Is it possible to unilaterally increase prices?

authors: dr. kamilla bodori and dr. lili horváth

A few weeks ago, a judgment of the regional Court of Appeal of the Environs of Budapest received high publicity. The judgment examined the provisions of the general terms and conditions applied by a car dealer that allowed the dealer to unilaterally increase the price of new cars already sold.

The public prosecution, in order to protect consumers, examined new car sales contracts and then challenged the general terms and conditions considered to be unfair in court by means of an action in the public interest. Since the price of a new car is significantly influenced by market conditions, it is not always possible to fix it precisely in advance in a changing economic environment. This creates a risk for both the buyer and the seller, but in the case of certain vehicle sales contracts, the public prosecution noticed that the contractual terms passed the burden of the price increase entirely onto the consumers. However, according to the public prosecution, it is not permissible that the risk of the increase in prices be carried alone by the purchaser. This scenario can be eliminated if the contract clearly sets out in advance the possible reasons for the increase and the extent of the increase, so that the consumer can assess the extent of the possible price increases before the conclusion of the contract and can also check afterwards whether increase was compliant with the provisions of the contract.

In light of the above, the public prosecution requested the court to declare that the general contractual term applied by the vehicle trader, which allowed for a unilateral increase in price, was unfair and therefore invalid, because the circumstances giving rise to the amendment of the contract were not clearly specified and it was not transparent to the consumer what the amount of his additional payment obligation would be if the circumstances allowing a price increase arose. Furthermore, the clause at issue allowed the amendment of the contract only to the detriment of the consumer, and it was not clear, either.

In the final judgement of the case, which went to first and second instance, the court of first instance and the court of appeal upheld the public prosecution’s arguments and ruled that a predetermined and not individually negotiated contractual term is unfair if it violates the principles of clarity, itemized specification, symmetry and transparency. According to the judgment, in the case at hand, the contractual clauses that could be unilaterally modified by the seller and the reasons for such modifications were not fully defined, and therefore could not be assessed in advance by consumers and were neither transparent to them. Consumers did not know in advance under what conditions and to what extent additional charges could be passed onto them, as the conditions allowed for unilateral price increases after the conclusion of the sales contract, for example in the case of an increase in the public charges regarding the vehicles. However, a potential reduction in the public charges to the benefit of consumers did not qualify as a reason for price reduction under the general terms and conditions, which violated the principle of symmetry. The judgment also pointed out that the mere fact that consumers were granted the right of withdrawal did not make the clauses in question fair. 

Cases such as the one mentioned above are currently pending before the courts, and the public prosecution is working hard to prevent the spread of unfair general terms by launching actions in the public interest. The effect of a ruling given in proceedings in the public interest extends to all natural persons who have entered into a contract with an entity that uses the general terms and conditions found to be unfair, therefore to all individual contracts in which the unfair term is found. Under the law, such a contractual provision may not be invoked as a basis for a claim and rights cannot be based on it.

It is important to establish that it is still possible to unilaterally increase prices, to regulate this in the general terms and conditions of contract and therefore to adapt pricing in any sector to the constantly changing economic environment, but this requires a thorough analysis and the confident knowledge of the relevant legislation and the case law. Our firm has assisted a number of companies in reviewing and amending their general terms and conditions, thus we offer a wide range of expertise to our current and future clients to ensure that their terms and conditions compliant with the laws and with the latest practices.