Unfair Contract Terms Act 1977
Encyclopedia
The Unfair Contract Terms Act 1977 (c 50) is an Act of Parliament
of the United Kingdom
which regulates contract
s by restricting the operation and legality
of some contract
terms
. It extends to nearly all forms of contract
and one of its most important functions is limiting the applicability of disclaimer
s of liability
. The terms
extend to both actual contract
terms
and notice that are seen to constitute a contract
ual obligation
.
The Act
renders terms
excluding or limiting liability
ineffective or subject to reasonableness, depending on the nature of the obligation
purported to be excluded and whether the party purporting to exclude or limit business liability, acting against a consumer.
It is normally used in conjunction with the Unfair Terms in Consumer Contracts Regulations 1999
(Statutory Instrument
1999 No. 2083), as well as the Sale of Goods Act 1979
and the Supply of Goods and Services Act 1982
.
The Law Commission
and the Scottish Law Commission
have recommended that the Unfair Terms in Consumer Contracts Regulations 1999
and the Unfair Contract Terms Act 1977 should be replaced by a more unified and coherent regime.
. s2(1), liability
for negligence
occasioning death
or personal injury
cannot be excluded.
Manufacturers' guarantee. s5(1), loss arising from (a) defective goods or (b) negligence
of distributor
; cannot be excluded where goods are "of a type ordinarily supplied for private use or consumption."
Sale of Goods
Terms
governed by the Consumer Protection Act 1987
.
They are also governed (since 2007) by the Occupiers Liability Act 1984.
. s2(2), exclusion of liability
for negligence
other than for death
or personal injury
must satisfy the requirement of reasonableness.
Contract
ual Liability. s3, This applies against a party that drafted a standard form contract
where the other party is a consumer. Exclusion of breach
of the same contract
(s3(2)(a)) or performance of which is substantially or totally different of that which is reasonably expected of him (s(3)(b)).
Indemnity
clauses. s4, A party dealing as a consumer
cannot contract
to indemnify a third party on behalf of the other party, except insofar as it satisfies the requirement of reasonableness.
Sale of Goods
. s6(3), Implied terms as to description, quality and sample
(Sale of Goods Act 1979
ss 13-15) may only be reasonably excluded where neither party is dealing as a consumer
.
Misrepresentation
. s8, substitutes the Misrepresentation Act 1967
s3. Under that post-1979 section, an exclusion of liability for misrepresentation
must satisfy the requirement of reasonableness.
Consumer. s 12, A party deals as a consumer if
Schedule 2 gives guidelines specifically to ss 6(3), 7(3), 7(4).
Common Law
Act of Parliament
An Act of Parliament is a statute enacted as primary legislation by a national or sub-national parliament. In the Republic of Ireland the term Act of the Oireachtas is used, and in the United States the term Act of Congress is used.In Commonwealth countries, the term is used both in a narrow...
of the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
which regulates contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
s by restricting the operation and legality
Legality
The principle of legality is the legal ideal that requires all law to be clear, ascertainable and non-retrospective. It requires decision makers to resolve disputes by applying legal rules that have been declared beforehand, and not to alter the legal situation retrospectively by discretionary...
of some contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
terms
Contractual term
A contractual term is "Any provision forming part of a contract" Each term gives rise to a contractual obligation, breach of which can give rise to litigation. Not all terms are stated expressly and some terms carry less legal gravity as they are peripheral to the objectives of the...
. It extends to nearly all forms of contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
and one of its most important functions is limiting the applicability of disclaimer
Disclaimer
A disclaimer is generally any statement intended to specify or delimit the scope of rights and obligations that may be exercised and enforced by parties in a legally recognized relationship...
s of liability
Legal liability
Legal liability is the legal bound obligation to pay debts.* In law a person is said to be legally liable when they are financially and legally responsible for something. Legal liability concerns both civil law and criminal law. See Strict liability. Under English law, with the passing of the Theft...
