Guidance

Writing a fair contract for customers

How to make sure your contract terms and notices are fair, and comply with the law.

• From: Competition and Markets Authority
• Published: 23 March 2016
• Last updated: 22 July 2026 — See all updates

If your business deals with customers, you must make sure that:

• the terms in any contract you have with them
• any notice you use with them

are both fair and transparent.

It’s illegal to use unfair contract terms or notices. You cannot rely on such terms or notices – and you may face penalties if enforcers such as the Competition and Markets Authority (CMA) or Trading Standards take action to stop you from using them.

This page explains what could make a contract term or notice unfair, to help you review your own. It also sets out how to ensure your terms are transparent.

This page summarises our guidance on unfair contract terms, which explains the law (Part 2 of the Consumer Rights Act 2015) and gives examples of terms that are unlikely to be fair.

If you are in any doubt about what you need to do, read the full guidance and consider finding independent legal advice.

What this applies to

These rules apply to terms in contracts between ‘traders’ and ‘consumers’, and consumer notices. They do not apply to employment contracts.

A ‘trader’ is anyone who is acting for the purpose of their trade, business, craft or profession. For example, this could be a sole trader, a legally defined company, a government department or local authority, a charity shop, or an agent or subcontractor acting on a trader’s behalf.

A ‘consumer’ is someone who is mostly acting for a purpose not relating to their trade, business, craft or profession – for example, someone buying groceries online for their family. A person can be a consumer or a trader in different situations: for example, a sole trader might agree to some contracts for a business purpose (such as ordering office supplies), and others as a consumer (such as occasionally selling unwanted personal items online).

On this page we use ‘you’ or ‘business’ to mean any trader, and ‘customer’ to mean consumer.

If you use the same contract when dealing both with individual customers and with other businesses, then you still must make sure that the terms comply with consumer law and are fair and transparent.

What we mean by a ‘term’ or ‘notice’

The law covers both contract terms and notices to customers.

A ‘term’ is any wording in a contract that describes your rights or obligations, or those of a customer, when you enter into an agreement with them. It does not need to be written down: you could agree it verbally.

Terms include those which are:

• stated explicitly, for example details about delivery of goods you are selling to the customer
• in standard contracts (‘small print’ terms)
• negotiated individually with the customer

A ‘notice’ may not be part of your contract, but it relates to the same kind of issues that you would deal with in a contract, including:

• the rights or obligations between you and the customer
• excluding or restricting your liability to the customer

This could be any kind of announcement or other communication, written or not, that the customer is likely to see or hear. For example:

• a notice on a till which sets out a customer’s refund rights
• a sign in a car park which sets out how customers must pay for parking
• a list of rules inside a gym, which sets out how customers are expected to behave
• a banner on the ‘sale’ page of a website setting out a promotion for a discounted item which carries certain returns conditions
• software and other digital products sold to consumers subject to End User Licence Agreements

On this page, we sometimes use ‘wording’ to mean either a contract term or a notice.

For more information about definitions and what the rules apply to, go to Chapter 2 (Key concepts) in the full guidance.

The flowchart on page 5 of the full guidance also gives a simple overview of unfair contract terms law.

What makes a term or notice unfair

The law applies a fairness test, which checks whether the term or notice:

• tilts the rights and responsibilities between you and the customer too much in your favour, and
• goes against the requirement for you to deal with customers in good faith

The test is applied by looking at the wording and how it could be used. It considers:

• what is being sold
• how a term relates to other terms in the contract, or another related contract
• all the circumstances at the time the term was agreed

What you should do to make a term or notice fair

Your terms and notices are more likely to pass the fairness test if you respect the customer’s legitimate interests in what rights and obligations you include and how you draft and present them.

Each term or notice will be assessed in its own context, but it is more likely to be fair if it:

• does not tilt the balance of rights or powers too much in your favour, or put the customer at an unfair disadvantage
• does not treat the customer less favourably than they would otherwise be treated under the law
• does not use ‘small print’ that might surprise consumers or undercut something else you’ve said – like in an advert or when talking to your customer
• does not exploit the customer’s circumstances, biases or limitations to your advantage, when setting out both sides’ rights and obligations
• clearly tells the customer about their rights and obligations so they are fully informed, especially if the term is likely to have a significant impact on them

For more information about unfair terms, go to Chapter 4 (Determining if terms and notices are fair and transparent) in the full guidance.

Some wording cannot be checked to see if it’s fair

Most wording can be checked to see if it’s fair, with a few exceptions.

