Self-test questions

. 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 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.

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.

. A purchases an electric oven for his bakery business from the B company. Before the contract is made, A 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.' A does not read the conditions 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?

Because B is not in breach of contract, he is entitled to impose the £10 handling charge.

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

Under the Unfair Contract Terms Act 1977 s. 3, B has no right to impose the £10 handling charge as A is dealing according to his (B's) written standard terms of business.

. A booked a business trip at the Metropole Hotel, Moscow, with B Ltd. The contract contained a highlighted clause allowing B Ltd to relocate A to another hotel if the Metropole has been overbooked. 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 the Unfair Contract Terms Act 1977, s. 7.

The clause is subject to the test of reasonableness according to the Unfair Contract Terms Act 1977, s. 3.

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

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

. In applying the reasonableness test under the Unfair Contract Terms Act 1977 to commercial contracts, the courts generally take a non-interventionist approach. In which one of the following cases was this approach not applied?

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.

. 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 he is a consumer to prove that he is.

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 he is a consumer to prove that he is, whereas for the purposes of Part 2, the burden is on the trader claiming the individual is not a consumer to prove it.

. 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 (providing 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.

. A purchases an electric oven for her home from B's shop. In the shop, there is a prominent notice near the cash till that reads: 'A purchaser has no right to return defective appliances bought from this shop.' A reads this notice after she pays for the oven. Two weeks later, the oven stops working. Which one of the following statements most accurately summarises the position between the parties?

According to the Consumer Rights Act 2015, s. 31(1), B cannot exclude liability for the defective oven.

According to the Consumer Rights Act 2015 s. 65(1), B cannot exclude liability for the defective oven.

According to the Unfair Contract Terms Act 1977 s. 6(2), B cannot exclude liability for the defective oven.

. A buys a train ticket from a self-service machine for the purpose of visiting his 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 A because it has been reasonably drawn to his attention.

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

. A was travelling abroad and hired a car from B company. The contract of hire exempted B 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, A made it clear that he wanted to leave his personal belongings in the car from time to time and B expressed no objection. When A parked the car outside a cinema, his personal belongings left in the car were stolen. It was discovered that this was solely attributed to the negligence of one of B's staff, who failed to repair the defective back door of the car. One of the legal questions arising from this case was whether the exemption clause covered B's negligence liability for the lost property. Which one of the following statements is probably true in respect of this legal question?

The clause did not cover B's negligence liability, because the word 'negligence' was not used.

The clause did cover B's negligence liability because the words used in that clause were wide enough to cover such liability.

The clause did cover B's negligence liability because the word 'neglect' used in that clause was a synonym of negligence.

The clause did not cover B's liability for negligence, because negligence was not the only ground of B's liability for the lost property.

. In applying the reasonableness test under s.11 of the Unfair Contract Terms Act 1977 to determine whether the term is a fair and reasonable one to have included, the courts make a broad assessment of the parties' relationship, considering factors such as the circumstances known to the parties at the time of contracting, as well as all relevant events subsequent to the contract's formation and the effect of those events on each party.

True

False

. Exemption clauses in standard-form contracts are presumed to be unfair or unreasonable but this presumption can be rebutted by contrary evidence.

True

False

. An exemption clause is incorporated into the contract if the party seeking to rely upon it has taken reasonable steps to bring it to the notice of the other party before the contract is concluded.

True

False

. The Unfair Contract Terms Act 1977 subjects every contract term falling within its scope to a reasonableness test.

True

False

. Where, according to the Unfair Contract Terms Act 1977 s. 11, one part of an exemption clause is unreasonable and the remainder of the clause is reasonable, it is generally possible to sever the unreasonable part from the remainder of the clause and to hold the latter binding.

True

False

. Any amendment of a party's written standard terms of business as a result of negotiation between the parties will mean s. 3 of the Unfair Contract Terms Act 1977 does not apply.

True

False

. The Unfair Contract Terms Act 1977, s. 3, does not apply to a clause purporting to exempt liability for breach of a qualified contractual obligation.

True

False

. The party seeking to challenge the effectiveness of an exemption clause has the burden of establishing that the clause has not been incorporated into the contract and does not cover the other (breaching) party's liability in issue.

True

False

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