Statutes
| Published date | 01 November 1978 |
| DOI | http://doi.org/10.1111/j.1468-2230.1978.tb01496.x |
| Date | 01 November 1978 |
STATUTES
AN OPTIMISTIC
LOOK
AT
THE
CONTRACT PROVISIONS
OF
UNFAIR CONTRACT TERMS ACT
1977
THE
Unfair Contract Terms Act
1977
has not been received with
unqualified praise by academic writers.’ In this comment
I
want to
suggest,
however,
that
some
d
the prablems which have been raised
in relation to the contract provisions, need not in practice give rise
to much difficulty, provided the Act is approaohed in a common-
sense way.
A major criticism made by Profewor Cmte,2
of
the Act’s con-
tmzt
provisions,
is
that
thy
have been drafted
on
the premise that
exception clauses operate
as
defences to accrued rights
of
action,
whereas on his thesis they do not. Rather, a ‘limitation or exclusion
of
liability
ips0
facto
limits the corrseslponding right
or
obligation, or
prevents its accrual, respectively. This thesis has ;been argued with
great cogency, though little success for many years.3 Certainly it
does not appear to have made much impression on the draftsman
of
this
Act.
So
for
example
&on
3
(2)
(u)
(whkh applies
to
the
exclusion
of
business liability, where one party deals
as
consumer
or
on
bhe other party’s standard terms
of
business), provides that
as
against what may
be
called the
“
innocent party,” the other cannot
by reference to any contract term
when himself in breach
of
con-
tract
exclude or restrict any liability
otf
his in respect
of
the breach.
On Professor Cmte’s thesis, an exception clause of the type
“
horse
warranted sound except for hunting,” affects the accrual
of
primary
rights, no breach olf contract
occurs
if
the horse
is
not
fit
for hunt-
ing, and therefore the section has no application. Yet this is a
common,
if
not a classical exception dause. Section
13 (1)
does not
help, indeed from the viewpoint
of
this
thesis it makes it worse. This
particular example, of colurse, would fall
within
section
6
(2)
if
it were
a sale. In relation to that section, section
13
(1)
seems
to
be
intended
to make it clear that a clause which defines the obligations
of
the
parties is
also
an
exemption clause, thus compounding the confusion.
Mr. Sealy4 however, suggests that in fact the courts may be
driven
to
accept Professor Coote’s thesis in order to keep the opera-
tion
of
the Act within sensible bounds. He gives the following
example:
“
my bricklayer contracts to supply and fit a cowl to the
ahimney
of
my smoking fireplace on the plain understanding (which
we both accopt) that it may
or
may not cure the fault.”
If
this
is
a
work and materials contract, section
7
(2)
seems to prevent exclusion
d
the warranties
of
quality. Only by adopting Professor
Coote’s
thesis in this case, can effect be given t’o the real bargain. How can
1
See especially Coote (1978)
41
M.L.R.
312; and Sealy (1978) 37
C.L.J.
IS.
2
LOC. cif.
note
1.
4
LOC.
eir.
note
1
above.
It
is
set out at length in Coote,
Exception
Clauses
(1964).
703
704
THE
MODERN LAW REVIEW
[Vol.
41
we justify this procedure in relation
to
section
7
however, when
in
relation to section
3
adapting
it
would daprive that ssction
d
much
of
its effect?
There is no academically tidy answer to these criticisms. There
may,
however,
be
a
practical answer. The
problem
with Professor
Coote’s thesis was that it applied, with impeccable logic, across the
whole range
of
exemption clauses: from exemptions in deeds to
exemptions
in
car-park tickets. The judicial response to exemption
clauses, which cdminated in the doctrine of fundamental breach,
was in reality a response to the problem
of
standard form contracts
which, as it was long ago observed, contradicted the presupposition
that the general
law
of
contract was adequately ~pecialised.~ The
standard form contract, has long
been
an indispensable part
of
commercial life.6 The trouble with the case law, as with Professor
Coote’s theory, was that it was locked in the
“
single seamless welb
”
view
of
contract, and failed to reccugnise that standard form con-
tracts were different in kind from the classical model of a bargain
between parties. They were, as it were, local acts
of
legislation
tailored to an operator’s individual needs. The fact that they often
went
beyond
this,
or
that those needs CoIUflictd with the oonmers’,
was the problem.
Now in relation to standard form contracts, it is not unreasonable
to foldow Lord Denning’s approach, first formulated in Karsales
v.
Wallis‘:
“The thing to do is
to
look at the contract apart from
the exempting clauses and see what are the terns express
or
implied,
whioh impose an obligation on the party.” In point
of
fact, all the
“
fundamental breach
”
cases properly
so
called which involved this
approach, do seem to have related to standard form contracts.
There is nothing to prevent courts holding that that was a material
fact in these cases. Section
3
would allow this since it applies where
one party deals on tihe other’s written standard terms.* Unfortun-
ately
it
also
apparently contemplates the alternative of dealing as
consumer, not on the other party’s standard terms, but
still
being
able to argue in a case similar to Mr. Sealy’s example on section
7,
that the contractor is liable.
The practical answer to this problem m\ay perhaps be suggested
by considering this example. Section 7 appears to prevent any con-
tracting out from the quality warranties at all.
So
that if the builder
says
“
I
can’t guarantee that this cowl will cure your simoke problem,
but I’ll install it
if
you want it
”
and the customer says
“
I’m happy
-you
go
ahead on that (basis,”
it
could be argued that the builder
5
See
K.
Llewellyn
(1939)
52
Harv.L.Rev.
700.
6
See
0.
Prausnitz, The
Standardisation
of
Commercial Contructs
(1937).
7
[1956]
1
W.L.R.
936, 940.
8
There is a potential problem of identifying certain borderline cases,
e.g.
contracts
typed from a common precedent (see Sealy
Ioc.
cit.).
Trade association terms
representing only the proffering party
are
presumably within the section. Part-
negotiated contracts incorporating common form exemptions are more difficult.
These are common in the engineering industry,
see
Beale
(1978)
5
Br.Jo.Law
&
Soc.
114, 118.
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