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Introduction
Sometimes contract terms are considered to be so unfair to one of the contacting parties that the courts have to intervene to prevent an injustice. This has tended to arise in the context of exemption clauses and these are controlled both by the common law and by the Unfair Contract Terms Act 1977.

Unfair Contract Terms Legislation

In general the Act only applies to clauses inserted into agreements in commercial concerns of businesses. The act does not apply to certain contracts, for example contracts relating to the creation or transfer of interests in land, contracts relating to company formation or securities transaction and insurance contracts.
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Unfair Contract Terms Act 1977 (UCTA)

Two techniques are used for controlling exclusion clauses:

(1) Some types of clauses are void (2) whereas others are subject to a test of reasonableness.
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Main provisions of UCTA Act

1. Avoidance of Liability for Negligence (S.2)

Liability for death or personal injury resulting from negligence cannot be excluded or limited clauses purporting to do so will simply be ineffective (S.2(1)).

Similarly, liability for other loss or damages resulting from negligence cannot be also excluded or limited unless the term is reasonable. Negligence covers breach of contractual obligations of skill and care.
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Main provisions of UCTA Act

2. Avoidance of liability for breach of contract (s.3)
(The meaning of reasonableness)

Clauses which are subject to reasonableness by UCTA obviously only apply if the courts decide it is reasonable for them to do so.

Main provisions of UCTA Act

Avoidance of liability for breach of contract (s.3)contd (s.3 )contd
The person who imposes the standard term cannot, or deals with the consumer, unless the term is reasonable,

(a) restrict liability for his own breach or fundamental breach, or (b) claim to be entitled to render substantially different performance or no performance at all.
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Main provisions of UCTA Act

3. Unreasonable Indemnity clauses (s.4)

A clause whereby one party undertakes to indemnify the other for liability incurred in the others performance of the contract is void if the party giving the indemnity is a consumer, unless it is reasonable.

Main provisions of UCTA Act

4. Sale and supply of goods (ss.6(ss.6-7)
A consumer contract for the sale of goods, hire purchase, supply of work or materials or exchange of goods cannot exclude or restrict liability for breach of the conditions relating to description, quality, fitness for the purpose for which sold and sample implied by the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982. 1982. In a nonnon -consumer contract these implied conditions may be excluded if the exclusion clause is reasonable. The implied condition as to title cannot be excluded in any contract.
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Consumers (s.12) A person deals as a consumer 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) The goods are of a type ordinarily supplied for private use or consumption
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Test of reasonableness (s.11)

For the purposes of Sale and supply of goods (ss (ss 6 and 7), the court will consider the following:
the relative strengths of the parties bargaining positions and other means by which the customers requirements cold have been met; met; whether the customer received an inducement to agree to the term (e.g. if goods were offered more cheaply if the exclusion clause was accepted), or could have been entered into similar contract with another party without agreeing to that term;

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Test of reasonableness (s.11)Contd

whether the customer knew, or ought reasonably to have known, about the term, bearing in mind any trade custom or previous course of dealing; where an exemption clause only comes into operation if a particular condition is not fulfilled, whether it was reasonable at the time of contracting to expect that it would be feasible to comply with that condition; and whether the goods concerned were made or adapted to a special order
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Regulations

The regulations of Unfair Terms in Consume Contracts Regulations (UTCCR) 1999 have created a three tier system for dealing with unfair terms in the UK: common law, Unfair Contracts Terms Act 1977, The Regulations 1999.
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Regulations

Unfair Terms
A contractual term which has not been individually negotiated (e.g. standard form contract) shall be regarded as unfair if, contrary to the requirements of good faith, it causes a significant imbalance in the parties rights and obligations arising under the contract, to the detriment (harm or disadvantage) of the consumer.

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Regulations
Unfair Terms Contd For example: terms which exclude or limit the liability of a seller in the event of death of a consumer resulting from an act or omission of that seller terms requiring any consumer who fails to fulfill his obligation to pay a disproportionately high sum in compensation
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Regulations
Unfair Terms Contd terms obliging the consumer to fulfill all his obligations where the seller or supplier dos not perform his duties Refer to http:// http://www.legislation.gov.uk www.legislation.gov.uk to see all the potentially unfair terms listed there.

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Regulations
Unfair Terms Contd

A term found to be unfair shall not be binding on the consumer although the contract in existence if it is capable of continuing without the unfair term.

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