The Fine Print: The Rule on Unusual Clauses in General Terms and Conditions

Modern commercial life is characterised by a significant increase in contractual transactions. Online retailers, service providers, banks and insurance companies conclude a vast number of contracts every day that contain largely identical terms. To avoid negotiating each contract individually, businesses have adopted the practice of using pre-formulated contractual provisions in general terms and conditions for the conclusion of large numbers of similar agreements.

Potential for Abuse

The use of general terms and conditions entails considerable potential for abuse. Since the party drafting the general terms and conditions unilaterally determines the contractual terms, while the other party usually accepts them without reading them in detail, there is a risk that the drafter secures advantages for itself while shifting costs and risks onto the other party. This problem becomes even more pronounced where entire industries use largely uniform general terms and conditions, effectively leaving customers with the choice of either accepting the pre-drafted terms or foregoing the contract altogether—a classic “take it or leave it” scenario.

To protect the party adhering to general terms and conditions, legislators and the case law have therefore developed several safeguards for cases of blanket incorporation of general terms and conditions, i.e. where the customer accepts the standard terms and conditions as a whole without being familiar with their detailed contents.

The Rule on Unusual Clauses

One of these safeguards is the rule on unusual clauses. According to Swiss legal doctrine and case law, a clause contained in general terms and conditions may be denied contractual effect if, when interpreted objectively under the principle of good faith, it is so unusual that the customer could not reasonably have been expected to anticipate it in light of all the circumstances. The decisive consideration is therefore the presumed contractual intent of the parties. The rule on unusual clauses comprises both a subjective and an objective element.

Subjective Element

The subjective element is assessed from the perspective of the party giving blanket consent at the time the contract is concluded, taking into account the specific circumstances of the case. One important factor is the business and industry experience of the adhering party: the less experience that party has, the more likely it is that a clause will be regarded as subjectively unusual. Consequently, a clause may be unusual for someone unfamiliar with the industry, while being regarded as standard by an industry professional.

It is important to emphasise that the rule on unusual clauses is not intended solely to protect weaker or less experienced contracting parties. Its primary purpose is to safeguard the principles of good faith and fair dealing in commercial transactions.

Objective Element

In addition to being subjectively unusual, the clause must also be objectively unusual by introducing terms that are foreign to the nature of the transaction. This is the case where the clause fundamentally alters the character of the contract or departs significantly from the statutory framework governing the particular type of contract. The more severely a clause restricts or impairs the legal position of the other contracting party, the more likely it is to be classified as unusual.

Conclusion The rule on unusual clauses constitutes an important protective mechanism in Swiss contract law. It is designed to prevent users of general terms and conditions from unilaterally improving their legal position at the expense of the party giving blanket consent. Subjectively, the rule requires that the adhering party is unfamiliar with the relevant industry, such that the clause would have been unexpected from that party’s perspective. Objectively, the clause must contain provisions that are foreign to the nature of the transaction. As a concrete manifestation of the principle of legitimate expectations, the rule helps preserve good faith and fair dealing even where contracts are concluded on the basis of pre-formulated standard terms.