Unfair Contract Terms Act 1977

PART I — AMENDMENT OF LAW FOR ENGLAND AND WALES AND NORTHERN IRELAND

Introductory

Scope of Part I.

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• (1) For the purposes of this Part of this Act, “negligence” means the breach—

• (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 (but not any stricter duty);

• (c) of the common duty of care imposed by the Occupiers’ Liability Act 1957 or the Occupiers’ Liability Act (Northern Ireland) 1957.

• (2) This Part of this Act is subject to Part III; and in relation to contracts, the operation of sections 2 , 3 and 7 is subject to the exceptions made by Schedule 1.

• (3) In the case of both contract and tort, sections 2 to 7 apply (except where the contrary is stated in section 6(4)) only to business liability, that is liability for breach of obligations or duties arising—

• (a) from things done or to be done by a person in the course of a business (whether his own business or another’s); or

• (b) from the occupation of premises used for business purposes of the occupier;

and references to liability are to be read accordingly but liability of an occupier of premises for breach of an obligation or duty towards a person obtaining access to the premises for recreational or educational purposes, being liability for loss or damage suffered by reason of the dangerous state of the premises, is not a business liability of the occupier unless granting that person such access for the purposes concerned falls within the business purposes of the occupier.

• (4) In relation to any breach of duty or obligation, it is,immaterial for any purpose of this Part of this Act whether the breach was inadvertent or intentional, or whether liability for it arises directly or vicariously.

Avoidence of liability for negligence, breach of contract, etc.

Negligence liability.

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• (1) A person cannot by reference to any contract term or to a notice given to persons generally or to particular persons exclude or restrict his liability for death or personal injury resulting from negligence.

• (2) In the case of other loss or damage, a person cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness.

• (3) Where a contract term or notice purports to exclude or restrict liability for negligence a person’s agreement to or awareness of it is not of itself to be taken as indicating his voluntary acceptance of any risk.

• (4) This section does not apply to—

• (a) a term in a consumer contract, or

• (b) a notice to the extent that it is a consumer notice,

(but see the provision made about such contracts and notices in sections 62 and 65 of the Consumer Rights Act 2015).

Liability arising in contract.

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• (1) This section applies as between contracting parties where one of them deals ... on the other’s written standard terms of business.

• (2) As against that party, the other cannot by reference to any contract term—

• (a) when himself in breach of contract, exclude or restrict any liability of his in respect of the breach; or

• (b) claim to be entitled—

• (i) to render a contractual performance substantially different from that which was reasonably expected of him, or

• (ii) in respect of the whole or any part of his 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.

• (3) This section does not apply to a term in a consumer contract (but see the provision made about such contracts in section 62 of the Consumer Rights Act 2015).

Unreasonable indemnity clauses.

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Liability arising from sale or supply of goods

“Guarantee” of consumer goods.

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Sale and hire purchase.

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• (1) Liability for breach of the obligations arising from—

• (a) section 12 of the Sale of Goods Act 1979(seller’s implied undertakings as to title, etc.);

• (b) section 8 of the Supply of Goods (Implied Terms) Act 1973 (the corresponding thing in relation to hire-purchase),

cannot be excluded or restricted by reference to any contract term.

• (1A) Liability for breach of the obligations arising from—

• (a) section 13, 14 or 15 of the 1979 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 a contract term except in so far as the term satisfies the requirement of reasonableness.

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) The liabilities referred to in this section are not only the business liabilities defined by section 1(3), but include those arising under any contract of sale of goods or hire-purchase agreement.

• (5) This section does not apply to a consumer contract (but see the provision made about such contracts in section 31 of the Consumer Rights Act 2015).

Miscellaneous contracts under which goods pass.

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• (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.

• (1A) 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 such a term except in so far as the term satisfies the requirement of reasonableness.

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3A) Liability for breach of the obligations arising under section 2 of the Supply of Goods and Services Act 1982 (implied terms about title etc. in certain contracts for the transfer of the property in goods) cannot be excluded or restricted by reference to any such term.

• (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,

cannot (in a case to which subsection (3A) above does not apply), be excluded or restricted by reference to any such term except in so far as the term satisfies the requirement of reasonableness.

• (4A) This section does not apply to a consumer contract (but see the provision made about such contracts in section 31 of the Consumer Rights Act 2015).

• (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other provisions about contracts

Misrepresentation.

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• (1) In the Misrepresentation Act 1967, the following is substituted for section 3—

(3) If a contract contains a term which would exclude or restrict— (a) any liability to which a party to a contract may be subject by reason of any misrepresentation made by him before the contract was made; or (b) any remedy available to another party to the contract by reason of such a misrepresentation, 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.

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• (2) The same section is substituted for section 3 of the Misrepresentation Act (Northern Ireland) 1967.

Effect of breach.

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Evasion by means of secondary contract.

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A person is not bound by any contract term prejudicing or taking away rights of his which arise under, or in connection with the performance of, another contract, so far as those rights extend to the enforcement of another’s liability which this Part of this Act prevents that other from excluding or restricting.

