THE BOTTOM LINE
- “Blank cheque” cost clauses in your consumer agreements are a major liability; courts will proactively review and can annul them, even if the consumer doesn’t object.
- If a contractual term is deemed unfair, your company may lose the right to claim not only the costs covered by that clause but the entire amount sought in a lawsuit.
- Companies cannot fall back on statutory regulations as a safety net if their own contract clause is thrown out. The penalty is absolute, creating an “all or nothing” risk.
THE DETAILS
In what appeared to be a straightforward collections case, Rabobank sued a consumer for the residual debt on a mortgage after the property had been sold. The defendant failed to appear in court, usually a clear path to a default judgment. However, under mandatory European consumer protection rules, the Amsterdam District Court was obligated to proactively review the loan agreement for unfair terms. This routine check turned the case on its head, providing a stark warning for all businesses that use standard form contracts with consumers.
The court zeroed in on a common clause in the bank’s general mortgage conditions. This term stipulated that the borrower was responsible for all judicial and extra-judicial costs incurred by the bank in enforcing its rights, with no specified limit. In this instance, the bank had included over €6,300 in its own legal fees as part of the total debt claimed. The court found this clause created a “significant imbalance” detrimental to the consumer, effectively giving the bank a blank cheque to run up costs and pass them on without any form of control or cap.
The real lesson for business leaders and legal counsel lies in the severe consequences. Citing established European case law, the Dutch court explained that an unfair term is not simply modified or reduced to a “reasonable” amount; it is annulled completely. Crucially, the business is then prohibited from relying on statutory provisions as a backup. The term is treated as if it never existed. Because the massive (and now invalid) legal fees formed a substantial part of the total sum claimed, the court announced its intention to dismiss the bank’s entire claim. This “all or nothing” approach serves as a powerful deterrent against including overreaching clauses in consumer contracts.
SOURCE
Rechtbank Amsterdam
