Limitation of Liability & Misrepresentation under Unfair Contract Terms Act 1977, Lecture notes of Contract Law

Download Limitation of Liability & Misrepresentation under Unfair Contract Terms Act 1977 and more Lecture notes Contract Law in PDF only on Docsity! Unfair Contract Terms Act 1977 1977 CHAPTER 50 ARRANGEMENT OF SECTIONS PART I AMENDMENT OF LAw FOR ENGLAND AND WALES AND NORTHERN IRELAND Section 1. Scope of Part I. Introductory Avoidance of liability for negligence, breach of contract, etc. 2. Negligence liability. 3. Liability arising in contract. .4. Unreasonable indemnity clauses. Liability arising from sale or supply of goods 5. " Guarantee " of consumer goods. 6. Sale and hire-purchase. 7. Miscellaneous contracts under which goods pass. Other provisions about contracts 8. Misrepresentation. 9. Effect of breach. 10. Evasion by means of secondary contract. Explanatory pro visions 11. , The " reasonableness " test. 12. " Dealing as consumer ". 13. Varieties of exemption clause. 14. Interpretation of Part I. PART II AMENDMENT OF LAw FOR SCOTLAND 15. Scope of Part II. 16. Liability for breach of duty. 17. Control of unreasonable exemptions in consumer or standard form contracts. A ii c. 50 Unfair Contract Terms Act 1977 Section 18. Unreasonable indemnity clauses in consumer contracts. 19. " Guarantee " of consumer goods. 20. Obligations implied by law in sale and hire-purchase contracts. 21. Obligations implied by law in other contracts for the supply of goods. 22. Consequence of breach. 23. Evasion by means of secondary contract. 24. The " reasonableness " test. 25. Interpretation of Part II.. PART III PROVISIONS APPLYING TO WHOLE OF UNITED KINGDOM Miscellaneous 26. International supply contracts. 27. Choice of law clauses. 28. Temporary provision for sea carriage of passengers. 29. Saving for other relevant legislation. 30. Obligations under Consumer Protection Acts. General 31. Commencement; amendments; repeals. 32. Citation and extent. SCHEDULES : Schedule 1-Scope of ss. 2 to 4 and 7. Schedule 2-" Guidelines " for application of reason- ableness test. Schedule 3-Amendment of enactments. Schedule 4-Repeals. Unfair Contract Terns Act 1977 c. 50 3 (ii) in respect of the whole or any part of his PART I contractual obligation, to render no performance at all, except in so far as (in any of the cases mentioned above in this subsection) the contract term satisfies the requirement of reasonableness. 4.-(1) A person dealing as consumer cannot by reference to Unreasonable any contract term be made to indemnify another person (whether indemnity a party to the contract or not) in respect of liability that may be clauses. incurred by the other for negligence or breach of contract, except in so far as the contract term satisfies the requirement of reason- ableness. (2) This section applies whether the liability in question- (a) is directly that of the person to be indemnified or is incurred by him vicariously ; (b) is to the person dealing as consumer or to someone else. Liability arising from sale or supply of goods 5.-(l) In the case of goods of a type ordinarily supplied for " Guarantee " private use or consumption, where loss or damage- of consumer . (a) arises from the goods proving defective while in con- goods sumer use ; and (b) results from the negligence of a person concerned in the manufacture or distribution of the goods, liability for the loss or damage cannot be excluded or restricted by reference to any contract term or notice contained in or operating by reference to a guarantee of the goods. (2) For these purposes- (a) goods are to be regarded as " in consumer use " when a person is using them, or has them in his possession for use, otherwise than exclusively for the purposes of a business ; and (b) anything in writing is a guarantee if it contains or purports to contain some promise or assurance (how- ever worded or presented) that defects will be made good by complete or partial replacement, or by repair, monetary compensation or otherwise. (3) This section does not apply as between the parties to a contract under or in pursuance of which possession or owner- ship of the goods passed. 6.-(1) Liability for breach of the obligations arising from- Sale and (a) section 12 of the Sale of Goods Act 1893 (seller's hire-purchase. implied undertakings as to title, etc.) ; 56 & 57 vict. B 4 c. 50 Unfair Contract Terms Act 1977 PART I (b) section 8 of the Supply of Goods (Implied Terms) Act 1973 c. 13. 1973 (the corresponding thing in relation to hire- purchase), cannot be excluded or. restricted by reference to any contract term. (2) As against a person dealing as consumer, liability for breach of the obligations arising from- (a) section 13, 14 or 15 of the 1893 Act (seller's implied undertakings as to conformity of goods with description or sample, or, as to their quality or fitness for a particular purpose) ; (b) section 9, 10 or 11 of the 1973 Act (the corresponding things in relation to hire-purchase). cannot be excluded or restricted by reference to any contract term. (3) As against a person dealing otherwise than as consumer, the liability specified in subsection (2) above can be excluded or restricted by reference to a contract term, but only in so far as the term satisfies the requirement of reasonableness. (4) The liabilities referred to in this section are not only the business liabilities defined by section 1(3), but include those aris- ing under any contract of sale of goods or hire-purchase agree- ment. Miscellaneous contracts under which goods pass. 7.