Unfair Contract Terms

Question 1

Approach to exemption clauses and notices

Answer 1

(1) What cause of action is alleged to be modified or excluded by the contractual term?
(2) Was the clause in question actually incorporated into the contract?
(3) Properly construed, does the clause cover the problem which has arisen, e.g. is the wording of the relevant clause apt to exempt the party seeking to rely upon it from the breach of duty (contractual or tortious) which has arisen
(4) In the case of consumer contracts, does the Unfair Contract Terms Directive as implemented into English law by the Unfair Terms in Consumer Contracts Regulations 1999 avail the consumer?
(5) Does the Unfair Contract Terms Act 1977 provide any additional/alternative relief?

Question 2

L’Estrange v Graucob (1934)

Answer 2

Signing a document that has been presented without fraud or misrepresentation is a binding contract whether it has been read or not. Will this scope still stand in modern times with small and complex terms? Think apple t&cs…

Question 3

Chapleton v Barry UDC (1940)

Answer 3

The claimant hired a deck chair and on the ticket there was a disclaimer. This was not reasonable notice as it was a mere form of receipt. It was not reasonable to expect contractual terms to be on this document.

Question 4

Parker v South Eastern Railway (1877)

Answer 4

This case established the rule that reasonable notice needs to be given of an exclusion clause.

Question 5

Thompson v London, Midland, & Scottish Railway (1930)

Answer 5

Clauses may be incorporated by reference to another document. Railway ticket referring to conditions on timetable allowed.

Question 6

Olley v Marlborough Court (1949)

Answer 6

An exclusion clause in the bedroom of a hotel was not reasonable notice as it was not brought to the attention of the guest at the time the contract was made. If it had been placed at the desk it would have been reasonable notice.

Question 7

Thornton v Shoe Lane Parking (1971)

Answer 7

Notice outside the carpark was sufficient but exclusion of all liability on vending machine was not. It was an unusual term so more effort should have been taken to bring notice to it. Any terms after the vending machine would be too late.
So “wide and so destructive of rights” Lord Denning MR

Question 8

Inferfoto v Stiletto Visual Programmes (1988)

Answer 8

Although it was reasonable to incorporate some terms on a delivery notice, this particular term was so onerous and unusual greater effort needed to be taken to bring this to the attention of the party.

Question 9

McCutcheon v MacBrayne (1964) HL

Answer 9

An example of a case where the course of dealings was not sufficiently established. General case law shows there needs to be a sufficient course of dealings.

Question 10

Houghton v Trafalgar Insurance (1954)

Answer 10

‘Contra Proferentem’: an exclusion clause will be construed against the party seeking to rely on it. Interpretation of the word “load” in a car contract not to mean passengers. Strained construction. Not sure if this would still stand following UCTA as purpose was to ensure compensation was given to consumers, it may be considered hostile construction.

Question 11

Canada Steamship Lines v The King (1952) HL

Answer 11

(1) Where there is express exception, that provision should be favoured
(2) Where there is no express reference to negligence, the court must consider whether the words are wide enough, in their ordinary meaning, to cover negligence
(3) The courts must then consider if the clause is substantially aimed at another type of damage
Lord Morton

Question 12

HIH Casualty v Manhattan Bank (2003) HL

Answer 12

Justifies Canada Steamships as a person should not be considered to have given up their rights unless expressly clear they have intended to.
It is not a “litmus test.” Lord Bingham

Question 13

Hollier v Rambler Motors (1972) CA

Answer 13

Arranged by telephone to have car repaired, it was not a sufficient course of dealings that he had used the company 3 or 4 times over 5 years previously signing the document containing the exclusion clause. Also clause “not responsible for damage caused by fire to customer’s cars on the premises” would only cover accidental fires, not negligent ones.

Question 14

White v John Warwick (1953)

Answer 14

Clauses are only given a narrow meaning where they may cover strict and negligent liability. It must explicitly remove negligent liability. (Clause: “Nothing in this agreement shall render the owners liable for any personal injuries”.)

Question 15

Aisla Craig (1983)

Answer 15

Words should be given their natural, pain meaning with regard to limitation clauses. They do not need to be approached with the same hostility as exclusion clauses.

Question 16

Darlington v Dello (1986) Australia

Answer 16

Do not draw a distinction between exclusion and limitation clauses.

Question 17

Unfair Terms in Consumer Contracts Regulations 1999

Answer 17

S. 3(1) applies to consumers; defines consumer and seller
S. 5 describes situations it would be an unfair term
S. 6(1) must consider nature of goods, circumstances, other terms
S. 6(2) the regulations cannot relate to the main subject of the contract or the adequacy of the price/remuneration
Schedule 2(1)(a) cannot exclude for death or person injury, prima face an unfair term (unless individually negotiated)
Regulation 8: rest of the contract remains enforceable
Regulation 7(1): plain, intelligible language
Regulation 7(2): interpretation most favourable to consumer prevails

Question 18

Procedures for EU Regulations

Answer 18

Step 1: Consumer makes complaint to Director General of Fair Trading (DGFT) (or other Qualifying Body);
Step 2: DGFT under a duty to consider whether term is unfair (unless complaint appears frivolous or vexatious) (Regulation 10)
Step 3: If DGFT decides that term is unfair, then has power to apply to the court for an injunction to prevent use (Regulation 12)

Question 19

Director General of Fair Trading v First National Bank (2002) HL

Answer 19

An injunction can be granted against usual rule regarding tax collection, but it must create a significant imbalance to the detriment of the consumer.

Question 20

UCTA 1977

Answer 20

S.1 defines liability/who is a business
S.2 negligence
S.3 consumer and business
S.4 indemnity clauses
S.11 unreasonableness test
S.13 prevents restrictive justice

Question 21

Stewart Gill v Horatio Myer (1992)

Answer 21

The courts have taken a flexible/liberal approach to what amounts to an exclusion clause and interpreting section 13.

Question 22

R&B Customs Brokers v United Dominions Trust (1988)

Answer 22

A business buying Christmas presents for their employees would be acting as a consumer as it is not in the course of their business.