COMMISSION NOTICE

Guidance on the interpretation and application of Council Directive 93/13/EEC on unfair terms in consumer contracts

(Text with EEA relevance)

(2019/C 323/04)

CONTENTS

INTRODUCTION 5

1. OBJECTIVES AND SCOPE OF THE UCTD 7

1.1. The objectives of the UCTD 8

1.2. The scope of the UCTD 10

1.2.1. The notions of ‘seller or supplier’, ‘consumer’ and of ‘contracts concluded between a seller or supplier and a consumer’ 10

1.2.2. Not individually negotiated contract terms (Article 3(1) and (2) UCTD) 13

1.2.3. Exclusion of contract terms reflecting mandatory statutory or regulatory provisions (Article 1(2) UCTD) 14

1.2.4. Interplay with other EU legislation 15

1.2.5. Application of the UCTD to traders established in third countries 17

2. RELATIONSHIP WITH NATIONAL LAW, INCLUDING MINIMUM HARMONISATION 17

2.1. Minimum harmonisation and extension of scope (Article 8 and 8a UCTD), including the role of national supreme courts 18

2.2. Other provisions of national law 19

3. THE GENERAL UNFAIRNESS TEST AND TRANSPARENCY REQUIREMENTS 20

3.1. Unfairness and transparency in general 20

3.2. Contract terms relating to the main subject matter of the contract or the price and remuneration (Article 4(2) UCTD) 23

3.2.1. Contract terms relating to the definition of the main subject matter of the contract 23

3.2.2. Contract terms relating to the price and remuneration 24

3.3. Transparency requirements 25

3.3.1. Transparency requirements under the UCTD 25

3.3.2. Transparency requirements stemming from other EU acts 28

3.4. Unfairness assessment under Articles 3 and 4(1) UCTD 29

3.4.1. The framework for the assessment under Articles 3(1) and 4(1) 29

3.4.2. The relevance of statutory provisions and the significance of the imbalance 31

3.4.3. Sanctions or consequences of the consumer's failure to comply with contractual obligations 32

3.4.4. Possible unfairness of the price or remuneration 33

3.4.5. Circumstances at the time of the conclusion of the contract 33

3.4.6. Relevance of lack of transparency for the unfairness of contract terms 34

3.4.7. Role of the Annex referred to in Article 3(3) UCTD 35

4. NON-BINDING CHARACTER OF UNFAIR CONTRACT TERMS (ARTICLE 6(1) UCTD) 37

4.1. The nature and role of Article 6(1) UCTD in the protection against unfair contract terms 37

4.2. The legal effect of ‘not being binding on the consumer’ 38

4.3. Consequences of the unfairness of contract terms for the rights and obligations of the parties 39

4.3.1. The principle: Setting aside unfair contract terms and prohibition from revising them 39

4.3.2. The exception: Filling gaps in the contract to avoid its nullity 41

4.3.3. The application of supplementary provisions in other cases 43

4.3.4. Possible application of unfair contract terms despite their unfairness? 43

4.4. Restitution of advantages obtained through unfair contract terms 43

5. REMEDIES AND PROCEDURAL GUARANTEES REQUIRED BY ARTICLES 6(1) AND 7(1) UCTD 44

5.1. The significance of Articles 6(1) and 7(1) UCTD and of the principles of equivalence and effectiveness in general 44

5.2. The principle of ex officio control of unfair contract terms 48

5.2.1. Link to Articles 6(1) and 7(1) 48

5.2.2. Relationship with principles of civil procedure 48

5.2.3. Ex officio control and total passivity on the part of the consumer 49

5.3. Obligations stemming from the principle of equivalence 49

5.3.1. Ex officio control of unfair contract terms 49

5.3.2. Other obligations based on the principle of equivalence 50

5.4. Ex officio assessment and the effectiveness of remedies 50

5.4.1. The applicable test 50

5.4.2. Relevant factors for the effectiveness of remedies 52

5.5. What does ex officio control imply? 58

5.5.1. Fundamental obligations 58

5.5.2. Aspects to be examined 58

5.5.3. Availability of the necessary legal and factual elements 59

5.5.4. Conclusions to be drawn from the unfairness assessment 61

5.6. Implications of ex officio control, effectiveness and equivalence for the national rules of procedure 61

5.7. Ex officio control of unfair contract terms and out-of-court proceedings 62

6. INJUNCTIONS IN THE COLLECTIVE INTEREST OF CONSUMERS (ARTICLE 7(2) AND (3) UCTD) 63

ANNEX I — List of court cases mentioned in this Notice 65

ANNEX II — Overview of notifications under Article 8a UCTD 90

INTRODUCTION

Council Directive 93/13/EEC (1) is a principle-based directive. It protects consumers against unfair terms in all types of business-to-consumer contracts. In this way, it is a central instrument in order to achieve fairness in the Internal Market.

Since its adoption 26 years ago, the UCTD has been interpreted through numerous decisions of the Court of Justice of the European Union (‘the Court’), in particular preliminary rulings, through which the Court has further developed many of the general principles laid down in the UCTD. The Court's interpretation is not limited to the criteria for the substantive assessment of contract terms and to the consequences to be drawn from the unfairness of contract terms, but also has implications for the national rules of procedure insofar as those rules are relevant to the effective protection against unfair contract terms.

The Fitness Check of 2017 (2) in the areas of consumer and marketing law included a comprehensive evaluation of the UCTD. It found that the principle-based approach of the UCTD is effective and contributes to a high level of consumer protection. However, the evaluation also identified a certain lack of clarity concerning the interpretation of this Directive and its application as regards for example: (i) the scope of exemptions for terms concerning price and the main subject matter; (ii) the legal consequences of the non-binding nature of unfair contract terms; and (iii) the obligation of national courts to take an active role in applying the UCTD in individual cases. Therefore, the Fitness Check Report recommended addressing these issues through specific Commission guidance.

Against this background, the Commission proposal of 11 April 2018 (3) amending different consumer protection directives is, as regards the UCTD, confined to proposing the insertion of a provision on penalties. At the same time, the Commission Communication ‘A New Deal for Consumers’ of 11 April 2018 (4) announced that the Commission would adopt guidance on the UCTD in 2019 to clarify questions that have arisen in the application of the Directive.

The main purpose of this Guidance Notice (hereinafter referred to as ‘this Notice’) is to present, in a structured way, the interpretation which the Court has provided on the key concepts and provisions of the UCTD, in light of specific cases dealt with by the courts of the Member States. In this way, the Commission would like to increase awareness of this case law amongst all interested parties, such as consumers, businesses, the authorities of the Member States, including national courts, and legal practitioners, across the EU, and, thereby, facilitate its application in practice.

Although the UCTD has achieved a high level of consumer protection and the harmonisation of key concepts in the protection against unfair contract terms in the internal market, there are specificities in the Member States that market participants and legal practitioners will also have to take into account. Such specificities may relate to a broader scope of the national rules transposing the UCTD, or may consist in more detailed or stricter rules regarding the unfairness of contract terms. Examples include a black list of contract terms that are always considered as unfair, lists of contract terms which are presumed to be unfair, the assessment also of contract terms that have been negotiated individually, the assessment of the unfairness of contract terms defining the main subject-matter or of the adequacy of the price or remuneration even where such terms are transparent. There may also be less demanding requirements for considering a contract term to be unfair under the general unfairness provision, for instance where the national transposition does not require that the imbalance in the rights and obligations of the parties is significant or that that the imbalance in the rights and obligations is contrary to the requirements of good faith. Such rules are possible, in principle, under the minimum harmonisation provision in Article 8 UCTD (5). Annex II to this Notice contains an overview of the notifications made by the Member States under Article 8a UCTD (6), which reflect deviations from the UCTD.

This Notice is based on the minimum standard provided by the UCTD and cannot provide a comprehensive picture of the application of the UCTD in the individual EU Member States, including the decisions of national courts and other competent bodies on the assessment of specific contract terms. In addition to different information sources available in the Member States, information on the national provisions transposing the UCTD, on case law and on legal literature is available in the Consumer Law Database which is accessible via the E-justice portal (7).

Where not specified otherwise, articles referred to in this Notice are those of the UCTD. Where the notion ‘contract term’ or ‘term’ is used it refers to ‘not individually negotiated contract terms’ within the meaning of Article 3(1) UCTD. Where quotations from the text of the UCTD or from Court rulings contain visual highlighting, such emphasis has been added by the Commission.

This Notice covers in Section 1 the objectives and the scope of the UCTD, while Section 2 relates in particular to the principle of minimum harmonisation and the relationship with national law in general. Section 3 discusses the assessment of the transparency and (un)fairness of contract terms under Articles 3, 4 and 5. Section 4 explains the implications of the unfairness of contract terms for the rights and obligations of the parties under Article 6(1). Section 5 covers in detail the procedural requirements for the assessment of contract terms, including the obligation for national courts to take an active role in the assessment of contract terms. Finally, Section 6 discusses some particularities of injunction proceedings.

The principles developed by the Court in relation to procedural guarantees under the UCTD, including the principle of ex officio control, apply mutatis mutandis to other pieces of EU consumer legislation (8). Likewise, this Notice takes into account certain rulings concerning other consumer protection directives insofar as they are relevant also to the UCTD.

