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Following the guidelines on unfair terms thought it may be worth looking at this more in depth.
Ref London Scottish Mortgages unfair indemnity clause ruling
http://www.oft.gov.uk/advice_and_res...come1/2010.pdf
OFT guidelines
18.2.7 Indemnities against risk. Terms under which the supplier must be
'indemnified' for costs which could arise through no fault of the consumer's
are open to comparable objections, particularly where the supplier could
himself be at fault. The word 'indemnify' itself is legal jargon which, if
understood at all, is liable to be taken as a threat to pass on legal and other
costs incurred without regard to reasonableness. Clearer and fairer wording
to replace legal jargon of this kind is illustrated in Group 19(b) of Annexe A.
Ref London Scottish Mortgages unfair indemnity clause ruling
http://www.oft.gov.uk/advice_and_res...come1/2010.pdf
The term appeared to give the firm extensive discretion to impose charges on consumers and there was no concept of reasonableness. The words '… or charged by the Lender…' seemed to give the firm particularly wide discretion. The term stated:
'You must pay on a full and unqualified indemnity basis all fees, expenses, taxes, liabilities and legal and other costs, including VAT if applicable on all such amounts, incurred or charged by the Lender…' This may not have met the requirements of Regulation
5(1), which provides that a term 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.
The term appeared to allow the firm to pass on the costs of proceedings (e.g. even if proceedings began because of the firm's negligence or the firm was unsuccessful in those proceedings). 'You must pay on a full and unqualified indemnity basis all fees, expenses, taxes, liabilities and legal and other costs … incurred or charged by the Lender in or incidental to:- (a) the preparation, completion, registration, administration, protection and enforcement (including the costs of any proceedings) of this mortgage…' This may not have met the requirements of Regulation 5(1).
'You must pay on a full and unqualified indemnity basis all fees, expenses, taxes, liabilities and legal and other costs, including VAT if applicable on all such amounts, incurred or charged by the Lender…' This may not have met the requirements of Regulation
5(1), which provides that a term 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.
The term appeared to allow the firm to pass on the costs of proceedings (e.g. even if proceedings began because of the firm's negligence or the firm was unsuccessful in those proceedings). 'You must pay on a full and unqualified indemnity basis all fees, expenses, taxes, liabilities and legal and other costs … incurred or charged by the Lender in or incidental to:- (a) the preparation, completion, registration, administration, protection and enforcement (including the costs of any proceedings) of this mortgage…' This may not have met the requirements of Regulation 5(1).
OFT guidelines
5.3 Other kinds of penal provisions which may be unfair are damages and costs
clauses saying that the supplier can:
• claim all his costs and expenses, not just his net costs
• claim both his costs and his loss of profit where this would lead to
being compensated twice over for the same loss
• claim his legal costs on an 'indemnity' basis that is, all costs, not just
costs reasonably incurred. The words 'indemnity' and 'indemnify' are
also objectionable as legal jargon – see below, Part IV, Group 19(b).
clauses saying that the supplier can:
• claim all his costs and expenses, not just his net costs
• claim both his costs and his loss of profit where this would lead to
being compensated twice over for the same loss
• claim his legal costs on an 'indemnity' basis that is, all costs, not just
costs reasonably incurred. The words 'indemnity' and 'indemnify' are
also objectionable as legal jargon – see below, Part IV, Group 19(b).
18.2.7 Indemnities against risk. Terms under which the supplier must be
'indemnified' for costs which could arise through no fault of the consumer's
are open to comparable objections, particularly where the supplier could
himself be at fault. The word 'indemnify' itself is legal jargon which, if
understood at all, is liable to be taken as a threat to pass on legal and other
costs incurred without regard to reasonableness. Clearer and fairer wording
to replace legal jargon of this kind is illustrated in Group 19(b) of Annexe A.
19.5 The underlying purpose of Regulation 7 also explains why the OFT does not
restrict its objections to obviously obscure jargon. Relatively straightforward
technicalities, such as references to 'indemnity' (see paragraph 18.2.7) and
'statutory rights' (see paragraph 1.5), can have onerous implications of
which consumers are likely to be unaware.
restrict its objections to obviously obscure jargon. Relatively straightforward
technicalities, such as references to 'indemnity' (see paragraph 18.2.7) and
'statutory rights' (see paragraph 1.5), can have onerous implications of
which consumers are likely to be unaware.
Comment