Introduction

The Trading Standards (Fair Trading) (Guernsey) Ordinance, 2023 (the "Trading Standards Ordinance") is due to come into force on 2 October 2023.  From this date, businesses in Guernsey will be subject to trading standards requirements and, in turn, consumers in Guernsey will have consumer rights. 

This briefing by Walkers Guernsey regulatory team summarises provisions relating to unfair contract terms which are introduced by the Trading Standards Ordinance. Our general briefing on the Trading Standards Ordinance can be found here.

Who is affected?

The Trading Standards Ordinance applies to businesses selling goods and/or providing services in Guernsey, including financial services. The Trading Standards Ordinance provides consumers dealing with these businesses various rights and protections.  "Consumers" for these purposes are natural persons receiving services and digital content, or buying goods, for themselves and not wholly or mainly for their trade, business, craft or profession. If a business wants to claim that a person is not a consumer it is up to the business to prove it.

Therefore banks, investment managers, pension providers, insurance providers and lenders, as well as businesses that sell goods or supply services such as internet, telecommunications, electricity and gas, are subject to the new rules in relation to unfair contract terms in relation to their contracts with consumers (but not contracts with businesses).

Unfair contract terms

The Trading Standards Ordinance provides that contractual terms and terms in consumer notices should be both transparent (i.e. expressed in plain and intelligible language and legible) and prominent (i.e. brought to the consumer's attention in such a way that an average consumer would be aware of the term).

The Trading Standards Ordinance also provides that contract terms that are "unfair" to the consumer cannot be relied upon or enforced by the business, although the consumer can choose to rely on an unfair term.  Where a contract has an unfair term, the remainder of the contract has effect, so far as is practicable.

A contract 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.  In determining whether a term in a consumer contract is unfair, the factors that must be taken into account are the nature of the subject matter of the contract, all the circumstances existing when the term was agreed as well as all of the other terms of the contract, or of any other contract on which it depends.

However, terms that specify the price or the main subject matter of the contract are excluded from being unfair if they are transparent and prominent, unless they are included in the list of potentially unfair terms set out in the Trading Standards Ordinance (see further below). 

The Trading Standards Ordinance provides that certain terms cannot be relied upon and so are, essentially, always unfair.  The Trading Standards Ordinance also includes a non-exhaustive list of terms that may be regarded as unfair, depending on the facts and circumstances.

Terms that are always regarded as unfair

Terms that purport to exclude or restrict a businesses' liability for any of the following matters are always unfair:

• a business' obligations under the Trading Standards Ordinance in relation to services - such as performing the service with reasonable care and skill and obligations for pre-contract statements that are binding on the business;
• a business' obligations under the Trading Standards Ordinance in relation to goods – such as the goods being of satisfactory quality, fit for a particular purpose and fit to description, and obligations for pre-contract statements that are binding on the business;
• a business' obligations under the Trading Standards Ordinance in relation to digital content – such as the content being of satisfactory quality, fit for a particular purpose and fit to description, and obligations for pre-contract statements that are binding on the business;

• in all cases, that exclude or restrict a right or remedy in respect of a liability under the above provisions, or that apply restrictive or onerous conditions to such a right or remedy, or allow a business to put a person at a disadvantage as a result of pursuing such a right or remedy, or exclude or restrict rules of evidence or procedure;
• in all cases, negligence (insurance and real estate contracts are excluded from this, as are certain indemnities relating to a settlement of a claim and certain occupier liabilities); and
• in all cases, death or personal injury resulting from negligence (insurance and real estate contracts are excluded from this, as are certain indemnities relating to a settlement of a claim and certain occupier liabilities).

Terms that may be regarded as unfair

The Trading Standards Ordinance contains a non-exhaustive list of terms that may be considered unfair, which are modified in some cases for financial services and certain other sectors. 

These potentially unfair terms are:

