#2231 - Unfair Contract Terms Act 1977 - Contract Law

Unfair Contract Terms Act 1977

1.— Scope of Part I.

• (1) For the purposes of this Part of this Act, “negligence” means the breach—

  • (a) of any obligation,

    • arising from the express or implied terms of a contract,

      • to take reasonable care or exercise reasonable skill in the performance of the contract;

  • (b) of any common law duty to take reasonable care or exercise reasonable skill (but not any stricter duty);

  • (c) of the common duty of care imposed by the Occupiers' Liability Act 1957 or the Occupiers' Liability Act (Northern Ireland) 1957.

• (2) This Part of this Act is subject to Part III; and in relation to contracts, the operation of sections 2 to 4 and 7 is subject to the exceptions made by Schedule 1.

• (3) In the case of both contract and tort, sections 2 to 7 apply only to business liability,

  • that is liability for breach of obligations or duties arising—

    • (a) from things done or to be done by a person in the course of a business (whether his own business or another's); or

    • (b) from the occupation of premises used for business purposes of the occupier;

• (4) In relation to any breach of duty or obligation,

  • it is immaterial for any purpose of this Part of this Act

    • whether the breach was inadvertent or intentional, or whether liability for it arises directly or vicariously.

2.— Negligence liability.

• (1) A person cannot by reference to any contract term or to a notice given to persons generally or to particular persons

  • exclude or restrict his liability for death or personal injury resulting from negligence.

• (2) In the case of other loss or damage,

  • a person cannot so exclude or restrict his liability for negligence

    • except in so far as the term or notice satisfies the requirement of reasonableness.

• (3) Where a contract term or notice purports to exclude or restrict liability for negligence

  • a person's agreement to or awareness of it

    • is not of itself to be taken as indicating his voluntary acceptance of any risk.

3.— Liability arising in contract.

• (1) This section applies as between contracting parties where one of them deals as consumer or on the other's written standard terms of business.

• (2) As against that party, the other cannot by reference to any contract term—

  • (a) when himself in breach of contract, exclude or restrict any liability of his in respect of the breach; or

  • (b) claim to be entitled—

    • (i) to render a contractual performance substantially different from that which was reasonably expected of him, or

    • (ii) in respect of the whole or any part of his contractual obligation, to render no performance at all,

      • except in so far as (in any of the cases mentioned above in this subsection) the contract term satisfies the requirement of reasonableness.

4.— Unreasonable indemnity clauses.

• (1) A person dealing as consumer cannot by reference to any contract term

  • be made to indemnify another person (whether a party to the contract or not)

    • in respect of liability that may be incurred by the other for negligence or breach of contract,

      • except in so far as the contract term satisfies the requirement of reasonableness.

• (2) This section applies whether the liability in question—

  • (a) is directly that of the person to be indemnified or is incurred by him vicariously;

  • (b) is to the person dealing as consumer or to someone else.

5.— “Guarantee” of consumer goods.

• (1) In the case of goods of a type ordinarily supplied for private use or consumption, where loss or damage—

  • (a) arises from the goods proving defective while in consumer use; and

  • (b) results from the negligence of a person concerned in the manufacture or distribution of the goods,

    • liability for the loss or damage cannot be excluded or restricted by reference to any contract term or notice contained in or operating by reference to a guarantee of the goods.

• (2) For these purposes—

  • (a) goods are to be regarded as “in consumer use”

    • when a person is using them, or has them in his possession for use,

      • otherwise than exclusively for the purposes of a business; and

  • (b) anything in writing is a guarantee if it contains or purports to contain some promise or assurance (however worded or presented)

    • that defects will be made good by complete or partial replacement, or by repair, monetary compensation or otherwise.

• (3) This section does not apply as between the parties to a contract under or in pursuance of which possession or ownership of the goods passed.

6.— Sale and hire-purchase.

• (1) Liability for breach of the obligations arising from—

  • (a) [section 12 of the Sale of Goods Act 1979]¹ (seller's implied undertakings as to title, etc.);

  • (b) section 8 of the Supply of Goods (Implied Terms) Act 1973 (the corresponding thing in relation to hire-purchase),

    • cannot be excluded or restricted by reference to any contract term.