Explanatory provisions

The “reasonableness” test.

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• (1) In relation to a contract term, the requirement of reasonableness for the purposes of this Part of this Act, section 3 of the Misrepresentation Act 1967 and section 3 of the Misrepresentation Act (Northern Ireland) 1967 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.

• (2) ln determining for the purposes of section 6 or 7 above whether a contract term satisfies the requirement of reasonableness, regard shall be had in particular to the matters specified in Schedule 2 to this Act; but this subsection does not prevent the court or arbitrator from holding, in accordance with any rule of law, that a term which purports to exclude or restrict any relevant liability is not a term of the contract.

• (3) In relation to a notice (not being a notice having contractual effect), the requirement of reasonableness under this Act is that it should be fair and reasonable to allow reliance on it, having regard to all the circumstances obtaining when the liability arose or (but for the notice) would have arisen.

• (4) Where by reference to a contract term or notice a person seeks to restrict liability to a specified sum of money, and the question arises (under this or any other Act) whether the term or notice satisfies the requirement of reasonableness, regard shall be had in particular (but without prejudice to subsection (2) above in the case of contract terms) to—

• (a) the resources which he could expect to be available to him for the purpose of meeting the liability should it arise; and

• (b) how far it was open to him to cover himself by insurance.

• (5) lt is for those claiming that a contract term or notice satisfies the requirement of reasonableness to show that it does.

“Dealing as a consumer”.

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Varieties of exemption clause.

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• (1) To the extent that this Part of this Act prevents the exclusion or restriction of any liability it also prevents—

• (a) making the liability or its enforcement subject to 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 rules of evidence or procedure;

and (to that extent) sections 2 , 6 and 7 also prevent excluding or restricting liability by reference to terms and notices which exclude or restrict the relevant obligation or duty.

• (2) But an agreement in writing to submit present or future differences to arbitration is not to be treated under this Part of this Act as excluding or restricting any liability.

Interpretation of Part I.

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In this Part of this Act—

• “business” includes a profession and the activities of any government department or local or public authority;

• “consumer contract” has the same meaning as in the Consumer Rights Act 2015 (see section 61);

• “consumer notice” has the same meaning as in the Consumer Rights Act 2015 (see section 61);

• “goods”has the same meaning as in the Sale of Goods Act 1979;

• “hire-purchase agreement” has the same meaning as in the Consumer Credit Act 1974;

• “negligence” has the meaning given by section 1(1);

• “notice” includes an announcement, whether or not in writing, and any other communication or pretended communication; and

• “personal injury” includes any disease and any impairment of physical or mental condition.

PART II — AMENDMENT OF LAW FOR SCOTLAND

Scope of Part II.

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• (1) This Part of this Act . . . is 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 and 17 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 and 17 —

• (a) do not apply to any contract to the extent that the contract—

• (i) is a contract of insurance (including a contract to pay annuity on human life);

• (ii) relates to the formation, constitution or dissolution 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 hovercraft; 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (4) This subsection relates to a contract in pursuance of which 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.

Liability for breach of duty.

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• (1) Subject to subsection (1A) below, Where a term of a contract , or a provision of a notice given to persons generally or to particular persons, purports to exclude or restrict liability for breach of duty arising in the course of any business or from the occupation of any premises used for business purposes of the occupier, that term or provision—

• (a) shall be void in any case where such exclusion or restriction 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 or, as the case may be, if it is not fair and reasonable to allow reliance on the provision.

• (1A) Nothing in paragraph (b) of subsection (1) above shall be taken as implying that a provision of a notice has effect in circumstances where, apart from that paragraph, it would not have effect.

• (2) Subsection (1)(a) above 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 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 or a provision of a notice is void or has no effect, the fact that a person agreed to, or was aware of, the term or provision shall not of itself be sufficient evidence that he knowingly and voluntarily assumed any risk.

• (4) This section does not apply to—

• (a) a term in a consumer contract, or

• (b) a notice to the extent that it is a consumer notice,

(but see the provision made about such contracts and notices in sections 62 and 65 of the Consumer Rights Act 2015).

Control of unreasonable exemptions in ... standard form contracts.

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• (1) Any term of a contract which is ... a standard form contract shall have no effect for the purpose of enabling a party to the contract—

• (a) who is in breach of a contractual obligation, to exclude or restrict any liability of his to the ... customer in respect of the breach;

• (b) in respect of a contractual obligation, to render no performance, or to render a performance substantially different from that which the ... 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.

• (3) This section does not apply to a term in a consumer contract (but see the provision made about such contracts in section 62 of the Consumer Rights Act 2015).

Unreasonable indemnity clauses in consumer contracts.

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“Guarantee” of consumer goods.

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Obligations implied by law in sale and hire-purchase contracts.

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• (1) Any term of a contract which purports to exclude or restrict liability for breach of the obligations arising from—