-(1) Where the ' possession or ownership of goods passes under or in pursuance of a contract not governed by the law of sale of goods or hire-purchase, subsections (2) to (4) below apply as regards the effect (if any) to be given to contract terms excluding or restricting liability for breach of obligation arising by implication of law from the nature of the contract. (2) As against a person dealing as consumer, liability in respect of the goods' correspondence with description 'or sample, or their quality or fitness for any particular purpose, cannot be excluded or restricted by reference to any such term. (3) As against a person dealing otherwise than as consumer, that liability can be excluded or restricted by reference to such a term, but only in so far as the term satisfies the requirement of reasonableness. (4) Liability in respect of- (a) the right to transfer ownership of the goods, or give possession ; or (b) the assurance of quiet possession to a person taking goods in pursuance of the contract, Unfair Contract Terms Act 1977 c. 50 5 cannot be excluded or restricted by reference to any such term PART I except in so far as the term satisfies the requirement of reasonableness. (5) This section does not apply in the case of goods passing 1964 c. 71. on a redemption of trading stamps within the Trading Stamps 1965 c. 6. Act 1964 or the Trading Stamps Act (Northern Ireland) 1965. (N.1.). Other provisions about contracts 8.-(1) In the Misrepresentation Act 1967, the following is Misrepre- substituted for section 3- sentation. " Avoidance 3. If a contract contains a term which would 1967 c. 7. of provision exclude or restrict-- excluding liability for (a) any liability to which a Par y to a contract sen o may be subject by reason of any misrepre- sentation made by him before the contract was made ; or (b) any remedy available to another party to the contract by reason of such a misrepresenta- tion, that term shall be of no effect except in so far as it satisfies the requirement of reasonableness as stated in section 11(1) of the Unfair Contract Terms Act 1977 ; and it is for those claiming that the term satisfies that requirement to show that it does.". (2) The same section is substituted for section 3 of the Mis- 1967 c. 14 representation Act (Northern Ireland) 1967. (N.1.). 9.-(1) Where for reliance upon it a contract term has to Effect of satisfy the requirement of reasonableness, it may be found to breach. do so and be given effect accordingly notwithstanding that the contract has been terminated either by breach or by a party electing to treat it as repudiated. (2) Where on a breach the contract is nevertheless affirmed by a party entitled to treat it as repudiated, this does not of itself exclude the requirement of reasonableness in relation to any contract term. 10. A person is not bound by any contract term prejudicing Evasion by or taking away rights of his which arise under, or in connection means of t.y with the performance of, another contract, so far as those rights secondary extend to the enforcement of another's liability which this Part of this Act prevents that other from excluding or restricting. B2 8 c. 50 Unfair Contract Terms Act 1977 PART II AMENDMENT OF LAW FOR SCOTLAND Scope of 15.-(1) This Part of this Act applies only to contracts, is Part II. subject to Part III of this Act and does not affect the validity of any discharge or indemnity given by a person in consideration of the receipt by him of compensation in settlement of any claim which he has. (2) Subject to subsection (3) below, sections 16 to 18 of this Act apply to any contract only to the extent that the contract- (a) relates to the transfer of the ownership or possession of goods from one person to another (with or without work having been done on them) ; (b) constitutes a contract of service or apprenticeship ; (c) relates to services of whatever kind, including (without prejudice to the foregoing generality) carriage, deposit and pledge, care and custody, mandate, agency, loan and services relating to the use of land ; (d) relates to the liability of an occupier of land to persons entering upon or using that land ; (e) relates to a grant of any right or permission to enter upon or use land not amounting to an estate or interest in the land. (3) Notwithstanding anything in subsection (2) above, sections 16 to 18- (a) do not apply to any contract to the extent that the contract- (i) is a contract of insurance (including a con- tract to pay an annuity on human life) ; (ii) relates to the formation, constitution or dis- solution of any body corporate or unincorporated association or partnership ; (b) apply to- a contract of marine salvage or towage ; a charter party of a ship or hovercraft ; a contract for the carriage of goods by ship or hover- craft ; or, a contract to which subsection (4) below relates, only to the extent that- (i) both parties deal or hold themselves out as dealing in the course of a business (and then only in so far as the contract purports to exclude or restrict liability for breach of duty in respect of death or personal injury) ; or (ii) the contract is a consumer contract (and then only in favour of the consumer). Unfair Contract Terms Act 1977 c. 50 9 (4) This subsection relates to a contract in pursuance of which PART II goods are carried by ship or hovercraft and which either- (a) specifies ship or hovercraft as the means of carriage over part of the journey to be covered ; or (b) makes no provision as to the means of carriage and does not exclude ship or hovercraft as that means, in so far as the contract operates for and in relation to the carriage of the goods by that means. 