commercial
Code, which is enacted concomitantly with the CO, governs the interest rates as well and states that
the parties to a contract are free to determine the rate as they see fit. There are also other provisions
in the Banking Law, which set out extensive and detailed rules about interest rates. Hence, the scope
of the CO seems to be narrow and the issue of interest rates can be regarded as another example of
incoherent law-making initiative. See Atamer and Sanlı (2016), pp. 398–440 (https://www.bilgi.
edu.tr/media/uploads/resume/publication/attachment/618/borclar-kanunu27ndaki-faiz-serbestisini-
sinirl_dLaBVOp.pdf).
16
According the CO, the legal restrictions apply to the non-movable used for residential and
business purposes. But for the latter category, the non-movable should be structure with a roof
(Art. 339).
692 K. C. Sanlı
it is not a commercial lease.17 Nevertheless, the rental price is not one of those terms
and the lessor can charge as high as the market can bear. Once the contract is
concluded however, the parties are not absolutely free to fix the rental price for the
next lease period.18 According to article 344 of the CO, the yearly increase cannot
exceed the producer price index of the previous year. Agreements contrary to this
provision are void and the maximum legal amount determined by the price index
supersedes parties’ agreement.19
Consequently, there are only few specific provisions under Turkish Law, which
control the price. However, the issue of price control in standard form contracts is yet
to be explored. With this exception in mind, it is fair to state that legal intervention in
markets, especially via judiciary, involves mainly non-price elements of contractual
agreements and the freedom to mutually set the price is seen as part of the civil
liberties. Nevertheless, there is also a growing tendency in Turkish law to trivialize
the importance of freedom of contract, and mandatory rules and regulations are ever
expanding. The problem, I should note, is not this tendency per se, as there may be
well-deserved justifications for legal intervention. But it is the lack of a coherent
legal policy, which shapes the law-making and intervention process. The
law-making is generally carried out with ad hoc motives and is not based on
consistent and holistic legal policy objectives. This not only creates problems for
legal enforcement but also social costs for society.20
17
Contractual freedom in lease contracts is severely restricted and apart from the rental price,
deposit agreements (Art. 342), penalty clause (Art. 346) and tying agreements (Art. 340) are
subjected to mandatory rules. Penalty clauses and tying agreements are prohibited and the CO
caps the amount of deposit that can be asked by the lessor.
18
According to Article 347 of the CO, lessor cannot terminate the contract without a cause; even
when the term of lease contract expires. Hence only the leaseholder can terminate the contract
relying on the duration of the contract. Should the leaseholder choose not to terminate the contract,
the contractual relation will be renewed for a fixed period of one year.
19
İnceoğlu (2014), pp. 122 ff.
20
A good illustration of this tendency has been emerged during the editing phase of this report. Due
to economic and political turmoil, foreign currency rates have been soared against Turkish Lira in a
relatively short period of time and this has triggered a sharp price increase (inflation) of prices in
goods and services. Usage of foreign currency in domestic transactions has been very common
since 1980s and the Turkish contract law has been tolerant to this practice except for few trans-
actions such as consumer loans (Decree No 32, Art. 17., OJ. Dated 16.6.2008.) However, very
recently, in order to cope with currency crisis, government has resorted to a very unusual solution.
With a presidency decree, the usage of foreign currency in various transactions between persons
settled in Turkey such as lease and sale of real estate, financial leasing, labor, service and production
contracts has been prohibited (see the Amending Decree on the Amendments to the Decree
numbered 32 on Protection of the Value of Turkish Currency, OJ. Numbered 30534 and dated
13.09.2018 (Amending Decree)). Following the promulgation of the Amending Decree, the Min-
istry of Treasury and Finance has enacted a Communiqué, which has listed the transaction that are
exempted from this prohibition (OJ. Numbered 30557 and dated 6.11.2018). Despite this long list
of exemptions, the currency ban covers most of the contracts in various industries. Non-conformity
with these laws not only results in administrative fines, but also nullity of transactions.
Another interesting and perhaps more troubled legal measure is to set price control mechanism
for retail goods and services under the name of “unfair prices increase”. According to the recent
amendment (OJ. Numbered 30521 and dated 31.08.2018) in the Commercial Advertisement and
3 Regulation of Standard Form Contracts: A Chronological

Overview of the Respective Laws
Presently, standard form contracts regulation in Turkish law appears to be somewhat

complicated. Three different codes, namely, the Code of Consumer Protection
(CCP),21 the CO and the new Commercial Code (CC)22 govern standard form
contracts, and the scope of application of these rules is overlapping. Unfortunately,
the codes lack any indication regarding the proper sphere of application of each code
in a particular case. Hence the issue of scope of application is a controversial topic in
the area of standard form contracts.
3.1 The Unfair Contract Terms Under the Former Code

of Consumer Protection
The Code of Consumer Protection was the first piece of legislation that had explicitly
regulated standard form contracts. The rules were introduced with an amendment in
2003.23 These rules were modelled Directive 93/13/EEC on unfair contract terms.24
Under the heading of unfair contract terms, article 6/A, which is an equivalent of
article 3 of the Directive, explains the conditions under which a term could be
qualified as “unfair”. According to this article, a contractual term will be deemed
unfair, if contrary to the requirement of good faith, it causes a significant imbalance
in the parties’ rights and obligations to the detriment of the consumer. However, if
the term is negotiated between the parties, no matter how unequal it is, it does not
qualify for the unfairness test. There is a presumption that terms in standard form
contract are not negotiated and the burden lies with the seller to prove otherwise. The
legal consequence of unfairness is nullity that can only be asserted by the consumer.
Despite the definition set out in Article 6, the term ‘unfairness’ is a vague one.
Hence the Ministry of Trade and Customs, which is responsible from consumer
Unfair Commercial Practices Regulation, the Ministry of Trade can impose sanctions on price
increases, which have no economic valid justification (Art. 19). Hence the Ministry officials have an
authority to inspect prices and if the prices are increased without increase in cost, the retailer can be
sanctioned with monetary fines. As of 8.11.2018, a total of 69,200 products and 3974 companies
were subject to inspection. Apparently it is very hard to make unfairness assessment and therefore
this could be only regarded as a provisional measure to combat the extraordinary economic
situations. The reason behind this odd measure is that the inflation creates a hazardous economic
environment where retailers can opportunistically increase their prices without real cost increase,
which in turn both exploits customers and contribute the rise of inflation.
21
The Act numbered 6502, OJ. Numbered 28835 and dated 28.11.2013.
22
The Act numbered 6102, OJ. Numbered 27846 and dated 14.2.2011.
23
The Act was enacted on 6.3.2003, OJ. Numbered 25048 and dated 14.3.2003.
24
95/29.
694 K. C. Sanlı
protection affairs, has issued a communiqué in order to elaborate the conditions

under which Article 6 will be implemented.25 Most of the provisions of the
Communiqué simply repeat Article 6 of the Code. The main contribution of the
Communiqué in that regard is that it encloses a list of unfair clause examples (black
list) in the annex. These examples, which are similar to those of the Directive 93/13/
EEC, are quite extensive and certainly help to counteract the vagueness of article 6.
Another contribution of the Communiqué is related to price terms. Article 6/3
explicitly states that, as long as the terms are in plain language and comprehensible,
the main subject matter of the contract and the price falls outside the scope of the
unfairness analysis. This is also referred to as the “transparency prerequisite”.26
Therefore, the fact that the good in question is supplied above the market price will
not call for unfairness inquiry provided that it is written in plain language. The
examples illustrated at the annex reiterate this approach, as there is no direct
unfairness example regarding price or the main subject matter of the contract.
3.2 Control of Standard Form Contracts Under the New Code

of Obligations
While these provisions have been in effect, the new CO has entered into force in
2012. One of the main novelties of the CO is that it has introduced rules regarding
control of standard form contracts (Art. 20–25). After defining the concept of
standard form contracts (Art. 20), the CO lays out three types of judicial control
for standard form contracts: “scope”, “interpretation” and “substance”.27
According to Article 21, unless the disadvantaged contracting party is informed
or provided with opportunity to learn about the adverse terms of the contract by the
drafting party, those terms are not binding. It is assumed that the contracting party
has limited information and therefore, his/her consent will be deemed to be valid
only to the extent that he/she has been expressly informed on the existence of the
terms of the SCT.28 Otherwise, unfavourable terms will not become part of the
contract. The CO phrases the legal consequence of violating this information
requirement quite peculiarly i.e., “those terms are regarded to be unwritten”. This
is construed as minds of parties with regards to those terms are not met and therefore
these terms are not part of the agreement.29
25
OJ. Numbered 25137 and dated 13.06.2013.
26
Atamer and Sanlı (2010), p. 41.
27
Atamer (2001), pp. 81 ff. (https://www.bilgi.edu.tr/media/uploads/resume/publication/attach
ment/631/29.pdf).
28
Apparently in order to achieve this condition, adverse contract terms should be written in
understandable and clear manner.
29
Atamer (2012), p. 11; Oğuzman and Öz (2012), p. 166.
Second type of control, “interpretation”, is a reflection of a well-known contract

law principle. According to Article 23, if the wording of a certain clause in a standard
form contract is vague or has various meanings, the lack of clarity will be interpreted
against the interests of the drafting party. This principle, while protecting the
interests of the aggrieved party, at the same time creates incentives for drafters to
write down clear and understandable contracts, which is efficiency enhancing as it
reduces transaction costs.
Third type of control, i.e., “substance”, is actually an unfairness test and therefore
resembles very much to that of Article 6 of the CCP. Article 25 of the CO states that
the drafter, contrary to good faith, cannot incorporate terms violating the interests of
the contracting party. Otherwise those terms will be void. The Code does not provide
a list of examples that might violate the good faith principle.30 Consequently, the
CCP and the Communiqué will be of great use while interpreting Article 25.
Taking all these provisions into consideration, one can make several observa-
tions. Despite the overlap; the CO and the CCP should not be construed in discordant
with each other. The CCP deals only with unfair clauses and unfairness control,
which can be applied to all kinds of contracts irrespective of its form. Hence, courts
can interfere even with bargained contracts as long as the conditions of Article 6 of
the CCP are met. Whereas the CO only applies when the contractual relation in
question is materialized in a standard form contract, as the subject of the general
provisions in the CO is the standard form contract itself. Hence in that respect, the
CCP, which is lex specialis, seems to have a wider scope. Also, unfairness analysis is
likely to be relevant for the application of Article 25, as the CO with that blanket
norm governs the same problem with that of Article 5 of the CCP.
In two respects, the CO has a broader application. First, the CCP obviously only
applies to B2C transactions, whereas the CO applies also to B2B transactions.31
Secondly, while the CCP interferes when the contract in question is unfair and there
is a problem of interpretation, the unfairness control is one of the three dimensions of
legal interference of the CO. Hence the CO, as a lex generali, has likely to have a
30
Arguably, however, Article 24 of the CO could be deemed as an example of such a term. Article
24 governs the issue of unilateral modification clauses and sets out that the clauses that entitle
drafter to alter the provisions of the standard form contracts unilaterally to the detriment of
customers are held to be unwritten. Obviously, this sanction corresponds to scope control that is
stated in Article 21 of the CO. However, given the commonness of those clauses in practice; they
are likely to be scrutinized under the good faith principle.
31
See for instance Atamer (2013), pp. 103–137; Aydoğdu (2013), p. 600. However this issue is
debated in Turkish legal doctrine. Some argue that B2B transactions lie out of the scope of the
standard form contracts control (Antalya 2012, p. 292). In any case, it should be noted that, judicial
control of standard form contracts between merchants should be implemented cautiously as the
underlying problem of information asymmetry or other cognitive problems rarely occurs with
regards to firms and to merchants.
696 K. C. Sanlı
larger role in dealing with standard form contracts.32 As a final point, the CO does
not have a specific provision regarding the price control.33
3.3 The Unfair Competition Provisions

of the Commercial Code
Parallel to the CO, the Turkish Parliament has enacted also a new Commercial Code
(CC). Unlike the CO, the CC has radically reformed the previous Commercial Code.
The provisions on unfair competition are among those which were revised by the
new CC. Article 55/f of the CC now clearly recognizes that employing standard
contract terms that violate the good faith principle constitutes unfair competition and
is therefore illegal. According to this novel article, especially in two instances,
standard contract terms violate the good faith principle: The provisions of the
standard form contracts substantially deviate from the default provisions which
would otherwise govern the contract and/or limits essential rights or duties inherent
in the nature of the contract to an extent that contradicts with the nature of the
contract in question. The idea here is that, by using these contracts, the drafter will
not only harm the other party, who may or may not be a consumer, but also gain an
“unjustified” competitive advantage vis a vis his/her competitors. Hence this type of
behaviour will damage competitive process as well and therefore deserves to be
recognized as unfair competition.
Similar to that of the CO, the CC does not elucidate the conditions under which a
standard form contract can result in unfair competition. Hence as with the other
governing laws, it is assumed that the judicial implementation and interpretation will
bring legal clarity.34 Judiciary will likely to benefit from the comprehensive rules of
the consumer legislation in this undertaking. The main difference of this Code is the
enforcement scheme. While the violation of the CO and the CCP results in the nullity
of the transaction only, the CC offers various safeguards. Aggrieved persons,
whether competitors or buyers, can claim for an injunction, damages and restitution
of the profit accrued by the infringer. Furthermore, according to Article 62 of the CC,
intentional violation of Article 55 is a crime. Hence upon a complaint of an
aggrieved person, using a standard form contract against good faith can result in
32
However, this is mainly an empirical question and it could well be argued that the Consumer
Code’s unfairness control is more important if one supposes that the main problem in legal practice
is the issue of unfairness and that problem occurs mainly in B2C transactions. In that case, the
principle of lex specialis derogot legi generali will apply and the Consumer Code will be of
relevance. And given that the provision with regards to unfairness control is not detailed as the
Consumer Code, the CO will have almost no importance in dealing with unfairness issue.
33
I should note that, it is widely accepted that Article 24 could be widely used against unilateral
price alteration clauses as price clauses in standard form contracts generally entitle drafter with such
a power.
34
See Uzunallı (2013), pp. 383–420; Topçuoğlu (2015), pp. 3–69.
2 years of imprisonment. Considering the harmful effects of the behaviour and the
problems associated with drawing a clear line between fair and unfair competition,
criminalization seems to be a harsh and overreaching policy choice for governing
such behaviour.
3.4 The Unfair Contract Terms in the Code of Consumer

Protection
In 2013, the new CCP has repealed the former CCP. Article 5 of the new CCP
regulates unfair terms and this provision is akin to that of the former Code. The
definition and the legal consequence of unfair terms are identical, and details of its
implementation are left to the secondary legislation. In 2014, the Ministry of Trade
and Customs has introduced a new Regulation,35 which very much resembles to the
repealed Regulation. The principle that the price terms are exempted from unfairness
analysis is also upheld in the new law.36
The Regulation includes an important novelty with regards to the enforcement
system.37 Typically, the judiciary conducts unfairness analysis and the court’s
decisions have inter partes effect. Article 8, however, empowers also the Ministry
of Trade and Customs to intervene and to control the SCT. According to the new
article, in the case of using SCT, the Ministry can step in and mandate the drafter to
remove unfair terms from the contracts. If the drafter does not remove the said terms
in 30 days, the Ministry can impose administrative fines. The procedural details of
this administrative enforcement scheme are not articulated in the law; therefore, it is
not clear when, and under which conditions the Ministry can intervene and deter-
mine the unfairness.38 In order to interpret this provision in line with the Constitu-
tion, and to grant a right to be heard in front of courts the Ministry’s administrative
power should be conditioned upon a prior court decision ascertaining the unfairness
of the disputed clause. Otherwise contractual freedom would be unduly restricted
and legal certainty would suffer drastically. One should note that the decision of the
Ministry affects all standard form contracts used by the drafter.
35
OJ. Numbered 29033 and dated 17.06.2014.
36
However, Article 4/3 of the CCP comprises specific provisions for pricing behaviour of the firms.
This issue is taken up under the following headings. See Sects. 4.2.1 and 4.2.3.
37
Typically enforcement system relies on consumer actions which are litigated before consumer
courts or arbitration boards depending on the scale of the monetary value of the conflict. Both the
former and the current code of consumer protection also empowers consumer organization to file a
suit on behalf of conumers (Art. 73/2).
38
For instance, can the ministry officials analyse the standard contract terms “ex officio” and
establish unfairness of a term independently? The answer is yet to be explored.
698 K. C. Sanlı
3.5 Interim Conclusions
Turkish law treats SCT in a complex manner. Basic law is the CO, but this piece of
legislation potentially overlaps with the CCP and the CC. As the aggrieved party will
generally be consumers the CCP is likely to be applied extensively. The enforcement
system is even more complicated, since using SCT that comprise unfair and mis-
leading terms not only triggers the application of civil law consequences, i.e. nullity
and damages claims, but also administrative and criminal penalties. Therefore, in
order not to deter beneficial economic activity, it becomes crucial to determine the
precise conditions under which using a (misleading) standard form contracts would
constitute a crime.
Defining the sphere of implementation of each code is beyond the scope of this
report, yet it is worthy to illustrate the complication and “over enforcement”
problems with an example: If a supplier, a merchant, intentionally employs SCT
which include unfair and misleading terms for consumers, three codes are concur-
rently applicable. Because the disadvantaged party is a consumer, the CCP has
prevalence over the CO and unfairness determination will be made in the light of
the consumer legislation.39 Nevertheless, being a general code that regulates the
standard form contracts, CO will also be applied where CCP lacks relevant pro-
visions. As a general consequence, unfair terms will be void. However, the consumer
is also entitled to claim his/her damages (or restitution of the profits accrued by the
infringer) in accordance with the Commercial Code provisions. Furthermore, upon a
complaint by the consumer, the merchant may face the risk of imprisonment up to
2 years and of administrative fines imposed by the Ministry of Customs and Trade.40
This may be considered a classic example of over-regulation and over-enforcement,
which, I believe, is caused by the lack of a holistic approach in law making
process.41
39
Whereas if the disadvantaged party is not a consumer and/or the issue does not concern unfair
term analysis, then the Code of Obligations (and most probably the Commercial Code) will apply to
the case.
40
I have explained that insisting on using standard form contracts that comprise unfair terms may
result in administrative fines. Moreover, administrative fines could also be emanated from the CCP
as misleading practices that are implemented via using standard form contracts, can be labelled as
unfair commercial practices within the meaning of consumer legislation. Hence the Ministry can
impose administrative fines based on article 77 of the CC.
41
Atamer (2012), pp. 10 ff.; Yongalık (2016) (ed Hüseyin Can Aksoy), p. 147.
4 Judicial Control of Price Terms in Standard Form

