Examination Timing: 00H01M23S
Simon, a homeowner, obtained planning permission for an extension to his home. He obtained quotations from a number of local building companies and decided to accept the slightly higher quote of £30,000 from a large commercial and residential contractor. The contractor issued Simon with a detailed contract that ran to many pages. The contractor began preliminary works at the property; however, Simon was made redundant. He decided he could not afford to proceed with the building works and sought to terminate the building contract pursuant to a "cooling off" clause. The contractor now seeks payment of the sum of £61,000 pursuant to a clause in the contract that asserts the right of the contractor to claim "compensation" in the event of the early termination of the contract in addition to the cost of any works actually undertaken.
Which of the following statements best reflects the position?
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Your selected option: D
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The clause is unfair pursuant to the provisions of the Consumer Rights Act 2015. The Consumer Rights Act 2015 extends the existing law on unfair terms in relation to consumer contracts. Section 62(1) of the 2015 Act provides that an unfair term of a consumer contract is not binding on the consumer. A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer. Part 1 of Schedule 2 of the 2015 Act contains a list of consumer contract terms that may be regarded as unfair. Paragraph 5 refers to “a term which has the object or effect of requiring that, where the consumer decides not to conclude or perform the contract, the consumer must pay the trader a disproportionately high sum in compensation or for services which have not been supplied." Taking into account the nature of the contract and by reference to all the circumstances, it is reasonable to conclude that the clause in the construction contract will be deemed unfair for the purposes of the 2015 Act and Simon will not be bound by it. It should be noted that aside from the unfair clause the contract continues, so far as practicable, to have effect in every other respect and thus entitle the contractor to obtain payment on the basis of a quantum meruit for any works actually undertaken.
Key Point: Under the Consumer Rights Act 2015, terms causing a significant imbalance in consumer contracts are deemed unfair and unenforceable. The contractor may still claim for work already done under a quantum meruit basis.
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