Following promulgation of the Law on Consumer Protection dated 02 November 2019 (“Consumer Protection Law”), the Ministry of Commerce (“MOC”) issued Prakas 0067 on Unfair Contract Terms on 1 March 2022 (“Prakas 0067”) aiming to protect consumer’s rights against excessive exploitation of benefits and abuse of circumstances arising from the contractual relations between consumers and business operators in Cambodia. Business operators who use non-negotiable standard form of contracts to deal with the consumers, such as retailers, service providers, banks, financial institutions, e-Commerce platforms, and real estate companies, need to ensure that such standard form of contract does not contain unfair contract terms.
What is a ‘Standard Form of Contract’?
A standard form of contract is a contract or any clause of a contract which is pre-formulated by the business operator for the provision of goods and/or services to the consumers without allowing the consumers to negotiate, revise or exert influence in whatever form on the said contract. While Prakas 0067 does not include examples of standard form of contract, the following could arguably be captured as the standard form of contract:
– standard terms and conditions posted on mobile apps or websites applied to end-users; and
– sale and purchase agreements for the provision of products between salesperson and consumers.
In practice, we note that business operators that have high volume of transactions to deal with a high number of consumers tend to use standard form of contract in order to avoid spending time to individually negotiate the terms and conditions of the contract with each consumer.
What is an Unfair Contract Term?
Unfair contract terms refer to “any terms of the standard form of contract that creates an excessive exploitation of benefits to the consumer”. According to Prakas 0067, clauses that can be construed as unfair includes:
- any clause excluding or limiting the liabilities of the business operator on the guarantee of the services and/or goods;
- any clause granting the right to the business operator to materially change or modify the type quantity, price and quality of goods and/or services without prior consent from the consumer;
- any clause granting the right to the business operator to change any substantial clause of the standard form of contract without prior consent; and
- any clause granting the right to the business operator to unilaterally and arbitrarily interpret or to terminate the contract at their sole discretion.
However, whether or not a term contains an excessive exploitation of benefits, a careful assessment needs to be taken in light of several factors including economic dominance, social circumstance, knowledge, or experience of the party. The criteria for the evaluation of the clause with excessive exploitation of benefits may also be further governed under the sectoral regulation to be issued by relevant ministry, institution or competent regulator.
What Should Companies Do to Avoid Using Unfair Contract Term?
Business operators can ensure compliance by formulating the standard form of contract in accordance with the below requirements:
- made in writing with a clear, precise, and comprehensible wording;
- prepared in Khmer language (although foreign languages can also be prepared in light of consumer’s request); and
- containing standard information as required by consumer protection related regulations (which include without limitation to prices, payment method, method on the cancellation of order, refund and delivery or exchange of goods).
Business operator must also explain, highlight, and provide clear information about the material clauses in the standard form of contract. For e-commerce, the substantial clauses of the standard form of contract must be explained to the consumers clearly in order to ensure that the consumers have the opportunity to read through it prior to their acceptance. The business operator shall also seek for consent from the consumer for any change of substantive terms and notify the consumers of any change of non-substantive terms.
In addition, business operators can request for a review on their standard form of contract in order to ensure compliance by filing such request to the National Commission for the Consumer Protection (“NCCP”) or the competent regulators in accordance with the applicable laws and regulations.
What are the Rights of a Consumer?
Prakas 0067 grants consumers the following rights:
- access to any necessary information in relation to the goods and/or services and the contract;
- demand for further clarification and explanation from the business operator and for sufficient time to consider the contract, especially the substantial clauses, prior to entering into such contract; and
- rescind or ratify any clause which provides excessive exploitation of profits and is deemed unfair in accordance with the Cambodian Civil Code.
Further, the consumer or any related party may file a complaint on their own or through associations for any non-compliance to this Prakas 0067 to the NCCP or the relevant ministry, institution, or regulators.
What are the Applicable Penalties?
The use of unfair contract clause is considered as a dishonest act being punishable under the Consumer Protection Law. Penalties include suspension, revocation or voiding of a certificate of commercial registration, and possible interim monetary fines of an amount up to KHR 50,000,000 (approximately USD 12,500). However, please note that payment of interim monetary fines does not release a violator from criminal and civil liability as provided under other relevant laws and regulations.
Standardized Contracts and Terms for Banks and Financial Institutions
To promote transparency and consumer protection in the banking and financial sector, the National Bank of Cambodia had initiated the Association of Banks in Cambodia and the Cambodia Microfinance Association to develop a standard loan contract (“Standard Contract”) and standard text of contractual terms (“Standard Terms”). Based on the Guidelines on the Implementation of Standard Loan Contracts and Standard Text of Contractual Terms for Banks and Financial Institutions issued in June 2023 (“Guidelines”), the Standard Contract is to be used by all banking and financial institutions for loans up to USD 50,000, whereas the Standard Terms are to be incorporated into financial agreements ranging from USD 50,000 to USD 100,000. There is no standard loan contract or standard text of contractual terms determined by the Association of Banks in Cambodia and the Cambodia Microfinance Association for loans greater than USD 100,000. Some key provisions in these documents concern, among others, the maximum lock-in period, notice period for early settlement of loans, period of collateral release upon settlement and hotline contact details.
Other than the banking and financial sector, to date, there is no standard form of contract issued for other sectors as yet. In this regard, for other sectors governed by the Consumer Protection Law, provisions under Prakas 0067 must be adhered to.
Should you have any concerns or queries on the matters mentioned above, please feel free to contact us at firstname.lastname@example.org.
The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.