Contracts
4.1 General Remarks
As explained above, three different laws deal with the problem of standard form
contracts and it is generally accepted that the “non-price terms” are the main concern
for legal interference. The policy rationale of exempting “price terms”42 from SCT
control is pretty straightforward: Judicial interference with SCT is justified by the
limited information and rational apathy of the consumers (or customers in general).43
Price on the other hand, is a salient element of a contract. Customers do pay attention
to the price of the goods and services, and in fact, they base their buying decisions on
the comparison of the prices of the relevant goods and services in the market. And
should that be possible, they also tend to negotiate as well. In short, there seems to be
no market failure regarding price terms. Hence, as long as markets are competitive,
price control is unwarranted.44
Besides, judicial price control can be a very costly way of interfering in the
markets even if the existence of a market failure is recognized. Judging unfairness of
price is not only an arbitrary undertaking, but also a costly one. Errors in making this
judgment (type 1 error) will certainly increase the price of the product, since a
change in price will affect the cost of suppliers.45 Therefore, the economic (or law
and economics) arguments against judicial price control are robust.
42
Price term here refers to any payment (in monetary value) that the supplier (or the drafter of the
contract) demands from customer as remuneration in return for a product or a service that he or she
is purported to provide regardless of its importance in the contractual relation. Therefore it could be
also characterized as secondary obligation. It should be emphasized that this definition does not
encompass all the clauses, which comprise monetary values such as penalty or liquidated damage
clauses.
43
As a result of these problems, standard form contracts (or at least non-price terms) are not
negotiated between the parties and instead of maximizing the interests of both parties; standard
contracts mainly serve to the interests of the drafting party, to the detriment of the consumers. Hence
by invalidating the unfair terms (and deterring the drafting party by other enforcement mechanisms)
legal interference is purported to restore contractual balance and mutual interests are maximized.
Apparently with regards to price terms, rational apathy and informational problems are less likely to
occur.
44
One exception to this rule occurs where market is highly concentrated. In highly concentrated
markets, whether there is a monopoly or a tight oligopoly situation, which may lead to tacit price
coordination, price control might be necessary, even if consumers have full information. It is the
lack of competition, not the information that leads to underperformance of the market. In those
cases, legal intervention might be arguably justified, however, there are other legal institutions, like
competition laws or market specific economic regulations that deal with such failures (See Sects.
5.1 and 5.2). Therefore, judicial control of price terms is not warranted in these scenarios.
45
Social cost of price control is generally higher compared to non-price terms even if there is a
market failure. This both because, interference will inevitably be made arbitrarily as it is difficult to
specify the conditions under which price is non-salient to the customers and error costs would be
just too higher compared to a non-price clause. Especially with respect to price, type I error could
700 K. C. Sanlı
Yet, the issue whether price terms can be subjected to judicial control is only
explicitly governed in the consumer legislation. The CCP states that, in principle,
price terms are exempted from unfairness analysis (art. 5/7 and art. 4). The CO and
the CC on the other hand, do not set out an exemption for price clauses. Thus, one
could argue that the CO authorizes judiciary to control the price terms in standard
form contracts.46 However, given the abovementioned policy rationale, the CO is
unlikely to be employed to control price terms in practice. First of all, price is
typically the negotiated element of the contract and once a term is subject to
negotiation, it cannot be qualified as a standard contract term anymore and falls
outside of the scope of SCT control (CO art. 20). In cases where no negotiation takes
place, “substance control” (or “good faith analysis”) is theoretically relevant (art.
25). However, if customers take the price consciously into account while concluding
a contract, one can hardly think of a situation where price terms would violate good
faith47 except in cases of laesio enormis. The same proposition holds true for the
Commercial Code, as article 55 requires in principle that SCT should be misleading
for the disadvantaged party in order to qualify for unfair competition.
So, the question is: Can a price term be misleading? Or can there be circum-
stances in which using a particular price clause is deemed contrary to good faith and
justifies price control? If one assumes that prices are always salient and therefore
observed by the customers, then the answers to these questions will be negative. This
response holds true for most of the cases where a contractual relationship comprises
a single or few services by the supplier in return for a single or a small number of
(upfront) payments. However, SCT are mostly used for long-term relationships with
numerous obligations where the pricing scheme can be complex as the supplier
might charge different prices for different services contingent upon various risks.
And some of the price terms could be related to secondary obligations for which
customers have less attention. Customers may not know whether they will benefit
from the service and consequently may not consider the probable prices (costs) of
these contingent services. Credit or deposit contracts, mobile phone subscription
contracts and car rental contracts are good illustrations of such relationships where
significantly raise the cost of providing the service and cause greater social costs compared to
control of non-price terms. Because prohibiting a price in cases where it is actually fair and efficient
will almost certainly increase the costs of providers. However, prohibiting non-price terms will only
affect the costs to the extent that it is materialized as these likely to govern certain risks. For
instance, prohibiting disclaimer clause, which limits or abolishes the responsibility of the supplier,
will affect the costs of provider only with a probability as it relates to a contingency. But if a fee or a
commission is prohibited, it will increase the costs almost with a certainty.
46
In fact, Article 24 of the CO, which prohibits unilateral adjustment clauses, can be regarded as a
price control provision.
47
In order to be fell within Article 25 of the CO, contract clause that violate good faith should,
apparently be disadvantageous to the aggrieved party. Hence when it comes to price, this would
amount to an undeserved price charged by the supplier. This means that the aggrieved party is either
making a payment for the good that is costless or paying a very high price for the good. There is no
reason to assume that a rational customer would make such a transaction as long as market is
competitive and the price is a salient element of the contract.
some forms of price term might be non-salient. Complex pricing schemes in these
contracts may create difficulties for customers in realizing the full price of the service
and in order to save “transaction costs”, customer may simply focus on the primary
price component and make sub-optimal buying decisions.48
It is naive to assume that price is always a salient element of the contract given the
complex contractual relationships formed by SCT. Even conventional law and
economics doctrine would acknowledge some degree of failure with regards to
these scenarios.49 Taking this fact into account, the CCP correctly provides an
affirmative answer and allows price control in circumstances where the price is not
formulated in a transparent fashion. In line with the Directive 93/13/EEC, Article
5, para 2 of the CCP states that if a price clause is not written in “plain and
intelligible language”, it can be subjected to unfairness analysis. Accordingly, if
the price clause is too complicated or not easily comprehensible by an average
consumer; courts can implement full unfairness analysis. In order to fulfil the
transparency requirement, Article 4, para. 4 of the CCP mandates seller and suppliers
to provide all necessary information about their prices separately at the annex of the
contract.
As the nature of the problem with regards to price control is identical in other
contractual settings where the CO and/or the CC is applicable, it is reasonable to
assume that courts will take into account the principles set out in the CCP and apply
the transparency principle also in B2B settings.50 Eventually, all three codes deal
with the ill decision-making of a customer, while concluding a transaction; therefore,
different phrasings in these provisions should not impede a holistic interpretation.
However, the real question remains: Can a price term be incomprehensible as
non-price terms and call for a judicial control? Under what conditions customers
make erroneous choices? The answers to these questions are also closely related to
the manner, in which the “transparency principle” should be interpreted.
Evidently, determining the conditions under which a price term is non-transparent
or non-salient requires a factual inquiry and to a large extent, depends on the context.
Yet, the on-going research in the area of behavioural sciences provides valuable
48
Sub-optimal buying decisions refer to the fact that, costs of the contract are not fully internalized
by the aggrieved party. Hence the consumer surplus from the contract will be less than what is
originally thought by the customer and in some circumstances where the non-salient price is
significant sum, customer could be wholly deprived of surplus. This is also a risk from ex-ante
perspective and should the customers have general perception that there might be hidden costs, this
will not only create transaction costs, but also decrease the surplus in general.
49
In cases where pricing scheme creates informational problems, conventional law and economics
scholars might still oppose to legal interference. In those instances, the main reason of negative
attitude to government interference is not related to the fact that existence of market failure is
rejected, but rather government involvement itself is costly and inefficient and therefore
unwarranted.
50
However, it should be noted that when aggrieved party to a contract is not a consumer but a
merchant, it is unlikely that transparency conditions will not be fulfilled. Due to repeated trans-
actions and other institutional advantages, they will in most cases have sufficient information about
the price.
702 K. C. Sanlı
insights in understanding the actual decision-making process of people. Behavioural

(law and) economics, for instance, basically concentrates on errors in decision-
making process and is proved to be very helpful in identifying (and theorizing) the
circumstances under which people tend to make mistakes. As the transparency
principle relates to decision-making errors, it would be a sensible policy to benefit
from the findings of the behavioural sciences and the behavioural law and economics
literature in general.
Explaining the findings of behavioural sciences and discussing the implications
for price control in standard form contracts is beyond the scope of this report.
However, I could mention some of its findings that could be directly relevant
while analysing the price terms. The main finding of the behavioural economics is
that actual decision-making is much more flawed than the rational choice theory
(neo-classical economics) predicts.51 What is more important is that those flaws are
generally systematic. This makes consumers vulnerable to firms, since by predicting
those flaws, firms could behave opportunistically and increase their profit to the
detriment of consumers’ interests. To be more concrete, firms, knowing consumers’
biases and cognitive limitations, have an incentive to increase the level of price. In
fact, competition would force them to behave opportunistically, as this will decrease
their costs without hampering their market share.52 Obviously, this line of thought
calls for a more intrusive approach in the markets and price term is not an exception.
Three findings of behavioural (research or) law and economics are particularly
relevant in this undertaking.53 First one is, when faced with complex choices,
consumers tend to ignore complexity by using short cuts or by focusing only on
salient features. If price terms are complex, as in multi-dimensional pricing or in
price partitioning, consumer may take into account only the price of the main
obligation and ignore the secondary price terms. Firms may take advantage of this
situation and prefer to implement what is known as “price obfuscation”.54 Second
one is, neglect of low probabilities which is closely linked to “consumer myopia”.
According to this cognitive problem, when confronted with low probabilities people
experience difficulties in calculating net effect of the choice on their well-being.55
People tend to focus on information immediately related to their judgement and to
51
The departure from rationality (homo economicus) has significant normative implications for
legal policy. Behavioural law and economics, in that regard, advocates for a broader role for legal
intervention in contract law and this is particularly the case with regards to standard form contracts.
52
This is a classic argument for controlling non-price terms in standard form contracts and could be
regarded as a variation of market for lemons hypothesis.
53
Atamer (2017), pp. 629 ff.
54
“Price obfuscation” or “shrouding” occurs where firms present information about their prices in
unnecessarily complex ways. By using this strategy, they are able to exploit consumers’ cognitive
biases and increase their profit. See Ellison and Ellison (2009), pp. 427–452; Muir et al. (2013). See
also Gabaix and Laibson (2006), pp. 505–540 (http://pages.stern.nyu.edu/~xgabaix/papers/
shrouded.pdf).
55
This is also called as “probability neglect”. See Sunstein (2001), https://chicagounbound.
uchicago.edu/cgi/viewcontent.cgi?article¼1384&context¼law_and_economics.
disregard other less obvious pieces of information. Therefore, if a low risk contin-
gency is priced separately, it is probable that the consumer will not fully internalize
that price term. Third one is very much related to “endowment effect”.56 Consumers,
while entering into a contract, can make correct choices on the basis of salient
features of the contracts. However, once the contract is concluded, researches
indicate that consumers, despite better alternatives, tend to stick with the current
contractual relation and hesitate to switch their partner.57 This may also arise during
the negotiation phase, in cases where consumers incur substantial search (transac-
tion) costs. A consumer, after deciding to enter into a contract with a particular seller,
may choose to ignore the unfavourable terms during the signature phase and resume
to sign the standard form contract despite it may not be welfare maximizing.
In the light of these considerations it is very probable that markets can fail with
regards to price in standard form contracts and behavioural law and economics might
assist us in finding those instances. Hence instead of resorting to abstract legal
concepts or categorizations, (i.e. ancillary and main subject matter of the contract)
while making legal analysis, it is wiser to benefit from the findings of science, given
that the problem concerns failure in decision-making. Hence the meaning of
non-transparency can (and should) be interpreted with reference to the findings of
behavioural sciences. This suggestion also ensures holistic approach in understand-
ing the nature of the problem and enables us to implement the law in more coherent
manner whether it is the CO or the Consumer Code, which applies to the case.
4.2 Some Examples of Turkish Jurisprudence Concerning

Price Control
The issue of price control in SCT, as an independent research question, has been
scarcely subject to a discussion in the Turkish legal literature.58 Authors generally do
not make a distinction between price and non-price clauses and therefore the issue
has not been elaborately studied within the legal literature.59 This seems quite odd,
considering that in the past 10 years, price control has been a fairly eminent topic in
the Turkish adjudication practice. Turkish judiciary has discussed the issue primarily
in relation to the banking and energy sectors where claimants had challenged the
56
Endowment effect refers to the situations where people overvalue something that they own or
posses regardless of its market value. This phenomenon can be explained by loss aversion. See
Kahneman et al. (1991), pp. 193–236.
57
This is another form of inertia. Consumer might subjectively attach high value to search costs.
58
Atamer (2015), pp. 7–41 direct link: https://www.bilgi.edu.tr/media/uploads/resume/publication/
attachment/631/20150730071316680.pdf.
59
Those who have touched upon this issue, basically have contended that judiciary should refrain
from price control and briefly discussed the principle of “transparency” in the consumer legislation.
See Memiş (2016), pp. 187–189; Çınar (2009), pp. 181–184; Aydoğdu (2014), pp. 202–203.
704 K. C. Sanlı
price terms in SCT both under the CCP and the CO.60 The decisions are mostly
related to restitution claims of various expenses and fees that the banks and electric
utility companies have charged from their customers. In most cases, the Turkish
Supreme Court has recognized the legitimacy of those claims and has taken side with
the consumers.
4.2.1 Banking Industry
The issue has first emerged in the banking industry and the conflict was initially
related to credit card fees.61 Charging annual credit card fees is a customary practice
in the banking sector. Following the economic crisis of 2001, competition has
intensified in the credit card market and that has compelled banks to offer extra
benefits and services for cardholders in order to maintain their market shares. These
extra benefits have increased the costs of providing credit card services and therefore
annual credit card fees have escalated. This has caused public dispute and consumers
filed actions before the consumer courts and claimed restitution of the fees.
After a series of inconsistent trial courts decisions, the Turkish Supreme Court in
its 2008 landmark decision, has resolved that credit card fees were unfair under
Article 6 of the former CCP62 and should be returned to consumers.63 While
reaching this conclusion, the Court has not assess whether the transparency condi-
tion was fulfilled rather, has only considered the fact that the price term was not
subjected to a negotiation between the parties as it was included in a standard form
contract and this mere fact alone was sufficient for an unfairness determination.
Hence both, unfairness and the transparency analysis were omitted in the decision.
Obviously, this evaluation not only displays a poor reasoning but also plainly
contradicts with the wording of the former CCP.
Following this decision, numerous cases have been filed in trial courts concerning
not only credit card fees,64 but also all sorts of commissions and expenses charged by
Banks.65 The Supreme Court, while essentially reiterating its stance on the matter,
60
Obviously the Supreme Court decisions are not limited to these two industries. There are some
examples from insurance, transportation and telecom sectors as well. See for instance Yargıtay,
3. HD. E. 2014/1703, K. 2014/9129, dated 9.6.2014 (the Court rejected the argument that the
roaming charge is unfair and should be resituated).
61
For detailed discussion on the topic see Uyumaz and Akdağ (2016), pp. 423–459.
62
As mentioned above (see Sect. 3.1) the previous consumer law was almost identical with the
Directive 93/13/EEC. See also Sect. 3.4.
63
Yargıtay, 13. HD. Dated 2.5.2008, 2008/4345 E., 2008/6088 K.
64
It should be noted that, card fees were not limited to annual fees. Banks charge various other credit
card fees, e.g. renewal fee, cash advance withdrawal fee and additional card fee, as well.
65
Customers had frequently challenged “valuation fees”, which were charged in relation to real
estate loan contracts. The Supreme Court has applied the same test and generally denied claims as
valuation services were basically outsourced to 3rd party contractors. Valuation was a legal
requirement by law and as long as banks could document the expenses, the fees were deemed to
enriched its reasoning by employing jurisprudential criteria that could provide

guidance in understanding the concept of “unfairness”. According to the Court,
the fees are deemed to be fair as long as they are indispensable, reasonable and
documented.66 Should one of these criteria be absent, the price term will fail the
unfairness test and the fee ought to be returned. Hence price should be charged for a
service that serves to the interests of consumer. Also, the level of price should not be
excessive compared to the costs of supplying that service (cost justified pricing) and
finally all prices should be explicitly articulated in the contract. Although making
some of these determinations is not forthright and therefore legal clarity will not
likely be fully achieved, employing this set of criteria represents a notable improve-
ment in the legal analysis. Besides it is open to criticism that courts can effectively
implement the unfairness analysis for price terms.
Nonetheless the Court, except for one decision,67 has not referred to or made use
of “transparency” test in these cases despite the clear wording of the old and new
be fair. Hence the Court refrained from the reasonableness determination. See Yargıtay 13 HD.
21.4.2014 T., 2014/12670 E., 2014/12700 K.
The Supreme Court, upon another set of cases involving life insurance contracts that are bundled
with housing loan contracts, has elaborated another criterion in judging unfairness. The banks
typically have been bundling life insurance contracts for borrowers of housing loans. Many
consumers challenged the legality of these insurance contracts and refused to pay the premiums
as, they contended, these contracts and their premiums were unfair and void. The Court has
established that consumers actually benefit from these contracts and if the contractual relation
rewards consumer, then, as long as the fees are reasonable and documented, terms cannot be
characterized as unfair. Just as in the previous cases, the Court has neither referred nor discussed
the transparency condition. Interestingly, the Court did not discuss the issue under the article 6 of
the CCP, which prohibits trying agreements unless there is a contrary rightful cause or commercial
custom. See the Yargıtay 13 HD. 21.4.2014 T., 2014/12670 E., 2014/12700 K., HGK, dated
4.3.2015 2015/13-111 E., 2015/886 K.; 13. HD. Dated 1.10.2014 2013/32773 E., 2014/30165 K.
Another set of decisions involves credit allocation fees or file expenditures that are charged by
banks when providing a credit to consumers. The Supreme Court has characterized those fees as
unfair within the meaning of CCP and stated that these extra costs should be calculated in advance
and reflected in the price (interest rate) of the credit contract. See Yargıtay 11 HD. 16.06.2014 T.,
2014/5758 E., 2014/11529 K., 11. HD. Dated 22.04.2013, 2012/9247 E., 2013/7945 K.; 11.
HD. 29.4.2014 T., 2014/13315 E., 2014/13503 K. However in the following years, the issue has
been governed by the Regulation and the Banks are authorized to charge these fees. However the
amount of fees are also capped by the Regulation. According to article 10, the amount of credit
allocation fee can not exceed 0.5% of the capital amount (see The Regulation on the Principles and
Procedures Concerning Fees That Are Collectible from Financial Consumers, OJ. Numbered
29138, dated 3.10.2014). Also see Atamer (2015), pp. 30 ff.
In some cases however, the Court has not employed to unfairness analysis and concluded (denied
the case) solely on the basis of whether the consumer has benefited from the service (insurance) in
return for an expense. See 13. HD. dated 2.7.2014, 2014/23525 E., 2014/22547.
66
Yargıtay 13 HD. 8.11.2012 T., 2012/23738 E., 2012/25211 K., 13. HD. 5.3.2013 T., E.2013/
4374, K.2013/526; 13. HD. 26.03.2013, E. 2013/137, K. 2013/7655; 13. HD. 20.01.2014, E. 2014/
1777, K. 2015/1261.
67
Although the Court has not discussed the conditions under which price term become non-salient,
it has mentioned the conditions set out in article 6 of the FCCP. Hence unless the term is plain and
understandable, it is regarded as unfair. Yargıtay HGK. dated 4.3.2015, 2014/13-11 E., 2015/886 K.
706 K. C. Sanlı
CCP and the secondary legislation.68 Therefore, even if banks draw up the price
terms clearly and understandably in the contract, this does not impede consumers to
successfully challenge the price terms in court proceedings. Practically, based upon
these precedents, the distinction between price and non-price terms in terms unfair-
ness analysis has been eroded.
In the succeeding years, the Supreme Court has mainly followed its jurisprudence
on the matter albeit with some minor departures.69 In most of those cases aggrieved
parties (and claimants) were consumers. Following the entry into force of the CO in
2012, however, the Court has handled various cases where the plaintiffs were
businesses. In reviewing those cases, the Court has made a simple distinction: If
the standard contract terms in question were signed before 2012, the provisions of
the CO and SCT control won’t apply.70 Concerning the contracts that are signed
after 2012, the Court has, in principle, endorsed the view that fees and commissions
are subject to judicial control of the CO. By endorsing this, it was also recognized
that judicial control applies even if the aggrieved party is a business.71 What is
perhaps more important in those cases is that, the Court has not employed its own
judicial criterion of unfairness and has sought to resolve the cases generally without
68
Uyumaz and Akdağ (2016), p. 435.
69
For instance, in loan restructuring contracts, banks have charged some extra fees, e.g.,
restructuring fee or early closure penalty. While concluding that these prices were unfair and
therefore should be returned to consumers, the Supreme Court did not refer to its unfairness test.
Hence the analysis in these cases was similar to that of 2008 landmark Decision. See 13 HD.
15.11.2012 T., 2011/9823 E., 2011/19204 K., 13 HD., dated 1.11.2012, 2012/23857 E., 2014/
24413 K.
In one of the cases, while rejecting the case, the Court reasoned that there is a competition in the
market and therefore consumer has an option to make a contract with an alternative bank which
offers credit card in more advantageous terms. See 13. HD dated 11.04.2012 and 2012/7979 E.,
2012/9930 K.
With regards to account management fees, despite some conflicting decisions (see for instance
the Yargıtay 11. HD., 30.11.2015 t., 2015/13248 E., 2015/12753 K.) the Supreme Court has
decided that those fees are collectable by banks given that the claimant is not a consumer and the
transaction at hand is not covered by the CCP. See. Yargıtay 11.HD. 9.3.2009 T., 2009/2029 E.,
2009/2700 K.; 13. HD. 26.10.2011 t., 2011/17142 E., 2011/15476 K. In line with these decisions,
the Banking Regulator has empowered banks to charge these fees (The Regulation on the Principles
and Procedures Concerning Fees That Are Collectible from Financial Consumers, OJ. Numbered
29138, dated 3.10.2014). However, the consumer organizations brought the issue before the
Council of State and the State Council has nullified the Regulation’s provisions only with regards
account management fees (The State Council, 15. Chamber, 6.2.2018 t., 2014/9570 E., 2018/1194
K.).
70
See for instance, Yargıtay 11. HD. Dated 13.12.2017, 2016/12678 E. 2017/7238 K.; 11.HD.
dated 13.12.2017, 2016/13118 E., 2017/7184 K. However the Supreme Court has conflicting
decisions on this issue. In the Energy Industry, for instance, the Court has accepted the view that
the price terms in contracts, which were signed before 2012, could be controlled in the light of good
faith (the Civil Code, art. 2). See below Sect. 4.2.2.
71
See for instance Yargıtay 11. HD, dated 20.12.2017, 2016/5470 E. 2017/7469 K. 11. HD. Dated
28.11.2017, 2016/8692 E., 2017/6679 K.; 11. HD dated 20.11.2017, 2016/8683 E. 2017/6348 K.
making any reference to transparency or to unfairness.72 These decisions also lack

