At the beginning of July 1995 the Unfair Terms in Consumer Contracts Regulations 1994 will come into force.

These regulations, which implement an EU Directive, promise to be one of the most important single pieces of consumer protection legislation in years.The aim of the regulations is to protect consumers from 'unfair' terms included in the standard terms of businesses with which they deal.

Their form is, however, unsatisfactory and as a result their likely effect is far from clear.The DTI has not produced original legislation giving effect to the Directive in the domestic context.

Instead it has reproduced the words of the Directive with the minimal changes required to accommodate them within a statutory instrument.

This has become a depressingly familiar style of implementation and is presumably intended to avoid arguments as to whether or not the regulations fully and properly implement the Directive.One result has been the introduction of a test of unfairness dependent upon the 'requirement of good faith'.

That requirement is not defined.

A general obligation of 'good faith' in commerce is familiar to continental civil law jurisdictions.

It is largely unknown to English law in this context.During negotiations in Brussels this problem was recognised.

Recitals were added to the Directive which suggest that 'good faith' may in some ways be analogous to reasonableness under the Unfair Contract Terms Act 1977.The regulations do not however follow this lead.

They refer to 'good faith' instead of 'reasonableness' - the result is likely to be two similar but slightly different tests.

In any particular case they may produce different results.

This is likely to confuse both consumers and businesses.The regulations fail properly to define the contracts to which they apply.

The result is that the impact on financial business in particular is unclear.

The Law Society's company law committee expressed concern about this at an early stage of the consultation process.

Little progress has since been made.Contracts for the provision of intermediary or advisory services together with certain commodity and secondary trading will be caught.

The issue of equity securities is almost certainly excluded.

The line will be difficult to draw.

Consumers and businesses may need legal advice before they know whether particular dealings are affected.

In the consumer field, this is not a desirable position.With no clarification of the contracts caught, any contract between an individual and a business supplier will be open to assessment for fairness.

As a result, the regulations may have unexpected consequences.

Where a bank lends one person money on the basis of a guarantee from a third party consumer, arguably the guarantee must be 'fair' even though the guarantor does not him or herself receive anything from the bank.

If a business rents a house from a private individual it could even find the purchase contract assessed for fairness.The Directive was intended to apply to contracts entered into after 31 December l994.

Due to government delays, the regulations will not come into force until 1 July l995.

However, they are not specifically confined to contracts entered into after that date.

It is at least arguable therefore that the regulations will catch all existing contracts.

This could allow, for example, the validity of a 20-year-old mortgage contract to be challenged.

Any term allowing contract terms to be varied unilaterally will almost certainly fall foul of the regulations.

As a result businesses may find it difficult to revise existing arrangements to comply.One much heralded element of the new regime is that it will, for the first time, embody in statute a concept of plain English.

The regulations require all contract terms to be in 'plain intelligible language'.

Unfortunately it is far from clear what will happen if they are not.Where there is any 'doubt about the meaning' of a term it will be construed in favour of the consumer.

The regulations do not tell us in whose opinion there must be doubt for this provision to come into play Is it the reasonable man on the Clapham omnibus or a High Court judge? Is the usual type of customer relevant to the test? Will plain intelligible language always be English?The drafting of the regulations would also allow consumers to use a whole range of unexpected arguments.

Take the example of an unclear clause which on any reading would favour a business.

If on one interpretation the clause would be fair and on another unfair, a court would face a difficult decision.

If it applied the 'fair' interpretation the term would be upheld to the detriment of the consumer.

If the term were interpreted in a way which rendered it unfair it would be void and the business would be left without any of its protection.

Which interpretation would be 'most favourable to the consumer'?The regulations are to be welcomed as is any legislation which encourages business not to take customers for granted.

However, they are deeply flawed.

This is likely to mean both that consumers make less use of them than they should and businesses find themselves spending excessive time attempting to identify the best method of compliance with the inevitable result of higher costs and therefore prices for all of us.

As each case will turn very much on its individual facts there is an additional danger that the regulations will give rise to repetitive litigation.

Much valuable court time will be spent in trying to establish ground rules for applying the regulations.