Short answer
Under Directive 93/13/EEC, a term that was not individually negotiated is unfair if, contrary to good faith, it creates a significant imbalance in contractual rights and obligations to the consumer's detriment. The assessment considers the contract's subject, all circumstances at conclusion, other terms, transparency and the position national law would create without the term. The Directive's Annex is indicative, not automatically decisive.
A national court must examine possible unfairness on its own motion once it has the necessary material, even if the consumer has not objected. Adversarial process must be secured, although EU law may permit that to occur in later proceedings where an initial order lacks res judicata effect. If the term is unfair, the court normally leaves it unapplied rather than rewriting it. An informed consumer can oppose non-application, and the remaining contract continues if it can survive without the term.
These rules apply through national procedures, constrained by EU effectiveness and equivalence.
Which contracts and terms are covered?
Directive 93/13 applies to terms in contracts between a seller or supplier acting for business or professional purposes and a consumer acting outside a trade or profession. Its main test concerns terms not individually negotiated, particularly standard terms drafted in advance.
A trader asserting individual negotiation bears the burden where the term is a standard term. Negotiating one clause does not automatically remove the rest of a standard contract from review. Terms reflecting mandatory statutory or regulatory provisions are outside the Directive's scope because the legislature presumed those rules balance the interests concerned.
The unfairness test
Article 3(1) defines an unfair term as one that:
“contrary to the requirement of good faith, […] causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.” —
The elements work together.
Significant imbalance asks how the term changes the consumer's legal position compared with the national rules that would apply without it. A term may restrict remedies, accelerate a loan, shift evidence burdens, impose disproportionate charges or give the trader unilateral powers. The Annex lists examples that may be regarded as unfair, but Member State implementation and the individual context matter.
Good faith is not merely absence of dishonesty. In Aziz, the Court said the national court should ask whether a seller or supplier dealing fairly and equitably could reasonably assume that the consumer would have agreed to the term in individual negotiations.
Article 4 requires attention to the nature of the goods or services, all circumstances attending contract conclusion, and other terms of the contract or a linked contract. The assessment generally uses the time of conclusion; later events may reveal consequences without retrospectively changing what was agreed.
Transparency and core terms
Terms must be drafted in plain, intelligible language. Transparency is more than grammatical readability: the consumer should be able to understand the term's practical and economic consequences on the information supplied before contracting.
Article 4(2) excludes assessment of the main subject matter and the adequacy of price or remuneration against the supplied goods or services only where those terms are in plain, intelligible language. The exception is interpreted strictly. It does not shield ancillary default charges or unilateral variation mechanisms merely because they affect price.
Where wording is ambiguous, the interpretation more favourable to the consumer prevails in individual proceedings. Lack of transparency is highly relevant to unfairness, but the precise legal consequence must be assessed under the Directive and applicable national law rather than assumed automatically.
What if the consumer says nothing?
The Directive treats consumers as being in a weaker bargaining and information position. Effective protection therefore cannot depend entirely on a consumer recognising the legal issue and pleading it correctly.
In Pannon GSM, the Court held:
“The national court is required to examine, of its own motion, the unfairness of a contractual term where it has available to it the legal and factual elements necessary for that task.” —
The duty arises when the court has sufficient material, including while checking its own jurisdiction. Banco Español de Crédito confirmed that national procedures cannot prevent own-motion review in an order-for-payment case merely because the consumer did not object. If the record raises a plausible issue but lacks necessary facts, national procedural powers must be used consistently with EU equivalence and effectiveness; the Directive does not prescribe one universal evidence procedure.
The court must secure adversarial process. In Investcapital, Case C-509/24, the Court held that EU law did not require consumer participation during an initial order-for-payment review where that order lacked res judicata effect and both sides could be heard in later proceedings concerning the same claim. The sequence depends on national procedure, but the consumer cannot lose effective protection through silence.
What must the court do after finding unfairness?
Article 6(1) says unfair terms:
“shall, as provided for under their national law, not be binding on the consumer”. —
The normal consequence is to treat the term as if it had not existed, while the contract remains binding if it can continue without that term. The deterrent effect matters: if courts routinely rewrote an unfair term to a reasonable level, traders could use overreaching clauses knowing the worst outcome was judicial adjustment. Banco Español therefore rejected a general power to revise an unfair late-payment term.
Later case law allows limited substitution by a supplementary national rule where removing the term would require annulment of the whole contract and expose the consumer to especially detrimental consequences. That protective exception is not a general contract-repair power, and the consumer's current interests and informed position matter.
Can the consumer choose to keep the term?
Pannon recognises that the court must not apply an unfair term except if the consumer opposes non-application. The protection exists for the consumer, who may have reasons for wishing to preserve the contract or term.
The court should not infer that choice from silence or lack of legal knowledge. It should inform the consumer of the assessment and consequences sufficiently to permit a free, informed response. A trader cannot turn this safeguard into advance contractual consent to unfair terms.
A practical review sequence
- Confirm a business-to-consumer contract and the Directive's temporal and territorial application.
- Identify whether the term reflects mandatory law or was genuinely individually negotiated.
- Determine the national default position without the term.
- Assess significant imbalance, good faith, context and linked terms at contract conclusion.
- Test whether language makes the legal and economic consequences intelligible.
- Use the Annex as an indicative guide, not an automatic result.
- If litigation is pending, ensure the court addresses apparent unfairness even without a consumer plea.
- Hear both parties and ascertain the consumer's informed position.
- Disapply the unfair term; preserve the remainder only if it can continue, subject to narrow protective substitution doctrine.
Conclusion
EU unfair-terms law combines a substantive fairness test with an active judicial duty. A standard term is not unfair merely because it favours the trader; it must create a significant consumer-detrimental imbalance contrary to good faith, assessed transparently and in context. But once the necessary material is before a national court, consumer silence does not end the inquiry. The court must examine the issue, hear the parties and normally remove the unfair term's binding effect, while respecting an informed consumer choice to oppose that protection.
Sources
This article provides general legal information, not advice for a specific matter. Laws, facts and procedural deadlines may change the result. Follow the linked primary sources and obtain local advice before acting.