proper reasoning and coherent approach to the problem.
Successful claims have encouraged consumers (and customers) to litigate and a
great number of cases have been filed in consumer courts, consumer arbitration
boards and general courts. Not surprisingly, these cases have constituted an impor-
tant burden for the judicial system and for the banking sector. As a result, the Turkish
lawmaker has chosen to resolve the issue with an explicit and more comprehensive
rule in the new CCP Art. 4, para 3.
Article 4, para 3 of the CCP explicitly governs the issue of fees and commissions
in two sets of provisions. One set of provisions is enacted solely to solve the pricing
problem in the banking industry. Article 4/3 empowers the Banking Regulator of
Turkey to issue a secondary legislation, which determines and limits the scope of all
charges that Banks could charge to consumers. On this basis, the Banking Regulator
has issued a regulation, which has enumerated the types of fees and commission that
the banks could charge to their customers.73 With this Regulation, while some fees
and commissions have been effectively prohibited and others are regulated. Hence
the lawmaker has chosen to solve the issue of price control with regulation instead of
adjudication, the reasons of which will be discussed under the following heading.74
Furthermore, the lawmaker also has incorporated a general norm in the CCP in
the Article 4 para. 3. The article sets out the principles under which a supplier can
charge extra fees or commissions to consumers in all consumer transactions. It
explicitly refers to the concept of “additional remuneration”, hence payments for
primary obligations should be deemed outside the scope of this article. This article
effectively governs the issue of price control in consumer contracts. Since the scope
of application of this article is not limited to banking industry the principles
embodied in this article will be analysed below. However we should emphasize
that this article, which is mainly influenced by the German Judicial Practice,75 is
incorporated to the law due to problems that are arisen in the banking sector.76
72
In one of the cases the Supreme Court has offered a set of criteria in assessing the legality of the
price term. According to the decision, the trial court should check whether the customer is informed
and the price term is expressly drafted in the contract. The Court should also evaluate whether the
expense in question is charged in return for a service in the light of industry practices. See 11.
HD. Dated 18.12.2017, 2016/13120 E., 2017/7300.
73
The Regulation on the Principles and Procedures Concerning Fees That Are Collectible from
Financial Consumers, OJ. Numbered 29138, dated 3.10.2014. With regards to card fees, the article
11 obliges banks to offer an additional free credit card (card with no fees). Hence the customers who
demand extra services along with the credit can opt in for credit card with fees, and price sensitive
customers can choose the free card.
74
See below Sect. 5.1.
75
Atamer (2015), pp. 33 and 34.
76
Uyumaz and Akdağ (2016), p. 430.
708 K. C. Sanlı
4.2.2 Electricity Industry
The cases in electricity market concern “leakage fees” charged by the electricity
companies. Leakage fees comprise two cost components: First one is the cost of
systemic failures. A certain percentage of electricity is lost in the distribution grid
due to a variety of factors including poor maintenance or defective infrastructure.77
Second cost component stems from the illegal usage of non-subscribers. Despite the
criminalization of this behaviour,78 i.e. “electricity theft”, illegal usage is a common
practice in some areas of Turkey.79 Therefore, the ratio of the fee in comparison to
the normal service fee is in Turkey above the world averages.
Traditionally, when electricity was provided by government utilities, these costs
have been reflected to the subscribers as a percentage of their electricity bills.
Practically, customers that are regularly paying their bills are subsidizing on one
hand the free riders (non-paying users) and on the other, inefficiency of the compa-
nies. After the privatization of the government monopoly in the distribution and
retail levels, private companies have continued to adhere the same practice. Indeed,
the Energy Authority of Turkey has regulated the issue with secondary regulation80
and has set out various thresholds that electric companies can charge their
customers with.
Consistent with the market regulations and the customary practice, leakage fee
clauses were included in the SCT. Customers challenged this practice and argued
that electricity companies charge leakage fees in SCT and their level is unfairly high
and therefore illegal. The Supreme Court, while accepting this claim,81 first
established that the leakage fee, being a financial burden, should be articulated in a
Code as mandated by the Turkish Constitution (Art. 73). Hence secondary legisla-
tion, as a legal form, does not constitute a sufficient legal ground for imposing these
charges. Second, most of the claimants were companies and the Court has decided
that the legal control for SCT also applies to contractual relations where the
aggrieved party is a business. Hence, in line with the cases concerning the banking
industry, the contention that businesses cannot benefit from the legal protection of
the CO was denied. Third, and that is rather interesting, the CO was applied to
contractual relations that were formed before 2012 with the argumentation that the
77
In Turkey, the percentage of this loss is around 8%, whereas the world average is around 4%.
78
This was explicitly governed as a crime in the Turkish Criminal Code in article 142 and 161/3.
79
In Turkey the rate of unpermitted usage of electricity is around 18% which is quite high compared
to other countries. In some cities it has been reported that rates can go up to 40%.
80
Since 2011 the issue was regulated with an amendment (dated 1.1.2011) in the Electricity Market
Tariffs Regulation OJ. Dated 11.08.2003, numbered 24843. This Regulation was replaced by the
new Regulation in 2015 (OJ. Dated 22.8.2015, numbered 29453).
81
Yargıtay HGK dated 17.12.2014, 2013/7-2454 E. 2014/679 K.; HGK. Dated 17.12.2014, 2014/7-
1888 E., 2014/1045 K., The Supreme Court has largely followed its precedents: 3. HD. dated
7.4.2015, E. 2014/13086 K. 2015/5767; 3. HD dated 25.12.2014, E. 2014/11021 K. 2014/17273
T. 25.12.2014, 3. HD., dated 18.12.2014, E. 2014/13539 K. 2014/16751.
provisions (Art. 21–25 CC) regarding SCT control were aiming at protecting public
interests and therefore have a retroactive effect.82 Finally, and perhaps the most
important argument is that the Court has decided that the electricity distribution
companies are monopolies in their respective territories and therefore, customers do
not have a freedom to make a contract with an alternative supplier. This monopoly
power allows them to charge unfair and unjust prices.
As one can see, the Supreme Court (again) did not refer to transparency
principle or analyse whether the customer, being businesses were in fact aware
of the leakage fee terms. Also, unfairness of the terms was not thoroughly scruti-
nized. In that regard the Court did neither applied its own unfairness test. However,
there are some sound economic arguments in the decision. It has been reasoned that
charging these costs to subscribers create perverse economic incentives for com-
panies in the sense that they may lack sufficient motivation to invest in the
infrastructure to increase quality or to detect the illegal usage. Consequently, the
Court has tacitly used an efficiency argument in order to intervene in the market.
Secondly, by using monopoly arguments it reasoned, even more implicitly, that it
is irrelevant for a customer to be aware of the leakage fee clause, given that the
provider is a monopoly. Even if these clauses were transparent to customers, due to
a lack of competition, companies would not have any incentive to alter their
pricing scheme in a favourable way.
This decision has caused a stir and numerous restitution actions have been filed
based on the provisions of the CO and the CCP. The Supreme Court consistently
ensued its precedents and decided in favour of litigants with respect to leakage
claims. However, as with the cases in the Banking industry, this has caused
massive litigation costs for the society and for the energy companies. Finally, the
lawmaker has chosen to resolve the issue with a law and has introduced a provision
in the Electricity Market Code numbered 6446, which authorizes Energy Compa-
nies to charge these fees to subscribers.83 Details regarding the pricing are regu-
lated in a secondary legislation, which is issued by the Energy Authority of
Turkey.84
82
As explained above, this proposition plainly contradicts with the approach taken in the decisions
of the Supreme Court with regards to the banking sector. See above Sect. 4.2.1.
83
The Amendment has been introduced with the Law numbered 6719, OJ. Dated 17.6.2016,
numbered 29745. This amendment has been brought to the Constitutional Court, however the
Constitutional Court rejected the claims that this amendment is unconstitutional. The Court has
found that there is a public interest in charging these claims to consumers. Decision dated
28.12.2017, 2016/150 E., 2017/179 K.
84
Regulation on the Precautionary Measures Concerning the Leakage Losses in the Distribution
System, OJ. Dated 31.12.2015, numbered 29579 and the Market Tariffs Regulation OJ. Dated
22.8.2015, numbered 29453.
710 K. C. Sanlı
4.2.3 Some Notes with Regards to Judicial Control of Price Terms

in Turkish Law
It has already been explained that, both the CPP and the CO can be used to control
price terms in SCT. The CCP, however, requires that in order to invalidate a price
term, the price should be non-transparent to the consumer. As the nature of the
problem in question is identical in B2C and B2B contracts the same requirement
should be applicable und the CO. Of course, this transparency requirement does not
apply to price variation clauses, as this clause is specifically governed both in the CO
(art. 24) and the CCP as unfair.85
Non-transparency is mainly correlated with the issue of asymmetry of informa-
tion. In some circumstances, consumers may have limited information with regards
to non-salient price terms and can make suboptimal choices. Behavioural law and
economics advance that those circumstances are not that exceptional after all, given
the fact that biased and suboptimal decisions are much more pervasive in real life
than the rational choice theory assumes. The condition of “transparency” can well be
construed in the light of these findings.
When considering the Turkish law on that matter, I can state that, quantitatively,
there has been a rich jurisprudence. The Supreme Court has been eager to interfere
with price terms and basically in two industries there have been ample cases. It could
well be the case that the contract terms for which judicial control took place could
have been correct on policy grounds86; yet legal justification in the decisions was
inadequate, incoherent and technically wrong. The Court did not apply or even refer
to transparency principle in its legal analysis despite the clear stipulation in the
Consumer Code. Not surprisingly, the findings of behavioural sciences were not
much of use in legal analysis. The Supreme Court has developed criteria for
unfairness assessment, however, those criteria have not been applied coherently.
Given the problems associated with judiciary practice, the lawmaker has decided
to resolve the issue with explicit provisions in the CCP. According to the Article
4 para. 3 of the CCP: “An additional fee cannot be claimed from the consumer for the
acts that are among the legal obligations of the party drafting the contract and
which the consumer rightly expects relative to the good or service presented to the
consumer, and for the expenses made in line with the benefits of the party drafting
the contract”. According to the article, in three instances, suppliers cannot demand
additional payments from consumers. If the service in question is a legal obligation
that is governed in the law or if consumer has a rightful expectation that the service
in question would be provided within the usual scope of the primary obligation,
supplier cannot ask for an additional payment. In these two instances, the consumer
85
Price alteration clause is deemed as an example (1/h) of unfair clause at the annex of the
Regulation on the Unfair Terms.
86
It may well be the case that for instance, the annual fees or other fees charged by banks might be
non-salient and therefore if the Supreme Court would have used the findings of behavioural
sciences, it could have reached the same conclusion. However, this has never come up in the
proceedings.
is the beneficiary of the service; yet the supplier has a legal obligation to serve at no
charge. In the third instance, the recipient of the service is the supplier and the law,
rightfully, allocates the costs of service to supplier. When the service serves to the
interests of the supplier, demanding remuneration is plainly forbidden.
Hence in a case where the consumer challenges fees or pricing behaviour of the
supplier, the court will implement a two-stage analysis. In the first stage, Article 4 of
the CCP will be taken into account as this provision provides an outright prohibition
for various price clauses. If the challenged price term falls under any of the instances
set out in Article 4, there is no need for an unfairness analysis given that these
instances can be characterized as per se unfair. Should the price term in question pass
the initial legal analysis, the court will proceed with Article 5 and perform unfairness
analysis. Here the assessment will be implemented in the light of the controversial
judicial criterion put forward by the Supreme Court precedents.
Given the fact that payments for primary obligations are almost always salient
and therefore would not be subject to unfairness analysis anyhow, this article
effectively governs the issue of price control in consumer contracts. Since the CCP
has entered into force in 2015, there have been only few cases decided under these
new provisions.87 So, it is hard to make inferences in the light of those cases. But
interestingly, even these few cases seem to be disregarding article 4, para. 3 of the
CCP and the High Court seems to apply its traditional unfairness analysis.88
In sum, price terms in SCT have been subjected to judicial control extensively in
Turkish practice, yet adjudication performance was inadequate. In connection with
this, judicial control of prices terms in these two industries has proven to be costly
for society and finally resulted in new legislation. Hence the lawmaker has decided
to solve the issue with regulation the reasons of which are explored below.
87
One probable reason for the decrease in the number of cases is that the banks have actually
complied with article 4/3 and the relevant banking regulations and therefore have been charging less
for their services.
88
See for instance 13. HD, dated 4.5.2016, 2016/8497 E., 12303/2016 K.; 13. HD. Dated 3.5.2016,
2016/9897 E., 2016/12206 K. On the other hand, there is one decision where the Supreme Court
denied the restitution claims on the basis of article 4/3 of the CCP and the relevant banking authority
regulations. See 13. HD. Dated 3.6.2016, 2016/6162 E. 2016/14271 K.
However, in one particular case in which the consumer has paid treasury commission within the
context of loan contract, the Supreme Court, without explicitly referring to the unfairness test, has
decided that the trial court has neglected to assess whether that commission serves to the interests of
the consumer and therefore has reversed the judgment for further inquiry. The Bank in this case has
contended the payment of commission will benefit the consumer since he or she will able to get a
lower rate upon payment. It seems that the Court found this argument plausible however, it should
be noted that, in theory, unfair commission would benefit consumers in that sense since receiving
the payments will decrease the cost of providing credit service. See 13. HD. Dated 17.4.2017, 2016/
170 E., 2017/4638 K.
712 K. C. Sanlı
5 Regulatory Control vs. Judicial Control of Price
5.1 Advantages of Regulatory Approach to Price Control
As explained above, both in the energy and in the banking industry, the issue of price
control has been sought to resolve by regulation. With regards to banking industry,
the legislator has incorporated an explicit provision in the new CCP concerning
banking industry and has empowered the Banking Authority of Turkey to determine
the types of fees and commission that the banks could charge. Thereupon the
Banking Authority has issued a regulation, which basically enumerates the types
of permissible fees and commission that could be reflected to the customers. This
numerous clausus list of fees is a clear restriction of pricing behavior. Furthermore,
for permissible fees, banks do not have an absolute freedom. The principles embod-
ied in the consumer law apply to pricing behavior and the fees should be cost
justified. The legislator solved the problem in the energy industry in a similar
manner. Since these regulations have been in force, the amount of litigation has
been dramatically declined. Hence, it seems that the regulation has at least reduced
the burden of judicial interference.
I should note that this preference seems to be in line with the general approach in
the law and economics literature. From institutional perspective, market regulation,
as opposed to judicial control, is considered to be a better enforcement alternative in
controlling prices.89 One can offer at least four reasons for this proposition. First, the
market regulator generally has superior information vis a vis courts in interfering
price, given that the regulator is equipped with the tools to deal with the failures of a
particular market and therefore has an economic expertise. This is of utmost impor-
tance since controlling price requires deep knowledge about the cost structure of the
company. If the price charge for a service is cost justified, then interference is
unwarranted. In terms of institutional capacity, courts are ill suited for such an
undertaking.90
Secondly, judicial control of price may cause problems of uncertainty and of legal
security. Typically judicial control of price is implemented with “standard norms”
(blanket norms), which require interpretation. If the legal standards are vague, which
is the case with respect to Turkish consumer and contract law, this may result in
inconsistent outcomes and hinder predictability. Obviously this not only increases
the cost of interference91 but also generates extra costs for firms who intend to
comply with the law. The regulatory body, on the other hand, typically controls the
price with ex ante regulations, which are characterized, as “rules”. Hence the firms
89
See generally Atamer (2017), pp. 639 ff.; Posner (2010), pp. 11–26; Shavell (2003) https://lsr.
nellco.org/cgi/viewcontent.cgi?referer¼https://scholar.google.com.tr/&httpsredir¼1&article¼
1192&context¼harvard_olin.
90
Besides this is a delicate undertaking, as type 1 errors in making that determination will increase
the cost of service and engender welfare losses.
91
Cost of enforcement per unit will escalate if the legal standards are not firm and precise.
will know in advance which prices are legally permitted. Although drafting “rules”
are more costly than “standards”, the expertise of regulatory bodies decreases these
costs and therefore market specific regulation represents more efficient method of
interfering with the price.92
Thirdly, price control is not an instantaneous involvement in the market. From
remedial perspective, in order to be effective and sound, the authority interfering
with price, whether court or regulatory body should monitor its implementation
given that conditions affecting cost and price are dynamic and subject to change.
These changing conditions should be constantly supervised and “fair” prices should
be adjusted where necessary. Again, courts are not well suited for this task, as they
do not have institutional capacity to carry out monitoring and adjustment. Admin-
istrative bodies can more efficiently perform this task.
Fourth, and may be the most important, judicial control of price is proved to be
very ineffective enforcement method if the pricing problem is widespread in the
market. The reason is straightforward: the court decision has an inter partes effect
and therefore only the successful claimant will benefit from the decision. Hence the
company charging unfair prices may choose not to change its pricing policy unless
sizable amount of customers file an action for restitution. In most cases however, the
customers will not choose to litigate given that the expected benefit of litigation will
be trivial.93 Hence, unless there is a procedural mechanism, which allows the victims
of unfair pricing behavior to gather and consolidate their claims in a single lawsuit,
which decreases the cost of litigation as in the class actions, judicial price control is
doomed to be unproductive enforcement method.94 Collective or class actions are
not governed and therefore not permitted in Turkish procedural law. The regulation
on the other hand, has erga omnes effect and as long as the fines are set high enough
to create deterrence, the companies will change their pricing policies. This substan-
tially decreases the cost of interference and renders the regulation an efficient
enforcement tool.95
92
Kaplow (1992), pp. 557–629. https://dash.harvard.edu/bitstream/handle/1/10611784/Kaplow_
RulesStandards.pdf?sequence¼2.
93
The former CCP and CCP exempt consumers from paying litigation fees when filing suits in
consumer courts (Art. 23/2 in the former CCP and 73/2 in the CCP).
94
Atamer (2017), p. 639. It should be noted that consumer organizations and Ministry have also
standing in consumer litigation (Art. 73/2). However, their involvement in consumer litigation does
not alter the legal effect of the court decisions.
95
As explained above, the CCP has provisions, which authorizes the Ministry to impose sanction to
companies that employ unfair (price) terms. Although the conditions for implementation is not
clear, enforcing those provisions will increase the efficiency of judicial control of price terms.
714 K. C. Sanlı
5.2 General Features of Price Control Regimes