• a term which has the object or effect of excluding or limiting the business's liability in the event of the death of or personal injury to the consumer resulting from an act or omission of the business;
• a term which has the object or effect of inappropriately excluding or limiting the legal rights of the consumer in relation to the business or another party in the event of total or partial non-performance or inadequate performance by the business of any of the contractual obligations, including the option of offsetting a debt owed to the business against any claim which the consumer may have against the business;
• 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 business is subject to a condition whose realisation depends on the business's will alone;
• a term which has the object or effect of permitting the business to retain sums paid by the consumer where the consumer decides not to conclude or perform the contract, without providing for the consumer to receive compensation of an equivalent amount from the business where the business is the party cancelling the contract;
• a term which has the object or effect of requiring that, where the consumer decides not to conclude or perform the contract, the consumer must pay the business a disproportionately high sum in compensation or for services which have not been supplied;
• a term which has the object or effect of requiring a consumer who fails to fulfil that consumer's obligations under the contract to pay a disproportionately high sum in compensation;
• a term which has the object or effect of authorising the business to dissolve the contract on a discretionary basis where the same facility is not granted to the consumer, or permitting the business to retain the sums paid for services not yet supplied by the business where it is the business who dissolves the contract; and
• a term which has the object or effect of excluding or hindering the consumer's right to take legal action or exercise any other legal remedy, in particular (a) requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions, (b) unduly restricting the evidence available to the consumer, or (c) imposing on the consumer a burden of proof which, according to the applicable law, should lie with another party to the contract.

Sector-specific modifications

There are some sector-specific modifications to the above list of potentially unfair terms. 

For financial services:

• a business can reserve the right to alter the rate of interest payable by or due to the consumer, or the amount of other charges for financial services without notice where there is a valid reason, if (a) the business is required to inform the consumer of the alteration at the earliest opportunity, and (b) the consumer is free to dissolve the contract immediately; and
• a business can reserve the right to terminate unilaterally a contract of indeterminate duration without notice where there is a valid reason, if the business is required to inform the consumer of the cancellation immediately.

For contracts that last indefinitely, a business can reserve the right to alter unilaterally the conditions of a contract if (a) the business is required to inform the consumer with reasonable notice, and (b) the consumer is free to dissolve the contract.

The terms listed above relating to cancellation without reasonable notice, variation of contract without valid reason, determination of price after consumer bound and increase in price do not apply to transactions in transferable securities, financial instruments and other products or services where the price is linked to fluctuations in a stock exchange quotation or index or a financial market rate that the business does not control, and contracts for the purchase or sale of foreign currency, travelers' cheques or international money orders denominated in foreign currency.

The terms listed above relating to determination of price after consumer bound and increase in price do not include a term which is a price-indexation clause (where otherwise lawful), if the method by which prices vary is explicitly described.

How do these requirements interact with the consumer lending rules introduced in July 2023?

The Lending, Credit and Finance (Bailiwick of Guernsey) Law, 2022, and the associated GFSC rules (together, "LCF") came into force on 1 July 2023 (you can see our LCF briefings here.  LCF brought in consumer protection for consumer credit, such as personal loans, mortgages and credit cards, which included provisions relating to unfair contract terms.  LCF also regulates other financial services, such as non-consumer credit and payment services.  It is only consumer credit that is subject to consumer protection under LCF.

The Trading Standards Ordinance applies in addition to LCF, so all LCF licensees, including businesses that lend to consumers and those that don't, will be subject to the Trading Standards Ordinance (except in relation to a consumer's right to redress, which does not apply to regulated financial services businesses).

Broadly, both the Trading Standards Ordinance and the LCF take the same approach to unfair contract terms.  Therefore, in practice, the terms that are considered as unfair by the Trading Standards Ordinance are virtually identical to the terms that are considered as unfair by the LCF (although the list of unfair terms for both regimes is not exhaustive).  Therefore consumer lenders who updated their business terms for LCF should not need to do so again for the Trading Standards Ordinance.

Walkers’ comment

The Trading Standards Ordinance is a significant piece of legislation for Guernsey, as it brings in rights and protections similar to those that consumers have in other jurisdictions, particularly the UK and Jersey. 

Until 2023, consumers in Guernsey had very few rights.  Consumer protection rules for consumer credit (such as loans and mortgages) came into force on 1 July 2023 and now consumer rights will apply more widely. 

All businesses, including financial services businesses, that sell goods or provide services to members of the public will need to consider the impact of the Trading Standards Ordinance, and will need to ensure that their marketing materials, terms of business and policies comply.  Businesses will need to consider their approach to customer complaints and what remedies they offer consumers.

Businesses should also ensure that their staff, especially sales and customer staff, are trained in the new consumer rights, as statements that they make to consumers could become binding.

About Walkers’ Guernsey regulatory team

Walkers’ Guernsey regulatory team can advise all aspects of the new Trading Standards Ordinance and is fully equipped to provide reviews of businesses' policies and procedures, as well as reviewing consumer terms and conditions, to ensure that they do not contain unfair contract terms.  Walkers’ Guernsey regulatory team can also provide bespoke training to staff to make sure that they are aware of consumers' rights.