#13 - Unreasonable Terms - Contract Law

Unfair Contract Terms Act (UCTA) 1977

s.1 (1) Negligence here = breach of a contractual obligation to use reasonable care or breach of common law duty or duty under occupiers’ liability act. (2) ss.2-7 only apply to things done in the course of business, except in s.6.

s.2 (1) A person cannot exclude or restrict liability for personal injury arising from negligence, and (2) can only do so for other damage if it satisfies ‘reasonableness’ requirement. (3) A person’s agreement/awareness of any such risk does NOT indicate voluntary acceptance of risk by him.

s.3 (1) When one party deals ‘as a consumer’ OR on the other party’s standard terms, (2) the other party can’t restrict/exclude his own liability for breach or be entitled to render substantially different performance to what was reasonably expected or non-performance, except insofar as is ‘reasonable’.

s.4 A person dealing as a consumer can’t be made to indemnify someone (even if that someone is a party to the contract) for breach of contract or negligence, unless its reasonable.

S.5 covers manufacturers’ guarantees so that, where legally binding, the manufacturer cant restrict liability for damage caused through defective goods that occur as a result of its negligence

s.6 Liability for breach from statutes re seller’s implied undertakings to title (s.12 Sale of goods act) or re ss.13-15 sale of goods act or re hire purchase goods corresponding to description under hire-purchase agreements, cannot be excluded against a person dealing as a consumer, and can only be excluded in relation to other parties insofar as is reasonable.

s.11 ‘Reasonableness’ = the term shall be a fair and reasonable one, having regard to the circumstances which were or ought to have been known to the parties when the contract was made. (4) Where D restricts his liability to a set amount of money, reasonableness depends on the resources he could expect to be available to him to meet liability should it arise, and how far it is open to him to cover himself through insurance. (5) Burden of showing reasonableness is on party claiming it. Schedule 2 gives guidance on reasonableness: Takes into account, (in)equality of bargaining positions; whether customer had opportunity to contract with another supplier who didn’t insist on such terms or received inducement to agree to the term; whether customer knew or ought to have know the extent of the term e.g. through course of dealing; whether, if the clause restricts liability for breach of a certain condition, it was reasonable to believe that compliance with that condition would be practicable; and whether goods were produced by special order of the customer.

s.12 P ‘deals as a consumer’ if he neither makes the contract in the course of business nor holds himself out as doing so; and the other party does make the contract in the course of business

s.13: To the extent that UCTA prevents exclusion or limitation of liability, it also prevents making liability or enforcement subject to restrictive or onerous conditions (including restricting rights or remedies or prejudicing a party for pursuing such a right or remedy). NB doesn’t affect arbitration.

Unfair Terms in Consumer Contracts Regulations

article 3: consumer = a natural person (nb not a legal person) which are outside his trade, business or profession

art.4: These deal with contracts between a supplier or seller and a consumer.

art.5: a term is unfair if not individually negotiated and, contrary to requirements of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract, to the detriment of the consumer. A term is never individually negotiated if drafted in advance so...