Prohibited Contract Clauses: What They Are and the Consequences of Using Them

In recent years the subject of prohibited clauses has become popular thanks to the proceedings brought by so-called Swiss franc borrowers, who publicised the problem of defects in contracts used by entrepreneurs. Consumers increasingly check whether contracts contain provisions contrary to the law. Entrepreneurs' terms and conditions are also subject to official review by the President of the Office of Competition and Consumer Protection (UOKiK), who may prohibit the use of abusive clauses and impose a financial penalty on the entrepreneur.

What Are Prohibited Clauses?

A prohibited clause (postanowienie niedozwolone) is a contract provision that was not individually agreed with the consumer and that shapes the consumer's rights and obligations contrary to good practice, grossly infringing the consumer's interests. Put most simply, these are contract provisions that are in some way harmful and unfair to the consumer.

See also: Commercial contracts (in Polish)

As a rule, provisions concerning the most important terms of a given contract, without which the contract would not have been concluded (the so-called main obligations of the parties), cannot be regarded as prohibited clauses. Examples of the main obligations of the parties include the agreed price, remuneration, the amount of rent or the subject matter of the service or mandate. The exception is a situation where such provisions are not worded unambiguously (that is, they raise doubts as to their content).

What Will Not Be Regarded as Individual Negotiation?

In court disputes, entrepreneurs often argue that because a consumer signed a contract, the consumer accepted its content. This position will not hold up in court, in particular in view of the case law of the Court of Justice of the European Union (CJEU), which sides with consumers on this point. Even the following situations are not regarded as individual negotiation:

• choosing the wording of provisions from options presented by the entrepreneur,
• the consumer reading the contract, making no comments on it and signing it.

An entrepreneur must therefore bear in mind that showing individual negotiation with a consumer will be very difficult and, where the entrepreneur uses terms and conditions or a standard form contract, practically impossible.

See also: Commercial mediation

How Can a Consumer Challenge Prohibited Clauses in Terms and Conditions?

A consumer may challenge prohibited clauses by:

• bringing an action in court,
• notifying the Municipal Consumer Ombudsman,
• notifying the President of the Office of Competition and Consumer Protection.

Can an Entrepreneur Challenge Abusive Clauses in a Contract?

Yes, an entrepreneur may challenge prohibited clauses in a contract or terms and conditions. This option is available to sole traders (entered in the Central Register and Information on Economic Activity, CEIDG) who have concluded a contract with another entrepreneur. They may do so even where they have received an invoice. The condition for exercising this right is that the contract concluded is not of a professional nature for that entrepreneur. This applies to contracts concluded from 1 January 2021.

See also: Company audit (due diligence)

What Is the Effect of a Clause Being Held Prohibited?

The consequence of a clause being held prohibited is that the provision is not binding on the consumer. This means that the contract is performed as if the provision had never been in the contract at all.

In some cases, a clause being held prohibited may even result in the entire contract being invalid.

See also: Legal services for companies

The Most Common Prohibited Clauses in Contracts

In practice, the prohibited clauses most often found in contracts are those that:

• entitle the entrepreneur to change the contract unilaterally without a valid reason stated in the contract;
• deprive only the consumer of the right to dissolve the contract, withdraw from it or terminate it;
• reserve for the entrepreneur the right to terminate a contract concluded for an indefinite period without stating valid reasons and without an appropriate notice period;
• provide that a fixed-term contract is extended unless the consumer, for whom an excessively short time limit is set, terminates it;
• exclude examination of the case by a court in Poland, or impose examination of the case by a court having jurisdiction for the entrepreneur (which is usually not in the place where the consumer lives).

See also: Business succession (in Polish)

Examples of Abusive Clauses in the Property Development Sector

Turning to "live" examples, below we present clauses held to be prohibited in 2023 in the property development sector in decisions of the President of UOKiK:

• All disputes arising from this agreement shall be resolved by the court having jurisdiction for the seat of the location of the property (Decision no. RLU 1/2023)
• (…) Where the actual floor area of the apartment unit with a residential function is smaller than the designed floor area by not more than 2% of the designed floor area, the Seller shall not be obliged to reduce the sale price of the unit (Decision no. RLU 1/2023)
• The Buyer undertakes towards the Company that, if the residential unit in question is disposed of, it will oblige the acquirer to grant the Company a power of attorney to the extent described above and to give the consent referred to above (Decision no. RPZ 1/2023)
• The Customer further confirms that, before concluding the Agreement, it read the draft of the Agreement and had the opportunity to submit comments and proposals on it. The Customer considers the content of this draft to be unambiguous and understandable to the Customer. In these circumstances, the Customer considers the Agreement to have been individually agreed with it (Decision no. RPZ 8/2023)
• The Customer authorises the Contractor to increase the agreed remuneration if, between the conclusion of the Agreement and its performance and the issue of the VAT invoice, the rates of value added tax (VAT) increase, on the terms set out in the provisions in force in Poland in this respect. The Contractor shall notify the Customer in writing of the exercise of this right; this does not require an amendment to the Agreement (Decision no. RPZ 8/2023)
• Completion of the assembly and start-up of the installation will be confirmed by a written record. The Customer authorises the Contractor to prepare such a record on its own and thereby confirm proper performance of the Agreement if, without agreeing this with the Contractor, the Customer does not attend the acceptance on the date previously indicated by email (SMS) (Decision no. RPZ 8/2023)
• If the Agreement is dissolved (or withdrawn from) by the Customer for reasons for which the Contractor is not responsible, the Customer undertakes to pay the Contractor a contractual penalty equal to 25% (twenty-five per cent) of the total gross remuneration agreed by the Parties in this Agreement, payable on first written demand, within 7 (seven) days, by bank transfer to the bank account indicated in the demand. The Contractor has the right to claim supplementary damages on general principles (Decision no. RPZ 8/2023)

Would you like to check whether your contract or terms and conditions contain prohibited clauses? Our Law Firm specialises in business law (in Polish). The legal services for businesses provided by our lawyers also include reviewing contracts and securing entrepreneurs' interests. Please contact us.