While preliminary rulings are addressed to the referring court and to national courts at large, which are obliged to apply them directly, they concern all national authorities dealing with unfair contract terms, including administrative authorities enforcing the UCTD and ministries responsible for proposing legislation. It is for the Member States to examine to what extent their rules and practices comply with the UCTD as interpreted by the Court and, where relevant, how compliance can be improved in order to protect consumers effectively against unfair contract terms.

This Notice is addressed to the EU Member States and to Iceland, Liechtenstein and Norway as signatories of the Agreement on the European Economic Area (9) (EEA). References to the EU, the Union or the Single Market should therefore be understood as references to the EEA or to the EEA market. This Notice is intended purely as a guidance document — only the text of the EU legislation itself has legal force. Any authoritative reading of the law has to be derived from the text of Directive 93/13/EEC and directly from the decisions (10) of the Court as they have been handed down to date and will be handed down in the future. This Notice takes into account rulings of the Court published until 31 May 2019 and cannot prejudge further developments of the Court's case law. The views expressed in this Notice cannot prejudge the position that the European Commission might take before the Court. The information contained in this Notice is of a general nature and does not specifically address any particular individuals or entities. Neither the European Commission nor any person acting on behalf of the European Commission is responsible for any use that may be made of the following information.

1. OBJECTIVES AND SCOPE OF THE UCTD

Article 1 1. The purpose of this Directive is to approximate the laws, regulations and administrative provisions of the Member States relating to unfair terms in contracts concluded between a seller or supplier and a consumer. 2. The contractual terms which reflect mandatory statutory or regulatory provisions and the provisions or principles of international conventions to which the Member States or the Community are party, particularly in the transport area, shall not be subject to the provisions of this Directive. Article 2 For the purposes of this Directive: (a) ‘unfair terms’ means the contractual terms defined in Article 3; (b) ‘consumer’ means any natural person who, in contracts covered by this Directive, is acting for purposes which are outside his trade, business or profession; (c) ‘seller or supplier’ means any natural or legal person who, in contracts covered by this Directive, is acting for purposes relating to his trade, business or profession, whether publicly owned or privately owned. Article 3(1) and (2) 1. A contractual term which has not been individually negotiated 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. 2. A term shall always be regarded as not individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term, particularly in the context of a pre-formulated standard contract. The fact that certain aspects of a term or one specific term have been individually negotiated shall not exclude the application of this Article to the rest of a contract if an overall assessment of the contract indicates that it is nevertheless a pre-formulated standard contract. Where any seller or supplier claims that a standard term has been individually negotiated, the burden of proof in this respect shall be incumbent on him. Recital 6 Whereas, in order to facilitate the establishment of the internal market and to safeguard the citizen in his role as consumer when acquiring goods and services under contracts which are governed by the laws of Member States other than his own, it is essential to remove unfair terms from those contracts; Recital 9 Whereas in accordance with the principle laid down under the heading ‘Protection of the economic interests of the consumers’, as stated in those programmes: ‘acquirers of goods and services should be protected against the abuse of power by the seller or supplier, in particular against one-sided standard contracts and the unfair exclusion of essential rights in contracts’; Recital 10 Whereas more effective protection of the consumer can be achieved by adopting uniform rules of law in the matter of unfair terms; whereas those rules should apply to all contracts concluded between sellers or suppliers and consumers; whereas as a result inter alia contracts relating to employment, contracts relating to succession rights, contracts relating to rights under family law and contracts relating to the incorporation and organization of companies or partnership agreements must be excluded from this Directive; Recital 11 Whereas the consumer must receive equal protection under contracts concluded by word of mouth and written contracts regardless, in the latter case, of whether the terms of the contract are contained in one or more documents; Recital 13 […] whereas in that respect the wording ‘mandatory statutory or regulatory provisions’ in Article 1(2) also covers rules which, according to the law, shall apply between the contracting parties provided that no other arrangements have been established;

1.1. The objectives of the UCTD

The UCTD aims at approximating national laws in order to raise the level of protection of consumers against unfair not individually negotiated terms in contracts concluded between a seller or supplier and a consumer.

Therefore, the UCTD has a double objective:

— the effective protection of consumers as the typically weaker party against unfair contract terms which are used by sellers or suppliers and have not been individually negotiated, and

— contributing to the establishment of the Internal Market through the minimum harmonisation of the national rules aiming at this protection.

The Court (11) has emphasised the role of the UCTD in connection with the overall objectives of the EU when stating that

‘[…] [i]t should also be noted that, according to the Court's case-law, that directive as a whole constitutes, in accordance with Article 3(1)(t) EC, a measure which is essential to the accomplishment of the tasks entrusted to the European Community and, in particular, to raising the standard of living and the quality of life throughout the Community […] (12).’

In that connection, the Court has repeatedly qualified protection under the UCTD as a matter of ‘public interest’ (13). As expressed in Article 114 of the Treaty on the Functioning of the EU (TFEU) (14), the legal basis for the UCTD, as well as in Article 169 TFEU and in Article 38 of the Charter of Fundamental Rights of the EU (15), the UCTD provides for a high level of consumer protection.

According to the settled case law of the Court (16), the system of protection introduced by Directive 93/13/EEC is based on

‘[…] the idea […] that the consumer is in a weak position vis-à-vis the seller or supplier, as regards both his bargaining power and his level of knowledge, which leads to the consumer agreeing to terms drawn up in advance by the seller or supplier without being able to influence the content of those terms[…].’

The UCTD thus aims to address situations of inequality of the parties in relation to contract terms, which can be due to an asymmetry of information or expertise (17) or bargaining power (18) in relation to the contract terms.

In particular, through the non-binding character of unfair contract terms under Article 6(1) the UCTD aims to create an effective balance (19) between the parties under the contract, by removing the imbalance created by unfair contract terms (20), in order to compensate for the weaker position of consumers (21).

Furthermore, the UCTD aims to deter sellers or suppliers from using unfair terms in the future (22). The Commission recalls that in its 2000 report (23) on the implementation of the UCTD, it stressed the harmful effects of the use of unfair contract terms for the legal and economic order of the EU as a whole and underlined the significance of the UCTD beyond the protection of individual consumers directly affected by unfair contract terms.

1.2. The scope of the UCTD

1.2.1. The notions of ‘seller or supplier’, ‘consumer’ and of ‘contracts concluded between a seller or supplier and a consumer’

As laid down in Article 1(1) UCTD, the UCTD applies to ‘contracts concluded between a seller or supplier and a consumer’.

For a contract to be covered by the UCTD, it is necessary to establish that one party to the contract is a seller or supplier, as defined in Article 2(c), and the other party a consumer (24) within the meaning of Article 2(b). This is without prejudice to the fact that the Member States are not, a priori, prevented from extending the scope of the national rules transposing the UCTD also to other contracts, applying it, for instance, also to contracts concluded between two sellers or suppliers or between two consumers.

1.2.1.1. The definitions of ‘seller or supplier’ and ‘consumer’

Whereas, according to Article 2(b), consumers have to be natural persons, pursuant to Article 2(c), a seller or supplier can be a legal or natural person.

In order to establish whether a given person is a seller or supplier or a consumer it is important to look at the balance of power between the parties in relation to the contract in question. Typical factors are the asymmetry of information, knowledge and expertise or bargaining power. The notions of ‘seller or supplier’ and ‘consumer’ are functional concepts based on the role of the parties in relation to the contract at issue. At the same time, the notion of ‘consumer’ is objective and reflects the typically weaker position of the seller or supplier's counterpart, meaning that superior knowledge and experience of a specific consumer does not disqualify such person from being a ‘consumer’ for the purposes of the UCTD (25).

The Court explained this functional approach as follows (26):

‘53 It is therefore by reference to the capacity of the contracting parties, according to whether or not they are acting for purposes relating to their trade, business or profession, that the directive defines the contracts to which it applies […] ( 27 ) .’ ‘55 [It follows that] the notion of “seller or supplier”, within the meaning of Article 2(c) of Directive 93/13 is a functional concept, requiring determination of whether the contractual relationship is amongst the activities that a person provides in the course of their trade, business or profession […] ( 28 ) .’

In order to establish whether a natural person who pursues a trade, business or profession is a seller or supplier or a consumer, it is important to establish whether the contract in question relates to one of these activities or not.

Despite certain variations of the term ‘seller or supplier’ in different language versions (29) of Article 2(c) UCTD, this notion has to be interpreted uniformly (30) and in light of the objectives of the Directive (31). This means that more restrictive terminology used in certain language versions of the UCTD and in the national transposition cannot restrict the types of contracts covered by the UCTD and, thereby, its scope of protection (32). In fact, ‘seller or supplier’ pursuant to Article 2(c) will have to be interpreted in the same way as the term ‘trader’ in other consumer protection directives, and the case law in relation to the terms ‘trader’ and ‘consumer’ in other directives is, in principle, also relevant for the UCTD (33).

The Court (34) has stated that the definition of ‘seller or supplier’ in Article 2(c), has to be interpreted broadly:

‘47 Article 2(c) of the directive defines the term “seller or supplier” as any natural or legal person who, in contracts covered by this directive, is acting for purposes relating to his trade, business or profession, whether publicly or privately owned. 48 It is clear from the wording itself of that provision that the EU legislature intended a broad definition to be given to the notion of “seller or supplier” […] ( 35 ) .’

