PLS I - Week 9 Statutory Control of Contract Terms 2024 PDF

Statutory Control of Contract Terms Welcome to PLS I – Week 9 with Dr Lorna Gillies Statutory Control of Contract Terms: Introduction Our focus: How and to what extent do statutes ensure fairness in contract terms? Business to consumer contracts Business to...

Statutory Control of Contract Terms Welcome to PLS I – Week 9 with Dr Lorna Gillies Statutory Control of Contract Terms: Introduction Our focus: How and to what extent do statutes ensure fairness in contract terms? Business to consumer contracts Business to business contracts  Statutory Control of Contract Terms in Business to Consumer Contracts (1) Part 2 of the Consumer Rights Act 2015 (replaces previous provision under the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations of 1994 and 1999) This Part applies to:- a contract between a trader and a consumer – s61(1) – a “consumer contract” – s61(3) and to notices – s61(4) trader – “a person acting for purposes relating to that person’s trade, business, craft or profession, whether acting personally or through another person acting in the trader’s name or on the trader’s behalf.” – s2(2) and s2(4) consumer – “an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession” – s2(3) A court must, if it can, consider the fairness of a term of a consumer contract even if the parties to the action before it have not raised the point in proceedings – s71  Statutory Control of Contract Terms in Business to Consumer Contracts (2) Unfair terms of consumer contracts and unfair consumer notices are not binding on the consumer – s61(1) and (2) How do we know what is fair? Three-part test – s62(5):- Contrary to the requirement of good faith Causes a significant imbalance in the parties’ rights/obligations To the detriment of the consumer Determined by – s62(7):- Taking into account the nature of the subject matter of the contract; and Reference to the circumstances existing when term agreed (contract) or when rights/obligations arose (notice) and to the terms of the contract  Statutory Control of Contract Terms in Business to Consumer Contracts (3) How do we know what is fair? ParkingEye Ltd v Beavis UKSC 67 Alternative argument Director General of Fair Trading v First National Bank plc UKHL 52 “The requirement of good faith in this context is one of fair and open dealing. Openness requires that terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer”  Statutory Control of Contract Terms in Business to Consumer Contracts (4) Consumer contract terms which may be regarded as unfair – Schedule 2 Terms restricting the liability of the trader Terms which allow the trader to make unilateral decisions about the main subject of the contract or the price Terms where the trader’s rights following a breach are disproportionately better than those of the consumer Terms restricting or adversely affecting the consumer’s right to litigate in the event of a breach.  Statutory Control of Contract Terms in Business to Consumer Contracts (5) Consumer contract terms which may not be regarded as unfair – s64 So long as transparent and prominent:- A term about the main subject matter of the contract A term about the price by comparison with the goods, digital content or services supplied under it. Office of Fair Trading v Abbey National plc UKSC 6 What if the meaning of the term is unclear or ambiguous? Meaning most favourable to consumer will prevail – s69(1)  Statutory Control of Contract Terms in Business to Consumer Contracts (6) What happens if a term is deemed to be unfair? not binding on consumer – s62(1) (contract) and s62(2) (notice) the rest of the contract will continue (so far as practicable) to have effect in every other respect – s67 Exclusion Clauses s65 – “A trader cannot by a term of a consumer contract or by a consumer notice exclude or restrict liability for death or personal injury resulting from negligence”  Statutory Control of Contract Terms in Business to Business Contracts Unfair Contract Terms Act 1977 Applies to “businesses” e.g., companies, firms, professionals, government, local authorities Applies only to certain types of business-to-business contract (and notices) – s15(2) e.g., sale, contracts of service, use of land Affects exclusions of liability and restrictions on liability for breach of duty Breach of any obligation… to take reasonable care or exercise reasonable skill in the performance of the contract Breach of any common law duty to take reasonable care or exercise reasonable skill Breach of the duty of reasonable care imposed by… the Occupiers’ Liability (Scotland) Act 1960  Statutory Control of Contract Terms in Business to Business Contracts (8) Key sections of Unfair Contract Terms Act 1977 It is not possible to exclude liability for death or personal injury – ss. 2(1), 16(1)(a) Otherwise, other terms excluding liability for breach –have no effect if not fair and reasonable to incorporate the term or to allow reliance on the term – ss. 2(2), 16(1)(b) volenti non fit injuria – ss. 2(3),16(3) George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd 2 AC 803 The onus of proving that a term is fair and reasonable lies on the party seeking to rely upon it – s24(4) - Smith v Eric S Bush (A Firm) 1 AC 831: Ask: Equal bargaining power? Advice from another source?, Difficulty of task/exclude liability? Who bears loss/insurance? Statutory Control of Contract Terms in Business to Business Contracts (9) Standard Form Contracts – no effect if excludes or restricts liability for a contractual breach or if allows no performance or a substantially different performance than that anticipated by the contract – s17