in Turkish Law
These reasons, I believe, explain why the Turkish legislator, in these industries, has
chosen to interfere with the price by way of regulation as opposed to an ex post
judicial control. Understandably price regulation is not limited to these industries.
Despite Turkey’s commitment to market economy, price regulation is quite common
in Turkish economy. It would be beyond the scope of this study to provide an
exhaustive list of instances where prices are regulated. However, in light of some
notable examples of price regulation, general characteristics of the regulatory
approach can be reviewed.
First, price regulations are put into effect with various policy goals. Underlying
rationale in a typical regulation is economic and regulation is justified under the
rubric of permanent “market failures”. Here I can cite two failures: Natural monop-
oly and transaction costs. Most of the price regulations are explained by natural
monopoly problem. That is the case with electricity,96 natural gas97 and telecom-
munications (land line phones).98 Companies operating in these industries are also
public utilities and there is a strong economic argument in controlling price. Another
economic argument in favor of price regulation is “transaction costs”. Representa-
tive example of price control where this rationale plays a primary role is taxi fare
regulation.
Other, non-economic policy goals play important roles as well and, in most cases,
price regulation serves multiple policy goals, primarily together with economic
objectives. A good illustration of this can be observed in the telecommunications
(and the electricity) industry. The monopoly argument might be the primary justifi-
cation for price regulation, however, the “universal service” also accounts for price
regulation. In order to provide universal service throughout the country, various
customers in remote regions to whom providing service is not cost-justified are
subsidized.99 Costs of those subsidies are logically reflected to the bills and so as to
determine the burden of customers, price regulation is put into an effect. Another
example can be provided from the electricity market. Electricity is a “political good”,
96
Electricity Market Act, numbered 6446. OJ. Dated 14.3.2013, numbered 28603. The law sets out
detailed rules on price tariffs. Not only transmission and distribution, but also retail prices are
subject to regulatory control. Price tariffs are prepared the companies and presented to the Energy
Authority for review. Upon approval of the Authority, tariffs are binding (see Article 17).
97
The Natural Gas Market Act, numbered 4646. OJ. Dated 2.5.2011, numbered 24390. According
to article 11/4 of, the Energy Authority directly sets the retail prices or tariffs. The Authority has
also issued a regulation, which specifies the details of pricing (OJ. Dated 13.10.2016, numbered
29856).
98
The Electronic Communication Act, numbered 5809. OJ. Dated 10.11.2008, numbered 27050.
The prices are regulated only if the undertaking has a dominant position in the relevant market
(effective market power). General principles that are relevant for tariffs are articulated in the Article
14 of the Act.
99
The Universal Service Act, numbered 5369. OJ. Dated 52.6.2005, numbered 25826.
in the sense that the price of the good considerably affects voting behavior of
constituents and therefore political success, the government has a viable interest in
keeping prices low. Therefore, although one might, rightfully, argue that the prices
are controlled due to monopoly problem, yet in practice, Energy Authority’s inter-
ference to prices could be largely explained by political motivations.
Price regulation in liberal professions’ is a good example of where prices of
services are regulated solely with non-economic, mainly social objectives.100
Although one could put forward economic arguments in favor of price regulation,
the only logical reason in these markets seems to be wealth transfer from customers
to professionals. Another example can be given from the pharmaceutical industry.
Price controls in transportation101 and agricultural industries could also be rational-
ized by non-economic policy objectives given the fact that these markets are
generally competitive and transparent.
As it is understood, “information asymmetry” (or “behavioral problems”) is
seldom a reason for regulating the prices. Apart from the banking industry, it is
hard to find an instance of price regulation where informational problems induced
price interference.102 Hence regulations in the banking industry could be regarded as
a unique case.
Secondly, the price regulations are generally put in effect by market specific
regulatory agencies, as is the case with the electricity, gas, telecommunications and
banking industries. Aside from the banking industry, these industries (or various
segments in these industries) are characterized as natural monopolies and given the
permanent nature of the failures in these markets, industry specific regulatory
agencies are established. However, it is not possible to generalize this principle as
in many cases price regulations are put into effect by a relevant ministry. This is the
case for instance with respect to transportation, agriculture and pharmaceutical
100
For instance the prices of legal services of lawyers are regulated by the Bar Association of
Turkey in the form of minimum prices. See Attorneyship Act numbered 1136, OJ. 7.4.1969
numbered 13168. Similar regulations are in force with regards to Notaries. See article 112 of the
Notary Act numbered 1512, OJ. Dated 5.2.1972, numbered 14090.
101
The Road Transport Act, numbered 4925. OJ. Dated 19.7.2003, numbered 25173. The article
11 of the empowers the Transportation Ministry to issue minimum and maximum price tariffs.
Based on this Article the Ministry has promulgated Regulations which also set caps on prices. See
for instance article 56 of the Road Transport Carriage Regulation, OJ. Dated 8.1.2018, numbered
30295.
102
Aside from the examples provided in this paper, interest rates of credit cards, overdraft account
interest rates, (variable) interest rates in mortgage credit contracts and rates in consumer credit
contracts can be mentioned as other notable examples of price regulation based on asymmetry of
information. With regards to mortgage credit contracts, a regulation is in force, which require parties
to set variable interest rates based on the indexes that are promulgated by the Central Bank
(Mortgage Credit Contracts Regulation, OJ. Dated 28.5.2015, numbered 29369). Regarding credit
cards and overdraft account interest rates, the article 26 of the Bank (Debt) and Credit Cards Act
(OJ. Dated 1.3.2006 numbered 26095) empowers the Central Bank to set a price ceiling. The
Central Bank regulates the price by issuing a communiqué (the latest Communiqué is enacted in
20.6.2018, OJ. Numbered 30464). See Atamer and Sanlı (2010), p. 53. For limitations of interest
rates in consumer credit contracts see Atamer (2017), pp. 132 ff.
716 K. C. Sanlı
industry.103 A unique case in that regard is liberal professions. Professions are

regulated by associations, which are comprised of its members. In some cases
where its constituent law empowers the association, the relevant body,
e.g. presidency, enacts price regulations. For instance, the prices of legal services
are regulated by the Union of Turkish Bar Associations.
Thirdly, price regulations are put into force in the form of secondary legislation.
This is the common feature of all price regulations in Turkey. Typically a Code
empowers the administrative body (or the association of the liberal professions) to
regulate the price and sets out only general principles that are to be followed when
drafting a regulation. Based on this authority, the administrative body promulgates a
regulation or a communiqué or a circular that articulates the conditions of price
control. This is in line with economic theory as markets are dynamic and prices that
are set by law should be easily adjusted to changes in the market conditions.
Fourthly, price regulations generally do not fix or dictate a certain level of price as
this type of interference may result in welfare losses due to probable errors in the
fixed level or prices. Therefore price regulations generally drafted in the form of
price caps. That is the case in telecommunications, electricity, fuel distribution and
certain segments of transportation104 industries. In certain cases, a more flexible
approach is adopted and prices are regulated by a price calculation method. For
instance in fuel refinery (upstream) market, the Energy Authority mandates the
refinery company, Tupraş, to employ a calculation method and later monitors
whether its prices are in line with the legal methodology.105 There are also cases
where prices are fixed; taxi fares, services of notaries and drug prices are for instance
fixed.106 In various segments, transportation industry and in many liberal profes-
sions, there are examples of minimum price regulations. For instance, the Turkish
Union of Bar sets minimum prices for various legal services that are provided by the
lawyers.107 These prices are mandatory and discounts are sanctioned with fines. This
piece of legislation hinders prices competition and reduces social welfare.
In sum, price regulations are quite common in Turkey and they are brought into
force with varied aims most of which are economic. However, “information
103
Concerning taxi fares, municipalities are vested with powers to regulate prices. In İstanbul for
instance, market specific regulator, UKOME, is established to govern transportation issues within
the İstanbul Municipality.
104
For instance, the terminal operators who serve to road transport carriers are bound by maximum
prices (OJ. Dated 4.11.2017, numbered 29522).
105
The article 10 of the Petroleum Market Act governs the pricing behaviour of the refinery. The
Act numbered 5015, OJ. Dated 20.12.2003, numbered 25322.
106
Price regulations also occur in the form of profit margins. For instance, in distribution and retail
level of pharmaceutical market, distribution companies (pharmacy warehouses) and pharmacies are
operating by fixed (maximum) profit margin set by law. This is corollary to the notion that drug
prices should be fix in the retail level. Hence in order to achieve that aim, distribution chain’s profit
margin is capped.
107
The Regulation on the Minimum Prices for Legal Services, OJ. Dated 30.12.2017, numbered
30286.
asymmetry”, which has been the main rationale for judicial price control in contract
and consumer law, is rarely a justification for controlling the price. Aside from the
banking industry, there is no example of price regulation motivated by informational
problems. The common feature of price regulations is that they are in the form of
secondary legislation; however the administrative authority that has the power to
legislate those regulations varies. In some cases, it is the market specific authority,
which is founded to deal with the failures of a particular market that issues the
regulation; however in other cases it is the relevant ministry or the association of a
certain liberal profession. The price regulations vary also in terms of substance. In
most cases they set a price cap or a maximum price, which is in line with economic
theory. However minimum or fixed price regulations are also in force as well.
6 Price Transparency, Competition and Regulation
Price transparency is essential for markets’ performance. If price terms are not
transparent, customers won’t be able to fully understand the cost of a service and
will make suboptimal choices. Suboptimal choices will lead to allocative ineffi-
ciency even if the market is competitive. In fact competition will compel firms to
benefit from the informational problems and firms will have incentive to make price
and other terms non transparent.108 This will augment the welfare loss resulted from
the allocative inefficiency of the market. Hence legal policies encouraging transpar-
ency are generally welfare increasing and therefore are desirable from economics
standpoint.109
As explained above, one way to achieve transparency is to interfere with markets
via judicial control. The provisions with regards to standard form contracts in the CO
(Art. 20–25) serve to this end.110 Another method for increasing transparency is
regulation. Businesses could simply be obliged to provide clear and understandable
information about the price (and other conditions) and violations can be sanctioned
with administrative fines. Compared to judicial interference, administrative enforce-
ment seems to be more efficient for the reasons that I have already discussed
above.111 In harmony with that proposition, the CCP sets out explicit provisions
108
See above Sect. 4.1.
109
However, it should be underlined that increasing transparency in price might facilitate carteli-
zation and therefore have negative effects on welfare. This may occur in markets that are prone to
collusion. In other words if market is highly concentrated, stable and the cost structure of companies
operating in that market is similar then price transparency could lead to cartelization. Hence outright
transparency requirements covering all markets could result in unintended negative consequences.
110
For instance interpretation control present in the article 23 of the CO might increase transparency
as well. If the price terms are vague and have several meanings, it will be interpreted against the
interests of the drafter. Thus drafter will be motivated to write down clear and understandable price
terms.
111
See above Sect. 5.1.
718 K. C. Sanlı
that aim to increase price transparency. According to article 4, para 4 of the Act, the
supplier has to provide information concerning any type of price that is demanded
from the consumer. That information should be served to the consumer on paper or
on a durable medium as an appendix of the contract. Moreover article 54 of the CCP
obliges firms to clearly write down the prices (price tags) of products. According to
the article: “Labels indicating the actual total price including all taxes and unit price
that the consumer will pay, place of production and distinctive characteristics
relating to the product shall be affixed on the goods offered for retail or on the
packages or containers thereof, in an easily visible and legible manner; and where
no labeling is possible, lists showing the same information shall be displayed on
appropriate places in a visible manner. The lists showing the tariffs and prices of
services shall also be displayed by preparing them as laid down in this article’s
provision”. Article 54, para 3 empowers the Ministry of Customs and Trade,
municipalities and relevant chambers to enforce this provision, and noncompliance
is sanctioned with monetary fines (Art. 77/1).
Based on this provision, the Ministry has issued the Regulation Concerning Price
Tags and articulated the details of its enforcement policy.112 Accordingly, the
suppliers have legal obligation to provide price tags unless the good or service in
question is exempted from this responsibility by article 6. The Regulation also
enumerates the list of informational elements to be included in the Tags (Art. 5/2).
Article 9/1 of the Regulation clearly mandates suppliers to provide information in a
clear and understandable manner. Besides the Regulation on the Commercial
Advertising and Unfair Commercial Practices obligates suppliers to provide correct
information with regards to prices in their advertisements.113
These rules apply to consumer transactions in all sectors. There are also market
specific regulations, which aim to increase transparency. Banking sector represents a
good illustration of this approach. According to the Regulation Concerning Banking
and Credit Cards,114 the Banks not only have to provide explicit information about
interest rates and other charges to the consumer when making the transaction (Art.
17), they also have to deliver this information to the Banking Authority for publi-
cation. The Authority publicizes this data on its website. Similarly, according to the
Regulation Concerning the Charges that are Claimed from Financial Consumers,115
the Banks are required to publicize all the relevant pricing information on their
websites in a clear and understandable manner and that information should also be
apt for a comparison (Art. 9). To be comparable, in some settings standardization is
necessary. Standardization of interest rates is a good illustration of standardization
112
OJ. Dated 28.06.2014, numbered 29044. This regulation is modelled on the Directive 98/6/EC of
the European Parliament and of the Council of 16 February 1998 on consumer protection in the
indication of the prices of products offered to consumers, OJ 1998, L 80/27.
113
OJ. Dated 10.1.2015, numbered 29232.
114
115
requirement. The Consumer Credits Contracts Regulations116 compels creditor to

provide information with regards to effective annual percentage rate alongside with
monthly and yearly rates (Art. 6/f, 11/f and 14).
Likewise, Information Technologies and Communication Authority, which is
vested with powers to regulate telecommunication industries (including internet,
mobile communication and land line phones), has governed transparency principle
in a market specific consumer protection regulation.117 According to the article 5/1
(g) of that regulation, obtaining detailed, clear and up-to-date information
concerning prices is indicated as a consumer right. Following article governs
transparency principle and mandates that the suppliers must provide all relevant
price information in a clear and understandable manner before concluding a contract
(Art. 6). Furthermore, all price information must be publicized from the suppliers’
websites (Art. 11).
This list of examples can be extended. The idea is however, in the quest for
increased transparency in prices, regulations are generally preferred in the Turkish
legal system. It seems that there is a trend for adopting market specific consumer
legislations and price transparency is one of the most important topics in those
legislations.
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119–148
Form Contracts in the UK: Regulating
Prices and Charges in the UK: Information
Versus Substance, General Clauses Versus
Rules Developed by Regulators
Christopher Willett
Abstract This paper considers how UK law regulates the price and other charges in
contracts. It asks how dominant the information paradigm is as a regulatory
approach, and also considers the limits of this paradigm in providing consumer
protection. Assuming a more substantive paradigm of regulation is desirable, the
paper considers how to achieve this. It considers the respective roles that should be
played by a legislative general clause; and on the other hand by more concrete rules
developed by regulatory bodies, each rule designed for specific charges in particular
types of contracts in different trade sectors.
1 Introduction
This paper addresses issues going to the very core of contract law, its values and its
standard setting processes. The focus is on how UK law regulates the price and other
charges in contracts, in particular the choice between rules simply requiring better
information about prices and charges (the information paradigm) and rules directly
regulating the substantive level of prices and charges (the substantive paradigm).
Although there is some discussion of business to business (B2B) contracts, the main
focus is on business to consumer (B2C) contracts (as Sects. 2 and 3 below demon-
strate, there is much greater legal intervention in B2C contracts).
The paper asks how dominant the information paradigm is as a regulatory
approach, and also considers the limits of this paradigm in providing consumer
protection. Then assuming the greater protection of a more substantive paradigm of
regulation is desired, the paper considers the tools that should be used to instate such
a paradigm. In particular it considers the respective roles that should be played on the
one hand by a legislative general clause i.e. a broadly worded ‘fairness’ test
C. Willett (*)
University of Essex, School of Law, Colchester, UK
e-mail: cwillett@essex.ac.uk

