Self-test questions: Exemption Clauses and Unfair Terms

. Nathan purchases an electric oven for his bakery business from Top Electrics Ltd. Before the contract is made, Nathan is given a document that contains the following clause: 'A purchaser is entitled to return any goods within 12 days of purchase and receive a full refund. However, if the returned goods are not defective in any way then the customer must pay a £10 handling charge.' Nathan does not read the terms before buying the oven and now wants to return the oven immediately because he has decided to emigrate abroad. Which one of the following statements most accurately summarises the position?

Nathan has not been given reasonable notice of the clause and is therefore not bound by it.

Because Top Electrics is not in breach of contract, it is entitled to impose the £10 handling charge.

Under s. 6 of the Unfair Contract Terms Act 1977, Top Electrics has no right to impose the £10 handling charge.

Under s. 3 of the Unfair Contract Terms Act 1977, Top Electrics has no right to impose the £10 handling charge as Nathan is dealing according to Top Electrics' written standard terms of business.

Under s. 7 of the Unfair Contract Terms Act 1977, Top Electrics has no right to impose the £10 handling charge.

. Ria and Amir are in dispute over whether Amir can rely on an exemption clause in the parties' contract. Which one of the following statements is most likely to represent the current approach applied by the courts to deciding whether an exemption clause covers a given liability for breach of contract?

Any ambiguity in the clause will be construed in the light of a reasonable person's understanding of the words used in the clause.

The courts are hostile towards exclusion clauses, being of the view that sensible commercial parties are unlikely to have intended significant exclusions of liability.

The clause is not applicable to any liability arising from a fundamental breach of the contract.

If an exemption clause purports to exclude any implied terms, the courts will generally consider this provision to extend to protect against liability arising from any express terms of the contract.

The clause may be overridden if an inconsistent implied promise given by the party seeking to rely upon the clause can be extracted from the contract.

. Mandeep was travelling abroad and hired a car from Car Co. The contract of hire exempted Car Co from liability for 'any losses or damage suffered by the hirers, whether caused by our company's neglect or fault or not'. At the time of contracting, Mandeep made it clear that she wanted to leave her personal belongings in the car from time to time and Car Co expressed no objection. When Mandeep parked the car outside a cinema, her personal belongings left in the car were stolen. It was discovered that this was solely attributed to the negligence of one of Car Co's staff, who failed to repair the defective back door of the car. In relation to whether the exemption clause covered Car Co's negligence liability for the lost property, which one of the following statements is probably true?

The clause does not cover Car Co's negligence liability, because the word 'negligence' is not used.

The clause does cover Car Co's negligence liability because the words used in that clause are wide enough to cover such liability.

The clause does cover Car Co's negligence liability because the word 'neglect' used in that clause is a synonym of negligence.

The clause does not cover Car Co's liability for negligence, because negligence is not the only ground of Car Co's liability for the lost property.

The clause does not cover Car Co's liability because the clause does not satisfy the 'clear words' requirement.

. Abi buys a train ticket from a self-service machine for the purpose of visiting her relatives. The ticket contains the following clause printed on its face in large, red letters: 'No liability in negligence is accepted for injury or death caused to passengers whilst travelling on this train.' Which one of the following statements is most likely to be true in relation to the exclusion clause?

The clause is subject to the statutory reasonableness test under the Consumer Rights Act 2015.

The clause is binding on Abi because it has been reasonably brought to her attention.

The clause is not binding on Abi, either because it has not been incorporated into the contract or because it is otherwise automatically unenforceable under the Consumer Rights Act 2015.

The clause is not binding on Abi because it is particularly onerous and, consequently, has not been reasonably brought to Abi's attention.

The clause is not binding on Abi because s. 2 of the Unfair Contract Terms Act 1977 means the clause is unenforceable.

. In considering the applicability of the Consumer Rights Act 2015 to a contractual relationship, which one of the following statements is true?

Where a trader asserts that the other party to the contract is not a 'consumer' within the definition of the Act, the burden is on the person alleging that they are a consumer to prove that they are.

Under the Act, 'consumer' can, for the purposes of Part 1 of the Act (consumer contracts for goods, digital content and services) include a company, whereas Part 2 of the Act (unfair terms) only applies to individuals.

Where a trader asserts that the other party to the contract is not a 'consumer' within the definition of the Act, the burden is on the trader claiming the individual is not a consumer to prove it.