. The terms
Contractual term
A contractual term is "Any provision forming part of a contract" Each term gives rise to a contractual obligation, breach of which can give rise to litigation. Not all terms are stated expressly and some terms carry less legal gravity as they are peripheral to the objectives of the...
extend to both actual contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
terms
Contractual term
A contractual term is "Any provision forming part of a contract" Each term gives rise to a contractual obligation, breach of which can give rise to litigation. Not all terms are stated expressly and some terms carry less legal gravity as they are peripheral to the objectives of the...
and notice that are seen to constitute a contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
ual obligation
Obligation
An obligation is a requirement to take some course of action, whether legal or moral. There are also obligations in other normative contexts, such as obligations of etiquette, social obligations, and possibly...
.
The Act
Act of Parliament
An Act of Parliament is a statute enacted as primary legislation by a national or sub-national parliament. In the Republic of Ireland the term Act of the Oireachtas is used, and in the United States the term Act of Congress is used.In Commonwealth countries, the term is used both in a narrow...
renders terms
Contractual term
A contractual term is "Any provision forming part of a contract" Each term gives rise to a contractual obligation, breach of which can give rise to litigation. Not all terms are stated expressly and some terms carry less legal gravity as they are peripheral to the objectives of the...
excluding or limiting liability
Legal liability
Legal liability is the legal bound obligation to pay debts.* In law a person is said to be legally liable when they are financially and legally responsible for something. Legal liability concerns both civil law and criminal law. See Strict liability. Under English law, with the passing of the Theft...
ineffective or subject to reasonableness, depending on the nature of the obligation
Obligation
An obligation is a requirement to take some course of action, whether legal or moral. There are also obligations in other normative contexts, such as obligations of etiquette, social obligations, and possibly...
purported to be excluded and whether the party purporting to exclude or limit business liability, acting against a consumer.
It is normally used in conjunction with the Unfair Terms in Consumer Contracts Regulations 1999
Unfair Terms in Consumer Contracts Regulations 1999
The Unfair Terms in Consumer Contracts Regulations 1999 is a UK statutory instrument, which implements the EU Unfair Consumer Contract Terms Directive into domestic law.Implemented under the European Communities Act 1972. See also, L95 OJ 29...
(Statutory Instrument
Statutory Instrument
A Statutory Instrument is the principal form in which delegated or secondary legislation is made in Great Britain.Statutory Instruments are governed by the Statutory Instruments Act 1946. They replaced Statutory Rules and Orders, made under the Rules Publication Act 1893, in 1948.Most delegated...
1999 No. 2083), as well as the Sale of Goods Act 1979
Sale of Goods Act 1979
The Sale of Goods Act 1979 is an Act of the Parliament of the United Kingdom which regulates English contract law and UK commercial law in respect of goods that are sold and bought. The Act consolidates the original Sale of Goods Act 1893 and subsequent legislation, which in turn had codified and...
and the Supply of Goods and Services Act 1982
Supply of Goods and Services Act 1982
The Supply of Goods and Services Act 1982 is an Act of the Parliament of the United Kingdom that requires traders to provide services to a proper standard of workmanship...
.
The Law Commission
Law Commission
A Law Commission or Law Reform Commission is an independent body set up by a government to conduct law reform; that is, to consider the state of laws in a jurisdiction and make recommendations or proposals for legal changes or restructuring...
and the Scottish Law Commission
Scottish Law Commission
The Scottish Law Commission is Scottish advisory public body established by Parliament of the United Kingdom in 1965 to keep the law of Scotland under review and recommend necessary reforms to improve, simplify and update Scots law. It plays a leading role in developing the law for the people of...
have recommended that the Unfair Terms in Consumer Contracts Regulations 1999
Unfair Terms in Consumer Contracts Regulations 1999
The Unfair Terms in Consumer Contracts Regulations 1999 is a UK statutory instrument, which implements the EU Unfair Consumer Contract Terms Directive into domestic law.Implemented under the European Communities Act 1972. See also, L95 OJ 29...
and the Unfair Contract Terms Act 1977 should be replaced by a more unified and coherent regime.