https://doi.org/10.1007/978-3-030-23057-9_29
724 C. Willett
applicable to different types of charges in contracts across trade sectors; and on the
other hand by a range of more concrete rules developed by regulatory bodies, each
rule designed for specific types of charge in particular types of contracts in different
trade sectors.
It is especially important to ask these questions currently, given the range of
important recent legal developments affecting prices and other charges:
e.g. Supreme Court decisions1; legislation dealing with ‘transparency’, ‘prominence’
and the substantive fairness of prices2; and rules developed by regulatory bodies
imposing substantive caps and other related forms of regulation of prices and other
charges in areas such as high cost short term lending, pensions, energy (gas and
electricity), bank overdraft fees and fees in the rent-to-own and home credit
markets.3
Certainly there has been prior work both on the extent to which the law relies on
the information paradigm, and on the effectiveness (or not) of this paradigm.4
However, this paper significantly advances thinking on these questions. In part it
does so by providing a completely new way of categorising various types of
non-essential charge (for example routine non-contingent charges, routine and
non-routine contingent charges and charges for breach5): and uses this categorisation
to analyse the new developments and demonstrate both the dominance of the
information paradigm, and its limits in protecting consumers. As charges have
never been categorised in this manner before, this is a wholly original way of
analysing price regulation. The analysis is also new in that the limits of the
information paradigm are demonstrated by taking into account some of the
abovementioned recent legal developments: in particular the new ‘transparency’
and ‘prominence’ rules.
Having demonstrated the dominance of the information paradigm and its con-
sumer protection limits, the paper also opens up an entirely new debate on the
question as to how exactly to give a greater role to the substantive paradigm. Prior
work has discussed some of the challenges in setting substantive fairness standards.6
However, this work has not addressed the specific question as to whether such
standards are best set by a broadly worded, broadly applicable general clause; or
by various rules developed by regulatory bodies each rule only being applicable to
specific charges in particular contracts.
1
Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent); ParkingEye Limited
(Respondent) v Beavis (Appellant) [2015] UKSC 67.
2
Part 2 Consumer Rights Act 2015.
3
Financial Conduct Authority (2018a), Ch. 5; Financial Conduct Authority (2016); House of
Commons Library (2016); Domestic Gas and Electricity (Tariff Cap) Act 2018; Financial Conduct
Authority (2018b), pp. 44–48; Financial Conduct Authority (2018c).
4
E.g. Howells (2005) and Willett (2018).
5
Section 3 below.
6
E.g. Collins (1999), Ch. 11; Willett (2012).
Control of Price Related Terms in Standard Form Contracts in the UK:. . . 725
It is argued here that (if it is considered desirable to instate more of a substantive

paradigm) the Consumer Rights Act (CRA) should be amended to allow its general
clause (GC) on unfairness to measure the substantive fairness of certain ‘non-routine
contingent charges.’ These are non-routine contingent charges where (notwithstand-
ing formal contractual presentation) what is provided in exchange for the charge
should not be regarded as a ‘real’ service: either because it is triggered by consumer
inadvertence or because what the trader provides is of no real substance. The CRA
GC contains criteria that can provide a clear and reasonably predictable measure of
the substantive fairness of such charges. It is the most efficient tool to perform this
function, because such charges raise the same issues of general principle whatever
the type of contract or trade sector, and the CRA GC criteria address these issues of
principle.
However, the CRA GC is not the appropriate tool to test the substantive fairness
of other types of non-essential charge,7 or of the main price: it contains criteria that
would cause uncertainty and inefficiency in such cases. These non-essential charges
and the main price are better dealt with on a case by case basis through rules
developed by regulatory bodies (the Competition and Markets Authority and the
Financial Conduct Authority), under their market intervention and product regula-
tion powers. These powers allow for an interest balancing analysis that is more
appropriate (than a GC) to measure the substantive fairness of the above-mentioned
non-essential charges and of the main price: an analysis that sets a (price or charge)
level that reduces consumer detriment while taking account of the broader needs of
the relevant market e.g. by limiting the scope for unintended consequences.
Why does this all matter? For a start, in hundreds of millions of daily contracts
there is of course a basic price, but there are also often now large numbers of extra
charges: e.g. with flights, additional charges for baggage, priority boarding, a
specific seat, insurance, airport check-in etc. These may not be expressed clearly
and the large numbers of charges may make it difficult for customers to determine
precisely what is payable and in what circumstances.8 This makes it hard for
customers to make informed decisions about what they are committing to pay. It
may also mean that customers cannot use charges to make choices between sup-
pliers, so the charges are not subjected to competitive discipline and are substan-
tively higher than if they were subjected to such discipline.9 There is plentiful
evidence as to the detriment caused by all of this to consumer customers in
particular.10
As noted above, a key issue is when information tools are considered sufficient to
deal with these problems; and conversely when more substantive controls are
required. This has important practical implications. Information rules affect the
7
‘Routine non-contingent subsidiary charges’, ‘routine contingent charges’ and those ‘non-routine
contingent charges’ where there is genuine service: on all of which see further below at Sect. 3.
8
Willett (2012); Atamer (2017), p. 634.
9
Willett (2012).
10
Citizens Advice/Oxford Economics (2016).
726 C. Willett
time and resources that suppliers must devote to drafting contracts and customers to
reading them; while substantive controls limit the revenue suppliers can bring in
from charges, but also the costs and financial detriment borne by customers.
However, the ‘information versus substantive regulation’ issue is also of wider
theoretical and legal policy significance. It reflects broader debates as to the ideal
market order: how interventionist the law should be in seeking to protect consumer
customers in particular from detriment. On the one hand the information paradigm
places significant trust in consumer self-reliance-e.g. consumers are expected to use
the fact that charges are more clearly expressed to protect their own interests by
making more informed choices. This is also in congruence with an ethic of business
self-interest (businesses can charge whatever they wish so long as the charges are
clear), and more generally with neo-liberal thinking on free markets.11
On the other hand, substantive regulation reflects a more protective or ‘need’
based ethic-emphasising consumer vulnerabilities and seeking to ensure protection
by requiring substantively fair outcomes.12 The need-oriented perspective is that
consumers have extremely limited capacity to make use of information to self-
protect: limited time to read the information, limited capacity (especially as
non-expert parties) to process it and use it to make more informed decisions.13 In
addition a need-oriented critique focusses on the financial vulnerability of consumers
to charges that are too high-that consumers, as private citizens, often have limited
capacity to absorb economic losses caused by harsh charges; that there may be a
significant detrimental impact on the private sphere of life (what are often known as
“consumer surplus” effects e.g. the stress of unexpected and high charges, increasing
debt etc.)14; and that this is especially problematic where the charges are for things
that are central to social inclusion, e.g. utilities, credit, banking, housing etc.15
Of course, it is one thing to argue for more substantive regulation, but as indicated
above it is also vital to choose the appropriate tools to achieve this (whether a
legislative GC or more specific rules developed by regulatory bodies). This should
take into account the importance of promoting certainty/predictability, which has
been core to the UK consumer policy agenda over the past decade16; maximising
efficiency in decision making (in the sense of using tools that adjudicate in the most
non wasteful ways17); and avoiding unintended consequences e.g. businesses
departing from markets and leaving consumers without access to important
services.18
11
Willett (2018).
12
Willett (2018).
13
Often supported by behavioural science evidence as to the limits of transparency: e.g. see
discussion in Atamer (2017).
14
Willett (2007), pp. 37–39.
15
Rott and Willett (2018), Ch. 11.
16
Willett (2018).
17
Kaplow (1994), pp. 307–401.
18
Starks (2018).
The paper is structured as follows. Section 2 notes the dominance of the infor-
mation paradigm in B2B contract law, and Sect. 3 demonstrates the increasing
dominance of this paradigm in B2C contract law. Section 4 shows the limits of
this paradigm in protecting consumers. To the extent that it is decided that the law
should instate more of a substantive paradigm, Sect. 5 considers the roles that should
be played in achieving this by the CRA GC and by more specific rules developed by
regulatory bodies. Section 6 provides a brief summary of the arguments made, how
they are original and why they are important; and considers the prospects for future
development of the substantive paradigm of regulation.
2 Dominance of the Information Paradigm in B2B

Contracts
The substantive paradigm plays a very limited role in UK B2B contract law. There
are exceptional instances e.g. s. 5A of the Late Payment of Commercial Debts
(Interest) Act 1998, which sets limits on the level of the penalty charges that may
be imposed in addition to statutory interest when the other party is late paying a
debt.19 However, the main legislation dealing with unfair standard terms-the Unfair
Contract Terms Act (UCTA) 1977-only applies to terms whereby a business
excludes or limits their liability to another business; not terms (such as unfair prices
or other charges) imposing unfair obligations or liabilities on another business.
A resistance to placing substantive controls over prices and other charges is
deeply rooted in the common law of contract, a fundamental principle of which is
that although there must be consideration moving from both parties, this consider-
ation need not be ‘adequate’, i.e. there is no enquiry as to the value (high or low) that
either party gets or gives.20 English courts also continually reject any general
principle of good faith21 (a concept that might conceivably be used to control
terms imposing excessive charges).
‘Agreed damages’ clauses are controlled in the sense that if they are considered to
amount to ‘penalty’ clauses they will not be enforceable. However, even this has
been interpreted in a narrow and non-protective manner recently: a charge is not a
penalty simply because it imposes a sum that exceeds a reasonable pre-estimate of
the innocent party’s loss (this being how the rule was thought of traditionally22). The
question now is whether the innocent party has a ‘legitimate interest’ in stipulating
for the sum in question. This legitimate interest might be to deter breach by the other
19
See also the example of substantive caps on fees payable by the National Health Service to
independent contractors: NHS (2018).
20
Chapel v Nestle [1959] UKHL 1.
21
Nat West Bank v Morgan [1985] AC 686; Walford v Miles [1992] 2 AC 128; and McKendrick
(2018), Ch. 15.
22
Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79.
728 C. Willett
party or even in some cases to generate an income stream.23 So there is scope for the
charge to be greater than the actual loss likely to flow from the breach. Indeed, the
language used by the court suggests that quite a lot of scope is provided in this
regard: the question is whether the amount charged to protect the legitimate interest
of the innocent party is ‘extravagant, exorbitant or unconscionable’.24
This brings us neatly to another feasible means of substantive control over B2B
charges: the equitable doctrine of unconscionability. This would only provide
control in the most extreme of cases, as it requires there to have been extreme
procedural unfairness (e.g. a party in a much stronger bargaining position exploiting
usually a particularly vulnerable party), leading to the resultant substantive contract
being extremely substantively unfair.25 This emphasises the limited scope for the
unconscionability doctrine to be used to regulate charges-it has never been used
routinely to do so.
The information paradigm dominates B2B contract law, and even then the
information standards are relatively weak. There are some quite strong information
requirements in very specific markets, e.g. the energy market, where suppliers must
provide their micro-business customers with information on their energy use, and
explain to them how their current price plan compares with the new package on offer
to them.26 More generally, there are the very limited information requirements of the
common law incorporation rules. The general rule on incorporation of standard
terms in unsigned documents (and any charges therein) requires ‘reasonable notice’
prior to conclusion of the contract.27 However, this requires simply that the other
party is made aware that the terms exist e.g. by some chain of reference to them in the
paperwork that is actually seen. There is no need for the actual terms to have been
made available or to be transparent (e.g. in decent sized print or plain language).28 In
the case of signed documents, the terms are treated as having been incorporated
purely by virtue of the signature, again with no requirement for the terms actually to
be transparent.29
Where the charges (or other terms) are ‘particularly onerous or unusual’, they are
only incorporated if they have been sufficiently drawn to the other party’s attention,
this usually being taken to suggest a high degree of prominence, perhaps the term
23
Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent); ParkingEye
Limited (Respondent) v Beavis (Appellant) [2015] UKSC 67 where the fee for overstaying the
2 h free period in a car park was not a penalty because it was considered necessary to deter overstays
and to provide Parking Eye (the business managing the car park and determining whether overstays
have occurred) with an income stream (para 94–101); Beale (2016).
24
Limited (Respondent) v Beavis (Appellant) para 152 [2015] UKSC 67.
25
Boustany v Piggot (1995) 69 P & CR 298; Strydom v Vendside Ltd [2009] EWHC 2130 (QB).
26
OFGEM (2018a).
27
Parker v SE Ry [1877] 2 CPD 416.
28
Willett (2007), pp. 400–401.
29
L’Estrange v Graucob [1934] 2KB 394.
being specially highlighted or pointed out.30 However, this rule does not apply to
signed documents; and even when it does apply, it is only triggered in the case of
rather extreme substantive unfairness, e.g. where a business had hired 147 photo-
graphic transparencies and a term provided for a charge of £5 per day for each one
not returned on time, meaning that after 14 days the amount owing was £3783.50.31
3 The Dominance of the Information Paradigm in B2C

Contract Law
3.1 Introduction
This section demonstrates, for the first time, the true extent of the dominance of the
information paradigm in relation to the price and other charges in B2C contracts. It
does so by providing a novel categorisation of the full range of charges covered by
the information paradigm.
3.2 Specific Information Rules
There are a huge range of rules requiring pre-contractual and post-contractual

disclosure of transparent (plain language, legible etc.) information on various
types of charges and prices in particular sectors (especially credit32), and more
generally in on-line and off premises contracts.33 There are also various substantive
caps on prices and other charges, in such sectors as high cost short term lending,
pensions, utilities and bank overdraft fees.34
30
Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1987] EWCA Civ 6.
31
Peninsula Business Services v Sweeney [2004] IRLR 49; Interfoto Picture Library Ltd v Stiletto
Visual Programmes Ltd [1987] EWCA Civ 6.
32
E.g. Consumer Credit (Disclosure of Information) Regulations 2010 SI 2010/1013 (information
as to type of credit, interest rate, amount and frequency of instalments etc.): for a full discussion
Woodroffe et al. (2016), pp. 367–368.
33
Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013
(SI 2013/3134): for a full discussion Woodroffe et al. (2016), pp. 93–103.
34
Further below Sect. 5.
730 C. Willett
3.3 The Dominance of the Information Paradigm Under

the Broadly Applicable CRA
3.3.1 The CRA GC
For the fullest picture as to which is the dominant paradigm, we must look to the
general regime on unfair terms under the CRA 2015, which applies across all trade
sectors and to all conceivable types of price or charge35 (in other words it is of much
broader application than any of the above information rules or substantive caps).
CRA s. 62 (4) contains the CRA GC, providing that a term is unfair if, ‘contrary
to the requirement of good faith, it causes a significant imbalance in the parties’
rights and obligations under the contract to the detriment of the consumer’.36
‘Significant imbalance’ goes to the issue of substantive unfairness; while violation
of ‘good faith’ goes to both procedural and substantive unfairness.37 So, while ‘good
faith’ requires terms to be transparent, terms that are sufficiently substantively unfair
will not only cause significant imbalance but probably will also (notwithstanding
transparency) be in violation of good faith38; in other words the CRA GC sets
substantive fairness standards.
3.3.2 The ‘Price Exemption’: Basic Wording
However, the CRA also contains a ‘price exemption’. It provides that, if a term is
‘transparent and prominent’, it cannot be assessed for fairness (under the CRA GC) if
‘the assessment is of the appropriateness of the price payable under the contract by
comparison with the goods, digital content or services supplied under it’.39 Subject
to the transparency and prominence requirements, this prevents the most important
type of substantive fairness assessments in relation to price, i.e. those as to the
35
The regime applies to all except specifically excluded terms, most significantly here being price
terms (s. 64).
36
Enforcement is both ex post (unfair terms are not binding on individual consumers-s.62 (1)) and ex
ante (action to prevent continued use of unfair terms may be taken by bodies such as the Competition
and Markets Authority and local authority trading standards authorities-s. 70, Schedule 3).
37
Director General of Fair Trading v First National Bank plc [2001] UKHL 52; Cavendish Square
Holding BV (Appellant) v Talal El Makdessi (Respondent); ParkingEye Limited (Respondent) v
Beavis (Appellant) [2015] UKSC 67; Willett (2012).
38
Beale (1995), p. 245; Willett (2012), p. 424.
39
S. 64 (1) (b) & 64 (2): deriving from art. 4 (2) Directive 93/13/EEC. Note that it was a UK choice
to follow art. 4 (2), it being a minimum harmonisation provision and it being open to Member States
to provide for a higher level of protection (art 8 Directive 93/13/EEC), in this case, e.g. by allowing
price terms to be tested under the GC.
substantive level of the price—whether this is too high, given what is received in
return.40
Previous work has noted that ‘price’ in this context has been interpreted rather
broadly.41 However, this work has not been clear as to precisely what this means for
the balance between the information and substantive fairness paradigms: as to the
full range of charges that count as the ‘price’ (and are therefore only subject to the
information paradigm-the transparency and prominence rules). The important new
contribution made here is to provide a categorisation of types of charge as a means of
demonstrating the very broad range of charges that can count as the price: thereby
illustrating the dominance of the information paradigm. To lay the foundations for
this new categorisation of charges, we must first review how ‘price’ was interpreted
under the Unfair Terms in Consumer Contracts Regulations (UTCCR) 1999 regime
under which the price exemption applied prior to its transfer to the more recent
CRA.42
3.3.3 The ‘Price Exemption’: Pre CRA
The key case is Abbey National, which dealt with terms providing for banks to
charge large sums e.g., where consumers exceeded agreed overdraft facilities.43
Under the terms, exceeding the overdraft facilities was not defined as a breach by
the consumer, but as the consumer opting to be provided with a service.44 Based on
this logic, the obligation to pay the charge was not defined as compensation for the
bank’s loss; but as a charge for a service provided by the bank, the ‘service’ being
that the bank allowed the relevant payment to be made from the consumer’s account.
The Court of Appeal (CA) held that ‘price’ only referred to charges which the
typical consumer would view as ‘essential’ to the bargain; and that this did not
include charges for an unauthorised overdraft, as consumers would not have planned
to take such an overdraft when first entering the contract (not being the ‘price’, the
substantive fairness of these charges could be assessed under the GC on unfair-
ness).45 The Supreme Court (SC) overruled this decision, holding that there could be
no distinction between essential and non-essential charges; and that identifying the
‘price’ was ‘a matter of objective interpretation by the court’.46 It was accepted that a
40
The fairness test is not excluded from testing ‘peripheral’ issues in relation to charges: e.g. when
payable, rights to increase or fix the price, equal treatment in relation to deposits: see Law
Commission (2013), Ch. 3, and CRA, Schedule 2, Part 1, paras 4–6, 14–15.
41
E.g. Willett (2018).
42
Sch. 1 CRA, for revocation of the UTCCR 1999.
43
OFT v Abbey National and others above, [2009] UKSC 6; and Whittaker (2011).
44
Abbey National term 3.3 (3.3.1–3.3.4) cited in OFT v Abbey National and others [2008] 2 All ER
(Comm) 625 (High Court) [135], on which further below (Chancellors 2017 and related text).
45
Abbey National plc and Others v OFT [2009] EWCA Civ 116.
46
OFT v Abbey National, [2009] UKSC 6; Lord Mance [113].
732 C. Willett
charge for consumer breach of contract was not the ‘price’.47 However, the SC held
that if a service was provided in exchange for the charge then the charge was the
price: and then went on to accept the formal depiction of the situation by the terms in
the case i.e. that the charges were payable for services and were therefore ‘prices’
(not charges for consumer breach) and so exempt from substantive review under the
GC.48
3.3.4 The ‘Price Exemption’ Under the CRA: A New Understanding As