• (2) As against a person dealing as consumer, liability for breach of the obligations arising from—

  • (a) [section 13, 14 or 15 of the 1979 Act]² (seller's implied undertakings as to conformity of goods with description or sample, or as to their quality or fitness for a particular purpose);

  • (b) section 9, 10 or 11 of the 1973 Act (the corresponding things in relation to hire-purchase),

    • cannot be excluded or restricted by reference to any contract term.

• (3) As against a person dealing otherwise than as consumer, the liability specified in subsection (2) above can be excluded or restricted by reference to a contract term, but only in so far as the term satisfies the requirement of reasonableness.

• [(4)]

[Section 7 omitted]

[Section 8 repealed]

9.— Effect of breach.

• (1) Where for reliance upon it a contract term has to satisfy the requirement of reasonableness,

  • it may be found to do so and be given effect accordingly

    • notwithstanding that the contract has been terminated either by breach or by a party electing to treat it as repudiated.

• (2) Where on a breach the contract is nevertheless affirmed by a party entitled to treat it as repudiated,

  • this does not of itself exclude the requirement of reasonableness in relation to any contract term.

11.— The “reasonableness” test.

• (1) In relation to a contract term, the requirement of reasonableness for the purposes of this Part of this Act, section 3 of the Misrepresentation Act 1967 [...]

  • is that the term shall have been a fair and reasonable one to be included

    • having regard to the circumstances which were, or ought reasonably to have been,

      • known to or in the contemplation of the parties when the contract was made.

• (2) In determining for the purposes of section 6 [..] above whether a contract term satisfies the requirement of reasonableness,

  • regard shall be had in particular to the matters specified in Schedule 2 to this Act;

    • but this subsection does not prevent the court or arbitrator from holding, [..] that a term which purports to exclude or restrict any relevant liability is not a term of the contract.

• (3) In relation to a notice (not being a notice having contractual effect), the requirement of reasonableness under this Act

  • is that it should be fair and reasonable to allow reliance on it,

    • having regard to all the circumstances obtaining

      • when the liability arose or (but for the notice) would have arisen.

• (4) Whereby reference to a contract term or notice a person seeks to restrict liability to a specified sum of money,

  • and the question arises (under this or any other Act)

    • whether the term or notice satisfies the requirement of reasonableness,

      • regard shall be had in particular (but without prejudice to subsection (2) above in the case of contract terms) to—

        • (a) the resources which he could expect to be available to him for the purpose of meeting the liability should it arise; and

        • (b) how far it was open to him to cover himself by insurance.

• (5) It is for those claiming that a contract term or notice satisfies the requirement of reasonableness to show that it does.

12.— “Dealing as consumer”.

• (1) A party to a contract “deals as consumer” in relation to another party if—

  • (a) he neither makes the contract in the course of a business nor holds himself out as doing so; and

  • (b) the other party does make the contract in the course of a business; and

  • (c) in the case of a contract governed by the law of sale of goods or hire-purchase, or by section 7 of this Act,

    • the goods passing under or in pursuance of the contract are of a type ordinarily supplied for private use or consumption.

• (1A) But if the first party mentioned in subsection (1) is an individual, paragraph (c) of that subsection must be ignored.

• (2) But the buyer is not in any circumstances to be regarded as dealing as consumer—

  • (a) if he is an individual

    • and the goods are second hand goods sold at public auction at which individuals have the opportunity of attending the sale in person;

  • (b) if he is not an individual

    • but the goods are sold by auction or by competitive tender.

• (3) Subject to this, it is for those claiming that a party does not deal as consumer to show that he does not.

13.— Varieties of exemption clause.

• (1) To the extent that this Part of this Act prevents the exclusion or restriction of any liability it also prevents—

  • (a) making the liability or its enforcement subject to restrictive or onerous conditions;

  • (b) excluding or restricting any right or remedy in respect of the liability, or subjecting a person to any prejudice in consequence of his pursuing any such right or remedy;

  • (c) excluding or restricting rules of evidence or procedure;

    • and (to that...