Terms rendered ineffective
NegligenceNegligence
Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...
. s2(1), liability
Legal liability
Legal liability is the legal bound obligation to pay debts.* In law a person is said to be legally liable when they are financially and legally responsible for something. Legal liability concerns both civil law and criminal law. See Strict liability. Under English law, with the passing of the Theft...
for negligence
Negligence
Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...
occasioning death
Death
Death is the permanent termination of the biological functions that sustain a living organism. Phenomena which commonly bring about death include old age, predation, malnutrition, disease, and accidents or trauma resulting in terminal injury....
or personal injury
Personal injury
Personal injury is a legal term for an injury to the body, mind or emotions, as opposed to an injury to property. The term is most commonly used to refer to a type of tort lawsuit alleging that the plaintiff's injury has been caused by the negligence of another, but also arises in defamation...
cannot be excluded.
Manufacturers' guarantee. s5(1), loss arising from (a) defective goods or (b) negligence
Negligence
Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...
of distributor
Distributor
A distributor is a device in the ignition system of an internal combustion engine that routes high voltage from the ignition coil to the spark plugs in the correct firing order. The first reliable battery operated ignition was developed by Dayton Engineering Laboratories Co. and introduced in the...
; cannot be excluded where goods are "of a type ordinarily supplied for private use or consumption."
Sale of Goods
- s6(1), implied termsContractual termA contractual term is "Any provision forming part of a contract" Each term gives rise to a contractual obligation, breach of which can give rise to litigation. Not all terms are stated expressly and some terms carry less legal gravity as they are peripheral to the objectives of the...
as to title (Sale of Goods Act 1979Sale of Goods Act 1979The Sale of Goods Act 1979 is an Act of the Parliament of the United Kingdom which regulates English contract law and UK commercial law in respect of goods that are sold and bought. The Act consolidates the original Sale of Goods Act 1893 and subsequent legislation, which in turn had codified and...
s12) cannot be excluded. - s6(2), implied termsContractual termA contractual term is "Any provision forming part of a contract" Each term gives rise to a contractual obligation, breach of which can give rise to litigation. Not all terms are stated expressly and some terms carry less legal gravity as they are peripheral to the objectives of the...
as to description, quality or sampleSampleSample or samples may refer to:* Sample , a subset of a population* Sample , a digital discrete sample of a continuous analog signal* Sample , a specimen or small quantity of something...
(Sale of Goods Act 1979Sale of Goods Act 1979The Sale of Goods Act 1979 is an Act of the Parliament of the United Kingdom which regulates English contract law and UK commercial law in respect of goods that are sold and bought. The Act consolidates the original Sale of Goods Act 1893 and subsequent legislation, which in turn had codified and...
ss13-15) cannot be excluded against a consumerConsumerConsumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...
.
Terms
Contractual term
A contractual term is "Any provision forming part of a contract" Each term gives rise to a contractual obligation, breach of which can give rise to litigation. Not all terms are stated expressly and some terms carry less legal gravity as they are peripheral to the objectives of the...
governed by the Consumer Protection Act 1987
Consumer Protection Act 1987
The Consumer Protection Act 1987 is an Act of the Parliament of the United Kingdom that made important changes to the consumer law of the United Kingdom. Part 1 implemented European Community Directive 85/374/EEC, the product liability directive, by introducing a regime of strict liability for...
.
They are also governed (since 2007) by the Occupiers Liability Act 1984.
Terms subject to reasonableness
NegligenceNegligence
Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...
