ECJ: Contract with unfair terms can be declared null and void
By Sophie Petitjean | Thursday 15 March 2012
European Union law does not preclude a member state from invalidating a consumer contract that contains an unfair clause if doing so ensures better protection of consumers, ruled the EU Court of Justice in a judgement handed down on 15 March
A Slovak court turned to the EU Court of Justice for an interpretation of Directives 93/13/EEC (unfair terms in consumer contracts) and 2005/29/EC (unfair business-to-consumer commercial practices).
Jana Perenicova and Vladislav Perenic obtained a loan of SKK150,000 (€4,969) from a non-bank institution that grants consumer loans on the basis of standard contracts. The annual percentage rate of charge (APR) of the loan – ie the consumer’s total costs in connection with the loan – was set in this contract at 48.63%, but according to the calculation of the Slovak court that referred the matter to the Court of Justice, it was in fact 58.76%. The applicants brought an action before a Slovak district court seeking to have the loan declared null and void due to the presence of several unfair terms in the contract.
The EU court pointed out that a commercial practice consisting of indicating in a loan an APR below the actual rate constitutes false information as to the total cost of the credit, which must be classified as a misleading commercial practice within the meaning of the directive on unfair commercial practices. This circumstance is not, however, such as to establish automatically and on its own that those terms are unfair, added the court.
On the criteria for assessing whether a contract can be declared null and void, the EU Court of Justice noted that the aim of Directive 93/13/EEC is to eliminate unfair terms in consumer contracts while preserving the validity of the contract as a whole, not to abolish all contracts containing unfair terms or to take into consideration solely the advantage to the consumer of the annulment of the contract as a whole. However, the EU judges noted that the directive achieved only a partial and minimum harmonisation of national legislation concerning unfair terms, while allowing member states to give consumers a higher level of protection. Consequently, they held that the directive does not preclude a member state from adopting, in compliance with EU law, “national legislation under which a contract between a trader and a consumer which contains one or more unfair terms may be declared void as a whole where that will ensure better protection of the consumer”.
(1) Case C-453/10