16.-(1) Where a term of a contract purports to exclude or Liability for restrict liability for breach of duty arising in the course of any breach of business or from the occupation of any premises used for business purposes of the occupier, that term- (a) shall be void in any case where such exclusion or restric- tion is in respect of death or personal injury ; (b) shall, in any other case, have no effect if it was not fair and reasonable to incorporate the term in the contract. (2) Subsection (1)(a) above does not affect the validity of any discharge and indemnity given by a person, on or in con- nection with an award to him of compensation for pneumo- coniosis attributable to employment in the coal industry, in respect of any further claim arising from his contracting that disease. (3) Where under subsection (1) above a term of a contract is void or has no effect, the fact that a person agreed to, or was aware of, the term shall not of itself be sufficient evidence that he knowingly and voluntarily assumed any risk. 17.-(1) Any term of a contract which is a consumer contract Control of or a standard form contract shall have no effect for the purpose unreasonable exemptions in of enabling a party to the contract- consumer or (a) who is in breach of a contractual obligation, to exclude standard form or restrict any liability of his to the consumer or custo- contracts. mer in respect of the breach ; (b) in respect of a contractual obligation, to render no per- formance, or to render a performance substantially different from that which the consumer or customer reasonably expected from the contract ; if it was not fair and reasonable to incorporate the term in the contract. (2) In this section " customer " means a party to a standard form contract who deals on the basis of written standard terms of business of the other party to the contract who himself deals in the course of a business. 10 c. 50 PART II Unreasonable indemnity clauses in consumer contracts. " Guarantee " of consumer goods. Obligations implied by law in sale and hire- purchase contracts. 56 & 57 Vict. c. 71. 1973 c. 13. Unfair Contract Terms Act 1977 18.-(1) Any term of a contract which is a consumer contract shall have no effect for the purpose of making the consumer indemnify another person (whether a party to the contract or not) in respect of liability which that other person may incur as a result of breach of duty or breach of contract, if it was not fair and reasonable to incorporate the term in the contract. (2) In this section " liability " means liability arising in the course of any business or from the occupation of any premises used for business purposes of the occupier. 19.-(l) This section applies to a guarantee- (a) in relation to goods which are of a type ordinarily supplied for private use or consumption ; and (b) which is not a guarantee given by one party to the other party to a contract under or in pursuance of which the ownership or possession of the goods to which the guarantee relates is transferred. (2) A term of a guarantee to which this section applies shall be void in so far as it purports to exclude or restrict liability for loss or damage (including death or personal injury)- (a) arising from the goods proving defective while- (i) in use otherwise than exclusively for the purposes of a business ; or (ii) in the possession of a person for such use ; and (b) resulting from the breach of duty of a person concerned in the manufacture or distribution of the goods. (3) For the purposes of this section, any document is a guaran- tee if it contains or purports to contain some promise or assur- ance (however worded or presented) that defects will be made good by complete or partial replacement, or by repair, monetary compensation or otherwise. 20.-(1) Any terns of a contract which purports to exclude or restrict liability for breach of the obligations arising from- (a) section 12 of the Sale of Goods Act 1893 (seller's implied undertakings as to title etc.) ; (b) section 8 of the Supply of Goods (Implied Terms) Act 1973 (implied terms as to title in hire-purchase agree- ments), shall be void. Unfair Contract Terms Act 1977 C. 50 13 (b) how far it was open to that party to cover 'himself by PART 11 insurance. (4) The onus of proving that it was fair and reasonable to incorporate a term in a contract shall lie on the party so contending. 25.