Requirement of transparency of contractual terms in the UE law – on an example of a loan agreement denominated in a foreign currency

The Court of Justice of the European Union (CJEU) has ruled the requirement that a contractual term must be drafted in plain intelligible language (Directive 93/13) is to be understood as requiring also that the contract should set out transparently the specific functioning of the mechanism to which the relevant term relates and the relationship between that mechanism and that provided for by other contractual terms, so that that consumer is in a position to evaluate, on the basis of clear, intelligible criteria, the economic consequences for him which derive from it.

That question must be examined by the referring court, in the light of all the relevant facts, including the promotional material and information provided by the lender in the negotiation of the loan agreement.

The Court accented that the borrower must be clearly informed of the fact that, in entering into a loan agreement denominated in a foreign currency, he is exposing himself to a certain foreign exchange risk which will, potentially, be difficult to bear in the event of a fall in the value of the currency in which he receives his income. Second, the seller or supplier, in this case the bank, must be required to set out the possible variations in the exchange rate and the risks inherent in taking out a loan in a foreign currency, particularly where the consumer borrower does not receive his income in that currency.

Therefore, in order to determine whether a contractual term is to be regarded as unfair, the national court must take account of the nature of the goods or services which are the subject matter of the contract and must take account ‘at the time of conclusion of the contract’ of all the circumstances attending its conclusion.


Sources: Judgment of the CJEU in case C-186/16, Directive 93/13/EEC.

Read in Polish: Wymóg przejrzystości warunków umownych w prawie UE na przykładzie umowy o kredyt w walucie obcej