Firstly, wording cannot be checked to see if it’s fair if you’re legally required to include it.

Secondly, the fairness test does not apply to what you are selling or the price you are charging for it. In the law this is referred to as the main subject matter of the contract and the price. This is the essential bargain set out in the contract and it cannot be checked to see if it’s fair as long as these terms are transparent and prominent. This exemption does not apply to notices.

For example, the main subject matter could include terms which describe the goods to be sold. It does not include terms describing how the goods are to be delivered. Elements of the price other than what you charge for what you sell, such as timing, method, or variation of payment are not part of the essential bargain, so they can be checked for fairness.

If you think a term of your contract may be exempt from the fairness test, you must ensure it is transparent and prominent. You must also check that the term is not on the list of terms in Schedule 2 to the Act. This is a non-exhaustive list of potentially unfair terms. If your terms are or work like those on this list, then they can be checked to see if they’re fair.

This list includes terms that:

• bind the customer to hidden terms
• limit or exclude your responsibility to the customer when things go wrong
• allow you to make changes to the contract after it has been agreed (raising the price, for example)
• allow you to keep prepayments or impose disproportionate fees if your customer cancels or breaches the contract
• allow you to cancel the contract whenever you like or without reasonable notice
• tie your customer into the contract for longer than they would expect
• allow you to decide disputes between you and the customer, or make it hard for them to use their legal rights

For more information about exemptions from the fairness test, go to Chapter 5 (Exemptions from fairness assessment under the Act).

For more information about potentially unfair terms that cannot be exempt from the fairness test, go to Chapter 6 (Examples of potentially unfair terms and notices).

Some wording is not allowed in any circumstances

Other types of term are prohibited automatically under the law. This means they are never legally binding and can be challenged without needing to prove they are unfair.

Never use wording that excludes or limits your responsibility for the death or injury of any customer.

Do not use wording that takes away or reduces your customer’s legal rights (such as the right to goods or digital content matching the description given or providing services of reasonable standard), or wording that denies them what their rights would otherwise allow (like getting a replacement or a price reduction).

For more information about prohibited terms, go to Chapter 3 (Prohibited terms and notices) in the full guidance.

Be open and clear

Make sure that your written terms or notices are transparent. If they aren’t, enforcers such as the CMA or Trading Standards can stop you from using them, even if they are not unfair, and you risk paying a penalty.

The law requires that written terms and notices are transparent. This means it must be easy for a customer to read them and understand what they’re signing up to.

Put yourself in your average customer’s shoes. Are they likely to understand what terms and notices mean for them, so they can make an informed choice about whether to agree to them?

If a term could have a significant effect on the customer, you must make it prominent by bringing it up front or otherwise highlighting it to your customer. You must share important information with the customer early – for example use formats such as summaries and FAQs to help them understand it. Make sure terms are easy for customers to find and refer to, no matter what device they use.

Legibility is an essential part of transparency. Organise your contract or notice logically. Ensure the font, size, colour, spacing and background of your contract or notice is reader friendly. Use short sentences and clear subheadings, and do not clutter the contract with too many cross-references or definitions.

Do not assume that the customer understands legal jargon or technical language. Instead, use everyday words and explain how terms work alone and together with other terms.

Avoid ambiguity: your wording should not be vague and open to many different interpretations. Explain complex terms or concepts clearly. Remember that your customer is unlikely to get legal advice before entering into the contract.

For more information about how to ensure your terms are transparent, go to Chapter 4 (Determining if terms and notices are fair and transparent) in the full guidance.

Types of term that could be unfair

Be careful not to use terms which:

• the law singles out as particularly likely to be unfair
• could be unfair even if they are not listed in the law

Such terms include, but are not limited to, the following types.

Binding customers to hidden terms

Customers should always have a real opportunity to read (or hear, if the contract is made over the phone) and understand a contract before being bound to it. Any wording that tries to force the customer to agree to hidden terms is unlikely to be fair – especially if the hidden term is surprising or could be burdensome for the customer.

You do not need to rely on a single contract document. Trying to communicate everything in a long, complicated set of terms and conditions is more likely to mean that the customer misses important terms. Bring important terms to the customer’s attention as soon as possible, including in promotional material.

Don’t put pressure on your customer to sign up without giving them enough time to read and understand the contractual documents. Ensure the customer has a copy of the contract they can keep. Consider giving your customers a cooling-off period if one isn’t legally required already to give them a chance to change their mind.