. s2(2), exclusion of liability
Legal liability
Legal liability is the legal bound obligation to pay debts.* In law a person is said to be legally liable when they are financially and legally responsible for something. Legal liability concerns both civil law and criminal law. See Strict liability. Under English law, with the passing of the Theft...
for negligence
Negligence
Negligence is a failure to exercise the care that a reasonably prudent person would exercise in like circumstances. The area of tort law known as negligence involves harm caused by carelessness, not intentional harm.According to Jay M...
other than for death
Death
Death is the permanent termination of the biological functions that sustain a living organism. Phenomena which commonly bring about death include old age, predation, malnutrition, disease, and accidents or trauma resulting in terminal injury....
or personal injury
Personal injury
Personal injury is a legal term for an injury to the body, mind or emotions, as opposed to an injury to property. The term is most commonly used to refer to a type of tort lawsuit alleging that the plaintiff's injury has been caused by the negligence of another, but also arises in defamation...
must satisfy the requirement of reasonableness.
Contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
ual Liability. s3, This applies against a party that drafted a standard form contract
Standard form contract
A standard form contract is a contract between two parties where the terms and conditions of the contract are set by one of the parties, and the other party is placed in a "take it or leave it" position with little or no ability to negotiate terms more favorable to it.Examples of standard form...
where the other party is a consumer. Exclusion of breach
Breach of contract
Breach of contract is a legal cause of action in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party's performance....
of the same contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
(s3(2)(a)) or performance of which is substantially or totally different of that which is reasonably expected of him (s(3)(b)).
Indemnity
Indemnity
An indemnity is a sum paid by A to B by way of compensation for a particular loss suffered by B. The indemnitor may or may not be responsible for the loss suffered by the indemnitee...
clauses. s4, A party dealing as a consumer
Consumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...
cannot contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
to indemnify a third party on behalf of the other party, except insofar as it satisfies the requirement of reasonableness.
Sale of Goods
Sale of Goods Act 1979
The Sale of Goods Act 1979 is an Act of the Parliament of the United Kingdom which regulates English contract law and UK commercial law in respect of goods that are sold and bought. The Act consolidates the original Sale of Goods Act 1893 and subsequent legislation, which in turn had codified and...
. s6(3), Implied terms as to description, quality and sample
Sample
Sample or samples may refer to:* Sample , a subset of a population* Sample , a digital discrete sample of a continuous analog signal* Sample , a specimen or small quantity of something...
(Sale of Goods Act 1979
Sale of Goods Act 1979
The Sale of Goods Act 1979 is an Act of the Parliament of the United Kingdom which regulates English contract law and UK commercial law in respect of goods that are sold and bought. The Act consolidates the original Sale of Goods Act 1893 and subsequent legislation, which in turn had codified and...
ss 13-15) may only be reasonably excluded where neither party is dealing as a consumer
Consumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...
.
Misrepresentation
Misrepresentation
Misrepresentation is a contract law concept. It means a false statement of fact made by one party to another party, which has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality...
. s8, substitutes the Misrepresentation Act 1967
Misrepresentation Act 1967
Misrepresentation Act 1967 is an Act of the Parliament of the United Kingdom, which regulates English contract law and unjust enrichment, so far as relevant for misrepresentations.-Section 1:-Section 2:...
s3. Under that post-1979 section, an exclusion of liability for misrepresentation
Misrepresentation
Misrepresentation is a contract law concept. It means a false statement of fact made by one party to another party, which has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality...
must satisfy the requirement of reasonableness.
Definition of consumer and business
Business. s 1(3), The Act only applies to "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". s14, Includes any government department.Consumer. s 12, A party deals as a consumer if
- s12(1)(a), He is not in the course of a business and does not hold himself to do so.
- s12(1)(b), the other party is in the course of a business.
- s12(1)(c), In Sale of Goods contract, the goods are of a type "ordinarily supplied for private use or consumptionConsumption (economics)Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined in part by comparison to production. But the precise definition can vary because different schools of economists define production quite differently...