to the Dominance of the Information Paradigm
3.3.4.1 Drawing Out the Fundamental Principles of the CRA Approach
The CRA apparently follows the above approach. It repeats the reference to
‘price’.49 This suggests that the intention is that any charge is the ‘price’, as long it
is in exchange for a service; that it is to be fairly readily accepted that there is indeed
a service if this is how the terms formally describe matters; and that it is not
necessary for the charge or the ‘service’ it pays for to be ‘essential’ to the contract
for it to be the price. This was the SC approach in Abbey National. In preparing the
CRA, the government asked the Law Commission for advice on the price term issue
and the Law Commission supported the manner in which price was defined by the
SC in Abbey National, taking the view that all that was required was to instate
stronger rules on information: specifically that price terms should not be exempt
simply on the basis of being in plain and intelligible language,50 but that they should
be ‘transparent’ and ‘prominent’.51 We shall return below to these requirements and
whether they improve the effectiveness of the information paradigm. However, the
point for now is that the CRA approach to the price issue was apparently based on
the Law Commission approach and as indicated above the CRA simply repeats the
word ‘price’. Now surely if there was an intention to deviate from the Abbey
National and Law Commission approach-to adopt a narrower interpretation of
price-this would have been made explicit in the legislative text or in guidance
e.g. by some provision to the effect that only essential charges count as the price.
There is no such provision, so (as already suggested) the price appears to cover any
charge (essential or not) for a service (essential or not): with formal presentation by
the terms as to what is a service being a strong indicator in this regard. However, it is
only by breaking down charges into the various categories suggested here that we
can fully appreciate just how many charges count as the price under this approach-
just how dominant the information paradigm is. The categorisation offered here is
47
OFT v Abbey National, [2009] UKSC 6 [102].
48
OFT v Abbey National, [2009] UKSC 6 [47].
49
S. 64 (2); further below in Sect. 4 on the transparency and prominence conditions.
50
As under the UTCCR (reg. 6 (2)), following 4 (2) Directive 93/13/EEC.
51
Law Commission (2013), pp. 16–36.
entirely original, not having been done in scholarship or other work either in relation
to the UK legal system or any other jurisdiction.
3.3.4.2 Charges for Consumer Breach
First, let us deal with charges that are payable on consumer breach (hereafter
‘breach’ charges). We can take as an example here a term in a property rental
contract under which:
[The tenant] . . . will pay the rent to the landlord at the times and in the manner specified and
will pay interest at the rate of £5 per day if the rent is in arrears for more than 14 days.52
The interest charge here is clearly payable for consumer breach as the term refers
to the rent being ‘in arrears’ i.e. not having been paid as due under the terms of the
contract.
This breach charge category seems to be the only category where the charges are
not viewed as the ‘price.’ Such charges are supposed to represent principally the
losses of the trader caused by the breach53; rather than what we would typically call
the price, i.e. payments for goods, services or DC supplied by the trader. It makes
sense then that the indicative list of terms that may be regarded as unfair describes
terms ‘. . . requiring that, where the consumer decides not to conclude . . . the
contract, the consumer must pay the trader a disproportionately high sum in com-
pensation or for services which have not been supplied’ and ‘. . . requiring a
consumer who fails to fulfil his obligations under the contract to pay a dispropor-
tionately high sum in compensation’.54
However, in addition to charges for consumer breach, there are at least five further
categories of charges which do count as the price:
3.3.4.3 Main Price Charges
The main (or ‘core’ or ‘essential’) charges payable for the main (or core or essential)
goods, digital content or services: the basic price of a computer, a cup of coffee, a
car, the interest on a loan etc. Here, the consumer commits to paying the precise
amounts in question at the point of entry into the contract, and obviously these ‘main
price’ charges are the price.
52
Competition and Markets Authority (2008), p. 40.
53
Perhaps also a sum to deter breaches-see Cavendish Square Holding BV (Appellant) v Talal El
Makdessi (Respondent); ParkingEye Limited (Respondent) v Beavis (Appellant) [2015] UKSC 67.
54
Sch. 2, Part 1, paras 5 & 6, CRA.
734 C. Willett
3.3.4.4 Routine Contingent Main Charges
Where on entering the contract consumers commit to pay what are (as with the
Sect. 3.3.4.3 above) the main charges for use of the main service, although here the
actual amounts payable will depend on a later contingency i.e. the level of
usage. A good example of this is the provision for payment of utility charges, for
instance:
The customer shall pay when due all bills for gas, water, electricity and other utilities used on
the Premises on and after the Rent Commencement Date and through and including the date
of expiration of this Lease.55
So, there is a clear commitment to pay charges, although the precise amount will
vary with the amount used by the tenant during the lease. Such payments are
certainly for services, and are clearly intended to be viewed as exempt ‘price’
terms. This category of charges will henceforth be referred to as ‘routine contingent
main’ charges (they are contingent on post contractual choices, but these choices are
entirely routine and the charges are for the main sort of thing provided under that
type of contract).
3.3.4.5 Routine Non-contingent Subsidiary Charges
Next there are charges for subsidiary services that are routinely chosen along with
the main service being provided e.g. priority boarding, choice of seat on an airline,
extra bags etc.56 On the Abbey National/CRA approach it does not matter that the
services/charges here are subsidiary: a service of one or other sort is certainly being
provided, there is a charge for this service and the charge is therefore the ‘price’.
Henceforth we shall refer to this category as ‘routine non-contingent subsidiary’
charges (they are for services that are routinely chosen, and are chosen when first
entering the contract, so neither the obligation to pay nor the amount to be paid is
contingent on future choices or events).
3.3.4.6 Consumer Inadvertence Charges
Next are charges that are not routinely payable in the normal performance of the
contract, but are contingent on later (usually inadvertent) consumer acts or omissions
that are not technically classed as a breach by the formal terms. Good examples here
are charges when consumers accidentally exceed an airline baggage allowance, or an
agreed overdraft limit, or forget to re-fuel a hired car. We shall call these ‘consumer
inadvertence’ charges. As seen above, as long as the trader’s terms formally classify
55
Law Insider Database (2018).
56
E.g. for numerous examples see the Ryanair (2018).
such charges as being for a service57 this classification will be accepted, and the
charge will count as the price.58 So, in the Abbey National case one of the terms
stated that causing a:
current account to go over any . . . [o]verdraft limit . . . previously agreed . . .is . . . an Instant
Overdraft request. . . . If we agree . . .to cover the amount of the withdrawal or the payment
involved. A . . .[f]ee will be payable by you for . . . our Instant Overdraft service.59
We see here that the charge is triggered by the consumer exceeding the agreed
overdraft. However, this is not classed as a breach, but rather as a ‘request’ for a
‘service’. As we have already seen this was enough for the charge to be viewed as the
price.
Now, recent case law has shown that there are some limits on when these charges
count as the price. It seems such a charge will not be the price (and will therefore be
subject to substantive review under the GC) where it is a non-variable charge for an
alleged ‘service’ that is very open ended-with the extent or duration of the alleged
service not affecting the level of the charge. So, in Parking Eye v Beavis60 there was an
£80 charge for exceeding the 2 h free period in the car park: the terms providing that
the £80 was a charge for the ‘service’ of allowing an overstay. The SC took the view
that legally there was no service in these circumstances, partly because there was no
fixed period for which the motorist could stay in exchange for this £80 charge. The
result was that the charge was not viewed as the price, but rather as a charge for breach
(therefore falling within the ‘charge for consumer breach’ category above).
This decision does place some limits on the breadth of the price exclusion.
However, it is not hard to draft around this, simply by specifying that the amount
of the charge will vary depending on the length of the over-stay. Presumably each
fixed period of over-stay would then be accepted to a service and the charges for
each of these periods would be viewed as a ‘price,’ and (subject to transparency and
prominence) these charges would escape substantive review under the GC.
3.3.4.7 Non-routine Contingencies Not Related to Consumer Inadvertence
Next there are charges that are not contingent on consumer inadvertence, but are
contingent on other non-routine events (hereafter ‘non-routine contingencies not
57
E.g. allowing for the extra baggage to be boarded, paying the money from the bank account,
re-fuelling the car.
58
For the approach of the Court of Justice of the EU, see CJEU Judgment of 30 April 2014, Kásler
and Káslerné Rábai, C-26/13, EU:2014:282, holding that a charge is not the price unless there is a
service in exchange, but not being clear whether contingent charges for contingent services can be
the price.
59
Abbey National term 3.3 (3.3.1–3.3.4) cited in OFT v Abbey National and others [2008] 2 All ER
(Comm) 625 (High Court) [135].
60
Limited (Respondent) v Beavis (Appellant) [2015] UKSC 67.
736 C. Willett
related to consumer inadvertence’). Take the situation in which a consumer landlord

engages a letting agent to manage the rental of property to a tenant. Here the
management services provided by the estate agent to the consumer landlord will
include arranging (and charging for the arrangement of) ad hoc repair work that may
be unusual and unexpected (and in this sense non-routine).61 Such a charge is clearly
nevertheless for a service (arranging the repairs) and under the Abbey/CRA
approach it qualifies as the price.
Another possibility is what happened in OFT v Foxtons,62 where the terms
provided that a consumer landlord must pay a fee to a letting agent if a tenant
happened to decide to extend their contract or buy the property at the end of the
initially agreed rental period. Now on the facts of the case, it was obvious there was
no service in at least some cases covered by the charges, as the terms stated that the
charges applied:
. . . including in circumstances where Foxtons does not negotiate the renewal, extension or
hold-over or provide any service(s).
However, the conclusion that there is no service should be very easy to change by
careful drafting. It could simply be provided that there is a service: e.g. by indicating
that the agent’s permission is required for the tenant to extend the lease or buy the
property and that there is an administrative charge for this ‘permission’ service.
Following the Abbey/CRA approach under which in deciding whether there is a
service very significant weight is given to how the terms describe matters formally, it
is likely that this administrative charge would now be regarded as being the price and
(subject to the information rules) would escape substantive review under the GC.63
3.3.4.8 Concluding As to the Dominance of the Information Paradigm
The above categories show that an extremely broad range of charges count as the
price, escape substantive control and are subject only to the information paradigm:
especially if we consider the very significant scope for traders to ‘draft their charges
into’ being price charges.64
61
E.g. Chancellors (2017), p. 4.
62
OFT v Foxtons [2009] EWCA Civ 288.
63
Another example of a charge for a non-routine contingency not related to consumer inadvertence
is a fee imposed by a freeholder for giving permission for a long leaseholder to sub-let: see Forte
Freehold Management (2017).
64
For further evidence beyond the CRA GC, note also the approach to the ‘unfair credit relation-
ships’ general clause (Consumer Credit Act 1974 s. 140A) where usually only extreme substantive
unfairness is found unfair (e.g. where, through addition of interest a debt of £56,450 eventually rose
to £4.5 million [2009] EWHC 3264); the norm being to rely on the information paradigm by only
finding unfairness in cases where there has been insufficient information (e.g. failure of those selling
payment protection insurance to declare the commission they earn—Plevin v Paragon Personal
Finance Limited [2014] UKSC 61).
4 Limits of the Information Paradigm
4.1 Fundamentals of the Information Regime
The fundamental logic of the information paradigm is that improved information

(e.g. transparency, prominence) will facilitate greater informed decision making by
consumers; the expectation being that this in turn will subject the charges to
improved competitive discipline and they will therefore be fairer (lower) in
substance.65
Earlier academic work has highlighted the general limits of information in
protecting consumers.66 However, the approach here is novel in that it takes into
account the new CRA transparency and prominence rules and other recent rules; and
considers how these information rules apply to the new categorisations of charges
developed above.67 Ultimately this serves to demonstrate the severe limits of this
new manifestation of the information paradigm.
A ‘transparent’ term is one that is in plain and intelligible language, and also
‘legible’.68 To be ‘plain and intelligible’ a term must enable the consumer to
“evaluate, on the basis of clear, intelligible criteria, the economic consequences for
him which derive from [the term].”69
The plain and intelligible language element here derives from Art. 4(2) Directive
93/13/EEC on unfair contract terms,70 and the CRA has added the ‘legibility’
criteria, which seems to go to whether the print is of decent size and is otherwise
readable (e.g. the colour of the print should make it distinguishable from the
background page colour).
4.1.1 Transparency and Its Limits
The main price will in the vast majority of cases be expressed outwith any formal
standard terms. Usually therefore it will be well known to and understood by
consumers and there will be a good level of informed consent: the prospects for
this will be boosted further by the requirements of plain and intelligible language and
(since the CRA) the requirement of legibility.
65
Generally, Willett (2018) and Law Commissions (2013).
66
Howells (2005) and Willett (2018).
67
See Sect. 3.3.4 above.
68
S. 64 (3) CRA.
69
Case C-26/13 Árpád Kásler, Hajnalka Káslerné Rábai v OTP Jelzálogbank Zrt [2014] [75]; for
an example of a UK case on the issue Spreadex Ltd v Cochrane [2012] EWHC 1290 (Comm)
(a contract with 49 pages of complex paragraphs); and see discussion in Woodroffe et al. (2016),
pp. 208–210.
70
95/29.
738 C. Willett
However, many of the other charges discussed above (whether routine subsidiary
charges or the various forms of contingent charges) will be contained in the standard
terms. In these cases there are good reasons to be sceptical as to the prospects for the
‘plain, intelligible and legible’ criteria to be successful in improving informed
decision making (if this does not happen then the ‘knock-on’ effects of improved
competition and improved fairness in substance are also undermined).
Consumers will often not read standard terms even when they are transparent.
First consumers will know that traders will be unlikely to agree to any changes; and
there is some evidence that they may even believe that the terms have a legal
sanction and represent ‘the law’.71 This seems likely to deter them from reading
standard terms no matter how plain and intelligible and (now post-CRA) how legible
they are.
Second, consumers have a proven tendency to be overly optimistic and an
inclination to discount future risks,72 e.g. because of very positive general marketing
messages and a prior psychological commitment to purchases. This may mean they
do not wish to think about the full extent of the commitment and that they do not read
about charges in the standard terms-no matter how plain, intelligible and legible
these are.
Third, there may be a large quantity of information to be processed prior to the
decision to enter the contract. In part this information comes in the form of sur-
rounding advertising and marketing. It also comes from the fact that as already
highlighted, there may be the main price, but also a range of other non-essential
non-contingent and contingent charges: so called ‘partition’ pricing.73 The evidence
is becoming stronger and more sophisticated in showing that, in light of all this,
consumers are inclined only to focus on the main (or core or essential) aspects of the
transaction: i.e. the main price paid for the main goods, services or digital content
provided.74 Again the implications of this are that no matter how plain, intelligible
and legible charges (other than the main price) may be they may not be read either at
all or in any great detail.
So, in the case of all of the categories of charges developed above here in Sect. 3
(apart from the main price) there is a significant risk that there will be a low level of
informed decision making even when these charges are plain, intelligible and
legible: these charges are almost always contained in the standard terms and for
the reasons set out above the transparency criteria are unlikely to be produce
informed decision making in relation to standard terms. One consequence of a
lack of informed decision making is that consumers are unlikely to compare between
the charges as used by different traders. It will therefore be rare for the charges to be
subjected to significant competitive discipline and for their substantive fairness to be
improved.
71
Willett (2007), p. 42.
72
So called ‘hyperbolic discounting’, on which see Frederick et al. (2002).
73
Atamer (2017), p. 634.
74
See Sect. 3.3.4 above for examples; and see Duke et al. (2013) and Atamer (2017).
4.2 Prominence
4.2.1 General Limits and Prospects of Prominence
In credit contracts, the UK has long sought to improve consumer understanding as to

the full range of financial commitments by requirements to build the expression of
the price around the ‘Annual Percentage Rate’ and the ‘total charge for credit’.75
More recently there have been attempts to achieve similar goals in the UK utility
sector, and OFGEM have worked on a standardised ‘tariff comparison rate’ to help
address this.76
Of course, these initiatives are restricted to particular sectors of the consumer
economy. Can the addition of the ‘prominence’ requirement (applicable to all
sectors) make a significant difference? A term is ‘prominent’ if it is ‘brought to the
consumer’s attention in such a way that an average consumer would be aware of the
term’.77 Does this have the potential to raise charges in the consumer consciousness-
meaning we can speak of a higher quality of informed consent, greater prospects of
comparison between traders, and greater consequent substantive control through
competitive discipline?
If charges are to be genuinely ‘prominent’ then this could suggest that they should
be grouped together and separated out from the other terms in some way. This could
improve the ability of consumers to focus on the charges and make comparisons with
those used by other traders.
However, much depends on just what exactly it would mean to say that charges
must be separated out from the other terms. The difficulty is that the above evidence
essentially suggests standard terms will often simply not be read at all,78 so if
prominence simply means that the charges must be prominent within the formal
standard contract (in a separate section, highlighted, in larger print etc.), this will
make little difference. The only real prospect of improving the chances of consumers
reading about the charges is surely if ‘prominence’ means that they must be set out in
other literature: perhaps even sometimes explained verbally whether by phone, or
face to face; perhaps even that consumers sometimes need to give separate assent to
the charges.
Now, certainly there are other rules79 that require material information on charges
to be supplied in invitations to purchase, but this may be too early to have a real
influence (consumers are probably not focussing on the ‘negative’ elements-the risks
75
Consumer Credit (Total Charge for Credit) Regulations 2010, SI 2010/1011; see discussion in
Woodroffe et al. (2016), pp. 354–355.
76
OFGEM (2018b).
77
S. 67 (4).
78
Section 4.1.1 above.
79
E.g. Consumer Protection from Unfair Trading Regulations 2008, Regs. 6 (4) (d)–(e) (from Art. 7
(4) (c) Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005
740 C. Willett
of the deal-when their eye is caught by an advertisement80). So, the point stands that
prominence may need to be given a very strong interpretation (a separate, highly
visible, eye catching and accessible summary of charges, perhaps even a requirement
of separate assent to the charges) if it is to have any chance of improving informed
decision making, competition and substantive fairness. Yet there was no indication
that this very strong form of prominence is what was intended and there is no
evidence that it is what is being practiced by traders.81
Even if such a very strong form of prominence is required, the prospects of this
being successful in producing informed choice will decrease proportionately with
the number of charges involved: if there are a large number of charges then even if
consumers are made aware of these, it is less likely that they will have the time or
inclination to calculate precisely what is or might be payable and to make compar-
isons with the packages on offer from other traders.
4.2.2 Particular Limits of Prominence in Relation to Contingent