-(1) In this Part of this Act- Interpretation " breach of duty " means the breach- of Part 11. (a) of any obligation,' arising from the express or implied terms of a contract, to take reasonable care or exercise reasonable skill in the performance of the contract ; (b) of any common law duty to take reasonable care or exercise reasonable skill ; (c) of the duty of reasonable care imposed by section 2(1) of the Occupiers' Liability (Scotland) 1960 c. 30. Act 1960 ; " business " includes a profession and the activities of any government department or local or public authority ; " consumer " has the meaning assigned to that expression in the definition in this section of " consumer con- tract " ; " consumer contract " means a contract (not being a con- tract of sale by auction or competitive tender) in which- (a) one party to the contract deals, and the other party to the contract (" the consumer ") does not deal or hold himself out as dealing, in the course of a business, and (b) in the case of a contract such as is mentioned in section 15(2)(a) of this Act, the goods are of a type ordinarily supplied for private use or consumption ; and for the purposes of this Part of this Act the onus of proving that a contract is not to be regarded as a consumer contract shall lie on the party so contend- ing ; " goods " has the same meaning as in the 'Sale of Goods 5 & c 771. Vict. Act 1893 ; " hire-purchase agreement " has the same meaning as in section 189(1) of the Consumer Credit Act 1974 ; 1974 c. 39. " personal injury " includes any disease and any impairment of physical or mental condition. (2) In relation to any breach of duty or obligation, it is immaterial for any purpose of this Part of this Act whether the act or omission giving rise to that breach was inadvertent or 14 c. 50 Unfair Contract Terns Act 1977 PART II intentional, or whether liability for it arises directly or vicariously. (3) In this Part of this Act, any reference to excluding or restricting any liability includes- (a) making the liability or its enforcement subject to any restrictive or onerous conditions ; (b) excluding or restricting any right or remedy in respect of the liability, or subjecting a person to any prejudice in consequence of his pursuing any such right or remedy ; (c) excluding or restricting any rule of evidence or pro- cedure ; (d) excluding or restricting any liability by reference to a notice having contractual effect, but does not include an agreement to submit any question to arbitration. (4) In subsection (3)(d) above " notice " includes an announce- ment, whether or not in writing, and any other communication or pretended communication. (5) In sections 15 and 16 and 19 to 21 of this Act, any reference to excluding or restricting liability for breach of an obligation or duty shall include a reference to excluding or restricting the obligation or duty itself. International supply contracts. PART III PROVISIONS APPLYING TO WHOLE OF UNITED KINGDOM Miscellaneous 26.-(1) The limits imposed by this Act on the extent to which a person may exclude or restrict liability by reference to a contract term do not apply to liability arising under such a contract as is described in subsection (3) below. (2) The terms of such a contract are not subject to any require- ment of reasonableness under section 3 or 4: and nothing in Part II of this Act shall require the incorporation of the terms of such a contract to be fair and reasonable for them to have effect. (3) Subject to subsection (4), that description of contract is one whose characteristics are the following- (a) either it is a contract of sale of goods or it is one under or in pursuance of which the possession or ownership of goods passes ; and Unfair Contract Terms Act 1977 c. 50 15 (b) it is made by parties whose places of business (or, if PART III they have none, habitual residences) are in the territories of different States (the Channel Islands and the Isle of Man being treated for this purpose as different States from the United Kingdom). (4) A contract falls within subsection (3) above only if either- (a) the goods in question are, at the time of the conclusion of the contract, in the course of carriage, or will be carried, from the territory of one State to the territory of another ; or (b) the acts constituting the offer and acceptance have been done in the territories of different States or 0 the contract provides for the goods to be delivered to the territory of a State other than that within whose territory those acts were done. 27.-(1) Where the proper law of a contract is the law of any choice of part of the United Kingdom only by choice of the parties (and law clauses. apart from that choice would be the law of some country outside the United Kingdom) sections 2 to 7 and 16 to 21 of this Act do not operate as part of the proper law. (2) This Act has effect notwithstanding any contract term which applies or purports to apply the law of some country outside the United Kingdom, where (either or both)- (a) the term appears to the court, or arbitrator or arbiter to have been imposed wholly or mainly for the purpose of enabling the party imposing it to evade the opera- tion of this Act ; or (b) in the making of the contract one of the parties dealt as consumer, and he was then habitually resident in the United Kingdom, and the essential steps necessary for the making of the contract were taken there, whether by him or by others on his behalf. (3) In the application of subsection (2) above to Scotland, for paragraph (b) there shall be substituted- (b) the contract is a consumer contract as defined in Part II of this Act, and the consumer at the date when the contract was made was habitually resident in the United Kingdom, and the essential steps necessary for the making of the contract were taken there, whether by him or by others on his behalf.". 