For the purposes of Part 1 of the Act, where a trader asserts that the other party to the contract is not a 'consumer' within the definition of the Act, the burden is on the person alleging that they are a consumer to prove that they are, whereas for the purposes of Part 2, the burden is on the trader claiming the individual is not a consumer to prove it.

Where an individual purchases an item that is partly for personal use and partly for business use, the transaction will be a non-consumer transaction and so the Act will not apply.

. Jas booked a conference room and the restaurant at the Brewster Hotel for the purpose of hosting her annual business conference. Jas specified the use of a particular conference room and specified the food and drinks she wanted to have served to her guests. She was of the view that the room she booked was the most suitable for her conference and would impress her guests. The contract contained a highlighted clause allowing the Brewster Hotel to relocate Jas to another conference room within the hotel and to amend the food and drinks booking chosen by Jas. Which one of the following statements most accurately describes the enforceability of that clause?

The clause is subject to the test of reasonableness according to s. 7 of the Unfair Contract Terms Act 1977.

The clause is subject to the test of reasonableness according to s. 3(2)(b)(i) of the Unfair Contract Terms Act 1977.

The clause is unenforceable against Jas according to s. 7 of the Unfair Contract Terms Act 1977.

The clause is unenforceable against Jas according to s. 3 of the Unfair Contract Terms Act 1977.

The clause is subject to the test of reasonableness according to s. 3(2)(b)(ii) of the Unfair Contract Terms Act 1977.

. In applying the reasonableness test under the Unfair Contract Terms Act 1977 to commercial contracts, the courts generally take a non-interventionist approach. Which one of the following cases does not evidence such an approach?

George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] 2 AC 803.

Watford Electronics v Sanderson CFL Ltd [2001] EWCA Civ 317, [2001] 1 All ER (Comm) 696.

Monarch Airlines Ltd v London Luton Airport Ltd [1997] CLC 698.

Photo Production Ltd v Securicor Transport Ltd [1980] AC 827.

AXA Sun Life Services plc v Campbell Martin [2011] EWCA Civ 133, [2012] Bus LR 203.

. Which one of the following assertions is not true in respect of the Consumer Rights Act 2015?

A contractual term that is transparent and prominent and specifies the main subject matter of the contract is excluded from the assessment of fairness under s. 62.

According to the Consumer Rights Act, a court (provided it has the necessary legal and factual material) has a duty to consider the fairness of a term even if none of the parties to the proceedings has raised that issue or indicated that it intends to raise it.

The test for whether a contract term is unfair under the Consumer Rights Act is whether, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer.

The Act goes further than the Unfair Terms in Consumer Contracts Regulations (1999) in that its assessment of 'fairness' extends to all terms of the contract, including so-called 'core' terms.

When assessing the fairness of a term, a court must take account of the nature of the subject matter of the contract.

. Shirley and Dillian have entered into a commercial contract for the sale of goods. Dillian claims the goods are faulty and that Shirley is in breach of contract. Shirley claims that she is able to rely on an exemption clause in the parties' contract and so is not liable for any fault with the goods. In relation to the reasonableness test within the Unfair Contract Terms Act 1977, which one of the following is not true?

In considering whether the clause is reasonable, a court will have regard to the strength of the bargaining positions of the parties relative to each other.

The burden of proof to show that the clause is a reasonable one is on Shirley.

The fact Dillian received a discounted price in return for agreeing to the inclusion of the exemption clause will be a relevant factor to consider as regards whether the clause is a reasonable one.

The fact the parties have entered into a large number of similar contracts over a long period of time might point towards a conclusion that the clause is a reasonable one.

The reasonableness of the clause will be determined taking into account the consequences of the faulty goods on Dillian's business and any other material circumstances existing at the time Dillian received the goods.

. In relation to s. 3 of the Unfair Contract Terms Act 1977, which one of the following is not true?

Any amendment of a party's written standard terms as a result of negotiation between the parties will mean s. 3 does not apply.

For the purpose of s. 3, there is no statutory definition of 'written standard terms'.

The burden of proof is on the party relying on s. 3 and alleging that the contract is on the other party's standard written terms to show that the contract was on such terms.

To engage s. 3, it will be necessary to show that, in relation to the terms that it is alleged are standard terms, the relevant party habitually uses those terms.

Section 3 does not apply to a term in a consumer contract.

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