Unfair Contract Terms Act 1977
|Long title||An Act to impose further limits on the extent to which under the law of England and Wales and Northern Ireland civil liability for breach of contract, or for negligence or other breach of duty, can be avoided by means of contract terms and otherwise, and under the law of Scotland civil liability can be avoided by means of contract terms.|
|Chapter||1977 c 50|
|Territorial extent||England and Wales; Scotland; Northern Ireland|
|Text of statute as originally enacted|
|Official text of the Unfair Contract Terms Act 1977 as in force today (including any amendments) within the United Kingdom, from the UK Statute Law Database|
The Unfair Contract Terms Act 1977 (c 50) is an Act of Parliament of the United Kingdom which regulates contracts by restricting the operation and legality of some contract terms. It extends to nearly all forms of contract and one of its most important functions is limiting the applicability of disclaimers of liability. The terms extend to both actual contract terms and notices that are seen to constitute a contractual obligation.
The Act renders terms excluding or limiting liability ineffective or subject to reasonableness, depending on the nature of the obligation purported to be excluded and whether the party purporting to exclude or limit business liability, acting against a consumer.
It is normally used in conjunction with the Unfair Terms in Consumer Contracts Regulations 1999 (Statutory Instrument 1999 No. 2083), as well as the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982.
The Law Commission and the Scottish Law Commission have recommended that the Unfair Terms in Consumer Contracts Regulations 1999 and the Unfair Contract Terms Act 1977 should be replaced by a more unified and coherent regime.
Terms rendered ineffective
|Part of the common law series|
|Defenses against formation|
|Excuses for non-performance|
|Rights of third parties|
|Breach of contract|
|Related areas of law|
|Other common law areas|
Manufacturers' guarantee. s5(1), loss arising from (a) defective goods or (b) negligence of distributor; cannot be excluded where goods are "of a type ordinarily supplied for private use or consumption."
- s6(1), implied terms as to title (Sale of Goods Act 1979 s12) cannot be excluded.
- s6(2), implied terms as to description, quality or sample (Sale of Goods Act 1979 ss13-15) cannot be excluded against a consumer.
Terms governed by the Consumer Protection Act 1987.
They are also governed (since 2007) by the Occupiers Liability Act 1984.
Terms subject to reasonableness
Negligence. s2(2), exclusion of liability for negligence other than for death or personal injury must satisfy the requirement of reasonableness.
Contractual Liability. s3, This applies against a party that deals on standard written terms or where the other party deals as a consumer. Any exclusion by that party for liability arising from a breach committed by that party under the same contract (s3(2)(a)) or performance under a contract which is substantially or totally different of that which is reasonably expected of him (s(3)(b)) shall be void except insofar as it satisfies the requirement of reasonableness.
Indemnity clauses. s4, A party dealing as a consumer cannot contract to indemnify a third party on behalf of the other party, except insofar as it satisfies the requirement of reasonableness.
Definition of consumer and business
Business. s 1(3), The Act only applies to "liability for breach of obligations or duties arising (a) from things done or to be done by a person in the course of a business (whether his own business or another's); or (b) from the occupation of premises used for business purposes of the occupier". s14, Includes any government department.
Consumer. s 12, A party deals as a consumer if
- s12(1)(a), He is not in the course of a business and does not hold himself to do so.
- s12(1)(b), the other party is in the course of a business.
- s12(1)(c), In Sale of Goods contract, the goods are of a type "ordinarily supplied for private use or consumption" (s12(1A), this subsection does not apply to individuals)
- s12(2), A party is not a consumer if dealing at an auction where he has the opportunity to attend in person or is not a natural person buying auction.
- s12(3), Burden is upon the party purported to be acting in the course of a business to show that either he is not in the course of a business or that the other party is otherwise not a consumer.
Definition of reasonableness
Section 11 provides some guidance but most development has been in common law.
Schedule 2 gives guidelines specifically to ss 6(3), 7(3), 7(4).
- Stewart Gill Ltd v Horatio Myer & Co Ltd provides that reasonableness is assessed at the time of contract; and that the burden of proof is upon the party purporting to have excluded liability.
- Levison v Patent Steam Carpet Cleaning Co Ltd provides that clarity and preciseness will raise the reasonableness of a term; and vice versa. See also Stag Line Ltd v Tyne Ship Repair Group Ltd as to small print (literally – relating to the size of the lettering).
- Smith v Eric S Bush. Lord Griffith provides 4 points that may be considered... (see application in St Albans City and District Council v International Computers Ltd.).
- Equality of bargaining powers.
- How practical was it to obtain independent legal advice regarding the term?
- How difficult is the task being undertaken for which liability is being excluded?
- What are the practical consequences of ruling that a term is unreasonable?
- Standard form contract
- Unfair Terms in Consumer Contracts Regulations 1999
- Electronic Commerce Regulations 2002
- Office of Fair Trading v Abbey National and Others (2008) - Bank charges test case
- Britvic Soft Drinks Ltd v Messer UK Ltd  EWCA Civ 548
- Commerzbank AG v Keen  IRLR 132
- Bridgen v American Express Bank Ltd  IRLR 94
- Baltic Shipping Company v Dillon (1993) 176 CLR 344
- Watford Electronic Ltd v Sanderson CFL Ltd  EWCA Civ 317
- as amended by the Unfair Terms in Consumer Contracts (Amendment) Regulations 2001 (Statutory Instrument 2001 No. 1186) which merely further defined a 'Financial Service Authority'
- The Law Commission, 'Unfair Terms in Contracts' (LC292, 2005)
- As amended by the Sale and Supply of Goods to Consumers Regulations 2002
- Holding himself is important as an otherwise consumer may attempt to act in the guise of a business for tax benefits or to shop at wholesale stores
-  2 All ER 257
-  3 WLR 90
-  2 Lloyd's Rep 211
-  1 AC 831
- (1996) The Times 14 August
- PS Atiyah, An Introduction to the Law of Contract (Clarendon, Oxford 2000)
- H Collins, Contract Law in Context (CUP 2004)
- E McKendrick, Contract Law (8th edn Palgrave 2009)
- J Hilliard and J O’Sullivan, The Law of Contract (2nd edn OUP 2006)
- A Burrows, A Casebook on Contract (2nd edn Hart, Oxford 2009)
- Jill Poole, Casebook on Contract Law (2006) 8th Ed., Oxford University Press
- Ewan McKendrick, Contract Law - Text, Cases and Materials (2005) Oxford University Press ISBN 0-19-927480-0