Unifying Unfair Terms Legislation
| Author | Elizabeth Macdonald |
| Published date | 01 January 2004 |
| DOI | http://doi.org/10.1111/j.1468-2230.2004.06701004.x |
| Date | 01 January 2004 |
REPORTS
Unifying Unfair Terms Legislation
Elizabeth Macdonald
n
INTRODUCTION
There are two major pieces of UK legislation which focus on unfair terms ^ the
Unfair Contract Terms Act 1977 (UCTA) and the Unfair Terms in Consumer
Contracts Regulations1999
1
(the Regulat ions). For over t wenty-¢ve yea rs UCTA
has been rendering exemption clauses in consumer and business contracts ine¡ec-
tive, either automatically or because they fail a reasonableness test. In the consu-
mer context the Regulations apply a fairness test to non-individually negotiated
terms more generally and have been seen as ‘turning on its head ythe general
duty of the lawyer to draft wholly and exclusively in the interests of the client’.
2
UCTA and the Regulationsare probably the twosi ngle most signi¢cant pieces of
legislation in the ¢eld of contract law in the UK.Together they provide a power-
ful weapon against unfair terms. Unfortunately, they are completely unrelated to
each other. Each individually is not an easy piece of legislation to understand and
the complexities become considerable when their di¡ere nces and overlaps fall to
be considered. It is therefore to be welcomed that the Law Commissions have
now ventured intothis maze with a consultationdocument. Itsterms of reference
relate not only to the substance of a replacement piece of legislation but also to
making it ‘clearer and more accessible to the reader’ and provisional proposals
relate to uni¢cation and simpli¢cation.
3
It is the purpose of this note to consider
those proposals. First, it will brie£youtline the two pieces of legislation and their
disparities. Secondly, it will outline the Law Commissions’provisional proposals
and ¢nally it will consider some aspects of those proposals in detail.
OUTLINE OF THE CURRENT LEGISLATION
UCTA is a very familiar piece of legislation. Broadly, it addresses the problem of
unfair exemption clauses and has been seen as removing the need to stretch the
n
Professor of Law, University of Wales,Aberystwyth.
1 SI1999/2093implementing the EC Directive onUnfair Termsin Consumer Contracts 93/13/EEC.
2 Pat Edwards, Legal Director, O⁄ce of Fair Trading, ‘The Challenge of the Regulations’ OFT
Unfair Contract Terms Bulletin No 4, 19 ^ The reference was to the Directive fromwhich the
Regulations derive as such, but the Regulations are very closely based on the Directive and
provide for its implementationi n the UK.
3UnfairTermsin ContractsLaw Commission Consultation Paper No166, Scottish LawCommiss ion
Discussion Paper No 119.
rThe Modern LawReview Limited 2004
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(2004) 67(1) MLR 69^93
common law to do so through, for example,‘strained construction’.
4
It does not
address all exemption clauses, but basically only those which attempt to exclude
or restrict ‘business liability’
5
and which fall within the compass of one of its
‘active sections’
6
(eg clauses dealing with liability for negligence,
7
or which are
used against someone dealing as a consumer orby one party in their ‘writtenstan-
dard terms of business’
8
, or clauses excluding or restricting liability for breach of
certain implied terms in ‘goods’ contracts
9
) and which are not in contracts which
are excludedwholly or in part from its operation(eg insurance contracts
10
). It d oe s
not merely provide assistance to consumers, but in appropriate cases can also be used
in relation to a bus iness transaction by a business faced with an exemption clause as,
for example, where the clause is to be found in the other business party’s written
standard terms.
11
In addition to its application to contract terms it also applies to
non-contractual disclaimers seeking to exclude or restrict liability in negligence.
12
In some cases it makes exemption clauses automatically ine¡ective, as with attempts
to exclude or restrictl iability fornegligently caused death or personal injury,
13
but for
the most part, it renders exemption clauses ine¡ective unless they satisfy‘the require-
ment of reasonableness’.
14
UCTA is enforced solely through the use of its provisions
to render aterm i ne¡ective whenthere is a dispute in relation to a particularco ntract.
The UnfairTerms in Consumer Contracts Regulations1999
15
are an impl emen-
tation of the EC Directive o n Unfair Terms in Consumer Contracts
16
(the Direc-
tive), replacing the prior implementation in the 1994 Regulations of the same
name.
17
Basically the Regulations applya fairness test to terms i ncontracts between
‘consumers’ and ‘sel lers or suppliers’, which have not been‘individually negotiated’
4EgPhoto ProductionLtd vSecuricorTransport Ltd [1980] AC 8 27, 851, GeorgeMitchell (Chesterhall)Ltd v
Finney L ock Seeds Ltd [1983]2 AC 803,810.
5 But see s6(4) for a limited exception.
6 There is a clear basic division in UCTA between those sections setting out the Actsbasic scope, the
de¢nition sections (which set out de¢nitions of terminology used elsewhere in the Act), and the
‘Active’sections which set out what is tohappen to an exemption clause in a particular situation or
dealing with a particular subject matterie whether it is to be rendered automatically ine¡ectiveor
it is to be ine¡ective unless it satis¢es the requirement of reasonableness.On UCTAgenerally see
E. Macdonald, Exemption Clauses and UnfairTerms (London: Butterworths, 1999), L. Ko¡man &
E. Macdonald,TheLaw of Contract(Croydon:Tolley, 20 01) Ch 10.
7 s 2. Similar provision is made for Scotland in s 16.
8 s 3. Similar provision is made for Scotlandi n s17.
9 ss 6 and 7. Similar provision is made forScotland i n ss20 a nd21.
10 Sched 1 (Similar provision is made for Scotland in s15), s 26. See also s 29 (saving for other
relevant legislationa nd international agreements).
11 s 3. In the Scottish part of UCTAs ee s 17.
12 s 2. Those seeking to exclude or restrict business liability for negligently caused death or
personal injury are automatically ine¡ective. In relation to other loss or damage the test of
reasonableness is applied. (In Scotland,th is is coveredby s 16).
13 s 2 (1).Simi lar provision is made for Scotland in s 16.
14 Eg s 2(2), s 3,s 6(3) (Similar provision is made for Scotland in ss s 16(1)(a), s 17, s 20(2)(ii)). On the
requirementof reasonableness see s11 (Similar provisionis made for Scotland in s 24) and sched 2.
15 SI 1999/2083.
16 93/13/EEC OJ 1993 L 95/29.
17 The main di ¡erences between the two sets of Regulations lies in the addition, ¢rst, in the 1999
version of powers for‘qualifying bodies’to take preventiveaction as well as the Director General
of Fair Trading to whom,alone, they were given in the earlier version. Secondly, the language of
the 1999 version was brought even closer to that of the original Directive than the earlier version
and cleared up certain di⁄culties as to the coverage of contracts dealing with land, for example.
Unifying Unfair Terms Legislation
70 rThe Modern LawReview Limited 2004
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