Example

The following wording is unlikely to be fair:

I/we the undersigned hereby agree to enter this agreement upon the terms and conditions set out on the company’s website which I/we acknowledge have been drawn to my/our attention and which I/we have read.

because it expects the customer to declare that they have read, understood and agreed to terms on the business’ website, whether they have or not.

The wording below, for example, is more likely to be fair because it encourages the customer to read and understand the terms and conditions before signing them.

This document comprises the terms and conditions that will apply to this contract. It is important that you read and understand the terms and conditions that will apply to this contract before signing. If there is any term that you do not understand or do not wish to agree to, then please discuss it with the sales representative before signing.

For more information about this type of term, go to page 60 in the full guidance.

Limiting or excluding your responsibility when things go wrong

A term is unlikely to be fair if it lets you off putting things right for the customer (for example by fixing defective products or compensating them) when something goes wrong, and you are at fault. This is sometimes called a ‘disclaimer’ or ‘exemption clause’.

It is unlikely to be fair to use disclaimers that are too broad (including unintentionally so) or unexplained legal jargon about their extent (such as ‘liability is excluded so far as the law permits’). Avoiding liability by forcing customers to say you have met their expectations or refusing to accept responsibility for anything done by your agents or subcontractors is also unlikely to be fair.

Do not use terms that exclude your responsibility:

• for the death or personal injury of your customer
• for faulty or misdescribed goods or digital content
• for poor service
• for failing to perform your contractual obligations
• for your delay
• for anything outside the written contract
• by imposing inappropriate time limits on customers who wish to make a claim against you
• by preventing customers from withholding payments if they have an arguable claim against you
• by only agreeing to honour the customer’s rights or your duties if the customer meets certain formalities
• by giving guarantee or warranty rights that are narrower or weaker than the rights customers normally have under the law
• by limiting your responsibility, even if you do not exclude it altogether
• by depriving customers of protection they normally have under the law

Your terms are more likely to be fair if both:

• your responsibility for loss or harm is excluded or limited only where you are not at fault; and
• you do not make it hard for the customer to get what they are entitled to

Example

The following wording is unlikely to be fair:

Dates specified for the commencement and completion of the work are estimates only and time shall not be of the essence of the contract.

because it gives you excessive margins of delay after an agreed date and excludes all your liability, even where you are at fault for the delay.

The wording below, for example, is more likely to be fair because it restricts delays to a limited period after the agreed date, and the customer can cancel without penalty where there is a delay.

If we do not start or complete the work within 5 days of any date included in our estimate or quote you may nominate a date on which you want us to start the work or by which you want us to complete the work. If we have not started or completed the work by the date you have nominated, you may cancel the agreement and receive a full refund.

For more information about this type of term, go to page 63 in the full guidance.

Changing the terms of a contract

A contract might include terms that allow you to change parts of it after it has been agreed with the customer. This is known as a ‘variation term’. For example, it might allow you to:

• change any of the contract terms
• change the description or nature of the product from what was previously agreed
• change the price of the product
• hand over your responsibilities to a third party

This type of term is unlikely to be fair if it gives you a ‘blank cheque’ to force the customer to accept higher costs, new requirements or reduced benefits, without their consent. Significant or unexpected changes are especially unlikely to be fair in fixed and short-term contracts.

It’s more likely to be fair if it:

• can be used in a limited way, for example for changes required by law or necessity or for minor technical adjustments
• does not put the customer in a difficult situation or take them by surprise
• explains specifically what, when and how the term may change so customers can make an informed decision whether to enter the contract in the first place
• requires you to warn the customer, giving them enough time to consider how the change could affect their rights and what’s expected of them after the change takes effect
• gives the customer a genuine right to exit the contract without penalty or otherwise being left worse off

Example

The following wording is unlikely to be fair:

The company may increase the price for the service  at any time after a period of one year from the installation date by giving notice in writing stating the increase and the date it shall become effective. The subscriber may within one month after the service of any notice of increase give three months’ notice in writing terminating this agreement.

because it allows you to vary the charges at any time, giving no indication of what may prompt the price increase or by how much the price could go up. It also forces the customer to pay the increased price for the duration of their cancellation notice period.

