Public and Private Enforcement in the Field of Unfair Contract Terms

Abstract

In 1993, the European legislator enacted the European Directive on Unfair Contract Terms in order to protect consumers from terms creating a significant imbalance between the rights and obligations of the parties to the detriment of the consumer. This article deals with (1) the non-binding nature of an unfair contract term, (2) the possibility to prevent the further use of unfair contract terms by applying for an injunction, and (3) the possibility to act in a repressive manner by imposing administrative and/or penal sanctions on sellers and suppliers using unfair contract terms. This article will show that national courts are required by the European Court of Justice (ECJ) to invoke the unfairness of a contract term of their own motion and must draw all the consequences of that finding in order to ensure that consumers are not bound by an unfair term. Although the jurisprudence of the ECJ, mainly based on the principles of equivalence and effectiveness, reinforces consumer protection, its impact in reality may not be exaggerated. As long as the case does not lead to court proceedings, the obligation, on behalf of the national courts, to invoke of their own motion the unfairness of a contractual term is not really helpful. Since (1) consumers are in most cases not aware of (the possibility to invoke) rules on unfair contract terms and (2) consumer protection associations often have only limited financial means to apply for injunctions, private enforcement mechanisms can in themselves not realize consumer protection from unfair contract terms. Therefore, public enforcement mechanisms should also be available in order to protect consumers.