Contract 3 Content of a Contract Part II

Question 1

UCTA 1977 stands for?

Answer 1

Unfair Contract Terms Act 1977

Question 2

To what kind of contractual relationship that UCTA 1977 does not govern?

Answer 2

Trader to consumers, it is governed by CRA 2015 instead

Question 3

5 types of clauses to which UCTA 1977 will have effect

Answer 3

UCTA applies to clauses that exempt liability for

Things done in course of business (not otherwise) (s.1(3))

breach of the SGA (s.6)

breach of SGSA (s.7)

Negligence and negligent breach of contract (s.2); and

breaches of express terms (s.3)

Question 4

The effect of UCTA 1977 if it applies:

Answer 4

renders the exemption clause void or

subjects it to the reasonable test

Question 5

Situations where UCTA 1977 render the exemption clause void and of no effect

Answer 5

Causing death or personal injury resulted from negligence

Implied terms about title (right to pass ownership) s.12 of SGA and s.2 SGSA 1982

Question 6

Siutations where UCTA 1977 will render the exemption clauses void; and
Situtations where UCTA 1977 will subject the clause to a reasonableness test

Answer 6

Clauses exempting liabilities for personal injuries and death, and the assumption of the rights of title from seller are automatically void (SGA s,12 and SGSA s..2

Other situatiions will be subjected to reasonableness test

Loss or damage to property caused by negligence

Breach of express term if dealing on standard terms of business (that is liability for breach of contract, performance of contractual duty signifiticantly different, no performance)

Breach of SGA s.13 s.14 and s.15 (description and quality, fitness for purpose and reasonable price)

Breach of SGSA s.3 and s.4 (descrpition and quality)

Question 7

State the knowledge threshold for an exemption for it to be subject to reasonable tset

Answer 7

It must have been fair and reasonable to include the exemption clause having regard to circumstances that

they were known
The parties ought reasonably to have been known; or
they were within the contemplation of the parties when the contract was made

Question 8

Pursuant to sch 2 of UCTA, what are the guidelines for the court to consider concerning an exemption clause

(5)

SIC SI

Answer 8

Relative Strength of the bargaining position of the parties S

Was there an Inducement (e.g price)? did the trader have an opportunity to enter a simliar contract without an exemption clause but chose not to do so? I

was the Compliance of the clause practisable? C

was the goods were made for a Special order? S

Incorporated? did the customer know or reasonably should have known about the clause I

Question 9

What are limitation clauses under UCTA

Reasonableness test for limitation clauses

Answer 9

Limitation clauses do not exempt liaiblities entirely but restrict the potential liabilities up to a fixed amount

The resources that D could use to meet liabilities
potential coverage of insurance

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

Question 10

Smith v Eric Bush (surveyor’s case)

ABCD

Answer 10

Court will consider the following to see if an exemption for professional advice is reasonable

1) Would it be reasonably practisible to obtain the advice from an Alternative source A
2) Were the parties of equal Bargaining power B
3) What are the practical Consequences C
4) How Difficult is the task D

Question 11

St Albans City and District Council v Interntional Computers ltd (council system ungrade error)

ARISE

Answer 11

For limitation clause (clause that restricts penalty up to a fixed amount)

ARISE
was there awareness of the clause? A

Does D have ample resources to meet liability? R

if the coverage of insurance exceed the damage sought, D must justify the restricted scope of the limitation clause I

is the clause common/standard practice? S

is C an experienced commercial body free to make its own bargain? E

Question 12

Schenkers ltd v Overland Shoes ltd

Answer 12

Standard industry terms are generally reasonable

Question 13

Stewart Gill ltd v Horatio Myer& Co ltd

Answer 13

One should consider the clause as a whole not only the part relied on; reasonableness will be assessed based on when the contract was made, not the time of breach.

