An unfair term in a contract between a trader and a consumer does not bind the consumer, under section 51 of the Consumer Protection Law 112(I)/2021, and the rest of the contract survives unless it cannot stand without it. The test in section 50 is good faith and significant imbalance. One term is unfair by statute whatever else is true of it: interest calculated on a 360 day year.
Businesses tend to think of their standard terms as theirs to write, and consumers tend to assume that a signature settles it. Neither is right where the contract is between a trader and a consumer. Part VII of the Consumer Protection Law 112(I)/2021 takes a term that fails its test and removes it from the contract, without the consumer having to prove they did not read it, did not understand it, or had no choice.
Two things about the scope are worth knowing before the test itself, because they decide whether any of this applies at all.
What it reaches, and what it leaves alone
Under section 48(1) the Part applies to every term of a contract concluded between a trader and a consumer. It is not confined to standard terms, and it does not depend on the term being buried in small print.
Section 48(3) is the provision most often missed in Cyprus. The Part applies, with the necessary changes of wording, to the terms of contracts for the sale, lease or any other disposal of immovable property. A developer's standard contract of sale and a landlord's standard tenancy are therefore inside the regime, not outside it, whenever the other side is a consumer.
Section 48(2) keeps two things out of the assessment: the definition of the main subject matter of the contract, and whether the price is adequate for what is supplied in return. A consumer cannot use this Part to argue that the price was too high. That exclusion applies only where the terms in question are drafted in plain, intelligible language, so a price mechanism written obscurely does not enjoy it.
Section 48(4) takes five categories outside the Part altogether: contracts of employment; contracts concerning succession rights; contracts concerning family law matters; contracts concerning the formation and organisation of companies or partnerships; and terms incorporated in order to comply with legislative or regulatory provisions of the Republic, or with the provisions or principles of international conventions to which the Republic or the European Union is a party.
The test: good faith, and significant imbalance
Under section 50(1) a term is unfair where, contrary to the requirement of good faith, it creates a significant imbalance to the consumer's detriment between the rights and obligations of the parties arising under the contract. Both limbs matter. A term that is merely favourable to the trader is not unfair; a term that is one-sided in a way good faith cannot explain is.
Section 50(2) says what the assessment takes into account: the nature of the goods or services which are the subject of the contract, all the circumstances surrounding its conclusion at the time it was concluded, and all the other terms of that contract or of another contract on which it depends. A term is therefore not read alone, and a harsh clause elsewhere in the same document can make a doubtful one worse.
Section 50(3) then lists four things to which particular regard is had in deciding whether the requirement of good faith is satisfied:
- the bargaining strength of the parties;
- whether the consumer received any inducement to agree to the term;
- whether the goods or services were sold or supplied to the special order of the consumer;
- the extent to which the trader dealt fairly with the consumer.
The last of the four is the one that most often decides a case, and it is a question about conduct rather than drafting. Section 50(4) adds that Annex IV to the Law contains an indicative and non-exhaustive list of terms that may be regarded as unfair, which is a starting point for an argument rather than the end of one.
One term the statute settles by itself
Section 50(5) does not ask about good faith or imbalance at all. Regardless of the preceding subsections, a term is unfair where interest is calculated, and the method of calculating it is described, on the basis of 360 days, or any number of days other than 365 days, or 366 days in a leap year.
That is the old banking convention, and it is worth checking on any facility a consumer has signed, because the difference it makes is not theoretical: it charges roughly five days of interest a year that the borrower did not agree to on a true daily basis. The provision is drafted so that finding it in the contract is the whole of the argument.
What happens to a term that fails
Section 51(1) states the consequence, and it does so notwithstanding the Contract Law: an unfair term in a contract between a trader and a consumer does not bind the consumer. It is not voidable at the consumer's election and it does not require a claim to set it aside.
Section 51(2) keeps the rest of the bargain alive. The contract continues to bind the parties unless it is incapable of continuing to exist without the unfair term. The usual outcome is therefore the contract minus the clause, which is what a trader planning to rely on an aggressive term should have in mind: the risk is not that the deal collapses, it is that the protection they wrote for themselves is simply not there.
How a term is written decides how it is read
Section 52 puts an obligation on the trader to ensure that, in written contracts, the terms are drafted in plain and intelligible language, and provides that where there is doubt about the meaning of a written term the interpretation most favourable to the consumer prevails. That rule does not apply within the enforcement proceedings under Part VIII, where the Service acts against terms in general use rather than in one contract.
The practical consequence for a business is that ambiguity is not a safety margin. A term drafted loosely in the hope that it can be read broadly later will be read the other way, and a term drafted obscurely also loses the protection of section 48(2) for the price and the main subject matter.
Questions we are asked
I signed it. Does that not settle the matter?
No. Section 51(1) provides that an unfair term does not bind the consumer, and it says so notwithstanding the Contract Law. Signature goes to whether the contract was made, not to whether a particular term survives the test in section 50.
Does this apply to a contract for a property?
Yes, where the other side is a consumer. Section 48(3) applies the Part, with the necessary changes of wording, to the terms of contracts for the sale, lease or any other disposal of immovable property. Developers' standard contracts and standard tenancies are inside the regime.
Can I argue that the price itself was unfair?
Not under this Part. Section 48(2) excludes from the assessment both the definition of the main subject matter and the adequacy of the price against what is supplied in return. The exclusion holds only where those terms are in plain intelligible language, so an obscure price or interest mechanism is not protected by it.
What is the 360 day rule?
Section 50(5) makes a term unfair where interest is calculated, and the method of calculation described, on the basis of 360 days, or any number of days other than 365 days, or 366 days in a leap year. No question of good faith or imbalance arises: the calculation basis is enough on its own. It is worth checking on any consumer facility, because the convention was once common.
If one term goes, does the whole contract go?
Usually not. Section 51(2) provides that the contract continues to bind the parties unless it cannot continue to exist without the unfair term. The ordinary outcome is the contract minus the clause.
Does any of this apply to my employment contract?
No. Section 48(4) excludes contracts of employment from this Part, along with contracts concerning succession rights, family law matters, and the formation and organisation of companies or partnerships. Employment terms are governed by the employment legislation instead.
This article is for general information only and does not constitute legal advice. Laws and their application can change, and individual circumstances differ. For advice on your own matter, contact Klitos Platis at klitos@kleanthousplatis.com or telephone +357 22 680 330.
Klitos Platis
Advocate, Partner
Kleanthous & Platis LLC, Nicosia · Published 22 August 2026
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