UCTA law essay

C. THE UNFAIR CONTRACT TERMS ACT 1977
The basic purpose of UCTA 1977 is to restrict the extent to which liability in a contract can be excluded for breach of contract and negligence, largely by reference to a reasonableness requirement, but in some cases by a specific prohibition.

S.6(2) states that as against a person dealing as consumer, liability for breach of the obligations arising from ss.13, 14 or 15 of the Sale of Goods Act 1979 (seller’s implied undertakings as to conformity of goods with description or sample, or as to their quality or fitness for a particular purpose) cannot be excluded or restricted by reference to any contract term.

Exclusion clauses subject to reasonableness
S.6(3) states that as against a person dealing otherwise than as consumer liability for breach of the obligations arising from ss.13, 14 or 15 of the Sale of Goods Act 1979 can be excluded or restricted by reference to a contract term, but only in so far as the term satisfies the requirement of reasonableness.

The Act gives the greatest protection to consumers. Under s12(1)
(1) A party to a contract ‘deals as consumer’ in relation to another party if –
(a) he neither makes the contract in the course of a business nor holds himself out as doing so; and
(b) the other party does make the contract in the course of a business; and
(c) in the case of a contract governed by the law of sale of goods or hire-purchase, or by section 7 of this Act, the goods passing under or in pursuance of the contract are of a type ordinarily supplied for private use or consumption.
(1A) But if the first party mentioned in subsection (1) is an individual paragraph (c) of that subsection must be ignored.


Peter Symmons ; Co v Cook [1981] 131 NLJ 758
R ; B Customs Brokers v United Dominions Trust Ltd [1988] 1 WLR 321.

Peter Symmons ; Co v Cook (1981) 131 NLJ 758
The plaintiff firm of surveyors bought a second-hand Rolls Royce from the defendants which developed serious defects after 2,000. It was held that the firm was acting as a consumer and that to buy in the course of a business ‘the buying of cars must form at the very least an integral part of the buyer’s business or a necessary incidental thereto’. It was emphasised that only in those circumstances could the buyer be said to be on equal footing with his seller in terms of bargaining strength.

R & B Customs Brokers v United Dominion Trusts Ltd [1988] 1 WLR 321
The plaintiff company, which was a shipping agency, bought a car for a director to be used in business and private use. It had bought cars once or twice before. The sale was arranged by the defendant finance company. The contract excluded the implied conditions about merchantable quality. The car leaked badly.

It was held by the Court of Appeal that where a transaction was only incidental to a business activity, a degree of regularity was required before a transaction could be said to be an integral part of the business carried on and so entered into in the course of that business. Since here the car was only the second or third vehicle acquired by the plaintiffs, there was not a sufficient degree of regularity capable of establishing that the contract was anything more than part of a consumer transaction. Therefore, this was a consumer sale and the implied conditions could not be excluded.

Exclusion clauses subject to reasonableness
S.6(3) states that as against a person dealing otherwise than as consumer liability for breach of the obligations arising from ss.13, 14 or 15 of the Sale of Goods Act 1979 can be excluded or restricted by reference to a contract term, but only in so far as the term satisfies the requirement of reasonableness.

THE REQUIREMENT OF REASONABLENESS
Under s11(1) the requirement of reasonableness is that “the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.”
Section 11(2) provides that, in determining whether the clause is a reasonable one for the purposes of ss6 and 7, regard shall be had to the Guidelines set out in Schedule 2 of the Act, which are as follows:
(1)The bargaining strengths of the parties relative to each other and the availability of alternative supplies.

(2) Whether the customer received an inducement to agree to the term. (The supplier may have offered the customer a choice: a lower price but subject to an exemption clause or a higher price without the exemption.)
(3) Whether the customer knew or ought reasonably to have known of the existence and extent of the term.

(4) Where the term excludes or restricts any relevant liability if some condition is not complied with, whether it was reasonable at the time of the contract to expect that compliance with that condition would be practicable.

(5) Whether the goods were manufactured, processed or adapted to the special order of the custom
The Regulations apply, with certain exceptions, to unfair terms in contracts concluded between a consumer and a seller or supplier and provide that an unfair term is one which has not been individually negotiated and which, contrary to the requirement of good faith, causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer. An unfair term shall not be binding on the consumer.