" (s12(1A), this subsection does not apply to individualIndividualAn individual is a person or any specific object or thing in a collection. Individuality is the state or quality of being an individual; a person separate from other persons and possessing his or her own needs, goals, and desires. Being self expressive...
s) - s12(2), A party is not a consumer if dealing at an auctionAuctionAn auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder...
where he has the opportunity to attend in person or is not a natural personNatural personVariously, in jurisprudence, a natural person is a human being, as opposed to an artificial, legal or juristic person, i.e., an organization that the law treats for some purposes as if it were a person distinct from its members or owner...
buying auctionAuctionAn auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder...
. - s12(3), Burden is upon the party purported to be acting in the course of a business to show that either he is not in the course of a business or that the other party is otherwise not a consumer
Definition of reasonableness
Section 11 provides some guidance but most development has been in common lawSchedule 2 gives guidelines specifically to ss 6(3), 7(3), 7(4).
Common Law
- Stewart Gill Ltd v Horatio Myer & Co LtdStewart Gill Ltd v Horatio Myer & Co LtdStewart Gill Ltd v Horatio Myer & Co Ltd [1992] is an English contract law case on the Unfair Contract Terms Act 1977.-Facts:Horatio Myer & Co Ltd was buying an overhead conveyer system from Stewart Gill Ltd. It was defective. Myer refused to pay the last 10% instalment. Gill sued...
provides that reasonableness is assessed at the time of contract; and that the burden of proof is upon the party purporting to have excluded liability. - Levison v Patent Steam Carpet Cleaning Co Ltd provides that clarity and preciseness will raise the reasonableness of a term; and vice versa. See also Stag Line Ltd v Tyne Ship Repair Group Ltd as to small print (literally; size-wise).
- Smith v Eric S Bush. Lord Griffith provides 4 points that may be considered... (see application in St Albans City and District Council v International Computers Ltd.).
- Equality of Bargaining Powers.
- How practical was it to obtain independent legal advice regarding the term?
- How difficult is the task being for which liability is being excluded?
- What are the practical consequences of ruling that a term is unreasonable?
See also
- Standard form contractStandard form contractA standard form contract is a contract between two parties where the terms and conditions of the contract are set by one of the parties, and the other party is placed in a "take it or leave it" position with little or no ability to negotiate terms more favorable to it.Examples of standard form...
- Unfair Terms in Consumer Contracts Regulations 1999Unfair Terms in Consumer Contracts Regulations 1999The Unfair Terms in Consumer Contracts Regulations 1999 is a UK statutory instrument, which implements the EU Unfair Consumer Contract Terms Directive into domestic law.Implemented under the European Communities Act 1972. See also, L95 OJ 29...
- Electronic Commerce Regulations 2002Electronic Commerce Regulations 2002The Electronic Commerce Regulations 2002, SI 2002/2013, incorporates the EU Electronic Commerce Directive 2000/31/EC into the law of the United Kingdom. They apply to contracts concluded by electronic means over distance whereby the buyer is a consumer...
- Office of Fair Trading v Abbey National and Others (2008)Office of Fair Trading v Abbey National and Others (2008)Office of Fair Trading v Abbey National plc and Others [2009] , [2009] , [2008] is a case about bank charges in the United Kingdom, concerning the situation where a bank account holder goes into unauthorised overdraft....
- Bank charges test case - Britvic Soft Drinks Ltd v Messer UK LtdBritvic Soft Drinks Ltd v Messer UK LtdBritvic Soft Drinks Ltd v Messer UK Ltd [2002] is a notable English contract law case, concerning the application of the Unfair Contract Terms Act 1977 in the context of consumer protection and a supply chain.-Facts:...
[2002] EWCA Civ 548 - Commerzbank AG v Keen [2007] IRLR 132
- Bridgen v American Express Bank Ltd [2000] IRLR 94
- Baltic Shipping Company v Dillon (1993) 176 CLR 344
- Watford Electronic Ltd v Sanderson CFL Ltd [2001] EWCA Civ 317