Question 14

Watford Electronics v Sanderson CFL ltd

discrete

Answer 14

if a term contains discrete parts, each part will be considered seperately

Question 15

Thomas Witter v TBP Industries

Answer 15

A clause that excludes liability for misrepresentation, could be read to include exclusion of fraudulent misrepresentation

Question 16

Goodlife Foods v Hall Fire Protection

Answer 16

If the parties are of equal bargaining power, then it is the party agreeing to the exemption clause best place to obtain the relevant insurance

Question 17

State section 31(1) of CRA 2015

Answer 17

Trader to consumers:

exemption clauses are not binding if the clauses exclude or restrict liability on

s. 9 quality
s. 10 fit for particular purpose
s. 11 correspond with description

Question 18

State section 31(2) of CRA 2015 (clause automatically void)

ROE

Answer 18

Trader to consumers: ROE
void if clause excludes a right to remedy in respect of liability under s.31(1) R

void if clause makes the right of remedy subject to onerous/restrictive condition/put the person at a disadvantage for pursuing a right of remedy O

void if clause excludes or restricts rules of evidence or procedure E

Question 19

State section 57(1) of CRA 2015

Answer 19

Trader to consumers

void if clause excludes or restrict liability arising from performance without reasonable care and skill

Question 20

State section 57(3) of CRA 2015

Answer 20

Trader to consumers

void if clause exclude or restrict trader’s liability arising from unreasonable price and performance in unreasonable time, if it would prevent the consumer from recovering the price paid or the value of any other consideration

Question 21

State 57(5) of CRA 2015

ROE

Answer 21

a term is not binding if it excludes or restricts a right of remedy, similar to section 31(2) of CRA 2015, namely:

void if clause excludes a right to remedy in respect of liability under s.49 - 52.

void if clause makes the right of remedy subject to onerous/restrictive condition/put the person at a disadvantage for pursuing a right of remedy

void if clause excludes or restricts rules of evidence or procedure

Question 22

State the Fairness test under s.62 of CRA 2015

(FA (I) (R)ness

Faith Imbalance detRiment

Answer 22

Fairness test: a term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the party’s rights and obligations under the contract to the detriment of the consumer

The term must be transparent meaning they must be drafted in plain and intelligible language

Question 23

How the fairness test under s.62 of CRA 2015 is carried out

Answer 23

This is to be determined by
taking account of the nature and subject matter of the contract; and

by reference to all circumstances when the term was agreed and to all other terms of the contract or any other contract on which it depends

Question 24

General rule for claims against third party

Answer 24

General rule: an exemption clause cannot protect a third party as the privity of contract rule provides that only a party to a contract can rely on the clause (Adler v Dickson

Question 25

Requirement for a third party to rely on Contracts (Rights of Third Parties) Act 1999

Does the act confer a right to sue in tort for the third party not being a party to the contract in question?

Answer 25

rights can be accorded to a 3rd party if
1) the contract expressly provides that he may acquire a benefit

2) the term purports to confer a benefit on him
3) case of negligence - a third party may claim in the tort of negligence if they can establish duty, breach and causation

Question 26

Under SGA, right to terminate is lost if:

3

Answer 26

the breach is so slight that if would be unreasonable to reject goods

is contrary to the requirement of good faith

buyer has accepted goods (retained goods beyond a reasonable time

Question 27

Under CRA, consumer can repudiate contrat if the trader breaches which sections?

Answer 27

s.9-11 (since they are conditions) by exercising their right to reject the goods. This overrides common law right to terminate for breach of these terms.

Question 28

3 conditions for an exclusion clause to be effective

Answer 28

1. it must be incorporated
2. it must be constured by its wording the cover the loss suffered by the claimant
3. it must not be in conflict with statute, namely UCTA and CPA

Question 29

Explain contra proferentum rule

Answer 29

if there is any ambiguity when interpreting an exclusion clause, the courts will interpret the ambiguity against the party seeking to rely on the clause.

Question 30

Terms to which the fairness test does not apply

same requirement for onerous clause

Answer 30

if it specifies the main subject matter fo the contract related to the price payable under the contract,
provided that the relevant term is
transparent (legible)
and prominent (notice and awareness)