Therefore, every natural or legal person is a seller or supplier when the contract relates to their professional activity, including where the activity is of a public nature or in the public interest (36) or governed by public law (37). Organisations or bodies that pursue a task of public interest or charitable or ethical goals will qualify as sellers or suppliers in relation to contracts on the sale of products or the services of any kind to consumers. In this respect, it is immaterial that an activity is carried out on a ‘not-for-profit’ basis. According to the Court (38),

‘[i]t follows that Article 2(c) of Directive 93/13 does not exclude from its scope of application entities that pursue a task in the public interest, nor those that are governed by public law […] (39). Furthermore, […], since tasks of a public nature and in the public interest are often conducted on a not-for-profit basis, the fact that a body is a not-for-profit organisation is irrelevant to the definition of the notion of “seller or supplier”, within the meaning of that provision.’

This means that, for instance, also contracts relating to health and care services will, in principle, be covered, regardless of the legal nature of the provider.

The Court has also specified that, in order to be considered a ‘seller or supplier’, it is not necessary that a contract reflects a person's main activity and can thus relate to a complementary or ancillary activity (40). Therefore, for instance, a loan offered by a company to its employees (41) or a loan granted to a student by an education establishment (42) can be covered.

In sum, whether a person qualifies as a ‘seller or supplier’ or a ‘consumer’ must be assessed on a case-by-case basis in relation to the specific contract at issue, taking account of the nature and purpose of the contract in question and the fact that the UCTD aims at the protection of consumers as the typically weaker party.

This also means that a given natural person can be a ‘seller or supplier’ in relation to certain contracts, e.g. a lawyer in relation to a contract on the provision of legal services (43), and a ‘consumer’ in relation to other contracts, e.g. a loan taken out for private purposes (44). In this respect, the Court (45) has stated:

‘In such a situation, even if a lawyer were considered to display a high level of technical knowledge [… (46)], he could not be assumed not to be a weak party compared with a seller or supplier. […] the weaker position of the consumer vis-à-vis the seller or supplier, which the system of protection implemented by Directive 93/13 is intended to remedy, relates both to the consumer's level of knowledge and to his bargaining power under terms drawn up in advance by the seller or supplier the content of which that consumer is unable to influence.’

Furthermore, a natural person acting, under an ancillary contract, as a guarantor for a contract concluded between two commercial entities has to be considered as a consumer where that person acted for purposes outside his trade, business or profession, and has no functional link with the borrowing company. A functional link may consist, for instance, in being a director of that company or holding non-negligible shares in it (47).

1.2.1.2. Contracts concluded between a seller or supplier and a consumer

As soon as there is a seller or supplier on one side and a consumer on the other side, the contract is deemed to be covered by the UCTD as expressed by the second whereas-clause of Recital 10. Recital 10 clarifies that the UCTD applies to all contracts concluded between sellers or suppliers and consumers.

This implies that the UCTD applies to all contracts concerning the purchase of goods and the supply of services and the Court has clarified that the UCTD is indeed intended to apply ‘in all sectors of economic activity (48).’

Recital 10 further explains that inter alia contracts relating to employment, contracts relating to succession rights, contracts relating to rights under family law and contracts relating to the incorporation and organization of companies or partnership agreements (49)‘must be excluded’ from its scope. As limitations of the scope of the Directive, those examples (50) will have to be interpreted narrowly (51).

The UCTD does not require that the consumer has to provide monetary consideration for a good or service. The Court has not considered monetary consideration to be necessary. It (52) has, for instance, held that private persons who provide a guarantee for a loan taken out by another party may be protected under the UCTD even though the guarantee contract does not stipulate any monetary consideration for a specific service. Therefore, also contracts between consumers and providers of social media services must be considered to be covered by the UCTD regardless of whether consumers have to pay certain amounts of money or whether the consideration for the services consists in consumer generated content and profiling (53).

Where an ancillary contract, for instance a guarantee contract, is concluded between a seller or supplier and a consumer, that contract is covered by the UCTD, even if the main contract, for instance a loan, is concluded between two commercial companies and is therefore outside its scope (54).

The Court has ruled on a limited number of specific cases where national courts had doubts about the classification of a given contract and has clarified that the following types of contracts are covered by the UCTD:

— residential tenancy agreements concluded between, on the one hand, an individual acting on a non-commercial basis and, on the other hand, a real estate professional (55),

— contracts on the supply of legal services (56),

— a mortgage credit contract concluded by a lawyer for private purposes (57),

— a contract concluded by a free educational establishment by which it grants one of its students repayment facilities for sums which the students owe in respect of registration fees and costs connected with a study trip (58),

— a contract of guarantee or a contract providing security concluded between a natural person and a credit institution in order to secure contractual obligations owed by a commercial company to the credit institution under a credit agreement, where the guarantor acted for purposes outside his trade, business or profession and has no link of a functional nature with that company (59),

— a mortgage loan which an employer granted to an employee and his spouse for private purposes (60).

1.2.2. Not individually negotiated contract terms (Article 3(1) and (2) UCTD) (61)

According to Article 2(a) in conjunction with 3(1), only contract terms which have not been negotiated individually are subject to the UCTD. Article 3(2) contains certain presumptions and provisions on the burden of proof for the question of whether a given contract term has not been negotiated individually. Along with Recitals 9 and 11, Article 3(2) also gives examples of what kind of contract terms are covered. Typically, but not exclusively, ‘standard’ (62), standardised (63) or pre-formulated (64) contract terms, often found in so-called ‘terms and conditions’ will be covered.

It is not decisive in which form the terms are set out, e.g. printed, online or off-line, handwritten or even oral (65), in what way the contract was concluded, e.g. privately or in the form of a notarial deed, in which part of the contract the terms are placed or whether they are contained in one or in different documents. What matters is that they contribute to defining the rights and obligations of the parties and that no individual negotiations have taken place on the specific term(s) in question.

Whether individual negotiations have taken place on a particular contract term is a matter of facts to be assessed by the national courts. According to the first paragraph on Article 3(2), where a contract term has been drafted ‘in advance’, for instance in the case of a ‘pre-formulated standard contract’, the term is ‘[is] always [to] be regarded as not individually negotiated’. The third subparagraph of Article 3(2) provides that, where a seller or supplier considers that ‘a standard term’ has been negotiated individually, the burden of proof is incumbent on such seller or supplier. According to the second paragraph of Article 3(2), where certain aspects of a term or a specific term have been negotiated individually, this does not mean that the other contract terms have been negotiated individually. The consumer's signature at the end of the contract or in order to confirm individual clauses does certainly not indicate that contract terms were negotiated individually.

The Court may give further guidance on this criterion and on the concept of ‘negotiation’ (66).

When this Notice refers to ‘unfair contract terms’ or ‘contract terms’, such references relate to ‘not individually negotiated contract terms’ even where the words ‘not individually negotiated’ are not repeated. This is without prejudice of the fact that in some Member States the protection of the UCTD applies also to individually negotiated contract terms (67).

1.2.3. Exclusion of contract terms reflecting mandatory statutory or regulatory provisions (Article 1(2) UCTD)

Under Article 1(2), contract terms which reflect mandatory statutory or regulatory provisions or the provisions or principles of international conventions to which the Member States or the Union are party, are not subject to the provisions of the UCTD. The Court (68) has stressed that, as an exception from the intended protection of consumers against unfair contract terms, Article 1(2) has to be interpreted narrowly:

‘[…] a national court must take account of the fact that, having regard to the purpose of that directive, namely the protection of consumers against unfair terms included in contracts concluded with consumers by sellers or suppliers, the exception provided for in Article 1(2) of the directive is to be strictly construed […] (69).’

In order to exclude assessment under the UCTD, it has to be determined that the contract term reflects a mandatory statutory or regulatory provision.

For the purposes of Article 1(2) and in line with Recital 13, a provision is mandatory if

— it applies to the parties of the contract independently of their choice,

— but also where it is of a supplementary nature and therefore applies by default, that is to say in the absence of other arrangements established by the parties to the contract (70).

In those cases, the exclusion from the scope of the UCTD is justified by the fact that

‘[…] in principle, it may legitimately be supposed that the national legislature struck a balance between all the rights and obligations of the parties to certain contracts (71).’

This applies, in principle, also where a mandatory provision is adopted after the conclusion of the contract and imposes an arrangement that replaces an unfair contract term (72).

At the same time, the exception in Article 1(2) has to be limited strictly to the question regulated by such mandatory rules (73). Furthermore, mandatory rules of national law applying to particular groups of customers do not constitute a mandatory rule for the purposes of Article 1(2) UCTD insofar as a contract term makes them applicable to other customers (74).

The Court (75) has clarified that the exception of Article 1(2) does not apply where national rules give the parties different options, for instance, for determining the competent court.

The Court may provide further guidance on Article 1(2) based on three requests for preliminary rulings pending at the time of adoption of this Notice (76).

Article 1(2) UCTD, furthermore, excludes from the scope of the UCTD the provisions or principles of international conventions to which the Member States of the Union are party, and refers specifically to international conventions in the transport area (77).

