transferring money abroad and unfair contract terms

Transferring money abroad is not a straightforward process and can give rise to complaints. Many of these complaints are about delays. But some are about money that has gone completely astray. And sometimes, when the money arrives, it is in the local currency even though a sterling transfer was specified. This can cause particular problems when the local currency is one that is not convertible back into sterling.

In a case we dealt with recently, although the firm arranging the transfer (the ‘sending’ firm) clearly stated the limitations on its liability, we decided that these limitations were not binding. They did not satisfy the ‘reasonableness’ test in the Unfair Terms in Consumer Contracts Regulations – which apply to contracts entered into by consumers from 1 July 1995.

In the case in question, the firm’s customer asked it to transfer some money to Pakistan. When problems arose, the sending firm refused to accept liability. It told the customer to claim directly against the firm it had used to make the transfer to the Pakistan bank.

The sending firm’s conditions for dealing with the transfer stated that:

• it had sole discretion to decide the method by which the transfer would be transmitted, and could use any bank of its own, or another bank’s, choice;
• it did not accept responsibility for any problems not directly caused by its own negligence or default;
• even if it was at fault, it would not be liable for any loss of business, goodwill or any type of consequential or indirect loss; and
• its liability would be limited to the amount of interest the customer lost during any delay or (if lower) to the amount of any direct loss.

We accepted that, in the course of a money transfer, difficulties can arise as a result of factors over which the sending firm has no direct control. The sending firm might have to entrust parts of the process to another bank, or to several different banks, abroad. European law includes special provisions covering transfers within the European Union but the situation is less clear-cut elsewhere.

The sending firm frequently has the right to seek indemnity from the other bank or banks involved in the process (in other words, to obtain a promise that they will be liable for any damages or losses that they cause). However, it may be impractical to enforce indemnities in respect of banks in some foreign jurisdictions. So we did not think it unfair for the sending firm to place reasonable limits on its contractual liability, provided it made those limits clear to the customer. It might otherwise have declined entirely to arrange transfers to certain destinations. But it was only reasonable for it to limit its liability to an extent that was necessary and proportionate.

The form that the sending firm gave the customer to complete stated that the amount of time it would take to complete a transfer could vary significantly – depending on the destination country and the amount and accuracy of the information supplied. But there was no reference to any risk that the payment might not arrive at all, or that it might arrive in a currency other than the one requested.

The sending firm reserved the right to choose the method of transfer and to use any bank of its own, or even of another’s choice. But it sought to avoid any liability for what that other bank did – regardless of whether it was able to obtain indemnity from that other bank. And it purported to limit its liability to interest on the money, if that was less than the actual loss.

We decided that the terms in this case were not proportionate. They created a significant imbalance – to the customer’s detriment – and so did not comply with the Unfair Contract Terms in Consumer Contracts Regulations. Schedule 2 of this says that a term is likely to be unfair if it has the effect of ‘inappropriately excluding or limiting the legal rights of the consumer vis-à-vis the seller or supplier or another party in the event of total or partial non-performance or inadequate performance by the seller or supplier of any of the contractual obligations’.

Paragraph 1.9 of the Office of Fair Trading’s Unfair Contract Terms Guidance (February 2001) says: ‘A disclaimer covering problems caused by a trader’s suppliers and subcontractors is regarded in the same way as one covering loss or damage caused directly by his fault. The consumer has no choice as to who they are, and has no contractual rights against them. The business has chosen to enter into agreements with them, and therefore should not seek to disclaim responsibility for their default.’

The fairness of the terms had also to be judged in the light of the circumstances when the contract was entered into. Unfair terms cannot be rendered fair simply because, for example, the intermediaries that the firm selected to carry out the transfer were reputable. So the exclusions and limitations of liability in this case did not bind the customer and we decided the case in his favour.