New research from the University of Law suggests that millions of people are at risk of being caught out and overspending on bills by not checking their contracts as they renew. The study showed some 82 per cent of respondents admitted they don’t always check updated terms and conditions for rolling contracts or those which auto-renew, of which 36 per cent said they ‘hardly or never’ check the small print.
A legal expert at the University has now warned consumers that this lack of vigilance could land them with higher costs, as suppliers could easily hike up prices for those not in contract. For those on certain energy tariffs, it could also see them continue to pay more for their gas or electricity as they may not realise the meaning of their tariff.
Aruna Verma, Associate Professor at the University of Law, said: “Contracts can often be long and complex documents, which can easily become laborious or confusing to read in-depth, however, it’s so important to fully understand what you’re entering into before signing on the dotted line, especially in the current economic climate.”
Professor Verma continued: “If anything were to go awry or you wanted to challenge something implemented by the supplier, a price increase for example, you’ll find it very difficult to do so if you have agreed to it in your contract’s terms and conditions.
“Not only this, but if you were to find yourself in breach of your contract terms this could have serious consequences, such as fines or even legal action. If you don’t know what your contract terms are then you are putting yourself at risk unnecessarily.”
To help, legal experts at the University of Law have broken down five common contract terms and clauses to be aware of.
Deemed energy contract
Dealing specifically with energy contracts, this is when your existing contract comes to an end, but your supplier continues to supply you. This happens when no renewal has been set up, or nothing has been arranged with another supplier.
Deemed energy contracts are a supplier’s most basic offering and are much more expensive, so be sure to make note of what happens with your contract when it’s time for renewal.
Entire agreement
This is a commonly used clause in contracts to make clear that the written document is an agreement between both parties. What this means is any claims made outside of that contract - for example on a phone call or in an email - won't be considered part of the legally binding contract.
Implied and Express Terms
Implied terms relate to any terms of contract that may not be provided in writing or verbally, but are implied by law, practice or custom.
Express terms on the other hand describe terms that are provided verbally or in writing, either before or at the time of the contract being signed. These terms make responsibilities clear for both sides of the contract and don’t rely on implied meaning.
Those that are implied by practice or custom are almost always over-ruled by express terms, whereas some that are implied by law cannot be overridden at all.
Pro Rata
Like many legal terms, Pro Rata is a Latin phrase, which means ‘for the rate’. This will often crop up when setting up a payment and means you will pay an amount for the fraction of the period according to its share of the whole cost.
For example, if you set up a monthly payment that is billed on the first of the month, and you join halfway through the month, payment will be Pro Rata so that you only pay for half of that month. This is often dependent on other clauses in your contract relating to payment terms, so be sure to fully read and understand everything.
Force majeure
This clause typically defines any extenuating circumstances that release all parties from any liability. The clause itself will define the hazards, dangers or ‘Acts of God’ that will have this effect. Typically, these will be major events that are beyond the control of either party - something experienced a lot in 2020 during the Covid pandemic.
Professor Verma also explained that legal professionals study for many years to get a handle on complex contractual terms, so people should not be disheartened if they get confused by a new or renewal contract, but warned that a lack of understanding shouldn’t tempt you to skim read, or worse, not read your contracts at all.
She warned: “So many are caught out by terms and conditions they had no idea existed. It is rare that a supplier will add anything to really trip you up, but you can very easily end up bound to unwanted subscriptions for longer than you’d like, or accidentally agreeing to unwanted price increases.”
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