1.2.4. Interplay with other EU legislation

The UCTD applies to contracts concluded between sellers or suppliers and consumers in all sectors of economic activity (78). Thus, also other provisions of EU law, including other consumer protection rules, may apply to a given contract, depending on the type of contract in question. Other relevant rules, which may apply in parallel, could be horizontal rules on pre-contractual information and on the right of withdrawal in Directive 2011/83/EU (79) on consumer rights, or on unfair commercial practices in Directive 2005/29/EC (80). Similarly, rules relating to particular types of contracts may apply in addition to the UCTD, for instance, Directive 2008/48/EC (81) on credit agreements for consumers, Directive 2008/122/EC (82) on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts, Directive 2014/17/EU (83) on credit agreements for consumers relating to residential immovable property, Directive (EU) 2015/2302 (84) on package travel and linked travel arrangements, Directive (EU) 2018/1972 (85) establishing the European Electronic Communications Code, Regulation (EC) No 1008/2008 (86) on air services, Directive 2009/72/EC (87) concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC, or Directive 2009/73/EC (88) concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (89). In addition, rules in the area of judicial cooperation in civil matters, for instance on the applicable law (90) and jurisdiction (91) and procedural rules, such as on small claims (92) or on the European Payment Order (93) may apply in cases involving unfair contract terms.

Some sector-specific acts explicitly clarify that they are without prejudice to the UCTD. Examples are Directive 2009/72/EC (94), Directive 2009/73/EC (95), Directive 2014/17/EU (96) and Directive (EU) 2018/1972 (97).

Because of Article 1(2) UCTD, which is discussed in Section 1.2.3, contract terms that reflect mandatory provisions, including those set out in sector-specific legislation, or provisions of international conventions are excluded from the scope of the UCTD.

Otherwise, where sector-specific legislation was adopted after the adoption of the UCTD, one will have to consider that such legislation can exclude the application of the UCTD only insofar it provides so explicitly (98). This will normally not be the case (99), so that the UCTD will generally apply in addition to sector-specific rules.

Where other EU provisions apply in addition to the UCTD, one will, in general, favour an interpretation that preserves as much as possible the effet utile of the UCTD and of a potentially conflicting provision. For instance, rules of procedure should not jeopardise the effectiveness of the protection against unfair contract terms under the UCTD.

Other EU provisions may have to be taken into account when assessing the transparency and unfairness of contract terms under the UCTD. For instance, the fact that a seller or supplier resorted to unfair commercial practices within the meaning of Directive 2005/29/EC (100) may be an element in the assessment of the unfairness of individual contract terms (101). At the same time, such a finding has no direct effect on the assessment of the validity of the contract from the point of view of Article 6(1) of the UCTD (102).

The relationship between sector-specific rules and the UCTD with particular regard to transparency/pre-contractual information requirements (103) or the compulsory content of contracts (104) is discussed below in Section 3.3.2.

1.2.5. Application of the UCTD to traders established in third countries

Whether the UCTD is applicable to a contract concluded between a consumer resident in an EU Member State and a non-EU and non-EEA trader or professional (105) is determined in principle by Regulation (EC) No 593/2008 (106) (Rome I).

Article 6(1) and (2) of the Rome I Regulation provides that:

1. Without prejudice to Articles 5 and 7, a contract concluded by a natural person for a purpose which can be regarded as being outside his trade or profession (the consumer) with another person acting in the exercise of his trade or profession (the professional) shall be governed by the law of the country where the consumer has his habitual residence, provided that the professional: (a) pursues his commercial or professional activities in the country where the consumer has his habitual residence, or (b) by any means, directs such activities to that country or to several countries including that country, and the contract falls within the scope of such activities. 2. Notwithstanding paragraph 1, the parties may choose the law applicable to a contract which fulfils the requirements of paragraph 1, in accordance with Article 3. Such a choice may not, however, have the result of depriving the consumer of the protection afforded to him by provisions that cannot be derogated from by agreement by virtue of the law which, in the absence of choice, would have been applicable on the basis of paragraph 1.

Therefore, whenever a professional (i.e. a trader or ‘seller or supplier’) from a third country carries on an activity in a Member State or directs its activities to consumers who have their habitual place of residence in a Member State, those consumers will benefit from the protection under the UCTD and the consumer protection rules of their Member State. This applies even where the parties choose the law of the third country as the applicable law. However, Article 5 of the Rome I Regulation contains particular rules for contracts of carriage.

In addition, Article 6(2) UCTD provides:

Member States shall take the necessary measures to ensure that the consumer does not lose the protection granted by this Directive by virtue of the choice of the law of a non-Member country as the law applicable to the contract if the latter has a close connection with the territory of the Member States.

This provision may grant the consumer extra protection since it applies in every case where the law of a third country is chosen but where there is a close connection with a Member State. The conditions of its application are thus broader than those of Article 6 of the Rome I Regulation.

Furthermore, the Court has held (107) that, under Article 3(1) UCTD, a contract term whereby a contract concluded with a consumer is to be governed by the law of the Member State in which the seller or supplier is established is unfair if it does not unambiguously specify that consumers can still rely on the mandatory consumer protection rules of the country of their usual residence under Article 6(2) of the Rome I Regulation. Without this specification, it may mislead the consumer by giving him/her the wrong impression that only the chosen law applies to the contract. The same logic must apply where the law of a non-EU Member State is chosen by way of a contract term within the meaning of Article 3(1) UCTD (108).

2. RELATIONSHIP WITH NATIONAL LAW, INCLUDING MINIMUM HARMONISATION

Article 8 UCTD 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. Article 8a UCTD (109) 1. Where a Member State adopts provisions in accordance with Article 8, it shall inform the Commission thereof, as well as of any subsequent changes, in particular where those provisions: — extend the unfairness assessment to individually negotiated contractual terms or to the adequacy of the price or remuneration; or, — contain lists of contractual terms which shall be considered as unfair[.] 2. The Commission shall ensure that the information referred to in paragraph 1 is easily accessible to consumers and traders, inter alia, on a dedicated website. 3. The Commission shall forward the information referred to in paragraph 1 to the other Member States and the European Parliament. The Commission shall consult stakeholders on that information. Recital 17 Whereas, for the purposes of this Directive, the annexed list of terms can be of indicative value only and, because of the cause of the minimal character of the Directive, the scope of these terms may be the subject of amplification or more restrictive editing by the Member States in their national laws;

The UCTD and national law interact in different ways. There are

— provisions which transpose the UCTD into national law, including those which extend their scope or lay down more stringent requirements, and

— provisions of national law, whether of a substantive or procedural nature, that cover additional aspects, but which have to be taken into account when courts have to rule on cases involving unfair contract terms.

2.1. Minimum harmonisation and extension of scope (Article 8 and 8a UCTD), including the role of national supreme courts

Under Article 8, Member States may ensure a higher level of consumer protection than the one provided for by the UCTD (110). Article 8a UCTD (111) obliges Member States to notify national rules which contain stricter standards or extend the scope of the national rules transposing the UCTD (112).

For instance, Member States may apply the national rules transposing the UCTD also to contract terms that were negotiated individually (113) or to business-to-business relations or to transactions between consumers (114).

They may also make them more stringent, in particular by applying a less demanding threshold for considering a contract term to be unfair. They may, for instance, adopt a ‘black list’ of contract terms which are always considered to be unfair without requiring a case-by-case assessment under the general unfairness test of Article 3(1) UCTD (115) and/or different types of grey list(s). Further information regarding the Annex to the UCTD can be found in Section 3.4.7.

National law may, for instance, also provide that lack of transparency can lead directly to the invalidity of contract terms without having to apply the unfairness-test under Article 3(1) (116).

The Court (117) has also clarified that, because of Article 8, there is no obligation for Member States to require, in accordance with Article 4(2) (118), that the definition of the main subject matter or the adequacy of the price and remuneration can be assessed only if the relevant terms are not in plain intelligible language.

The Court (119) has confirmed that the case law of national supreme courts does not come within the ambit of stricter national measures pursuant to Article 8. Nevertheless, where national supreme courts elaborate certain criteria for the assessment of the unfairness of contract terms that lower courts will de facto have to respect if they do not wish to be overruled or which lower courts are even formally bound by, this is, in principle, compatible with the UCTD. However, the criteria used by national supreme courts have to comply with the case law of the Court and must not prevent the competent court from offering consumers an effective remedy for the protection of their rights or from referring a question to the Court for a preliminary ruling (120).

2.2. Other provisions of national law

Other national rules that may apply to cases involving unfair contract terms include general provisions of contract law, in particular on the formation and validity of contracts, as well as the rules of procedure for proceedings before national courts. Such questions are not specifically regulated in the UCTD, but may have a significant impact on its application.

For instance, while applying to the assessment of individual contract terms contained in a business-to-consumer contract, the UCTD does not as such regulate the validity of contracts as a whole. It is possible, however, that, under national contract law, the unfairness of one or more contract terms leads to the invalidity of the contract in its entirety, for instance, where the contract cannot be performed without arrangements for essential duties of the parties. This possibility is contemplated in Article 6(1) UCTD and is discussed in Section 4.

