Unfair Contract Terms Directive, Article 4

Provisions concerning the sole liability of the consumer for limitless currency exchange rate risk in foreign currency-based loan contracts are not unfair terms if the loan contract and the preceding explanation provided by the loaning business jointly ensure that the average consumer with reasonable conduct would understand the essence of exchange rate risk, its nature, its effect on the repayment of the loan, and that there is no limit on the risk.

The parties agreed to a foreign currency-based loan contract for the purposes of financing the purchase of a property. Before the contract was concluded, the consumer signed an explanation on the exchange rate risk posed by the loan contract. The contract was also backed by a mortgage. The consumer later attempted to sue the loaner, citing the unfairness of certain terms within the contract, specifically the provisions concerning the sole liability of the consumer for any currency exchange rate risk.

Whether the provisions concerning the currency exchange rate risk were unfair terms.

The Supreme Court found that the provisions in question were not unfair terms. It ruled that together with the earlier explanation provided by the business, the average consumer with reasonable conduct would be able to understand what was the essence and nature of the exchange rate risk, how it can affect the repayment of the loan, and that there is no limit on the risk, for which the consumer is solely liable. It thus meets the criteria of intelligibility and clarity.

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The Supreme Court upheld the decision of the Court of First Instance.