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Corporate & Commercial

CCPC to develop guidelines on obligations of providers of residential care services for older people

By Elena Vassileva
3/10/2017

In August of this year, it came to the attention of the Health Services Executive, the Health Minister, and later on, to the general public, that some nursing home residents were paying up to €100 a month in additional fees for a variety of activities, therapies and consumables. One such additional fee was for attending Mass and, needless to say, it was heavily criticized by some. Others were of the opinion that private nursing homes, being profit-making organisations, should be free to charge for the services they provide under the contracts entered into with the residents.

Earlier this month, the Competition and Consumer Protection Commission (the “CCPC”), publicly announced that it is launching a project to examine standard term contracts in residential care services for the elderly and aimed at developing guidelines setting out the obligations and responsibilities placed on service providers in the sector under the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 (the “Regulations”). Although the Regulations have been in force for quite a number of years, they have only recently became topical in Ireland in the context of bank repossessions.

The Unfair Terms Directive, 1933/13/EC (the “Directive”) and the Regulations which give it effect are the main legislative instruments in Ireland which protect customers against the abuse of power by a seller or a service provider. The rationale behind this system of protection is twofold. On the one hand, the average consumer often has limited bargaining power and may be forced to enter into a contract, the terms of which are weighed heavily in favour of the seller or service provider. On the other, consumers may have insufficient information to or otherwise be unable to understand the exact legal consequences of the contract terms. 

Application

The Regulations apply to any term in a contract between a seller of goods or supplier of services and a consumer which has not been individually negotiated and causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.

The following contracts and terms are expressly excluded from the scope of application of the Regulations:

  • contracts of employment;
  • contracts relating to succession rights;
  • contracts relating to rights under family law;
  • contracts relating to the incorporation and organisation of companies or partnerships;
  • terms reflecting mandatory statutory or regulatory provisions of Ireland;
  • terms reflecting the provisions or principles of international conventions.

Consumers and sellers/suppliers

The Regulations apply only to business to consumer contracts (“B2C”) and do not apply to contracts between consumers or between businesses.

A consumer is an individual who is acting for purposes which are outside his business, profession or trade. Where a person or an organisation is acting for these purposes, they would qualify as a seller or supplier. Governmental departments, local or public authorities are also considered sellers or suppliers.

Pre-formulated standard form contracts

For the Regulations to apply, the contract must not have been negotiated individually. The Regulation states that a term will always be regarded as not having been individually negotiated if it has been drafted in advance and the consumer has not been able to influence its substance. It is generally considered that this encompasses standard form contracts, which are offered to the consumer on a “take-it-or-leave-it” basis.

Exemptions

Provided a term is in plain and intelligible language and relates to (i) the definition of the goods and/or services the consumer is receiving under the contract or (ii) the adequacy of the price and remuneration, as against the goods and services supplied, it is excluded from the scope of the Regulations.

Interestingly, the CCPC’s predecessor –the National Consumer Agency - has in the past examined whether extra charges and contingent fees form part of the above exemption and came to the conclusion that if the additional fees and charges are not part of the core bargain that the consumer contracted for, then they would be excluded from the scope of the exemption and would be subjected to the unfairness test, discussed below.

Unfair term

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. When assessing whether a term is fair, the following factors must be considered:

  • the bargaining power of the parties;
  • whether any inducement was offered to the consumer to agree to the particular term;
  • whether the goods or services were sold or supplied to the special order of the consumer, and
  • whether the supplier/seller dealt with the consumer fairly and equitably.

It should be noted that the term does not need to have been relied on by the seller/supplier to be determined to be unfair.

The Regulations provide an indicative and non-exhaustive list of 17 terms (a so-called “grey list”) which may be regarded as unfair.

Finding of unfairness

It is up to the courts to determine whether a consumer contract term is unfair. Unfair terms are not binding on the consumer. If the contract is capable of continuing to exist without the unfair term, it will continue to exist and bind the parties. A consumer has the right to rely on the Regulations as a defence in any case before a court of competent jurisdiction. What is more, the Court of Justice of the European Union has ruled that the national courts in Member States of the EU must examine, of their own motion, the matter of unfairness.

The CCPC has the right to apply to the Circuit Court or the High Court for a declaration that any term drawn up for general use in consumer contracts is unfair and may, at the discretion of the court, be granted an order prohibiting the use or continued use of such a term or similar terms of like effect.

In case the CCPC considers a term drawn up for general use in consumer contracts to be unfair, it may also apply for an injunction (including an interim injunction) against any seller/supplier using, or recommending use of that term.

Conclusion

The CCPC’s guidelines will no doubt be awaited with much anticipation as under the Consumer Protection Act 2007 they are admissible in evidence and, if one of their provisions has any bearing on a question arising in the proceedings, the provision may be taken into account in determining that question.

For more information on the content of this Insight contact:
Elena Vassileva, Solicitor, elena.vassileva@rdj.ie, +353 21 2332817

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