Furthermore, there are rules in national law which may provide for the invalidity of the contract as a whole, for instance, where it violates a legal prohibition, is usurious or otherwise violates the requirements of basic morality. Moreover, under national law, consumers may be able to avoid contracts because their conclusion was based on fraudulent or aggressive behaviour by the seller or supplier, which may correspond to misleading, aggressive or otherwise unfair commercial practices within the meaning of Directive 2005/29/EC (121).

Where such instances coincide with the presence of unfair contract terms, the UCTD will normally be without prejudice to such national rules, as long as such rules do not call into question the effectiveness of the UCTD, in particular its Article 6(1) (122). The Court (123) has indicated that, in principle, the rules on the invalidity of contracts have to be considered under their own logic (124) and that, where they coincide with unfair contract terms, such rules are acceptable under Article 8 UCTD insofar as they lead to more advantageous results for consumers than the minimum of protection required by the UCTD (125).

It should be emphasised that, within its scope, EU law takes precedence over national law and that the national authorities, including the courts, are obliged to interpret national law as much as possible in conformity with EU law in order to ensure its effectiveness. In the words of the Court (126),

‘[…] [I]t must be recalled […] that a national court, when hearing a case between individuals, is required, when applying the provisions of domestic law, to consider the whole body of rules of national law and to interpret them, so far as possible, in the light of the wording and purpose of the directive in order to achieve an outcome consistent with the objective pursued by the directive [… (127)].’

Where national law, including the rules of procedure, cannot be interpreted in conformity with EU law, national courts, have to set them aside and base themselves directly on Union law (128). The Court (129) has confirmed that national courts have the duty to give full effect to the UCTD, if necessary refusing of their own motion to apply any conflicting provision of national legislation, even if adopted subsequently. It is, therefore, not necessary for the courts to request or await the prior setting aside of such provision by legislative or other constitutional means. This includes cases where national law does not provide for the ex officio assessment of unfair contract terms or even prevents it, whereas such control is required by the UCTD (130), or where national law otherwise infringes the UCTD or the principles of equivalence or effectiveness (131).

At the same time, the Member States are obliged to amend rules that do not comply with the UCTD, including in cases where there is uncertainty about their interpretation (132).

3. THE GENERAL UNFAIRNESS TEST AND TRANSPARENCY REQUIREMENTS

3.1. Unfairness and transparency in general

Article 3(1) and (3) 1. A contractual term which has not been individually negotiated 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. […] 3. The Annex shall contain an indicative and non-exhaustive list of the terms which may be regarded as unfair. Article 4 1. Without prejudice to Article 7, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent. 2. 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. Article 5 In the case of contracts where all or certain terms offered to the consumer are in writing, these terms must always be drafted in plain, intelligible language. Where there is doubt about the meaning of a term, the interpretation most favourable to the consumer shall prevail. This rule on interpretation shall not apply in the context of the procedures laid down in Article 7 (2). Recital 16 […] whereas, in making an assessment of good faith, particular regard shall be had to the strength of the bargaining positions of the parties, whether the consumer had an inducement to agree to the term and whether the goods or services were sold or supplied to the special order of the consumer; whereas the requirement of good faith may be satisfied by the seller or supplier where he deals fairly and equitably with the other party whose legitimate interests he has to take into account; Recital 20 Whereas contracts should be drafted in plain, intelligible language, the consumer should actually be given an opportunity to examine all the terms and, if in doubt, the interpretation most favourable to the consumer should prevail; Point 1 (i) of the Annex to the UCTD referred to in Article 3(3) 1. Terms which have the object or effect of: […] (i) irrevocably binding the consumer to terms with which he had no real opportunity of becoming acquainted before the conclusion of the contract; (j) enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract;

Article 3(1) contains the general test under which the unfairness of contract terms used by sellers or suppliers is to be assessed. This general test has to be reflected in the rules of the Member States and has to be applied by their authorities on a case-by-case basis when assessing individual terms.

In addition to the general test in Article 3(1), Article 3(3) refers to an Annex which contains an indicative and non-exhaustive list of contract terms that may be regarded as unfair (133).

Furthermore, the UCTD contains transparency requirements for sellers or suppliers using not individually negotiated contract terms. These are expressed in the rules that contract terms have to be (drafted) in plain, intelligible language (Articles 4(2) and 5 UCTD) and in the requirement that consumers must be given the real opportunity to become acquainted with contract terms before the conclusion of the contract (Point 1(i) of the Annex and Recital 20).

Under the UCTD, transparency requirements have three functions:

— According to Article 5, second sentence, contract terms that are not drafted in plain, intelligible language have to be interpreted in favour of the consumer (134). — Under Article 4(2), the main subject matter or the adequacy of the price and remuneration set out in the contract are subject to an assessment under Article 3(1) only insofar as such terms are not in plain intelligible language (135). — Failure to meet the transparency requirements can be an element in the assessment of the unfairness of a given contract term (136) and can even indicate unfairness (137).

The Court has provided guidance both on the transparency requirements sellers or suppliers have to meet and on the criteria for the general unfairness test. More details on transparency can be found in Section 3.3, whereas Section 3.4 provides more information on the general unfairness test.

At the same time, the Court has repeatedly insisted (138) that, while its role is to give guidance on the interpretation of transparency and unfairness, it is for the national authorities, in particular the national courts, to assess the transparency and unfairness of specific contract terms in light of the specific circumstances of each case. The Court (139) has expressed this in the following way:

‘42 While it is true that the Court, in exercising the jurisdiction conferred on it by Article 234 EC ( 140 ) , in Océano Grupo Editorial and Salvat Editores, paragraph 22, interpreted the general criteria used by the Community legislature in order to define the concept of unfair terms, it cannot however rule on the application of those general criteria to a particular term, which must be considered in the light of the particular circumstances of the case in question (see Freiburger Kommunalbauten, paragraph 22). 43 It is for the national court, in the light of the foregoing, to assess whether a contractual term may be categorised as unfair within the meaning of Article 3(1) of the Directive.’

It is for the national court to determine whether, having regard to the particular circumstances of the case, a term meets the requirements of good faith, balance and transparency.

The same is true with regard to the examination of whether a contract terms falls within the concept of ‘main subject matter of the contract’ or whether its examination relates to ‘the adequacy of the price and remuneration’ within the meaning of Article 4(2) of the UCTD (141).

In light of the above, the Court (142) has generally refrained from providing a final assessment of the unfairness of a specific contract term, leaving this assessment to the referring national court. However, in certain cases, the Court has nevertheless provided fairly clear indications as to the unfairness of a given contract term (143).

National courts may develop more specific criteria for the assessment of the unfairness of contract terms, as long as they comply with the methodology established by the Court (144). Insofar as, in the interest of ensuring uniform interpretation of the law, national supreme courts adopt binding decisions concerning the modalities for implementing the UCTD, such decisions may not prevent individual courts from ensuring the full effect of that directive and from offering consumers an effective remedy, nor from requesting the Court to provide a preliminary ruling (145).

This Notice cannot cover the abundant case law on the assessment of particular types of contract terms in the Member States.

3.2. Contract terms relating to the main subject matter of the contract or the price and remuneration (Article 4(2) UCTD)

Contract terms relating to the main subject matter of the contract or the price and remuneration are within the scope of the UCTD (146). The particularity of such contract terms is that, under the minimum standard of Article 4(2) UCTD (147), the assessment of their unfairness under Article 3(1) is excluded (148) or limited (149) if they are drafted in plain, intelligible language or, in other words, if such terms meet the transparency requirements of the UCTD.

Since Article 4(2) of the UCTD lays down an exception to the application of the unfairness-test under Article 3(1), that provision must be strictly interpreted (150). Article 4(2) must also be interpreted uniformly throughout the European Union, taking into account the purpose of the UCTD (151). It is for national courts to determine in individual cases whether a given contract term (a) relates to the definition of the main subject matter of the contract or whether the examination of its unfairness would imply an assessment of the adequacy of the price and remuneration (152), and (b) whether such contract terms are drafted in plain intelligible language (153).

3.2.1. Contract terms relating to the definition of the main subject matter of the contract

The Court has stated that contract terms falling within the concept of the ‘main subject matter of the contract’, within the meaning of Article 4(2) of the UCTD, must be understood as being those that lay down the essential obligations of the contract and, as such, characterise it (154). By contrast, terms that are merely ancillary cannot fall within the concept of ‘main subject matter of the contract’ (155). In order to determine whether a term falls within the concept of the ‘main subject matter of the contract’ the nature, the general scheme and the stipulations of the contract and its legal and factual context have to be considered (156).

The Court (157) has expressed this as follows in relation to foreign currency loans:

‘37 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 between a seller or supplier and a consumer without being individually negotiated, 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” within the meaning of Article 4(2) of Directive 93/13. 38 […] the fact that a loan must be repaid in a certain currency relates, in principle, not to an ancillary repayment arrangement, but to the very nature of the debtor's obligation, thereby constituting an essential element of a loan agreement.’

In this regard, the Court (158) has stressed the difference between contract terms stipulating that the loan has to be repaid in the same foreign currency in which it was issued and contract terms under which a loan dominated in foreign currency had to be repaid in the national currency according to the selling rate of exchange applied by the bank (159). The Court considered (160) that a contractual term, incorporated into a loan agreement denominated in a foreign currency, according to which the loan must be repaid in the same foreign currency as that in which it was contracted, lays down an essential obligation characterising that contract. It thus relates to the ‘main subject matter of the contract’ within the meaning of Article 4(2). In that respect, it is irrelevant if the amount of the loan is made available to the consumer in local currency and not in the currency stipulated in the contract (161). By contrast, the Court considered a term defining the currency conversion mechanism to be an ancillary arrangement (162).

