A recent High Court case has repercussions for club membership contracts after its ruling that fixed terms and early termination fees in gym contracts are unfair and unenforceable.
Following action by the Office of Fair Trading, the High Court, ruled in the Office of Fair Trading v Ashbourne Management Services Ltd [2011] EWHC 1237, that Ashbourne’s standard form agreements specifying minimum membership periods of between one to three years and requiring members to pay the balance of the minimum membership period in the event of early termination (and allowing Ashbourne to terminate for minor breaches by the customer) were unfair within the meaning of the Unfair Terms in Consumer Contracts Regulations 1999.
Justice Kitchin ruled that Ashbourne’s business model was “designed and calculated to take advantage of the naivety and inexperience of the average consumer.” The ruling found that Ashbourne had used to its advantage the knowledge that most consumers usually overestimate their usage of the gym facilities when they first sign up.
In these circumstances, the terms imposing a minimum membership of 24 and 36 months were unfair and12-month minimum terms were also unfair where the customer was given insufficient rights to terminate early.
However, minimum terms of 12 months were not unfair where the contract allowed the member to suspend or cancel their membership (without incurring charges) in certain circumstances, including for financial or health reasons, or if the member moved out of the area or lost their job.
Although this case is primarily concerned with gym memberships, it has wider application and could include golf, sport centres, spas and leisure and health centres memberships.
Membership arrangements that oblige customers to pay for a minimum period, regardless of usage or early termination charges, should be carefully considered for fairness. If there is any doubt, a right to suspend cancel or terminate early without charge should be included.
For more information, please contact Paul Hardman.
