UNFAIR TERMS IN BUSINESS CONTRACTS

Section "Law": Theory and history of Economic Law and Process

Abstract

On February 6, 2018, the Law of Ukraine No. 2275-VIII "On the Companies with Limited and Complementary Liability" was adopted. Quite unexpectedly, the legislator chose to decide therein on a totally unrelated matter, repealing Art. 207 of the Economic Code of Ukraine. Section 2 of the said article had provided some minimal possibilities of challenging unfair terms in business contracts. For the present moment, businesses in Ukraine, first and foremost small- and medium-sized ones, actually enjoy no protection against onerous or discriminatory contract terms, not being covered by consumer protection legislation.
We heavily criticize the situation und undertake the analysis of the respective provisions of the UNIDROIT Principles on International Commercial Contracts (UNIDROIT, fr. Institut international pour l’unification du droit privé), the Principles of European Contract Law and the national legislation of Australia, New Zealand, United States of America, Great Britain, France, Germany and Sweden. We identify three approaches to treating unfair terms in business contracts: 1) businesses are explicitly treated as consumers for the purposes of legislation; 2) there are discrete controls of unfair terms in business contracts; and 3) pro-active preventive measures exist to bar the use and dissemination of unfair practices.
The results of the research highlight the global recognition of the issue, that therefore needs to be addressed promptly by the Ukrainian legislator.
A protection should be granted against any contractual term which has not been individually negotiated if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract. I adhere to the unified regime of dealing with unfair terms in business contracts as well as consumer contracts. The uniform "fair and reasonable" test should apply in both instances though naturally they may apply somewhat differently in a business context, the courts exercising more restrictive and rigorous approach. The courts are, inter alia, to take into account the size of the business, and whether it makes transactions of the kind in question regularly or only occasionally, in assessing the fairness of the terms complained of.

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