Contractual Terms - Concepts of fairness

Question 1

What is procedural fairness?

Answer 1

this is about how the contract is entered. Rules that require notices to be prominent, or terms to be clear, reflect the concept of procedural fairness

Question 2

What is substantive fairness?

Answer 2

this is about the law intervening when terms are really one sided and impose a heavy burden on a party

Question 3

What is needed in order for an exemption clause to be upheld?

Answer 3

It must satisfy the common law rules on incorporation.

Question 4

When would a party be deemed to have notice of the terms of a document even without reading the terms?

Answer 4

If a contractual document containing the contractual term is signed by the party affected by the term that party will be deemed to have notice of the terms

Question 5

What was held in L’Estrange v Graucob?

Answer 5

Terms were held part of the contract despite the machine being in broken conditon - buyer did not read terms.

Question 6

What was held in Curtis v Chemical Cleaning Co?

Answer 6

if the nature of a term has been misrepresented by the other party, or his or her agent, that party cannot rely on the term beyond the extent to which it has been misrepresented, even if the misrepresentation is innocent.

Question 7

What about terms incorporated in an unsigned document?

Answer 7

Terms contained in such a document will only be incorporated into the contract if the party affected by them had reasonable notice of them, even if, in fact, s/he does not actually know of them

Question 8

What is meant by reasonable notice?

Answer 8

In this context ‘reasonable’ notice means ‘notice’ sufficient to have brought the existence of the clause to the attention of a reasonably alert and attentive recipient.

Question 9

What are two distinct elements in the issue of ‘reasonableness’ of notice?

Answer 9

firstly when the notice was given and, secondly, even assuming it was given and received ‘in time’ how ‘reasonable’ on the facts it seems to be. - notice of a term must have been given to the affected party at or before the time the contract was made.

Question 10

What was held in Olley v Marlborough Court Hotel?

Answer 10

Hotel liable - exemption clause back of bedroom - notice after contract had been made.

Question 11

What is held as reasonable notice? Parker v South Eastern Railway

Answer 11

Reasonable person expects terms and should read them. Clause held effective as part of contract

Question 12

What was held in Chapelton v Barry?

Answer 12

Clause not part of contract - term not on contractual document.

Question 13

Really onerous terms - What did Denning state in Spurling v Bradshaw and Thornton v Shoe Lane Parking?

Answer 13

The more unreasonable the clause, the more greater the notice which must be given of it.

Question 14

What was held in Interfoto Picture Library v Stiletto Visual Programmes?

Answer 14

Clauses in which are too onerous can be held not enforceable.

Question 15

What about non-standard claimants?

Answer 15

Thompson v LMS Railway - reasonable person can read terms. Unless written in foreign language (Geier v Kujawa, Western and Warne Bros)

Question 16

What is held if both parties have been involved in previous dealings?

Answer 16

Spurling v Bradshaw - Terms had alreayd been previously incorporated from previous dealings despite arriving late.

Hollier v Rambler Motors - Dealings were held not sufficiently frequent so could not rely on past to incorporate dealings - same in McCutcheon v David Macbrayne Ltd

Question 17

What is the limits of the incorporation rules?

• highlighting rule

Answer 17

Transparency required is low - little notification of terms will suffice.

Higher standard of transparency in unsigned documents. - does not apply to terms excluding liability for negligence causing loss of or damage to property, late delivery of goods, unfair bank charges.

Question 18

What is the contra proferentem rule?

Answer 18

Interpretation of a clause narrowly against the party relying on it.

Question 19

What is the guidance on the exclusion of negligence was provided in Canada Steamship Lines v The King?

Answer 19

1. Where the wording actually states it excludes liability in negligence, then it should have that effect.
2. If the wording does not actually refer to negligence, the court has to work out if the wording is wide enough to cover negligence.
3. If the words are wide enough to cover liability in negligence, the court should see if there are other possible types of liability that could have been intended to be covered by the clause.

Question 20

What are the limits to the contra proferentem rule?

Answer 20

If the meaning of the clause is clear and free from any doubt, then the court contra proferentem approach has no scope to apply.

Question 21

What was held in the case of Photo Productions v Securicor 1980?

Answer 21

The House of Lords (led by Lord Wilberforce) held that this covered the liability even for deliberate acts. It could not have been given any other meaning. - Clear wording - no scope

Question 22

What is fairness in substance?

Answer 22

Terms may be taking away important rights or imposing unreasonable burdens.

Question 23

Statutory Controls - used to overcome issues caused by exemption clauses and unfair terms.

Answer 23

Unfair Contract Terms Act 1977

Consumer Rights 2015

Question 24

What is The Unfair Contract Terms Act 1977?

Answer 24

Only concerned with business contracts.

Question 25

What are the complete bans? - UCT Act 1977

Answer 25

• Excluding or restricting liability for negligence causing death or injury
• Excluding or restricting liability for certain implied terms

Question 26

What is the UCTA reasonableness test?

Answer 26

(a) negligence causing losses other than death or injury, e.g. loss or damage to property
(b) for misrepresentation
(c) for breach of express promises
(d) whenever a term tries to say that the business can perform in a way that is different from the reasonable expectations of the customer

Question 27

What are the relevant factors needed for the reasonableness test UCTA Test?

Answer 27

• Relative bargaining power
• Choices and alternatives available
• Difficulty of the task liability relates to
• The practical consequences of the decision
• Possibility of insurance against the loss
• Whether there was an inducement

Question 28

What did the now repealed UTCCR 1999 act bring into force?

Answer 28

Scope - covered unfair terms generally.

Transparency - plain intelligible language

Preventative controls - public bodies such as the Office of Fair Trading (now the CMA) and local authority trading standards’ departments could go to court and obtain injunctions to actually prevent the use of unfair terms in the first place

Question 29

What are the criticisms?

Answer 29

• Interpretation can suffice as narrow
• Existence of two sources for legislation in terms of exemption clauses created confusion for consumers
• The test of fairness did not apply to terms that had been individually negotiated

Question 30

What is the Consumer Rights Act 2015?

Answer 30

Essentially, the consumer protection from UCTA and the UTCCR has been moved and placed into the CRA.

Question 31

What are the banned terms in the UTCA?

Answer 31

The banned terms from UCTA are now in the CRA but the CRA now includes contracts for digital content. So under the CRA, a business cannot exclude or limit liability from the implied terms (now in the CRA) in:
• Contracts for the sale of goods (s.31);
• Contracts for the supply of services (s.57);
• Contracts for the sale of digital content (s.47);
• Liability in negligence for death or personal injury (s.65).

Question 32

Unfair terms CRA?

Answer 32

Unfair terms are not binding on the consumer.

• Terms that

• allow traders to increase the price after the contract
• requiring the consumer to pay in full for building work before it even begins
• allowing very high fees or charges to be paid where consumers are late with credit card payments or exceed their credit or overdraft limit

Question 33

What was held in ParkingEye Ltd v Beavis [2015]?

Answer 33

Term was not held unfair. It did create an imbalance but was not contrary to good faith.

Question 34

What was held by Lord Bingham in DGFT v First National Bank?

Answer 34

Supplier should not take advantage of the consumers necessity, indigence or lack of experience.