Minimum contracts - are they actually enforceable?

Khanis

I'm not entirely happy with some services I subscribe to but they all have these "Minimum Contract" clauses with penalties for terminating the service before 12 or 18 months or whatever the period outstanding is.

However, I checked out EU Directive 93/13 which is basically the EU Consumer directive on unfair contracts and there I found this:

Article 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.

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.

3. The Annex shall contain an indicative and non-exhaustive list of the terms which may be regarded as unfair.

and in the annex I found:

ANNEX

TERMS REFERRED TO IN ARTICLE 3 (3) 1. Terms which have the object or effect of:

...

(c) making an agreement binding on the consumer whereas provision of services by the seller or supplier is subject to a condition whose realization depends on his own will alone;

...

(e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation;

(f) authorizing the seller or supplier to dissolve the contract on a discretionary basis where the same facility is not granted to the consumer, or permitting the seller or supplier to retain the sums paid for services not yet supplied by him where it is the seller or supplier himself who dissolves the contract;

(g) enabling the seller or supplier to terminate a contract of indeterminate duration without reasonable notice except where there are serious grounds for doing so;

I'm not a lawyer, but (f) seems pretty cut and dried to me. If they can pull the plug on you (and in all the contracts I read they can) with no penalty, then you can do exactly the same to them.

Am I missing anything here?

Khanis

You can read the Directive in it's entirety here:

RangeR

Interesting...

Cabaal

Surely if this was the case no mobile phone, telephone, Broadband, cable, satalite, electricity or service provider of anykind in any EU country to date would have a contract.

Contracts generally exisit for a good reason, they allow a company to recoup the costs over a extended period.

For example with ADSL it costs a company money to provision a ADSL service but yet they do not charge a customer a install fee, however putting them in a contract allows the company to make back this cost over a long time.

So in the example above if you didn't have a contract expect to pay a 40e install fee,

In the case of mobile phones they allow a similar situation except that the phone can be sold at a very low price

Khanis

But by the same token, if they were to decide to terminate a particular plan or contract I might be forced to waste my time looking for another service or plan and then spend more time reconfiguring my equipment setup etc.. and they wouldn't have to re-imburse me for my efforts.

I think the key issue here is that you can't enforce contracts where a clear inequity exists between both parties. I do agree that some form of compensation should be paid where one party covers the cost of installation, for example. However, this outlay and the associated costs should be made clear and agreed upon in the contract and not unilaterally decided by the supplier.

jor el

That is interesting. Not sure if it's a good or bad thing though. Sure, it would be nice not to be stuck in a contract with a service provider that isn't providing, but the providers that do a good job could end up having to charge more in order to cover themselves for potential losses due to people exiting the service early (before their initial investment is recouped).

Might be worth asking the National Consumers Association what they think it all means, and what the implications to the consumer (and supplier) are.

dotsman

Some contracts get around this by stating that the installation/sign-up fee is waived if you use the service for a set amount of time (ie 12-18 months). Effectively, it's the same thing, but instead of forcing you to complete the contract or fining you for breaking it (which would conflict with the directive), you get stung having to pay the installation/sign-up fee (which was notionally applied at the start of the contract but waived for 12-18 months).

Slice

My dealings with people who dispute standard contracts such as these is that if you dispute it long and hard enough you can usually get away with it. Every company's complaints procedure can get exhausted and once that happens they will often do whatever they can to see the back of you, you just have to know what you're doing.

ShooterSF

dotsman wrote: »

Some contracts get around this by stating that the installation/sign-up fee is waived if you use the service for a set amount of time (ie 12-18 months). Effectively, it's the same thing, but instead of forcing you to complete the contract or fining you for breaking it (which would conflict with the directive), you get stung having to pay the installation/sign-up fee (which was notionally applied at the start of the contract but waived for 12-18 months).

That seems fairest. But what's to stop a company setting a ridiculous installation fee?