3.2.2. Contract terms relating to the price and remuneration

Terms relating to the price and remuneration, i.e. the financial obligations of the consumer, are, in principle, subject to the unfairness test under Article 3(1). However, under Article 4(2) (163), the unfairness test may include an assessment of the adequacy of the price and remuneration, or, as expressed in Recital 19, of ‘the quality/price ratio of the goods or services supplied’, only where the relevant terms are not transparent. By contrast, the unfairness of other aspects relating to the price or remuneration, such as the possibility of or the mechanism for unilateral price changes, is to be assessed even if the relevant terms are fully transparent.

The Court (164) has described the limitation in the assessment of such contract terms in the following way in relation to a loan contract:

‘Terms relating to the consideration due by the consumer to the lender or having an impact on the actual price to be paid to the latter by the consumer thus 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 is adequate as compared with the service provided in exchange by the lender.’

The Court (165) has further clarified that contract terms on price changes are fully subject to the unfairness test under Article 3(1):

‘[…] However, this exclusion cannot apply to a term relating to a mechanism for amending the prices of the services provided to the consumer.’

This is consistent with the fact that the Annex to the UCTD sets out conditions which terms on price changes normally have to meet in order not to be considered unfair (166).

Furthermore, the Court considers that the fact that a certain fee should have been included in the calculation of the total cost of a consumer loan under Directive 2008/48/EC does not indicate that the contract term setting out that fee is covered by Article 4(2) UCTD (167).

Finally, the Court has clarified that the adequacy of the price or remuneration is excluded from the unfairness-assessment only if the relevant terms lay down a real remuneration for a product or service provided (168). On this basis the Court (169) has ruled

‘[…] that the exclusion cannot apply to terms that […] merely determine the conversion rate of the foreign currency in which the loan agreement is denominated, in order to calculate the repayment instalments, without however any foreign exchange service being supplied by the lender in making that calculation and do not, therefore, constitute “remuneration”, the adequacy of which as consideration for a service supplied by the lender could be assessed to determine its unfairness pursuant to Article 4(2) of Directive 93/13.’

3.3. Transparency requirements

3.3.1. Transparency requirements under the UCTD

The transparency requirements of the UCTD apply to all types of (not individually negotiated (170)) contract terms that are within the scope of the UCTD (171).

The Court has interpreted the requirement in Articles 4(2) and 5 according to which contract terms have to be in plain, intelligible language, broadly. In this connection, the Court also has taken into account that, under point 1(e) of the Annex to the UCTD, the fact that consumers had no real opportunity of becoming acquainted with a contract term (172) is an indication of their unfairness.

Although the Court has not specifically addressed many of the factors mentioned below, in the Commission's view, the following factors will be relevant for assessing whether a given contract term is plain and intelligible within the meaning of the UCTD:

— whether the consumer had the real opportunity of becoming acquainted with a contract term before the conclusion of the contract; this includes the question of whether the consumer had access to and was given the opportunity to read the contract term(s); where a contract term refers to an annex or to another document, the consumer must have access also to those documents;

— the comprehensibility of the individual terms, in light of the clarity of their wording and the specificity of the terminology used, as well as, where relevant, in conjunction with other contract terms (173). In this connection, the position or perspective of consumers to whom the relevant terms are addressed has to be taken into account (174); this will also include the question of whether the consumers to whom the relevant terms are addressed are sufficiently familiar with the language in which the terms are drafted;

— the way in which contract terms are presented. This might include aspects such as: — the clarity of the visual presentation, including font size, — the fact of whether a contract is structured in a logical way and whether important stipulations are given the prominence they deserve and are not hidden amongst other provisions, — or whether terms are contained in a contract or context where they can reasonably be expected, including in conjunction with other related contract terms etc.

For example, contract terms whose impact can only be understood when reading them jointly, should not be presented in such a way that their joint impact is obscured, e.g. through placing them in different parts of the contract (175).

The Court has drawn from Articles 4(2) and 5, sometimes referring also to Recital 20 and the Annex to the UCTD, in particular Points 1(i) and (j), transparency standards, including information requirements, which go beyond the aspects referred to above. In that respect, the Court also uses the term ‘substantive transparency requirements’ (176). According to the Court, transparency requires more than contract terms being formally and grammatically intelligible and implies that consumers must be able to evaluate the economic consequences of a contract term or contract (177):

‘44 the requirement of transparency of contractual terms , as is clear from Article 4(2) of Directive 93/13, the Court has ruled that that requirement, also repeated in Article 5 thereof, cannot be reduced merely to their being formally and grammatically intelligible , but that, to the contrary, since the system of protection introduced by Directive 93/13 is based on the idea that the consumer is in a position of weakness vis-à-vis the seller or supplier, in particular as regards his level of knowledge, that requirement of plain and intelligible drafting of contractual terms and, therefore, the requirement of transparency laid down by the directive must be understood in a broad sense […] As regards, as is clear from Article 4(2) of Directive 93/13, the Court has ruled that that requirement, also repeated in Article 5 thereof,, but that, to the contrary, since the system of protection introduced by Directive 93/13 is based on the idea that the consumer is in a position of weakness vis-à-vis the seller or supplier, in particular as regards his level of knowledge, that requirement of plain and intelligible drafting of contractual terms and, therefore,[…] ( 178 ) .’ ‘45 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 […] Therefore, the requirement that a contractual term must be drafted in plain intelligible language is to be understood 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,, on the basis of clear, intelligible criteria,for him which derive from it […] ( 179 ) .’

This broad understanding of transparency entails that sellers and suppliers have to provide clear information to consumers on contract terms and their implications/consequences before the conclusion of the contract. The Court has repeatedly emphasised the importance of such information so that consumers can understand the extent of their rights and obligations under the contract before being bound by it. The Court (180) has stated that

‘[…] it is settled case-law that information, before concluding a contract, on the terms of the contract and the consequences of concluding it, is of fundamental importance for a consumer. It is on the basis of that information in particular that he decides whether he wishes to be bound by the terms previously drawn up by the seller or supplier […] (181).’

The Court has specified the requirements further, in particular with regard to contract terms which are essential for the extent of the obligations consumers accept to undertake, for instance with regard to contract terms relevant for establishing the payments which consumers have to make under a loan contract. Some of those rulings concern in particular mortgage credit contracts (denominated) in a foreign currency or indexed to a foreign currency. The Court has summarised the standard to be expected from sellers and suppliers as follows (182):

‘[…] it is for the national court, when it considers all the circumstances surrounding the conclusion of the contract, to ascertain whether, in the case concerned, all the information likely to have a bearing on the extent of his commitment have been communicated to the consumer, enabling him to estimate in particular the total cost of his loan. First, whether the terms are drafted in plain intelligible language enabling an average consumer, that is to say a reasonably well-informed and reasonably observant and circumspect consumer to estimate such a cost and, second, the fact related to the failure to mention in the loan agreement the information regarded as being essential with regard to the nature of the goods or services which are the subject matter of that contract play a decisive role in that assessment […] (183)’

The Court has applied these standards, for instance, to the functioning of the currency conversion mechanisms applying to mortgage loans indexed to a foreign currency (184) and to the interests and fees due, including their adaptation, under a consumer credit agreement (185). Furthermore, the Court has applied these transparency standards to the fact that, in relation to loans taken out in foreign currencies, consumers bear the risk of the depreciation of the currency in which they receive their income (186). Such depreciation may indeed affect their ability to pay back the loan. In such cases, the Court requires the seller or supplier to set out the possible variations in the exchange rate and the risks inherent in taking out a loan in a foreign currency and asks national courts to check whether the seller or supplier has communicated to the consumer all the relevant information enabling him/her to assess their financial obligations (187). It will also be relevant whether the seller or supplier gave appropriate prominence to such important information.

The Court has further stated that national courts, when assessing compliance with transparency requirements, have to check whether consumers received the required information (188) and have to take into account also the promotional material and information provided by the lender in the negotiation of the loan agreement (189).

Where the nature of the contract term requires sellers or suppliers to provide certain information or explanations prior to the conclusion of the contract, they will also have to bear the burden to prove that they provided consumers with the necessary information in order to be able to claim that the relevant terms are plain and intelligible (190).

While the rulings on transparency often relate to contract terms defining the main subject matter of the contract or the remuneration or contract terms that are closely related to those core aspects of the contract, the transparency requirements under Article 5 are not limited to the type of terms referred to in Article 4(2) UCTD. Transparency, including predictability, is an important aspect, also in relation to unilateral changes to the contract, in particular price changes, for instance, in loan contracts or in long-term supply contracts (191).

While all contract terms have to be in plain intelligible language, it is likely that the extent of the pre-contractual information obligations for sellers or suppliers stemming from the UCTD depends also on the significance of the contract term for the transaction and its economic impact.

The Court (192) has been requested to give guidance on the transparency criteria for the inclusion in a mortgage loan contract of an index for the applicable interest rate established by a national bank.