28.--(1) This section applies to a contract for carriage by Temporary sea of, a passenger or of a passenger and his luggage where provision a the provisions of the Athens Convention (with or without modi- for sea of fication) do not have, in relation to the contract, the force of passengers. law in the United Kingdom. 1 8 c. 50 Unfair Contract Terms Act 1977 PART III Citation and extent. 32.-(1) This Act may be cited as the Unfair Contract Terms Act 1977. (2) Part I of this Act extends to England and Wales and to Northern Ireland ; but it does not extend to Scotland. (3) Part II of this Act extends to Scotland only. (4) This Part of this Act extends to the whole of the United Kingdom. Unfair Contract Terms Act 1977, c. 50 19 SCHEDULES SCHEDULE 1 SCOPE OP SECTIONS 2 TO 4 AND 7 1. Sections 2 to 4 of this Act do not extend to-- (a) any contract of insurance (including a contract to pay an annuity on human life) ; (b) any contract so far as it relates to the creation or transfer of an interest in land, or to the termination of such an interest, whether by extinction, merger, surrender, forfeiture or otherwise ; (c) any contract so far as it relates to the creation or transfer of a right or interest in any patent, trade mark, copyright, registered design, technical or commercial information or other intellectual propcrty, or relates to the termina- tion of any such right or interest ; (d) any contract so far as it relates- (i) to the formation or dissolution of a company (which means any body corporate or unincorporated association and includes a partnership), or (ii) to its constitution or the rights or obligations of its corporators or members ; (e) any contract so far as it relates to the creation or transfer of securities or of any right or interest in securities. 2. Section 2(1) extends to-- (a) any contract of marine salvage or towage ; (b) any charterparty of a ship or hovercraft ; and (c) any contract for the carriage of goods by ship or hovercraft ; but subject to this sections 2 to 4 and 7 do not extend to any such contract except in favour of a person dealing as consumer. 3. Where goods are carried by ship or hovercraft in pursuance of a contract which either- (a) specifics that as the means of carriage over part of the journey to be covered, or (b) makes no provision as to the means of carriage and does not exclude that means, then sections 2(2), 3 and 4 do not, except in favour of a person dealing as consumer, extend to the contract as it operates for and in relation to the carriage of the goods by that means. 4. Section 2(1) and (2) do not extend to a contract of employ- ment, except in favour of the employee. 5. Section 2(1) does not affect the validity of any discharge and indemnity given by a person, on or in connection with an award to him of compensation for pneumoconiosis attributable to employ- ment in the coal industry, in respect of any further claim arising from his contracting that disease. Section 1(2). 20 c. 50 Unfair Contract Terms Act 1977 Sections 11(2) SCHEDULE 2 and 24(2). Section 31(3). " GUIDELINES " FOR APPLICATION OF REASONABLENESS TEST The matters to which regard is to be had in particular for the purposes of sections 6(3), 7(3) and (4), 20 and 21 are any of the following which appear to be relevant- (a) the strength of the bargaining positions of the parties relative to each other, taking into account (among other things) alternative means by which the customer's requirements could have been met ; (b) whether the customer received an inducement to agree to the term, or in accepting it had an opportunity of entering into a similar contract with other persons, but without having to accept a similar term ; (c) whether the customer knew or ought reasonably to have known of the existence and extent of the term (having regard, among other things, to any custom of the trade and any previous course of dealing between the parties) ; (d) 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 com- pliance with that condition would be practicable ; (e) whether the goods were manufactured, processed or adapted to the special order of the customer. SCHEDULE 3 AMENDMENT OF ENACTMENTS 56 & 57 Vict. In the Sale of Goods Act 1893- c. 71. 1973 c. 13. 1974 c. 39. (a) in section 55(1), for the words " the following provisions of this section " substitute " the provisions of the Unfair Contract Terms Act 1977 " ; (b) in section 62(1), in the definition of " business ", for " local authority or statutory undertaker " substitute " or local or public authority ". In the Supply of Goods (Implied Terms) Act 1973 (as originally enacted and as substituted by the Consumer Credit Act 1974)- (a) in section 14(1) for the words from " conditional sale " to the end substitute "a conditional sale agreement where the buyer deals as consumer within Part I of the Unfair Contract Terms Act 1977 or, in Scotland, the agreement is a consumer contract within Part II of that Act (b) in section 15(1), in the definition of " business ", for " local authority or statutory undertaker " substitute " or local or public authority ".