Charges
In the case of the CRA transparency rule, we saw above that the failings of this rule
applied equally to the different categories of charge developed in this paper. How-
ever, in the case of the prominence rule the categories help us to differentiate
between cases where prominence has some chance of success and cases where it
has really very little chance of success. Let us suppose that a very strong version of
prominence is required: (as per above) charges to be listed in a visible, accessible
manner, separate from the standard terms. Let us suppose also that there are a limited
number of charges, so consumers have a reasonable chance of calculating what is
payable, and a reasonable chance of making comparisons with the offerings of other
traders. This might significantly improve informed decision making, competition
and substantive fairness, in the case of those charges (the main price and routine
subsidiary charges82) that consumers always or routinely pay simply by virtue of
entering the contract and that the consumer therefore knows are payable.
However even the strongest possible form of prominence will struggle to make a
difference with the various categories of contingent charges: the routine contingent
charges, the non-routine consumer inadvertence contingent charges and the
of the Council, OJ 2005, L 149/22.)
80
Frederick et al. (2002) and related text on over-optimism and discounting future risks.
81
Law Commission (2013), pp. 16–36. One proposal that may provide an effective approach in the
banking sector is to introduce an ‘application programming interface’, an independent resource
enabling consumers to compare to the offerings of banks (including on charges): Competition and
Markets Authority (2016), p. 166; and see discussion by Atamer (2017), p. 651.
82
See the Sects. 3.3.4.3 and 3.3.4.5 above.
non-routine contingent charges not related to consumer inadvertence.83 Even if such

contingent charges are sufficiently prominent to be considered by consumers, it is
often extremely difficult for consumers to make pre-contractual informed decisions
about them.
With the routine contingent charges84 (e.g. utility charges), consumers have the
best chance of an informed decision as they can at least usually act from experience
of their past usage of the services. Nevertheless many future circumstances can affect
the level of the services that will be required in future: e.g. weather and health in the
case of fuel, personal/family circumstances in the case of phone usage etc. Informed
decision making might be fostered in relation to this category of contingent charges
by separate rules that have been suggested providing for provision of post contrac-
tual information on product use. The idea here is that such information can help to
make better choices about use e.g. to realise charges are high and to reduce usage, to
switch suppliers etc.85 Certainly such post contractual information is more likely to
be effective than pre contractual warnings. At least by the post contractual stage
consumers have the real experience of paying (possibly too many, high) charges: so
prior optimism is dimmed somewhat, and self-protection (e.g. via reductions in
spending, switching etc.), becomes more plausible. Of course, much still depends
on consumers having time and capacity to act to change behaviour, switch etc.
It is even more difficult to make informed pre-contractual decisions in relation to
the consumer inadvertence contingent charges and the non-routine contingent
charges not related to consumer inadvertence.86 Consumers are likely to find it
difficult to assess how likely (or not) it is that the events triggering these charges
will occur. Whether consumers become responsible to pay the inadvertence charges,
is to some extent within their control (e.g. avoid exceeding the baggage allowance or
overdraft limit). However, consumers will not usually intend the events to happen87;
rather they will happen by inadvertence, mistake, natural human error, cognitive
overload etc. In addition, the ‘normal’ experience of most consumers will be of
routine, non-problematic performance by both parties, where these contingencies
and the charges they trigger do not usually come into play: this being likely to shore
up the natural optimism/expectation that the contingencies will not arise.
There are more sophisticated post contractual approaches that may help in the
case of some consumer inadvertence contingent charges. The Competition and
Markets Authority has proposed requiring banks to warn consumers of imminent
unauthorized overdrafts, and allowing a subsequent ‘grace period’.88 In addition,
83
See Sects. 3.3.4.4, 3.3.4.6 and 3.3.4.7 above.
84
See Sect. 3.3.4.4.
85
Atamer (2017), pp. 643, 646 and 654.
86
Sections 3.3.4.6 and 3.3.4.7 above.
87
Frederick et al. (2002) on over-optimism and discounting future risks.
88
Competition and Markets Authority (2016), para 5.
742 C. Willett
some airlines warn passengers a few days prior to a flight of the need to check in
online and the fee for airport check in.89 Approaches such as these are obviously
intended to offer some opportunity for consumers to protect their interests. As with
more general post-contractual product use information/warnings, this may at least be
of more practical use than pre-contractual prominence: An immediate practical
problem issue arises and there is an opportunity for consumers to address it.
Of course, in the case of bank overdrafts, consumers may not be able to afford to
pay what is required to get back within the agreed limit, or they may plan to but
forget etc. In the case of on-line check in, they may also forget. Also, in the case of
bank overdrafts, even if the consumer does pay off the required amount, they have
still not made an informed decision earlier (when actually entering the contract), and
so the charge has still not been subjected to competitive discipline. Also, post-
contractual warnings may not be practical in some cases, e.g. with car hire, even if
the consumer is warned some time before the end of the hire of the need to re-fuel
(or pay a charge), the re-fuelling needs to be done immediately before returning the
car, and may have been forgotten about by this point.
Turning now to non-routine contingencies not related to consumer inadvertence,
consumers may have very little experience in relation to these. As indicated above,
these often arise as charges payable by a consumer landlord for management services
such as arrangement of ad hoc repair work, or charges a consumer landlord must pay
if a tenant happens to decide to extend their contract or buy the property at the end of
the initially agreed rental period.90 No matter how prominent and transparent such
charges are, it will be very difficult for consumers (pre-contractually) to estimate the
likelihood that they will become payable.
4.3 Limits of Information in Producing Informed Decision

Making and Competitive Discipline
The above analysis demonstrates that while these various new information standards
have merit, they are still seriously deficient when it comes to improving informed
decision making: meaning that it is also very doubtful that they will generate
competitive discipline and produce substantively fair charges. The strength of
these conclusions is all the greater in being based on a particularly granular analysis
that considers how the information rules apply to the new categorisations of charges
developed earlier in the paper.91
89
Travel Supermarket (2018).
90
Section 3.3.4.7 above.
91
4.4 Limits of Information Based on Wider Competition

Problems and Distinctive Consumer Needs
Understanding the limited prospects for information rules to produce informed

decision making (and consequently to discipline the substantive content of terms)
is in fact only part of the story when it comes to demonstrating the limits of the
information paradigm. In the case of all types of charge,92 even where improved
information does produce informed decision making, there may still be a case for a
substantive review (for not being restricted to the information paradigm) in at least
two situations.
The first situation is where there is a lack of competition in the market generally-
whether simply no competitors or markets where there is ineffective competition,
with e.g. one or more traders in a dominant position.93 In such cases, even if there is
informed decision making (as is often likely in relation to the main price), this will
not result in lower substantive prices because (there being no competition) there is no
incentive for the business to reduce prices-there is no competitive discipline over the
charges.
Second, even where there is competitive discipline, there may be distinctive
protection needs and it may be concluded that the competitive discipline does not
guarantee that charges and prices are sufficiently low to meet those needs. This may
be the case, for instance, where services of general interest are concerned, and there
is a need to respect the goals of universal service, meaning access for all at affordable
prices.94 It might also be the case where the nature of the product or market makes
consumers especially vulnerable, e.g. in the high cost short term lending market:
where consumers in a vulnerable financial position95 are charged very high interest
rates and encouraged to agree to rollovers of the loan when they cannot pay it off-this
leading to an increasing cycle of debt and detriment.96
4.5 Normative Choices
There is no space here to engage in a detailed discussion as to the normative merits of

a need-oriented approach to contracts as opposed to an approach more guided by an
ethic of trader self-interest and consumer self-reliance.97 However, to the extent that
law makers are indeed guided by a need based ethic, the logic would be that in
92
I.e. all of the categories at Sect. 3.3.4 above.
93
Rodger and McCulloch (2015).
94
Rott and Willett (2018).
95
E.g. low income, long or short term loss of employment, money needed for basic housing and
sustenance etc.
96
Further below at Sect. 5.3.3.
97
Willett (2018).
744 C. Willett
response to the limits of the information paradigm explained above, there should be
scope for substantive regulation of such charges-for more of a substantive paradigm.
The next section starts from the assumption that a need based ethic is in play and
therefore a more substantive paradigm should be instated.
5 The Substantive Paradigm: General Clauses Versus

Rules Developed by Regulators
5.1 Introduction
If there is to be further substantive regulation, what form should it take? The

difficulties of measuring what is a substantively fair price have long been
recognised.98 However, what prior work has failed to do is to consider when this
task is best performed by open textured GCs applicable to different types of charges
in contracts across trade sectors; and when it is best performed by more concrete
rules developed by regulatory bodies, with each such rule being carefully designed
for specific types of charge in particular types of contracts in different trade sectors.
This is what is considered here: when should extension of the substantive
paradigm be carried out by GC and when by rules developed by regulatory bodies,
which of these tools are most suited in particular in terms of certainty and efficiency?
These questions as to appropriate legal tools are very important. Certainty is always a
value that should at least be considered in legal policy. However, more than this,
clarity and certainty (rules that are clear in their expression and predictable in their
application) are goals that have been given a high priority in UK consumer legal
policy thinking over the past decade: being foundational to the consolidation of
consumer contract law that took place in the CRA,99 and even more recently being
cited as important priorities in the development of consumer law post-Brexit.100
‘Efficiency’ here means that rules should not lead to wastefulness of resources.101 In
part this is inextricably linked to the avoidance of unclear and uncertain rules: the
idea being that such rules waste the time and money of businesses, consumers, courts
and regulators.102 In addition, it is arguable that preserving resources (efficiency) is
about choosing rules that can deal with the broadest range of problems in the most
straightforward way-‘legal multi-tasking’ as it were.
98
Collins (1999), Ch. 11.
99
Willett (2018).
100
Department for Exiting the EU (2017), p. 5.
101
Kaplow (1994).
102
Kaplow (1994).
5.2 Measuring the Substantive Fairness of Non-routine

Contingent Charges Where There Is No Real Service: A
Job for the CRA GC
5.2.1 Main Argument
The contention here is that the wording of the price exemption should be amended. It
should be provided that ‘price’ does not cover non-routine contingent charges where
(however they are formally presented in the contract) what is provided in exchange is
not a ‘real’ service: either because it is triggered by consumer inadvertence or
because what the trader provides (as an alleged service) is of no real substance.
Such charges would then be able to be assessed under the CRA GC, which has the
capacity to assess the substantive fairness of such charges in a predictable manner,
and which is the most efficient tool to perform this function.
5.2.2 Consumer Inadvertence Contingent Charges, No Real Service

and Measuring Substantive Fairness Under the GC
As we saw above, standard terms often describe consumer inadvertence charges103

formally as being payable in exchange for services provided by the trader. However,
this arguably does not reflect how the situation would in substance be viewed by
most consumers. If asked to reflect, most would surely view a service as something
that one positively chooses to take up and therefore reasonably expects to pay for in
the due performance of the contract104: with Western capitalist norms holding that it
is legitimate for the service provider to make a profit in such circumstances (assum-
ing the lack of some overriding charitable or other public interest goal).105 Arguably
most consumers would not think in this way about something that typically arises by
inadvertence: e.g. accidentally exceeding an agreed overdraft, forgetting to check in
on-line or to re-fuel a hired car. However such events are labelled formally by the
contract terms, they would surely be thought of by most consumers as being mis-
takes, rather than positive choices to take up services.106 Viewed in this light, it
becomes hard to justify traders making a profit through such charges. Rather the
situation should arguably be viewed as one of (or at least analogous to) consumer
breach, where trader losses should be recoverable but where it is not legitimate for
the trader to make a profit.107
103
104
The notion of ‘reasonable expectation’ used here is empirical i.e. based on what one typically
experiences: on which in contract law: Mitchell (2003), p. 656.
105
Friedman (1970), pp. 32–33 and 122–124.
106
See FCA work showing that consumers often view exceeding an authorised overdraft as a
‘mistake’: FCA (2015), p. 4.
107
746 C. Willett
Once inadvertence charges are re-conceptualised in this manner (and explicitly

provided not to be price terms), it is possible to measure their substantive fairness in
a stable and predictable way under the CRA GC. As indicated above, whether there
is substantive unfairness under the CRA GC depends on there being significant
imbalance to a degree sufficient to violate good faith.108 One accepted benchmark
for measuring this is to compare the term to whatever default rule would apply were
it not for the term.109 So, fairness can be measured e.g. by considering the extent to
which a term excludes/restricts an obligation or remedy otherwise imposed by law
on the trader; or imposes on the consumer an obligation or liability not otherwise
imposed by law.110 This latter sort of measure applies to charges triggered by
consumer breach. Here the traditional ‘default’ rule in the UK is provided by the
general law on damages, in particular the broad idea that damages should be based
on the losses of the innocent party.111
This is broadly reflected within the CRA regime which provides that charges for
consumer breach are indicatively unfair under the GC if they ‘disproportionately’
exceed trader losses.112 This is measured by determining what the trader’s loss is,
and then whether the trader has a ‘legitimate interest’ in charging the amount in
excess of this loss that is in fact charged.113 This approach can be applied to
consumer inadvertence scenarios once these are re-conceptualised as consumer
breaches (or analogous to such breaches).
In consumer inadvertence cases, the loss is relatively easily identifiable: e.g. with
an unauthorised overdraft, it is the overall costs of sending reminder letters divided
by the number of cases in which this is typically required; with failure to check in
online, it is the overall costs of providing airport check in divided by the number of
passengers typically requiring this; for failure to re-fuel a hired car, it is the costs of
the staff time required to carry out the re-fuelling, again divided by the typical
numbers of customers in relation to which this must be done.
A ‘legitimate interest’ in charging more than these losses would typically be
grounded in the trader’s need to deter the consumer inadvertence in question. For
example, it might be important to deter consumers form overstaying a 2 h free
parking period, as overstays might disrupt efficient management of the car park and
the ability to ensure that the 2 h free period can continue to be made available for
other users.114 So, generally the first question is whether there is indeed some such
108
109
CJEU Judgment of 14 March 2013, Aziz, C-415/11, EU:C:2013:164, para 68.
110
Willett (2007), pp. 227–240.
111
Friedmann (1995).
112
113
ParkingEye Limited (Respondent) v Beavis (Appellant) [2015] UKSC 67, para 102–114.
114
E.g. ParkingEye Limited (Respondent) v Beavis (Appellant) [2015] UKSC 67; Lord Neuberger
[102–114]. If inadvertence charges are classed as being for breach by the consumer, then the
common law rule on penalties is also engaged, but this may provide slightly less protection. In
Parking Eye v Beavis it was held that under the penalty rule, the ‘legitimate interest’ (that makes
charging more than one’s losses not a penalty) includes not only deterring the other party’s breach
requirement for deterrence (or some other legitimate interest in charging more than
the trader’s losses/costs). If there is, it must then be determined what level of charge
is likely to have the required deterrent effect (or serve whatever other legitimate
interest there may be).
So, once inadvertence charges are re-conceptualised as charges for consumer
breach, the substantive fairness of these charges can be assessed in a relatively stable
and predictable (certain) manner under the CRA GC.
5.2.3 Contingent Charges Not Related to Consumer Inadvertence, No

Real Service and Measuring Substantive Fairness Under the GC
We now turn to non-routine contingent charges not related to consumer inadver-

tence.115 Now, the issue with consumer inadvertence charges is that they are
generally based on mistakes, rather than positive choices to take up services: it is
on this basis that it has been argued above here that there should not be considered to
be a genuine service and the charge should be viewed as a charge for consumer
breach. In the case of non-routine contingent charges not related to consumer
inadvertence, the issue is more ‘trader sided’: the lack (in at least some cases) of
any real substance in what is being provided by the trader. For sure in some cases
what is provided is certainly of real substance. For example in the case of manage-
ment services in a property rental contract whereby the agent arranges ad hoc repair
work, this work may be unusual and unexpected (and in this sense non-routine), but
there is nevertheless substance in what is provided by the agent: contacting and
engaging the plumber, paying the plumber for their work etc.116
However, there are non-routine contingent charges not related to consumer
inadvertence where (notwithstanding formal contractual presentation) what is pro-
vided in exchange should arguably not be regarded as a ‘real’ service: what the trader
provides is of no real substance. This arguably applies to charges a consumer
landlord must pay to a letting agent if a tenant happens to decide to extend their
contract or buy the property at the end of the initially agreed rental period.117 Here
the consumer landlord or the tenant will have already paid the agent (before the start
of the initial contract) for services involving for example the letting agent obtaining
tenant details and checking tenant references; and the consumer landlord will have
also paid (at the end of the initial contract period) for further services such as the
letting agent checking the property to see how the tenant has looked after it. So, even
if the tenancy is to be extended, with the existing agent continuing to manage the
property (and the agent will be paid for such management services in due course), it
but also making a profit [94–101]. In contrast, the decision did not refer (expressly at least) to profit
being legitimate in assessing unfairness under the CRA GC [paras 102–114].
115
116
E.g. see Chancellors (2017), p. 4.
117
OFT v Foxtons (2009) and related text.
748 C. Willett
is hard to see what (other than saying ‘yes’) is involved in the agent giving
permission for the tenant to extend the tenancy. Indeed, in some cases the lease
will be extended but under the management of another agent or with no manage-
ment; while in other cases the consumer landlord may decide to sell to the tenant. In
these situations, the agent surely has no interest whatsoever in the tenant’s character,
past treatment of the property etc.: so there should be no need for any form of
permission, never mind a charge for such permission.
Charges are often also imposed for other forms of consent e.g. for the freeholder
of property to give consent to a long leaseholder to sub-let the property on each
separate occasion when it is sub-let.118 Again, it is arguable that there is no real
substantive endeavour by the trader-no real service. The lease will already permit
sub-letting: if it did not permit it when originally drafted, the leaseholder will have
paid for the lease to be varied to allow for this. Yet in the scenario described here,
further consent is then required when a new sub-tenant prepares to move in, however
it does not appear typically that this consent involves any enquiries or checks in
relation to the sub-tenants. Rather it seems to be no more than the free-holder saying
‘yes’ in an email or letter. The cost of this is minimal and indeed given that there are
no checks, arguably there is no purpose whatsoever to the process (other than to
pretend a service is involved and seek to justify imposing a charge!).
Just as with inadvertence charges, once these other non-routine contingent
charges are re-conceptualised as not being for genuine services (and explicitly
provided not to be price terms), their substantive fairness can be measured stably
and predictably under the CRA GC. In fact, the application of the GC should be even
more predictable with these charges than with consumer inadvertence charges. There
is no need to look even to benchmarks of fairness such as default rules. Rather the
general criteria of ‘significant imbalance’ and violation of ‘good faith’ themselves
provide a relatively straightforward answer. It seems quite obvious that there is
‘significant imbalance’ and violation of ‘good faith’ when there is any sort of non-de
minimis charge for providing no real service at all. Indeed this is arguably the
quintessential imbalance in rights and obligations-the trader has an obligation
involving virtually nothing of substance and the consumer has an obligation to pay
a significant sum for it. This is analogous with the list of indicatively unfair terms
which describes:
‘A term which has the object or effect of making an agreement binding on the
consumer in a case where the provision of services by the trader is subject to a
condition whose realisation depends on the trader’s will alone’.119
Here of course the idea is that it is unfair if the trader has discretion not to provide
services (the implication being that there are services that might or might not be
provided). Yet it surely logically follows that it is also almost always unfair to charge
for something that is not really a service at all.
118
E.g. Forte Freehold Management (2017).
119
Sch. 2, Part 1, 3, CRA.
5.2.4 Why the GC Is an Efficient Tool for Charges Where There Is No

Real Service
In the case of both the above categories of contingent charge, not only can substan-
tive fairness be measured in a clear and predictable manner under the CRA GC, but
the GC is the most efficient tool to use. This is because the criteria available under the
GC are suitable to apply generally to these sorts of charges across different types of
contracts and sectors. Such charges raise the same issues of general principle
whatever the type of contract or trade sector: that there is no legitimacy in traders
making a profit from these charges; that in the case of inadvertence charges what is
fair should be judged by reference to the real costs/losses of the trader subject to any
amount required to fulfil another legitimate interest (typically deterrence); and where
the trader provides nothing of substance, that any substantial charge is unfair.
Use of the GC is therefore the most efficient option. It is efficient first of all
because it provides clear criteria and so minimises disputes in any given case
(disputes that waste the time and resources of the disputants, and of courts and
regulators).120 It is also efficient because it allows replication of the same criteria
across contracts and sectors: the sort of ‘legal multi-tasking’ that was argued above
to be an efficient use of resources.121 This avoids unnecessary development and
application of a range of different rules. Such development and application requires
significant resource investment by a range of stakeholders-consumers, businesses,
courts, regulators etc.-in research, consultation, argument etc.
5.3 Measuring the Substantive Fairness of Other

