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Unreasonable Terms Notes

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Unfair Contract Terms Act (UCTA) 1977 s.1 (1) Negligence here = breach of a contractual obligation to use reasonable care or breach of common law duty or duty under occupiers' liability act. (2) ss.2-7 only apply to things done in the course of business, except in s.6. s.2 (1) A person cannot exclude or restrict liability for personal injury arising from negligence, and (2) can only do so for other damage if it satisfies 'reasonableness' requirement. (3) A person's agreement/awareness of any such risk does NOT indicate voluntary acceptance of risk by him. s.3 (1) When one party deals 'as a consumer' OR on the other party's standard terms, (2) the other party can't restrict/exclude his own liability for breach or be entitled to render substantially different performance to what was reasonably expected or non-performance, except insofar as is 'reasonable'. s.4 A person dealing as a consumer can't be made to indemnify someone (even if that someone is a party to the contract) for breach of contract or negligence, unless its reasonable. S.5 covers manufacturers' guarantees so that, where legally binding, the manufacturer cant restrict liability for damage caused through defective goods that occur as a result of its negligence s.6 Liability for breach from statutes re seller's implied undertakings to title (s.12 Sale of goods act) or re ss.13-15 sale of goods act or re hire purchase goods corresponding to description under hire-purchase agreements, cannot be excluded against a person dealing as a consumer, and can only be excluded in relation to other parties insofar as is reasonable. s.11 'Reasonableness' = the term shall be a fair and reasonable one, having regard to the circumstances which were or ought to have been known to the parties when the contract was made. (4) Where D restricts his liability to a set amount of money, reasonableness depends on the resources he could expect to be available to him to meet liability should it arise, and how far it is open to him to cover himself through insurance. (5) Burden of showing reasonableness is on party claiming it. Schedule 2 gives guidance on reasonableness: Takes into account, (in)equality of bargaining positions; whether customer had opportunity to contract with another supplier who didn't insist on such terms or received inducement to agree to the term; whether customer knew or ought to have know the extent of the term e.g. through course of dealing; whether, if the clause restricts liability for breach of a certain condition, it was reasonable to believe that compliance with that condition would be practicable; and whether goods were produced by special order of the customer. s.12 P 'deals as a consumer' if he neither makes the contract in the course of business nor holds himself out as doing so; and the other party does make the contract in the course of business s.13: To the extent that UCTA prevents exclusion or limitation of liability, it also prevents making liability or enforcement subject to restrictive or onerous conditions (including restricting rights or remedies or prejudicing a party for pursuing such a right or remedy). NB doesn't affect arbitration. Unfair Terms in Consumer Contracts Regulations article 3: consumer = a natural person (nb not a legal person) which are outside his trade, business or profession art.4: These deal with contracts between a supplier or seller and a consumer. art.5: a term is unfair if not individually negotiated and, contrary to requirements of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract, to the detriment of the consumer. A term is never individually negotiated if drafted in advance

so that consumer doesn't have a chance of influencing the substance of the term. Schedule 2 gives non-exhaustive list of unfair terms: Terms with the object or effect of

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Restricting (meaning excluding or limiting) liability for death/personal injury of consumer resulting from an act or omission of that seller

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Inappropriately excluding rights of consumer in event of total/partial nonperformance or inadequate performance, including offsetting it against debts the consumer may have against D

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Making performance by consumer binding whereas performance of seller is subject to his will alone

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Allowing seller to keep sums paid by the consumer is consumer cancels contract, but not vice versa.

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Imposing disproportionately high sums on consumers who breach terms

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Authorising seller to dissolve contract on a discretionary basis

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Enabling seller to terminate without reasonable notice if the contract is of indeterminate length

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Irrevocably binding consumer to terms he had no reasonable opportunity of becoming acquainted with

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Enabling seller to alter unilaterally without valid reason change the terms of the contract or alter the product or nature of the product/services to be provided.

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Enabling seller to unilaterally determine or raise the price without giving the consumer the right to pull out if the price is too high.

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Excluding or hindering the right of the consumer to take legal action or limiting rules of evidence or by requiring any dispute to go to arbitration art.6: (1) Unfairness of the term is assessed by reference to the nature of the goods and services to be delivered and all other circumstances. (2) Insofar as it is in plain, intelligible language, the assessment of fairness of a term shall not relate to - (a) the definition of the main subject matter of the contract nor (b) the adequacy of the price or remuneration art.7 Contra proferentem rule applies in favour of the consumer art.8 an unfair term is not binding on the consumer and (2) the contract shall continue to bind the parties if capable of continued existence without the unfair term. art.12 DG of OFT can seek injunctions against parties using unfair terms.

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