Another issue in Mylcrist was whether the arbitration clause was an “unfair” contract term as regulated by the Unfair Terms in Consumer Contracts Regulations 1999. It was held that the arbitration clause hindered the right of Buck (a consumer) to take legal action and caused a “significant imbalance” in the parties’ rights and obligations to the detriment of Buck. The clause was part of a standard term contract not negotiated by Buck. Moreover, Buck would not have appreciated the consequences of the clause. The clause and its effects should have been more clearly and fully set out. Accordingly, the arbitration clause was not binding on Buck and therefore the Award unenforceable.
This case shows how important it is that parties properly comply with the provisions for the appointment of arbitrators whether provided in the contract between the parties or, in the absence of such contractual provisions, as set out in the Arbitration Act 1996. In respect of unfair contract terms, the case provides a stark warning to businesses that arbitration clauses and their effects should be made plainly clear to consumers. Insurers should note that the 1999 Regulations apply to insurance consumer contracts. The OFT has said that terms preventing consumers from taking disputes to court (such as arbitration clauses) are likely to be liable to challenge.