Chapter 11 in essence

1. Even if a term is validly incorporated into the contract and covers the event which has occurred, it may still be subject to direct substantive control under the Unfair Contract Terms Act 1977 (UCTA) and the Consumer Rights Act 2015 (CRA).

2. In applying these statutory instruments it is helpful to ask the following questions: Who is prejudiced by judicial control? Who will benefit? Which terms are reviewable under each of these instruments? What are the review mechanisms? What are the enforcement mechanisms? (See Diagram 11B.)

3. Who is prejudiced? UCTA applies to liability arising in the course of ‘business’ and CRA affects the liability of a ‘trader’.

4. Who will benefit? UCTA protects businesses (non-consumers). CRA only protects consumers (natural persons) agreeing to non-negotiated terms.

5. What terms are reviewable?

Under UCTA:

  1. exclusion or restriction (ie exemption) of liability for negligence causing personal injury or death is invalid outright (s 2(1));
  2. other exemptions of liability are only enforceable if they are reasonable:
    • for negligence causing loss or damage other than personal injury or death (s 2(2));
    • for breach of certain statutory implied terms in the sale and supply contracts against non-consumers; some are void against consumers (ss 6–7); and
    • for breach of contract (s 3).

Under CRA:

  1. terms that attempt to exempt liability for breach of terms ‘treated as included’ in consumer contracts by the CRA are not binding.
  2. terms that are not ‘transparent’ are interpreted contra proferentem.
  3. terms which relate to the main subject matter or price of the contract (reg 6(2)) are not reviewable if ‘transparent and prominent’.

6. A term is transparent if it is expressed in plain and intelligible language and is legible. A term is prominent if it is brought to the consumer’s attention, such that an average consumer would be aware of the term.

7. The scope of ‘main subject matter’ and ‘price’ must be kept narrow in support of consumer protection.

8. Are the nature and function of exemption clauses (see Diagram 11E) defences against liability which has arisen (as UCTA assumes), or do they restrict the primary duty owed by the defendant (duty-defining) to prevent liability from arising in the first place (as Coote argues)? If it is the latter, or if there is no difference between the two (ie both strongly arguable), then: (i) the coverage of all non-‘core’ terms by CRA is less artificial than UCTA’s focus on exemption clauses; and (ii) the idea that contract law does not directly control the substantive fairness of contracts but only controls exemption clauses (secondary remedial terms) is undermined.

9. What counts as reviewable ‘exemption clauses’ under UCTA? UCTA extends the scope of ‘exemption clauses’ by including (see Diagram 11F):

  1. terms that obstruct the claimant’s proof of his case (s 11(1)–(3));
  2. terms that are duty-defining (the last part of s 11(1)) and s 3(2)(b)) in the sense of restricting the other party’s obligations.

10. The review mechanisms are:

  1. Outright invalidity of specified terms under UCTA.
  2. The requirement of reasonableness imposed on specified terms under UCTA, and
  3. the test of unfairness of non-‘core’ non-negotiated terms under CRA (whether, contrary to good faith, the term causes significant imbalance).

(ii) and (iii) are likely to produce the same outcome in practice. Both require the assessment to be made by references to all the circumstances (procedural and substantive) at the time of contracting.

11. Burden of proof

  • Under UCTA, the party seeking to rely on the term must prove that the challenged term is reasonable, assisted by a list of guidelines for applying this test.
  • CRA leaves the burden with the party seeking to escape the term, to prove the unfairness of the term, assisted by a few guidelines and a list of 20 indicatively unfair terms.

12. The enforcement mechanisms:

  • Under UCTA, it is up to a complainant to bring an action to invalidate an exemption clause.
  • In contrast, while the consumer can bring an action, CRA also provides for pre-emptive challenge by the Competition and Markets Authority (CMA) and other listed ‘regulators’ for an injunction against the future use of the challenged term. They can also consider complaints and accept undertakings from traders about the use of certain terms.

11. Aside from UCTA and CRA, there are many consumer protection statutes which regulate the content of particular types of contract (eg Consumer Credit Act 1974). There are also common law doctrines which directly control the substance of contracts (eg the rule against penalty clauses) or allow courts to vary their terms (eg salvage).

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