The varied scope of applications, inconsistency and complexity of current legislation relating to exemption clauses in Contracts has caused much consternation. This paper examines such issues encountered in the Unfair Contract Terms Act 1977 (UCTA) and the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) which should be addressed by future legislation. It has become apparent that three significant issues should be addressed: accessibility (ensuring concepts are easily understood); the scope of legislation; and limitation of negligence (adequacy of terminology).
For coherence, this paper is organized in the following manner: first, an examination of accessibility relating to the abovementioned consumer legislation, then an overview of issues relating to the scope of the legislation and our changing economic environment, followed by a section examining ways parties limit liability for negligence. A section on reform notes recommendations that ought to be addressed by future legislation.
ACCESSIBILITY
In the Report on a reference under section 3(1)(e) of the Law
Commissions Act 1965, the Law Commission and the Scottish Law Commission1 (LC & SLC) called for the use of plain language in consumer legislation, saying that all respondents agreed it would be of assistance. This is a logical request, considering the legislation must be adhered to by lay people as well as those in the legal profession who advise them. Concise language will assist parties to a Contract to decide whether the Contract passes the other criteria of “reasonableness”2
The “Unfair Contract Terms Act 1977”3 states that a contract term must satisfy “the requirement of reasonableness.” Austen-Barker4 notes a contract may be perfectly unfair, but still perfectly reasonable. Therefore, a current difficulty with terminology between the two pieces of legislation is that the UCTA refers to a requirement for “reasonableness” while the UTCCR requires “fairness”5. As well, a contract must adhere to the idea of “transparency”.
Community participants believe that accessibility can be affected by a lack of transparency6. Parties to a Contract must include all pertinent details if they are to honour the need for transparency. Lack of transparency was illustrated in a submission to the Review made by SWERCOTS when, in relation to websites, it was noted that “On many sites the terms and conditions are so difficult to find or so obscure that consumers either cannot find them or forget to look for them”7.
SCOPE OF LEGISLATION
The Unfair Contract Terms Act 1977 (UCTA) and the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) are separate and influential pieces of legislation that in some parts cover the same areas of law. Both deal with consumer contracts, while the UCTA applies “to contracts between businesses and consumers, between one business and another and, to a limited extent, even to ‘private’ contracts where neither party is acting in the course of business”8. Therefore parties to contracts may have difficulty knowing which legislation applies to their circumstances.
In addition, the UCTA does not encompass terms that broaden a party’s obligations, dealing mostly only with terms that limit liability or obligation. Lack of consistency of terminology or concepts between the UCTA and the UTCCR raises concerns regarding accessibility of justice9. If once cannot understand what they read, that party is naturally in a difficult position. A further difficulty occurs when terms of a Contract are noted to be under the jurisdiction of a foreign law10. While there are provisions made in both pieces of legislation regarding a party’s choice of law, consideration ought to be given to the independent operation of the Rome Convention11, yet the Consumer Law Review ultimately decided to recommend that, for consumers residing in the UK, the UK law should prevail as it offers stronger protection to consumers than the laws of other nation states12. SWERCOTS pointed out the difficulty of changing markets and internet crime in their submission to the Consumer Law Review13, noting that “with current resources, work is mostly reactive rather than proactive”. One final limitation of the scope of legislation worth noting is that regarding land and insurance transactions.
While the UTCCR does not limit the type of agreements included in the legislation, the UCTA does not cover “consumer contracts of insurance and any contract so far as it relates to the creation, transfer or termination of interests in land ”14. The Consumer Law Review would prefer that this be rectified15.
LIMITATION OF NEGLIGENCE
In the past it has been possible to use a secondary contract to skirt the safeguards placed in a primary contract16. Because the UTCCR applies to all contracts, the difficulty is overcome because the secondary contract could also be addressed as unfair; however although the UCTA does make provision to protect consumers from the use of secondary contracts, the loophole is that the UCTA does not cover all types of contracts17. This is an example of the confusion created by having two pieces of legislation. The references to negligence of both pieces of legislation is also affected by the changing market created by the development of online business.
In their submission to the Consumer Law Review, the software development company symantec pointed out that it is difficult to make warranties for “fitness of purpose” when the software developer has no control over the hardware and environment in which the software is to be used18. The situation poses a difficulty for the retailer in this circumstance to show where and how a defect began, and it is quite possible the defect may be the responsibility of the consumer rather than the supplier. The explosive growth of internet commerce could also provide difficulties regarding avoidance of responsibility under current consumer legislation, as the UCTA in Section 3 addresses business terms that are “written” and some vendors may believe that electronic transactions do not fall under the concept of writing19. Macdonald and Poyton argue for Section 3 to be altered to clearly address e-commerce20.
Another issue addressing evasion of the law relates to clauses that may be “unfair”21. The Consumer Law Review provides examples of clauses that have the potential to be unfair as covering deposits of money, interest rates, contract clauses that are automatically extended, fluid pricing, “entire agreement” clauses, and clauses relating to matters of arbitration, indemnity and termination22. Further some parties try to be clever with the concept of “non-core terms” that a consumer may not realize the importance of negotiating on. One case that illustrates this is that of Director General of Fair Trading v First National Bank, in which the consumer was not aware that after defaulting on the contract, a county court’s judgement for payment would not allow for continued interest23. It is possible that “non-core” terms could also be challenged as failing the test of reasonableness24. One case into which the idea of “reasonableness” came into play was that of Ruxley Electronics and Construction Ltd v Forsyth.
