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Director General of Fair Trading v First National Bank[2001] UKHL 52

The House of Lords was concerned with the interpretation of Reg 3 of the 1995 Unfair Terms in Consumer Contract Regulations which are identical in wording to Reg 6 of the 1999 Regulations. The House of Lords were determining the question of whether a clause, providing that interest at the contractually agreed price, was payable after a judgment, came within the ambit of Regulation 3 of the 1995 Regulations. It was held that this did not represent a core term under the Regulations notwithstanding the fact that it was an agreed term representing the price of remuneration.

Lord Steyn:

"In any event, article 3(2) must be given a restrictive interpretation. Unless that is done article 3(2)(a) will enable the main purpose of the scheme to be frustrated by endless formalistic arguments as to whether a provision is a definitional or an exclusionary provision. Similarly, article 3(2)(b) dealing with "the adequacy of the price of remuneration" must be given a restrictive interpretation. After all, in a broad sense all terms of the contract are in some way related to the price or remuneration. That is not what is intended....It would be a gaping hole in the system if such clauses were not subject to the fairness requirement."

On the issue of the meaning of good faith under Reg 5

Lord Bingham:

"Good faith in this context is not an artificial or technical concept... It looks to good standards of commercial morality and practice. It lays down a composite test, covering both the making and the substance of the contract, and must be applied bearing clearly in mind the objective which the regulations are designed to promote. Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position"

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