Non-essential Charges and the Main Price: A Job
for Rules Developed by Regulatory Bodies
5.3.1 Introduction
Here the argument is that the CRA GC would actually cause uncertainty and
inefficiency if used to test the substantive fairness of other types of non-essential
charge, or of the main price; and that such a task is better performed through rules
developed by regulatory bodies (RDRB) under their market intervention and product
regulation powers: each rule designed for the particular type of charge in question.
120
Kaplow (1994).
121
See Sect. 5.1 above.
750 C. Willett
5.3.2 Unsuitability of the GC to Measure the Substantive Fairness

of Other Charges
The focus here is on routine contingent charges,122 routine non-contingent subsid-

iary charges,123 non-routine contingent charges where there is genuine service,124
and the main price. In all these cases the charge is genuinely for goods, digital
content or services. The difficulty is that the GC criteria are not suited to measure
substantive fairness in such cases and attempts to apply the GC criteria might well
generate significant uncertainty and inefficiency.
We saw above that one possible approach under the GC is to compare the term to
whatever default rule would apply were it not for the term.125 In civil law jurisdic-
tions there are often significant numbers of rather concrete default rules that can
assist in this context: providing that certain charges can (and impliedly others
cannot) be made for particular goods or services; or that a particular obligation is
the responsibility of the trader (so charging the consumer for it is typically unfair).
This is the approach in Germany and it probably explains why while German law
contains the price exemption,126 it interprets ‘price’ much more narrowly than in the
UK and subjects a broad range of non-essential charges to the German equivalent of
the CRA GC: many of these charges are easily, predictably and efficiently testable
under the GC because of the strong background guidance given by default rules.127
Similarly in Spain, where the Directive 93/13/EEC price exemption was not
implemented at all, when the substantive fairness of charges is assessed under the
GC, it is often also done by reference to background rules or norms that provide a
predictable and efficient measure.128
The problem in the UK is that in the case of prices and charges to be paid for
goods, digital content or (‘real’) services, the only default rules are ones that set
extremely open-ended standards. So, if no price is agreed in a contract for goods or
services, a ‘reasonable’ price applies.129 This in itself is just as open ended a standard
as ‘fairness’. Now ‘reasonable price’ is sometimes concretised by reference to what
is normal in the market in question.130 However, this is unsatisfactory because not all
market norms are ‘fair’, especially where there is a competition problem generally or
where (as with most standard terms) there is insufficient informed decision making
122
123
124
125
CJEU Aziz (n 109).
126
On the source of the exemption in art. 4 (2) Directive 93/13/EEC.
127
Law Commission (2012), paras 7.56–6.
128
De Elizalde (2019).
129
Sale of Goods Act 1979 ss. 8 (2) & (3); CRA 2015 s. 51.
130
MacLeod and Devenney (2006), para 15.15 (UK); and on this approach in Nordic countries
where the price exemption does not apply, Wilhelmsson (1995), p. 199.
to impose competitive discipline.131 Even where there are no such competition

problems, there will often be huge scope for debate-and uncertainty-as to what is
the market norm: particularly in markets with many suppliers and/or fluctuating
prices.
In recent years the CJEU has developed an autonomous EU norm for measuring
fairness under the GC. The idea is that a term may be unfair if it is one that
consumers would not agree to if they were in a position to negotiate standard
terms.132 Yet in the abstract this is almost entirely meaningless-how is a court or
regulator to know what a consumer might agree to pay if they could negotiate, when
the reality is that they can so rarely ever actually negotiate? So, without some starting
reference point, this test would create huge uncertainty if applied to the main price
and the other charges discussed here-with all sorts of competing and subjective
claims being made as to what consumers would agree to. The uncertainty would be
especially acute in individual litigation, where the GC requires the individual
circumstances of the parties to be taken into account.133
Now, where default rules exist on a particular issue (as is more typical in civil law
jurisdictions), these can serve as the starting reference point for the ‘agreement’ test
and provide a degree of certainty: the question being what degree of deviation from
the default rule consumers would agree to. However, as indicated above, there are
generally no sufficiently concrete default rules in the UK.
Another possible benchmark for the ‘agreement’ test might be the ‘reasonable
expectations’ of consumers.134 The position might be taken that consumers would
agree to charges that they ‘reasonably expect. Yet this again generates uncertainty
and provides inadequate answers. Under a ‘normative’ approach, ‘reasonable con-
sumer expectations’ are simply another way of describing what the law decides is
‘fair’.135 This is entirely circular, and provides no specific guidelines for determining
a fair charge or price. Another more empirical version of reasonable expectations is
one grounded in some form of background signal which raises certain expecta-
tions136: fairness is then measurable by reference to how far the term deviates from
this background expectation. The background expectation might derive from the
specific relationship between the parties. So, there might be an agreed price which
the consumer reasonably expects is what is payable, but there is a price variation
clause allowing for this expectation to be deviated from by a price increase. In fact
the CRA GC applies to such a term, the question being whether the permitted
increase is too high compared with the initially agreed price.137 Arguably this is
131
Section 4 above.
132
CJEU Aziz (n 109); ParkingEye Limited (Respondent) v Beavis (Appellant) [2015] UKSC 67.
133
S. 62 (5) (b) of the CRA.
134
Willett (2007), pp. 240–244.
135
Mitchell (2003), pp. 656–657.
136
Mitchell (2003), p. 656.
137
Sch 2, Part 1, 15, CRA: not being an assessment as to the basic level of the charge, this is not
covered by the price exemption (n. 40 and related text).
752 C. Willett
another way of asking whether the increase deviates too far from the original
consumer expectation. However, with the main price and other charges considered
here, the question is simply whether the level is too high. Unlike with price variation
clauses, there is no clear background expectation as to what the level of the price or
charge should be, so the reasonable expectation measure does not work. Indeed it
may cause uncertainty in the form of debates as to various other (and different)
possible sources of background expectations: market norms, personal experiences,
previous dealings with the trader etc.
In short then, application of the CRA GC to the charges discussed above could
cause significant uncertainty, which in turn may lead to inefficiency in the form of
wasteful disputes amongst stakeholders (consumer, businesses, courts and regula-
tory bodies) as to how the criteria should be understood and applied.
5.3.3 RDRB Under Product Regulation and Market Intervention

Powers
5.3.3.1 Introduction
So what is the best way to measure the substantive fairness of the main price, routine
contingent charges, routine non-contingent subsidiary charges, and those
non-routine contingent charges where there is genuine service? Arguably it is best
measured by a broad interest balancing analysis that is unencumbered by the above
benchmarks associated with the CRA GC. The approach, rather, should be to
develop rules specifically designed for the particular charge or price: rules which
reduce significant consumer detriment, while taking due account of important
features of the relevant market. This of course has its own efficiency limitations in
that resources must be devoted to developing different rules for a range of similar
charges in different sectors, rather than all such charges being dealt with under a
GC. However, it at least avoids the uncertainties of the CRA GC and the wasteful
disputes that this might cause.
5.3.3.2 Financial Conduct Authority Price Caps
Such an approach is possible under the rule making powers and duties of the
Financial Conduct Authority (FCA). The Financial Services and Markets Act
(FSMA) 2000, s. 137D provides the FCA with ‘product intervention’ powers, this
covering placing conditions on agreements (which could include placing substantive
caps on prices and charges) where this is necessary or expedient to advance
consumer protection or competition objectives. However, it is understood by the
FCA that this should be done by taking account of the needs of the particular market,
including minimising the scope for unintended consequences.138 In particular inter-

ventions will tend to be exceptional rather than routine in relation to the main price,
where competition will usually provide an adequate discipline; and where the risks
of unintended consequences are greatest.139
Examples of substantive regulation based on these powers are the caps placed on
charges in high cost short term lending (HCSTL) contracts140: an initial cost cap, of
0.8% per day of the outstanding principal141; all loan costs, including default fees
and charges, are capped at 100% of the amount borrowed142; and the number of
times the loan could ‘rollover’143 being restricted to two.144 These were based on
significant research and evidence as to the distinctive consumer detriment caused by
extremely high interest rates and other charges and by rollovers.145 Importantly
however, the research also led the FCA to conclude that HCSTL provided access to
credit for consumers who may otherwise not have such access.146 Therefore it was
important to fix the caps at a level that would reduce detriment to an acceptable level,
while also aiming to ensure lenders did not withdraw from the market. This seems to
have been a successful cost benefit exercise as there does not appear to be significant
evidence of a radical reduction in access to high cost short term loans by those who
rely on them.147
Other important examples here are the recent caps on fees for claiming pensions
early. These are now capped at 1% of the value of a member’s benefits being taken,
converted or transferred from a scheme; they cannot be increased in existing
schemes that currently have early exit charges set at less than 1% of the member’s
benefits; and they cannot apply in schemes entered into since the new regime began
(in 2017).148 Again these rules were carefully crafted following a broad analysis
138
Starks (2018).
139
Starks (2018). The main price makes routine profits for traders: contrast with the contingent
charges (Sects. 3.3.4.6 and 3.3.4.7) it has been suggested should be covered by the CRA GC where
caps are likely to be less damaging to the main income streams of traders.
140
Fejős (2015), pp. 181–202.
141
Consumer Credit Sourcebook (CONC) 5A.2.3R.
142
CONC 5A.2.2R.
143
The consumer pays off the interest and charges initially due, but the capital amount, which has
not been paid off, ‘rolls-over’ (with new interest and charges) beyond the original repayment period,
into a new loan.
144
CONC 6.7.23R.
145
E.g. in 2012 roughly 10% of loans rolled over 4–6 times, around 5% over 7–10 times, and there
was one example of a loan rolling over 36 times: Office of Fair Trading (2013) Payday Lending
Compliance Review, Final Report, OFT 1481, March 2013.
146
FCA, Proposals for a price cap on high cost short term credit (2014), 1.8, 5.84.
147
Citizens Advice, Payday Loans After the Cap (2016), 23.
148
Occupational Pension Schemes (Charges and Governance) Regulations 2015, regulation 13 SI
879 (as amended by the Occupational Pensions Schemes (Charges and Governance) (amendment)
Regulations 2017 SI 774).
754 C. Willett
focussed on taking into account consumer detriment but also keeping the market
viable.149
There have also been various Financial Conduct Authority proposals in relation to
banking overdraft fees. These include the possibility of: prohibiting all fixed over-
draft fees, except fees for refusing a payment due to lack of funds; requiring only a
single interest rate to be charged for arranged overdrafts on each customer account;
requiring the rate for unarranged overdrafts to be in line with arranged overdrafts
(with any differences to be based on differences in the cost of providing the credit);
and even introducing backstop price cap for all overdraft charges. These proposals
are based on a careful analysis of the distinctive nature of the banking market and the
detriment caused to consumers by unduly high overdraft fees.150
5.3.3.3 Competition and Markets Authority Price Caps
The Competition and Markets Authority (CMA) has powers under the Enterprise
Act 2002 to conduct market investigations and to take action or recommend rule
changes that could involve a broad range of remedies: from information remedies
and other strategies aimed at influencing consumer behaviour to actual substantive
caps on prices and charges.151 These CMA powers cover the financial sector and
where there is a CMA investigation in that sector it would be done in consultation
with the FCA.152 Indeed it was the CMA that began the above work on bank
overdrafts.
However, the CMA powers apply also to all other sectors of the economy, so that
there is the potential to deal with prices and charges in all sectors. The CMA powers
allow for a broad analysis of whether action is needed to address problems that have
adverse effects on competition and cause consumer detriment.153 In other words,
there can be a broad assessment of the nature of the market and how it can be made to
work more effectively while not generating undue consumer detriment.
149
Authority (2018b), pp. 44–48; Financial Conduct Authority (2018c).
150
Authority (2018b), pp. 44–48; Financial Conduct Authority (2018c). Of course, it has been argued
above here that charges for exceeding overdrafts (being consumer inadvertence charges) can be
most efficiently dealt with under the CRA GC; but this does not undermine the value of this
example as an illustration of the way in which regulatory bodies can develop highly specific and
tailored rules for particular types of charge. See also recently the proposals for caps to fees in rent-
to-own transactions, home-collected credit and catalogue credit and store cards (Financial Conduct
Authority 2018c).
151
Ss. 134–8.
152
E.g. Competition and Markets Authority (2016).
153
Ss. 134–8: On approaches taken see Competition and Markets Authority (2017).
There has been important work in this regard in the energy sector: CMA pro-
posals for prohibiting the charging of a security deposit in circumstances when a
customer is not in debt and has not incurred any fines, charges or interest for late
payment in the last 6 months; prohibiting suppliers from charging customers upfront
for the cost of a new meter when switching away from prepayment; and a transitional
‘safeguard price cap’ for domestic prepayment customers.154
5.3.3.4 Utility Regulators’ Price Caps
Another source of RDRB are rules developed by regulatory bodies dedicated to the
utility sector, a good example being OFGEM, the body responsible for regulating
gas and electricity markets. Just as the FCA and CMA overlap and work together in
the financial sector, OFGEM and the CMA often overlap and coordinate their work
in the gas and electricity sectors. The general need for intervention (based on lack of
competition) is often developed by the CMA, while OFGEM is then expected to
actually develop and implement the specifics of the cap in question. So, for example,
OFGEM has very recently been given responsibility to design and implement a
temporary cap on standard variable tariffs and fixed term default tariffs.155 OFGEM
has just published a consultation document on how it will set these caps. The
approach is to achieve a high level of protection by making tariffs more closely
reflect the actual underlying costs of supplying energy; and OFGEM say that 96% of
customers in 2017 would have paid less under the proposed default tariff cap, this
reducing their bills by £1.3 billion.156
Aside from these initiatives on particularly problematic charges, OFGEM also
sets the routine standard prices payable by gas and electricity consumers. Again, this
is done by reference to the particular needs of the market in question. In this regard
there is a highly sophisticated economic formula that is the traditional benchmark, a
so called ‘Inflation-X’ formula. Under this approach prices are permitted to rise in
line with an inflation index minus an X% reduction each year to pass on to customers
the benefit of improved efficiency.157
154
House of Commons Library (2016).
155
Domestic Gas and Electricity (Tariff Cap) Act 2018.
156
OFGEM (2018c), p. 5. Note that this includes work on meters and in this sense overlaps with the
CMA proposals (House of Commons Library 2016 and related text), but the other CMA proposals
(on security deposits and safeguard price cps) are not being taken forward for now.
157
Understanding Regulation (2018): noting also that the traditional formula for measuring inflation
is the retail price index (RPI), so the formula has traditionally been RPI-X but the consumer price
index harmonised (CPIH) is beginning to be preferred, so CPIH-X could take over as the formula.
For an academic (law and economics) analysis of utility price regulation see Baldwin et al. (2013).
756 C. Willett
5.3.3.5 Concluding on RDRB
So these RDRB are based on a broad analysis that seeks to reduce consumer
detriment while recognising the distinctive needs of the market in question. They
also avoid the uncertainty that would be caused by the criteria that apply under the
CRA GC, and by avoiding costly disputes, they are more efficient standard setting
tools.
6 Concluding Comments
Prices and other charges play a central role in millions of daily transactions. Here the
focus has been on the tension between an information paradigm and a substantive
paradigm in regulating prices and other charges. The main focus has been on B2C
contract law. Choices between information and substantive based rules are of huge
practical importance: affecting how traders should draft contracts, how (and
whether) consumers should them, trader income streams and consumer costs.
These alternatives also mirror deeper choices as to the ideal market order:
emphasising business self-interest/consumer self-reliance (information paradigm)
versus emphasising consumer need (substantive paradigm).
This paper has demonstrated both the dominance of the information paradigm and
its consumer protection limits, by using new legal material and a new approach to
classification of prices and charges. It has also addressed the very important question
as to the tools that should be used in the UK if it is decided to extend the substantive
paradigm-breaking new ground by demonstrating the respective roles that should be
played by a legislative GC and by RDRB. Of course, whether there is actually a
further development of the substantive paradigm is another matter. The key regula-
tors (the FCA and the CMA) have the legal powers to develop more RDRB in the
form of substantive caps if they see fit. On the other hand legislative reform would be
required when it comes to the role that it has been argued here should be played by a
GC: i.e. legislation expressly providing that certain contingent charges are not
‘price’ terms and are subject to the CRA GC. There is no indication that the current
government has any plans to do this. However, this paper has shown at least how this
would improve consumer protection and allow for a stable and efficient assessment
of substantive fairness.
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Ius Comparatum – Global Studies in Comparative Law

More information about this series at http://www.springer.com/series/11943

Académie Internationale de Droit Comparé

Control of Price Related

ISSN 2214-6881 ISSN 2214-689X (electronic)

© Springer Nature Switzerland AG 2020

The structure of each chapter is broadly determined by the questionnaire prepared

Bern, Switzerland Yeşim M. Atamer

Part I General Report

Part II Supranational Report: European Union

Part III National Reports

Control of Price Related Terms in Common Law Canada:

Control of Price Related Terms in Standard Form Contracts

Control of Price Related Terms in Standard Form Contracts

Jaime Alcalde Silva Associate Professor, Pontiﬁcal Catholic University of Chile,

Juan Luis Goldenberg Serrano Associate Professor, Pontiﬁcal Catholic Univer-

Andrey M. Shirvindt Associate Professor, Lomonosov Moscow State University,

A South African Appellate Division

ANCOM National Authority for the Administration and Regulation of

BGE Entscheidungen des Schweizerischen Bundesgerichtes

CCR Romanian Constitutional Court (Curtea Constituțională a

CPC Communist Party of China

ECB European Central Bank

GDP Gross Domestic Product

KB Court of King’s Bench (United Kingdom)

Ont CA Ontario Court of Appeal (Canada)

Rev Ed Revised editions (Singapore)

STJ Brazilian Superior Tribunal of Justice (Superior Tribunal de

CJEU Judgment of 30 Mai 2013, Asbeek Brusse and Austria 27

CJEU Judgment of 14 June 2012, Banco Español de Denmark 59

CJEU Judgment of 3 October 2013, Duarte Hueros, EU 161

CJEU Judgment of 1 December 2009, Martín Martín, EU 161

CJEU Judgment of 19 November 2015, Tarcău, EU 29

Yeşim M. Atamer and Pascal Pichonnaz

© Springer Nature Switzerland AG 2020 3

1 Presentation of the Research Question

Control of standard contract terms (SCT) in business to consumer (B2C) as well as in

understood by an average consumer it is subject to competition and there is no need

contracts denominated in foreign currency (Kásler15); terms giving the right to

2 Presentation of the Results of the Questionnaire

3 Freedom of Contract and Justiﬁcations of Its Limitation

3.1 The Justiﬁcation of Freedom of Contract

Freedom of contract is recognized as a fundamental principle of contract law in all

Some reporters indicate that freedom of contract is a constitutional right,42 some

3.2 Limits to Freedom of Contract

Even understood as a fundamental right, freedom of contract is never conceived as

• To ensure a proper or better functioning of the market. This is true especially

4 Standard Contract Terms and Their Control

competition as long as it is transparently formulated, and no additional information

4.2 Deﬁnition, Incorporation and Interpretation of Standard

4.3 Substantive Control of Standard Contract Terms

4.3.1 Ambit of Substantive Control

4.3.2 Various Techniques of Substantive Control

4.3.2.1 Indirect Substantive Control

We have already mentioned above techniques of indirect or disguised substantive

4.3.2.2 Direct Substantive Control

4.3.3 Legal Consequences

• Consequences of lack of transparency. As already mentioned above, Art. 5 Direc-

4.4 Litigating Against Standard Contract Terms: Collective

a) Arbitration mechanisms for consumer contracts. When speaking of arbitration,

In many non-EU States, consumer associations are authorized to ﬁle claims

5 Judicial Control of Price Related Standard Contract

5.1 Principal Rule: Prices Are Determined Freely