Legal Literature

Unfair Contract Terms Directive, Article 3 Unfair Contract Terms Directive, Article 4 Unfair Contract Terms Directive, Article 6 Unfair Contract Terms Directive, ANNEX I

In light of Directive 1993/13 in unfair terms and recent caselaw from the Court of Justice on ‘acceleration clauses’ (which, in relation to a loan agreement, usually provide that full repayment can be demanded when there has been a single default in the repayment of principal or interest) the author critically examines the recent Irish Supreme Court case Pepper Finance Corporation (Ireland) DAC v Cannon [2020] IESC 2 which the author notes appears to be the first occasion on which the Supreme Court has considered Council Directive 93/13 on unfair terms in consumer contracts in any significant detail. The author also expresses his surprise that the Supreme Court rejected the appellants' contention that a clause which permitted the lender to call in the loan facility on the basis of a single default in repayment was unfair. The author contrasts ‘the assessment of unfairness’ under EU jurisprudence with ‘the Irish approach’ in Pepper Finance Corporation (Ireland) DAC v Cannon. He finds that the review by the Supreme Court of the jurisprudence of the ECJ on the test for unfairness was relatively uncontroversial. However, he also finds that the conclusion of the Supreme Court is problematic in a number of respects, including the Court’s assertion that the acceleration clause was not invoked in this case and their conclusion that the Code of Conduct on Mortgage Arrears prevented the acceleration clause in this case from being considered unfair. The author goes on to identify a more fundamental criticism of the conclusion of the Supreme Court in Pepper Finance Corporation (Ireland) DAC v Cannon in that it does not seem to be consistent with the wording of the Directive or the jurisprudence of the ECJ, both of which require unfairness to be determined on the date the contract was entered into. The difficulty in Cannon is that the loan agreement was entered into in December 2007 whereas the first Code of Conduct on Mortgage Arrears did not come into force until 27 February 2009.