Contract 3 Content of a Contract Part II Flashcards
UCTA 1977 stands for?
Unfair Contract Terms Act 1977
To what kind of contractual relationship that UCTA 1977 does not govern?
Trader to consumers, it is governed by CRA 2015 instead
5 types of clauses to which UCTA 1977 will have effect
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)
The effect of UCTA 1977 if it applies:
renders the exemption clause void or
subjects it to the reasonable test
Situations where UCTA 1977 render the exemption clause void and of no effect
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
Siutations where UCTA 1977 will render the exemption clauses void; and
Situtations where UCTA 1977 will subject the clause to a reasonableness test
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)
State the knowledge threshold for an exemption for it to be subject to reasonable tset
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
Pursuant to sch 2 of UCTA, what are the guidelines for the court to consider concerning an exemption clause
(5)
SIC SI
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
What are limitation clauses under UCTA
Reasonableness test for limitation clauses
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
Smith v Eric Bush (surveyor’s case)
ABCD
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
St Albans City and District Council v Interntional Computers ltd (council system ungrade error)
ARISE
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
Schenkers ltd v Overland Shoes ltd
Standard industry terms are generally reasonable
Stewart Gill ltd v Horatio Myer& Co ltd
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.
Watford Electronics v Sanderson CFL ltd
discrete
if a term contains discrete parts, each part will be considered seperately
Thomas Witter v TBP Industries
A clause that excludes liability for misrepresentation, could be read to include exclusion of fraudulent misrepresentation
Goodlife Foods v Hall Fire Protection
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
State section 31(1) of CRA 2015
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
State section 31(2) of CRA 2015 (clause automatically void)
ROE
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
State section 57(1) of CRA 2015
Trader to consumers
void if clause excludes or restrict liability arising from performance without reasonable care and skill
State section 57(3) of CRA 2015
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
State 57(5) of CRA 2015
ROE
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
State the Fairness test under s.62 of CRA 2015
(FA (I) (R)ness
Faith Imbalance detRiment
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
How the fairness test under s.62 of CRA 2015 is carried out
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
General rule for claims against third party
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
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?
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
Under SGA, right to terminate is lost if:
3
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
Under CRA, consumer can repudiate contrat if the trader breaches which sections?
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.
3 conditions for an exclusion clause to be effective
- it must be incorporated
- it must be constured by its wording the cover the loss suffered by the claimant
- it must not be in conflict with statute, namely UCTA and CPA
Explain contra proferentum rule
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.
Terms to which the fairness test does not apply
same requirement for onerous clause
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)