3.3.2. Transparency requirements stemming from other EU acts

Various EU acts regulate in a detailed fashion the pre-contractual information that traders have to provide to consumers in general or with regard to specific kinds of contracts. Examples include the Unfair Commercial Practices Directive (193), the Consumer Rights Directive (194), the Consumer Credit Directive (195), the Mortgage Credit Directive (196), the Package Travel Directive (197), the European Electronic Communications Code (198), Regulation (EC) No 1008/2008 on air services (199) and Directives 2009/72/EC (200) and 2009/73/EC (201) concerning common rules for the internal market in electricity natural gas. Such acts may also regulate the compulsory content of the relevant contracts (202) and contain rules on the admissibility of contract changes and their transparency (203).

The UCTD is without prejudice to such provisions and the consequences of the failure to comply with them as set out in such specific instruments (204).

Insofar as specific pre-contractual and contractual information requirements apply, they will also have to be taken into account for the transparency requirements under the UCTD, on a case-by-case basis, and in light of the purpose and scope of those instruments.

Thus, for instance, in relation to EU consumer credit legislation (205), the Court has stressed the importance of borrowers having to hand in all information which could have a bearing on the extent of their liability (206) and, thereby, of presenting the total cost of the credit in the form of a single mathematical formula (207). Therefore, the failure to indicate the annual percentage rate of charge (APR) as required under EU consumer credit rules (208) is ‘decisive evidence’ as to whether the term of the agreement relating to the total cost of the credit is drafted in plain intelligible language. This is true also where the necessary information on the calculation of the APR is not provided (209). The same must apply if the indicated APR is erroneous or misleading. If the information on the total cost of the loan required under EU consumer credit rules is not provided or if the indication is misleading, the relevant terms will, therefore, be deemed not to be plain and intelligible.

As regards mortgage credit contracts with consumers, all the rulings so far handed down by the Court related to contracts concluded before the entry into application of Directive 2014/17/EU (210) on credit agreements for consumers relating to residential property. For this reason, the Court has not yet ruled on the relationship between specific information requirements under Directive 2014/17/EU and the transparency requirements under the UCTD. Directive 2014/17/EU imposes high transparency standards by requiring clear and comprehensible general information about credit agreements to be made available to consumers through the European Standardized Information Sheet (ESIS) and the calculation of the Annual Percentage Rate of Charge (APR). In relation to foreign currency loans, Article 23(6) of Directive 2014/17/EU requires that creditors and intermediaries disclose to the consumer, in the ESIS and in the credit agreement, the arrangements available for him/her to limit exposure to the exchange rate risk during the lifetime of the credit. Where there is no provision in the credit agreement to limit the exchange rate risk to which the consumer is exposed to a fluctuation of less than 20 %, the ESIS shall include an illustrative example of the impact of a 20 % fluctuation in the exchange rate.

The Court has applied (211) transparency requirements stemming from Directive 2003/55/EC (212) concerning common rules for the internal market in natural gas and the UCTD in a complementary fashion.

The fact of whether a seller or supplier has complied with sector-specific requirements is an important element when assessing compliance with the transparency requirements under the UCTD. However, given the parallel applicability of the UCTD with sectorial legislation, compliance with such instruments does not automatically indicate compliance with all transparency requirements under the UCTD. Furthermore, the fact that a specific act does not contain specific information requirements does not exclude information obligations under the UCTD on contract terms that sellers or suppliers add on their own initiative.

3.4. Unfairness assessment under Articles 3 and 4(1) UCTD

3.4.1. The framework for the assessment under Articles 3(1) and 4(1)

Contract terms are to be regarded as unfair under Article 3(1) if,

— contrary to the requirements of good faith,

— they cause a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.

Although the Court has so far not been asked to explain the relationship between those two criteria, the wording of Article 3(1) and of Recital 16 suggest that the absence of good faith is linked to the significant imbalance in the rights and obligations created by a contract term. Recital 16 refers to the bargaining power of the parties and explains that the requirement of ‘good faith’ relates to the question of whether a seller or supplier deals fairly and equitably with a consumer and takes his legitimate interests into account. In this respect, the Court (213) finds it particularly relevant to consider whether the seller or supplier could reasonably assume that the consumer would have agreed to the term in individual negotiations:

‘With regard to the question of the circumstances in which such an imbalance arises “contrary to the requirement of good faith”, it should be stated that, having regard to the 16th recital of Directive 93/13, the national court must assess for those purposes whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to such a term in individual contract negotiations […] (214).’

This confirms that, for the purposes of Article 3(1), the concept of good faith is an objective concept linked to the question of whether, in light of its content, the contract term in question is compatible with fair and equitable market practices that take the consumer's legitimate interests sufficiently into account. It is, thereby, closely linked (215) to the (im)balance in the rights and obligations of the parties.

The assessment of a significant imbalance requires an examination as to how a contract term influences the rights and obligations of the parties. Insofar as there are supplementary rules from which the contract term deviates, those will be the primary yardstick for assessing a significant imbalance in the rights and obligations of the parties (216). Where there are no relevant statutory provisions, a significant imbalance will have to be assessed in light of other points of reference, such as fair and equitable market practices or a comparison of the rights and obligations of the parties under a particular term, taking into account the nature of the contract and other related contract terms.

Pursuant to Article 4(1) (217), the unfairness of a contract term has to be assessed taking into account

— the nature of the goods or services to which the contract relates,

— all the other terms of the contract or of another contract on which it is dependent, and

— all the circumstances attending the conclusion of the contract.

The Member States may deviate from this general unfairness-test only for the benefit of consumers, i.e. only if the national transposition makes it easier to conclude that a contract term is unfair (218).

The indicative list of contract terms in the Annex (219) to the UCTD is an essential element on which the assessment as to whether a given term is unfair under Article 3(1) may be based (220). By contrast, where a given contract term is covered by a national ‘black list’, there is no need to carry out a case-by-case assessment based on the criteria of Article 3(1). A similar logic will apply where a Member State has adopted a list of contract terms that are presumed to be unfair.

3.4.2. The relevance of statutory provisions and the significance of the imbalance

When assessing whether a contract term ‘causes a significant imbalance in the parties’ rights and obligations, to the detriment of the consumer', national courts have to carry out, in the first place, a comparison of the relevant contract term with any rules of national law which would apply in the absence of the contract term (221), i.e. supplementary rules. Such regulatory models can be found in particular in national contract law, for instance in the rules setting out the consequences of a party's failure to fulfil certain contractual obligations. This may include, the conditions under which penalties, such as default interest, may be requested or provisions on the statutory interest rate (222).

Such comparative analysis will enable the national court to evaluate whether and to what extent the contract term places the consumer in a legal situation less favourable than under the otherwise applicable contract law. The contract term may make the legal situation less favourable for consumers for instance where it restricts the rights that consumers would otherwise enjoy, or may add a constraint on their exercise. It may also impose an additional obligation on the consumer not envisaged by the relevant national rules (223).

The imbalance in the rights and obligations to the detriment of the consumer is significant if there is a ‘sufficiently serious impairment of the legal situation in which the consumer […] is placed by reason of the relevant national provisions (224)’. This does not necessarily require that the term must have a significant economic impact with regard to the value of the transaction (225). Therefore, for instance, a contract term which imposes on the consumer payment of a tax where under the applicable national legislation this tax should be borne by the seller or supplier can create a significant imbalance in the parties' rights and obligations, regardless of the amounts which the consumer eventually will have to pay under such contract term (226).

The effect of a contract term will also depend on its consequences under the national legal system applicable to the contract, which means that other legal provisions, including rules of procedure may have to be taken into account as well (227). In this context, the difficulty for the consumer to prevent the continued use of the type of contract term in question may also be relevant (228).

The Court has described the assessment of a significant imbalance in the rights and obligations of the parties as follows (229):

‘21 In that regard, the Court has held that in order to ascertain whether a term causes a “significant imbalance” in the parties' rights and obligations under a contract to the detriment of the consumer, particular account must be taken of which rules of national law would apply in the absence of an agreement by the parties in that regard. Such a comparative analysis will enable the national court to evaluate whether and, as the case may be, to what extent, the contract places the consumer in a legal situation less favourable than that provided for by the national law in force […] ( 230 ) 22 It thus appears that the question whether that significant imbalance exists cannot be limited to a quantitative economic evaluation based on a comparison between the total value of the transaction which is the subject of the contract and the costs charged to the consumer under that clause. 23 On the contrary, a significant imbalance can result solely from a sufficiently serious impairment of the legal situation in which the consumer, as a party to the contract in question, is placed by reason of the relevant national provisions, whether this be in the form of a restriction of the rights which, in accordance with those provisions, he enjoys under the contract, or a constraint on the exercise of those rights, or the imposition on him of an additional obligation not envisaged by the national rules. 24 In that regard, the Court has confirmed that, pursuant to Article 4(1) of the Directive, the unfairness of a contractual term is to be assessed taking into account the nature of the goods or services for which the contract in question was concluded and by referring to all the circumstances attending its conclusion, as well as all the other clauses in the contract […] ( 231 ) . In that respect, it follows that the consequences of the term under the law applicable to the contract must also be taken into account, requiring consideration to be given to the national legal system […] ( 232 ) .’

