Prakas on Unfair Contractual Terms Issued to Enhance Consumer Protection
On 1 March 2022, the Ministry of Commerce (“MOC”) issued Prakas No.0067 on Unfair Contract Terms (“Prakas No.0067”). This Prakas is a supplemental instrument to enhance consumer protection under the 2019 Consumer Protection Law.
Prakas No.0067 lays out procedures and formalities governing standard form contracts which are created for the purposes of providing goods and/or services and tackling unfair contract terms and excessive benefits between business operators and consumers in their contractual relationships.
The following are the main highlights of Prakas No.0067:
Standard Form Contracts
Standard Form Contract refers to a contract or any clause of a contract that is pre-formulated by the business operator for the provision of goods and/or services to consumers without allowing the consumers to negotiate, revise, or influence in whatever manner.
Standard Form Contracts must fulfill the following conditions:
- must be made in writing in a clear and precise manner with easily understandable terms and conditions.
- must be prepared in Khmer languages (Additional languages can also be provided for the convenience of the consumers).
- must contain the standard information as required by the Consumer Protection Law, and other applicable laws and regulations.
For Substantial Clause (i.e., contractual clause/terms which are important or deemed to be important by consumers in the contract’s formulation and the business operator should have been aware of such importance) under Standard Form Contracts:
- the business operator must explain, highlight and provide clear information regarding the Substantial Clauses in the Standard Form Contract.
- for E-Commerce, a clear explanation must be given to consumers and the consumers should be given the opportunity to read through the Substantial Clause, before accepting the Standard Form Contract.
Prakas No.0067 prohibits the inclusion of clauses that grant excessive benefits to the business operators. Excessive benefits, under the Civil Code, is defined as a contract where one party is taking advantage of the other party’s economic difficulties, ignorance, or inexperience, and made benefits from that contract.
Unfair Contractual Terms
Business operators are prevented from including the following clauses:
- any clause exempting or limiting their liabilities on the guarantee of the goods and/or services in accordance with the Civil Code.
- any clause granting their right to materially change or modify the type, quantity, price, and quality of goods and/or services without prior consent from the consumer.
- any clause granting their right to change any Substantial Clause of the Standard Form Contract without prior consent from the consumer.
- any clause granting their right to interpret unilaterally and arbitrarily, or to terminate the contract at their own discretion.
Business operators shall provide written notification to the consumer before the effective date of any change to any clause other than the Substantial Clause.
Business operators may file its Standard Form Contract to the competent authorities (either the competition committee or authority overseeing the specific sector) to review the contract for any clause containing excessive benefits or any unfair contract terms.
Those who are found to have violated this Prakas could be subjected to a monetary fine in accordance with the Law on Consumer Protection, as well as possible civil and criminal actions.
This alert is for general information only and is not a substitute for legal advice.