In this case, Forsyth contended that the depth of his swimming pool constructed by Ruxley was, at six feet nine inches, less than the depth of seven feet six inches that was specified in the contract. On appeal the majority focused on the literal breach of contract and recommended Forsyth be reinstated £21,560, but Poole notes that Dillon LJ dissented with this majority and agreed with the trial judge who had assessed restitution in the order of £2,500 — Dillon LJ believed that “reasonableness” (taking into account the fact that Mr Forsyth could still enjoy his pool in the manner intended) was more appropriate than the majority’s suggestion, which might lead to “unintended consequences”25.
REFORM
Because of overlapping and unclear legislation set out in the framework of the UCTA and UTCCR, and because of the changing marketplace that far more commonly includes online delivery of service and therefore increases business transactions between countries and operating environments, it makes sense that the current legislation be replaced by one cohesive consumer law. The Consumer Law Review noted that “a unified regime would reduce uncertainty and confusion”26. New legislation should not exempt any form of transaction, regardless of product or whether the transaction is made between a company and an individual or is a private contract. This would address the lack in the UTCCR currently only covers consumer contracts. Negligence could also be addressed in a number of ways.
One way to address negligence was suggested by TSEM in their submission to the Consumer Law Review. The creation of one record for “all judicial outcomes (not just convictions) for the full range of trading standards legislation would be a huge step forward”27. The company noted that currently there are outcomes that go unrecorded, while others are scattered across a range of databases.
Including transactions for land and insurance in any new legislation would reduce confusion, as consumers buying insurance or land should reasonably be able to expect that these fall under consumer contract law. The other important reform should be that of plain language.
Legislation should, while being concise, be as clear to consumers as legal practitioners. If consumers know what it is they are signing, and understand what terms they should negotiate, conflict in the court system may be reduced. Another suggested reform is that of “regulation of all standard form contracts” regardless of whether they are business-to-business or business-to-consumer28. Macdonald writes that while tightening control might limit freedom of contract, “the point can also be made that, as it stands, the scope of protection provided by the UCTA is rather arbitrary”29. The LC & SLC Review also suggested that, to address the issue of the UCTA speaking of “reasonable” while the UTCCR speaks of “fair”, a new unified legislation ought to have terms held to scrutiny by a “fair and reasonableness” standard30.
CONCLUSION
Review of our consumer law legislation would be beneficial. Uniformity would mean individuals and business operators spend less time attempting to decipher which legislation is applicable, whether their terms are addressed and whether they understand which terms must be thoroughly negotiated. Parties to contracts could understand what is reasonable and fair in contracts and how different jurisdictions affect the contract. Parties would better understand “core” and “non-core” terms and the changing business landscape could be accommodated.
Authorities should communicate clearly across borders and establish a central record of convictions. Businesses could then reduce on paperwork and deliver products with certainty, and consumers would know what protection is offered.
Bibliography
Austen-Baker, Richard. Implied Terms in English Contract Law, 2011. Edward Elgar Publishing Inc. Print.
Fox, John, prepared for Trading Standards East Midlands (TSEM). “Response to: CONSUMER LAW REVIEW — CALL FOR EVIDENCE, MAY 2008.” “Responses to the Consumer Law Review S-Z”. 2008. Department for Business Innovation & Skills (BIS), pp 36-52. Web. 8 March 2012
Macdonald, Elizabeth. “Scope and Fairness of the Unfair Terms in Consumer Contracts Regulations: Director General of Fair Trading v First National Bank”. 2002. Vol. 65, No. 5 “The Modern Law Review”, pp 763-773. Web. 10 March 2012.
Macdonald, Elizabeth and Poyton, David. “A particular problems for e-commerce: Section 3 of the Unfair Contract Terms Act 1977.” 2000. Web Journal of Current Legal Issues (3). Web. 14 March 2012.
Macdonald, Elizabeth. “Unifying Unfair Terms Legislation.” 2004. Vol. 67, No. 1 “The Modern Law Review”, pp 69-93. Web 10 March 2012.
Poole, Jill. “Damages for Breach of Contract Compensation and ‘Personal Preferences’”. 1996. Vol. 59 “Modern Law Review”, pp 272-275. Web. 10 March 2012.
South West Trading Standards (SWERCOTS), “SWERCOTS Response to the Consumer Law Review.” 2008. “Responses to the Consumer Law Review S-Z”. 2008. Department for Business Innovation & Skills (BIS), pp 18-28. Web. 7 March 2012.
symantec, “Symantec Response to Department of Business, Enterprise and Regulatory Reform Consumer Law Review.” “Responses to the Consumer Law Review S-Z”. 2008. Department for Business Innovation & Skills (BIS), pp 12-15. Web. 9 March 2012.
The Law Commission and the Scottish Law Commission, Unfair Terms In Contracts, February 2005. The Law Commission, London and the Scottish Law Commission, Edinborough. Web. 7 March 2012.
The Law Commission and the Scottish Law Commission, Exemption Clauses Second Report (LAW COM. No. 69) (SCOT. LAW COM. No. 39), August 1975. London: Her Majesty’s Stationery Office. Web. 7 March 2012.
Legislation
Amendment of Law for England and Wales and Northern Ireland, “Unfair Contract Terms Act 1977”. London: Her Majesty’s Stationery Office. Web. 6 March 2012.
Statutory Instruments, “The Unfair Terms in Consumer Contracts Regulations 1999” © Crown Copyright 1999, The Stationery Office Limited under the authority and superintendence of Carol Tullo, Controller of Her Majesty’s Stationery Office and Queen’s Printer of Acts and Parliament. Web. 7 March 2012.
