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Fixed Term Gym Membership Contracts Held Unfair

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Fixed Term Gym Membership Contracts Held Unfair A recent ruling in Office of Fair Trading v Ashbourne Management Services Limited has found that terms setting out minimum membership periods in contracts for gym membership and payment without discount for early termination are unfair under the Unfair Terms in Consumer Contracts Regulations (UTCCR)1999. The defendant company (Ashbourne) acted for over 700 gyms nationwide and was tasked with recruiting new members, collecting payments and administering membership. The standard contracts used provided for a minimum membership period between 12 and 36 months, further stating that should membership be terminated early the member would remain liable for the payments that would have been made during the remaining period without discount. Where members fell behind in payments, or wished to terminate their agreements before the end of the minimum period, the defendant company described them as defaulters and reported them to credit reference agencies. At the hearing Mr Justice Kitchin considered the fairness of the terms in the contracts. It was held that the terms setting out the minimum membership period was a "core term" falling within the scope of Reg. 6(2) of UCCTR. This would normally preclude the assessment of the term, however Kitchin J found that Reg. 6(2)(a) applied only to the definition of the main subject matter and did not preclude assessment of the fairness on other grounds. In this case the assessment did not relate to the main subject matter of the term, but rather it related to the obligation to pay monthly subscriptions upon early termination of membership. His Lordship found that the minimum term created a "significant imbalance in the parties rights … which is contrary to good faith" and were contrary to good faith. The ruling therefore held that such minimum terms incorporated by Ashbourne into their agreements were unfair and they could not bind members. It was also held that a clause requiring the immediate payment of all future monthly instalments upon early termination without discount for accelerated receipt was unfair and a penalty at common law. Kitchin J also concluded that reporting non-payment of a member to a credit reference agency, or threats to report non-payment, was an unfair commercial practice (contract to the Consumer Protection from Unfair Trading Regulations) where the term providing for the payment of the sum was unfair, where the amount in question was simply a claim for damages, or where the consumer had a genuine reason to dispute liability to pay. The ruling represents a significant victory for members of gyms and health clubs nationwide, and serves as a warning to companies to ensure that their consumer contracts are fair and lawful. • For additional information please contact: Justin Emerson of Gepp & Sons. The above is not legal advice; it is intended to provide information of general interest about current legal issues.

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