The wording below, for example, is more likely to be fair because it:

• sets out an objective, clear and specific justification for the price increase
• specifies the level of the price increase or what an increase will be based on so the customer can know what they will have to pay
• specifies the timing of the price increase, which may include limiting the number of changes you can make to the charge in a period
• gives the customer enough time to cancel the agreement before the new charge takes effect

The company may change the price for the service once annually to reflect increases or decreases in the costs we are charged by our suppliers in the course of providing the service. Any increase will not be higher than the increase in the Consumer Prices Index. The company will give one month’s notice in writing of the change, stating the level of the change and basis for it, and the date it shall be effective. The subscriber may cancel this agreement by giving one week’s notice in writing within one month after the service of any notice of increase.

For more information about this type of term, go to page 91 in the full guidance.

Cancelling or breaching a contract

You may include terms in your contract that allow you or your customer to cancel the contract for a good reason.

If you cancel or breach a contract

Cancelling could leave the customer with serious problems and potentially facing costs. If they are not at fault, they may well have a right to a refund.

A term is unlikely to be fair if it allows you to:

• cancel without giving any valid reason or reasonable notice or for minor breaches by the customer
• keep prepayments (including deposits) if the contract does not go ahead or the customer has received no benefit
• stop your customer cancelling if you breach the contract

If you can use a cancellation term, you should give reasonable notice before cancelling, except where there are ‘serious grounds’ for immediate cancellation. You should clearly set out any ‘serious grounds’ in the contract.

A term is more likely to be fair if:

• it explains any right for you to cancel so it will not come out of the blue
• it allows you to cancel if the customer is in serious breach, for example where you reasonably suspect fraud
• where the customer is not at fault, you can cancel only where circumstances genuinely beyond your control make it impossible to carry out the contract as agreed
• you check to see if it is possible to do the work before you start it and, if it isn’t, you tell the customer why not and do not charge them
• you give the customer a refund of any prepayments if they are not at fault

Example

The following wording is unlikely to be fair:

The right is specifically reserved to terminate this engagement at any time, where in the estate agents’ opinion, the asking price is unrealistic in the light of the prevailing market conditions or the vendor later raises any additional point which is unacceptable to the estate agents.

because it gives you the power to cancel the contract at any time, based on subjective and vaguely defined criteria such what you consider ‘unacceptable’.

The wording below, for example, is more likely to be fair because it:

• limits when you can end the agreement
• gives specific and justified reasons in advance
• gives the customer time to respond or make alternative arrangements

We can end this agreement by giving 14 days’ notice in writing to you at any time in the following circumstances: a) if we believe that the price at which you require us to market the property is unrealistic; or b) if you require us to take any step which may put us in breach of our legal or professional obligations.

For more information about this type of term, page 113 in the full guidance.

If the customer cancels

If the customer cancels and it’s not your fault, you have the right to protect your business. But any prepayments or deposits you keep must take into account what your business will actually lose as a result. Any cancellation fee you charge must not be excessive and it should reflect steps you can take to minimise your losses (for example, finding another customer).

A term is unlikely to be fair if it allows you to:

• make prepayments non-refundable, regardless of why the customer cancels
• charge the customer to cover your costs and loss of profit, when this could mean you get compensated for the same loss twice
• charge the customer if they cancel even though you could reasonably reduce your losses, for example by reselling what they have ordered and paid for
• collect all outstanding payments under the contract when you do not have to supply the product any longer or the outstanding sums exceed your costs

It’s more likely to be fair if:

• customers do not lose large prepayments if they cancel, in all circumstances
• you set non-refundable prepayments (including deposits) or cancellation charges so they reflect a genuine estimate of what you will lose directly because of the customer cancelling – you may legitimately keep a deposit in full if it’s no more than a small percentage of the price and you make it clear when exactly it would be non-refundable
• when you’re not at fault, you only seek to recoup losses that you have actually made

Example

The following wording is unlikely to be fair:

Please note that in the event of unsatisfactory references or aborted transactions, there is no refund of the holding deposit.

because it:

• allows you to keep the deposit even if the customer is not at fault (in the case of an aborted transaction)
• is not clear about what ‘unsatisfactory references’ would be

The wording below, for example, is more likely to be fair because:

• it specifies what will happen if the customer is at fault and what will happen if they’re not
• you are being proportionate about the amount of funds you will retain

If false information or references are submitted, the company has the right to withhold reasonable costs incurred. If the landlord withdraws the property from the transaction, a full refund is given.

