Unfair Terms Essay (A) Flashcards
What is the stance on defining unfair terms?
Courts strike out unfair terms based on procedural unfairness, which tends to be a more certain and objective process.
In the case of consumer contracts, substantive unfairness does result in some arbitrariness but necessary for protection of weaker parties
What are the points made in this essay
1) When English law is concerned with procedural unfairness, and how it is less arbitrary.
2) When English law is concerned with substantive unfairness, and how it is arbitrary
3) Necessity to protect fairness and negate inequality of bargaining power
What is the definition of procedural unfairness?
Concerned with the process of bargaining
1) If there was negotiation between parties
2) whether the parties agreed to the terms
3) Is there any presence of unequal bargaining power between parties
4) occasionally concerned with the doctrine of duress
What is the definition of substantive unfairness?
concerned with the content of bargaining
1) is it a fair price?
2) is it a good deal?
What is the stance of English law with regards to these 2 different unfairness?
- UCTA 1977 (B2B relationships) mainly protect procedural unfairness
- CRA 2015 (consumer transactions) protect a mix of procedural and substantive unfairness
How does UCTA 1977 protect procedural unfairness?
- only applies to exclusion and restriction clauses.
This places a greater emphasis on the form of the term which excludes or restricts liability of the party seeking to rely on them.
- evident from the criteria used in determining unfairness
Schedule 2 of the UCTA 1977 defines unfairness as:
- Whether the customer knew or ought to have known of the term
- Whether there was significant disparity in bargaining power
- Whether it was reasonable at the point of contract to expect compliance
- Whether there was opportunity to enter similar contracts without clause
How is the decision in Smith v Eric Bush similar to UCTA 1977?
Lord Griffiths examined if
- the parties were of equal bargaining power
if it would have been reasonably practicable to obtain advice from an alternative source
How does CRA 2015 protect procedural unfairness?
- also addressses exclusion and restriction clauses - liability cannot be excluded (s31 CRA 2015)
Requirements of excluded core terms
- terms must be transparent and prominent (s 64)
- terms must be the main subject matter of the contract, or concerning price (s64)
what does transparent and prominent mean?
transparent = plain and intelligible
prominent = brought to the attention of the consumer such that the average consumer would have been aware of it
prominent requirement place a greater emphasis on procedural fairness - in whether the term is sth that the consumer was aware of/ was it sth he genuinely consented to
How does English law show that is concerned with substantive fairness?
- CRA 2015
where all other non - core terms are subject to the test of unfairness
test of unfairness is
1) the term is unfair is contrary to the requirement of good faith, have caused significant imbalance between the parties’ rights and obligations under the contract to the detriment of the consumer
2) this will be determined: i) taking into account the nature of the subject matter of the contract and (ii) by reference to the other
Is s62 in CRA 2015 the only way such unfairness is protected?
- Schedule 2 of the CRA 2015 contains an indicative and non-exhaustive list of terms which may be held to be unfair
- CRA 2015 is new and the courts must be given time to decide how to approach this question before a more consistent and principled framework for dealing with unfair terms
What does Beavis v ParkingEye (2015) say about unfairness?
- Court is split over whether a term which imposed a $85 charge for exceeding the time limit in a carpark was unfair
- Majority said no
1) reasonably motorist would have agreed to it, because it was comparable to local authority parking charges and because it was a legitimate for the defendant to charge such a fee for its space - Minority disagreed
would not have been agreed to if indv/seperately negotiated and it was disportionate to damages - shows room for uncertainty for substantive unfairness
What is the justification for the focus on substantive unfairness?
1) Greater need to protect the interests of consumers
Lord Denning in George Mitchell v Finlay Lock Seeds
- comment on the proble of inequality of bargaining power
- freedom was all on the side of the big concern
- no freedom for the little man who took the ticker or order form or invoice
- the big concern said, ‘Take it or leave it’. The little man had no option to take it
What is the reason why consumers need stronger protection? (Lack of knowledge)
1) Lack of industry knowledge
S2 of the CRA 2015 defines a consumer as ‘an indv acting for purposes that are wholly or mainly outside the indv trade, business or profession’
- While it defines trader as a person acting for purposes relating to that person trade, business, craft or profession,
- *The difference in degree of knowledge available to both parties requires that the law put them on equal grounds’
Why consumers need stronger protection? (standard form contracts)
- Lack of negotiation process - consumers tend to treat transactions in a hurried and informal manner
- Tilden Rent-a-Car Co v Clendenning (1978) - “there ought to be a distinction in which consumers re given more leeway” in agreeing to a contract
- the nature of the contract demands more flexibility from
- the greater flexibility may lead to arbitrariness but its part of the process of facilitating market transactions
- Chen WIshart: contract law not just about facilitating market transactions but also regulating them