Where contractual arrangements infringe a statutory provision of national or EU contract law from which the parties may not deviate by way of contract, such contractual stipulations will generally be invalid already directly by virtue of such provisions. Not individually negotiated contract terms deviating from such provisions are likely to violate also Article 3(1) UCTD.

3.4.3. Sanctions or consequences of the consumer's failure to comply with contractual obligations

In order not to cause a significant imbalance to the detriment of the consumer, sanctions or consequences attached to the consumer's failure to comply with contractual obligations have to be justified in light of the importance of the consumer's obligation and the seriousness of the failure to comply with it (233). In other words, they have to be proportionate (234). This assessment has to include the question of whether the contract term derogates from statutory provisions which would apply in the absence of a contract term on that question and, where the term leads to a particular procedure, the procedural means available to the consumer (235).

The Court (236) has presented the relevant criteria with regard to so-called ‘acceleration’ or early repayment clauses in mortgage credit agreements which allow the creditor to start mortgage enforcement proceedings in the following way:

‘[…] Article 3(1) and (3) of Directive 93/13 and Points 1(e) and (g) and 2(a) of the annex thereto must be interpreted as meaning that, in order to assess the unfairness of a contractual term accelerating the repayment of a mortgage, […], the following are of decisive importance: — whether the right of the seller or supplier to cancel the contract unilaterally is conditional upon the non-compliance by the consumer with an obligation which is of essential importance in the context of the contractual relationship in question, — whether that right is provided for in cases in which such non-compliance is sufficiently serious in the light of the contractual term and amount of the loan, — whether that right derogates from the rules applicable in the absence of agreement between the parties, so as to make it more difficult for the consumer, given the procedural means at his disposal, to take legal action and exercise rights of the defence, and — whether national law provides for adequate and effective means enabling the consumer subject to such a contractual term to remedy the effects of the unilateral cancellation of the loan agreement. It is for the referring court to carry out that assessment in relation to all the circumstances of the particular case before it.’

With regard to default interests, the Court (237) has explained this test as follows:

‘[…], regarding the term concerning the fixing of default interest, it should be recalled that, in the light of paragraph 1(e) of the annex to the Directive, read in conjunction with Articles 3(1) and 4(1) of the directive, the national court must assess in particular, […], first, the rules of national law which would apply to the relationship between the parties, in the event of no agreement having been reached in the contract in question or in other consumer contracts of that type and, second, the rate of default interest laid down, compared with the statutory interest rate, in order to determine whether it is appropriate for securing the attainment of the objectives pursued by it in the Member State concerned and does not go beyond what is necessary to achieve them.’

In relation to the proportionality (238) and, thereby, unfairness of sanctions set out in contract terms, the Court has furthermore specified (239) that it is necessary to evaluate the cumulative effect of all the penalty clauses in the contract in question, regardless of whether the creditor actually insists that they all be satisfied in full.

Even if only the cumulative effect of the sanctions makes them disproportionate, all relevant contract terms have to be considered as unfair (240), regardless of whether they have been applied (241).

3.4.4. Possible unfairness of the price or remuneration

As mentioned above (242), under the minimum standard of the UCTD, the adequacy of the price or remuneration is to be assessed under Article 3(1) only if the contract terms determining the applicable price or remuneration are not drafted in plain intelligible language. For their assessment under Article 3(1), insofar as the relevant national law does not contain supplementary rules, for instance, market practices prevailing at the time when the contract was concluded, will have to be taken into account when comparing the consideration to be paid by the consumer and the value of a particular good or service (243). For instance, regarding the possible unfairness of an ordinary interest rate laid down in a loan agreement, the Court has stated (244) that

‘where the national court considers that a contractual term relating to the calculation of ordinary interest, […], 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;’

Taking into account also the ‘requirement of good faith’ in Article 3(1), the Commission considers that only fair and equitable market practices can be considered for this assessment.

3.4.5. Circumstances at the time of the conclusion of the contract

According to Article 4(1), the unfairness of a contract term, i.e. the significant imbalance against the requirements of good faith, has to be assessed taking into account the nature of the contract, other contract terms and other related contracts, as well as ‘all the circumstances attending the conclusion of the contract’. The latter aspect does not include circumstances manifesting themselves during the performance of the contract. However, the circumstances attending the conclusion of the contract must include all the circumstances which were known, or could reasonably have been known, to the seller or supplier and which could affect the future performance of the contract (245).

One example for such circumstances is the risk of variations in the exchange rate inherent to contracting a loan in a foreign currency, which may materialise only during the performance of the contract. In such cases it will be for national courts to assess, in light of the knowledge and expertise of the lender, whether the consumer's exposure to the exchange rate risk is in line with the requirements of good faith, i.e. constitutes a fair and equitable practice and, gives rise to a significant imbalance within the meaning of Article 3(1) (246).

Where contract terms are amended or replaced, it makes sense to take into account the circumstances prevailing at the time of the amendment or replacement when assessing the new contact terms (247).

The significant imbalance has to be considered with regard to the content of a contract term and regardless of how it has been applied in practice (248). For instance, where a contract term allows a seller or supplier to demand immediate full repayment of the loan if the consumer fails to pay a certain number of monthly instalments, the unfairness has to be assessed based on the number of unpaid monthly instalments required in the contract. It cannot be based on the number of monthly instalments which the consumer had actually failed to pay before the seller or supplier invoked the relevant term (249).

3.4.6. Relevance of lack of transparency for the unfairness of contract terms

Lack of transparency does not automatically lead to the unfairness of a given contract term under Article 3(1) of the UCTD (250). This means that, after establishing that a contract term covered by Article 4(2) (251)‘is not in plain intelligible language’, its unfairness normally still has to be assessed under the criteria of Article 3(1) (252). Conversely, lack of transparency is not an indispensable element in the assessment of unfairness under Article 3(1) (253) so that also contract terms that are perfectly transparent can be unfair under Article 3(1) in light of their unbalanced content (254).

However, insofar as contract terms are not plain and intelligible, i.e. where sellers or suppliers do not comply with transparency requirements, this circumstance can contribute to finding a contract term unfair under Article 3(1) or can even indicate unfairness. Point 1(i) of the Annex, in general, and Point 1(j) of the Annex, with particular regard to unilateral changes to contract terms, confirm that lack of transparency may be decisive for the unfairness of contract terms.

Several judgments refer to lack of transparency as a(n) (important) element in the assessment of the unfairness at least of particular types of contract terms (255) or refer to the lack of transparency and unfairness of contract terms in one breath (256).

The Court has stressed the significance of transparency for the fairness of contract terms, for instance, with regard to clauses which allow the seller or supplier to change the rates to be paid by consumers in long-term contracts (257), terms which determine the consumer's core obligations in loan agreements (258) or with regard to choice-of-law clauses (259).

The Court has indicated explicitly that, in relation to a choice-of-law clause that fails to acknowledge the fact that, under the Rome I Regulation consumers can always rely on the more advantageous rules of their Member State of residence (260), this omission of information or the misleading character of the term can imply its unfairness. The Court (261), after recalling the criterion of a significant imbalance in the rights and obligations of the parties, stated that

‘[i]n particular, the unfairness of such a term may result from a formulation that does not comply with the requirement of being drafted in plain and intelligible language set out in Article 5 of Directive 93/13. […]’

One may thus conclude that, depending on the content of the contract term at issue and in light of the impact of the lack of transparency, the possible unfairness of a contract term can be closely related to its lack of transparency or the lack of transparency of a contract term may even indicate its unfairness. This may be the case, for instance, where consumers cannot understand the consequences of a term or are misled.

Indeed, where consumers are put in a disadvantageous position based on contract terms which are unclear, hidden or misleading, or where explanations necessary to understand their implications are not provided, it is unlikely that the seller or supplier was dealing fairly and equitably with the consumer and took their legitimate interests into account.

3.4.7. Role of the Annex referred to in Article 3(3) UCTD

As stated in Article 3(3) UCTD, the list in the Annex to the UCTD contains ‘only’ an indicative and non-exhaustive list of the terms which may be regarded as unfair. The Court has stressed this on different occasions (262). The non-exhaustive character of the Annex and the minimum harmonisation principle under Article 8 UCTD mean that national law may extend the list or use formulations leading to stricter standards (263).

Since the list is only indicative, the terms contained therein should not automatically be considered unfair. This means that their unfairness still has to be assessed in light of the general criteria defined in Articles 3(1) and 4 UCTD (264). The Court has specified that terms listed in the Annex need not necessarily be considered unfair and, conversely, terms not appearing in the list may none the less be regarded as unfair (265). Nevertheless, the Annex is an important element in the assessment of the unfairness of contract terms. In the words of the Court,

‘if the content of the annex does not suffice in itself to establish automatically the unfair nature of a contested term, it is nevertheless an essential element on which the competent court may base its assessment as to the unfair nature of that term (266).’

Where a Member State (267) has adopted a ‘black list’ of terms that are always considered to be unfair (268), contract terms that are contained in such lists will not have to be assessed under the national provisions transposing Article 3(1).

Otherwise, national authorities have to examine the term under Article 3(1), using the Annex as indication for what will normally constitute a significant imbalance in the rights and obligations of the parties contrary to the requirements of good faith.

In its case law, the Court has referred to the following points of the Annex:

— Point 1(e) (269): C-76/10