If the customer breaches the contract

A term is unlikely to be fair if it allows you to:

• decide arbitrarily how much to charge the customer for breaching the contract
• impose disproportionately high charges on customers for breaching a contract, which may include requiring the customer to pay more than your actual losses or to pay unreasonable interest on outstanding payments
• threaten penalties or sanctions over and above what you can legally impose (without going to court), such as entering private property without consent

A term is more likely to be fair if you:

• explain clearly and upfront what sanction the customer must pay and when, so they know how they can avoid that
• charge a proportionate and appropriate sum

For more information about this type of term, go to page 104 in the full guidance.

Automatically renewing a contract

Customers need to know how long their contract is due to run and how to cancel it easily (if they don’t want it renewed).

A term could be unfair if:

• you use it to extend a contract beyond what the customer would normally expect
• it is not appropriate to renew onto a new minimum term (for example, if it is in the customer’s interest to be put onto a rolling contract instead)
• you require unreasonably early or long notice or otherwise make it inconvenient or costly for the customer to cancel
• you rely on the customer not doing something or not having enough information such as effective reminders of automatic renewals

This could lock customers into paying for something they no longer want or need.

It is more likely to be fair if you:

• remind the customer at a reasonable time before the renewal, bringing it to their attention and allowing them to cancel
• give them clear information at the outset about the automatic renewal and ask them to agree to it
• allow a cooling-off period after the renewal
• renew them onto a rolling contract that can be cancelled with a reasonable notice period
• make it easy for them to switch off automatic renewal at any time
• allow them to cancel the contract after renewal without any cancellation fee or excessively long notice period
• make it easy for customers to obtain a refund (either full or pro-rata) following cancellation if they want it

Example

The following wording is unlikely to be fair:

This agreement shall commence on the connection date and shall continue for the minimum period of 12 months and thereafter until terminated by no less than 3 months’ notice in writing given by either party to the other. Such notice is to be given not before the expiry of the minimum period.

because:

• it requires the customer to give at least 3 months’ notice to cancel the contract
• the customer can only give notice after the minimum period has passed. This forces them to pay beyond the minimum period which is longer than they might want or need to
• it does not tell the customer the steps to take to cancel the contract if they want to

The wording below, for example, is more likely to be fair because it allows the customer to give notice before the minimum period is up, the notice period is reasonable, and it provides instructions for cancellation.

This agreement is for a minimum period of 12 months. It may be terminated by giving one month’s notice, which commences on or after the end of the initial 11 months by following the instructions available at this link.

Some subscription contracts also have to comply with the subscription contracts rules under the Digital Markets, Competition and Consumers Act 2024. These rules are expected to come into force in Spring 2027.

For more information about this type of term, go to page 117 in the full guidance.

Resolving disputes

Your terms should allow customers to resolve disputes fairly and not restrict their ability to challenge your terms or enforce their rights.

A term is more likely to be unfair if it:

• allows you to decide what terms mean and how they apply
• gives you complete freedom to decide how and when to carry out your obligations
• enables you to decide whether you have breached the contract and prevent customers from seeking redress
• allows you to decide when the customer is or might be in breach of their obligations
• forces a customer to use a specific dispute resolution process
• prevents a customer from starting legal proceedings in their local courts

A term is more likely to be fair if it:

• requires you to act reasonably and allows the customer to refer disagreements with how you interpret the contract to an independent arbitrator, if they choose to
• allows customers to have a free choice on whether and how they want to resolve disputes, including through an alternative dispute resolution service
• allows customers to take proceedings in their local courts and apply their local laws to any contract that has a close connection to the UK

Example

The following wording is unlikely to be fair:

The company reserves the right to withdraw or suspend membership when, in its sole opinion, a member is misusing the service or behaving inappropriately.

because it gives you ultimate discretion to impose sanctions on customers for what you choose to regard as their breaches.

The wording below, for example, is more likely to be fair because it:

• sets out how the dispute will be handled
• gives the customer a genuine opportunity to resolve the dispute independently

The company may revoke a person’s membership if a member has misused the service or behaved in way which objectively could be regarded as inappropriate. The company will first provide the member with written reasons for the revocation. If the member so chooses, they will be entitled to challenge the company’s decision by referring the matter to the trade body responsible for the industry Code of Practice that the company is bound by.

For more information about this type of term, go to page 119 in the full guidance.

What to do next

Review your terms and notices carefully to make sure they are fair and transparent. Refer to our full guidance for more about the potentially unfair use of terms and notices and how to ensure they are transparent.

Published 23 March 2016

Last updated 22 July 2026 — Show all updates

1. 22 July 2026

   Guide updated to reflect changes to full guidance.

2. 23 March 2016

   First published.