Unfair Contract Terms Act 1977

Contents

Amendment of Law for England and Wales and Northern Ireland
Sale and hire-purchase
Varieties of exemption clause
Saving for other relevant legislation

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Unfair Contract Terms Act 1977

List of UK acts

  Crown Copyright Acknowledged

   as amended up to date to 1/10/2003

Amendment of Law for England and Wales and Northern Ireland

Scope of Part I

Part I

Amendment of Law for England and Wales and Northern Ireland

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.

This Part of this Act is subject to Part III; and in relation to contracts, the operation of sections 2 to 4 and 7 is subject to the exceptions made by Schedule 1.

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.

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Negligence liability

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.
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.
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.

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Liability arising in contract

This section applies as between contracting parties where one of them deals as consumer or on the other’s written standard terms of business.
As against that party, the other cannot by reference to any contract term—
1. when himself in breach of contract, exclude or restrict any liability of his in respect of the breach; or
2. claim to be entitled—
  1. to render a contractual performance substantially different from that which was reasonably expected of him, or
  2. 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.

Unreasonable indemnity clauses

A person dealing as consumer cannot by reference to any contract term be made to indemnify another person (whether a party to the contract or not) in respect of liability that may be incurred by the other for negligence or breach of contract, except in so far as the contract term satisfies the requirement of reasonableness.
This section applies whether the liability in question—
1. is directly that of the person to be indemnified or is incurred by him vicariously;
2. is to the person dealing as consumer or to someone else.

Sale and hire-purchase

Liability for breach of the obligations arising from—
1. section 12 of the Sale of Goods Act 1979 (seller’s implied undertakings as to title, etc);
2. 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.
As against a person dealing as consumer, liability for breach of the obligations arising from—
1. 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);
2. 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.
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.
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.

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Miscellaneous contracts under which goods pass

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.
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.
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. 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 references to any such term.
Liability in respect of—
1. the right to transfer ownership of the goods, or give possession; or
2. 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.
This section does not apply in the case of goods passing on a redemption of trading stamps within the Trading Stamps Act 1964 or the Trading Stamps Act (Northern Ireland) 1965.

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Misrepresentation

(This section substitutes the Misrepresentation Act 1967, s 3 and the Misrepresentation Act (Northern Ireland) 1967, s 3)

Effect of breach

Where for reliance upon it a contract term has to satisfy the requirement of reasonableness, it may be found to 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.
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.

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Evasion by means of secondary contract

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.

Varieties of exemption clause

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 and 5 to 7 also prevent excluding or restricting liability by reference to terms and notices which exclude or restrict the relevant obligation or duty.
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.

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Interpretation of Part I

In this Part of this Act—

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

“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.

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Part III

                                                        Part II
                                           (applies to Scotland only)

                                                        Part III
                           Provisions applying to whole of United Kingdom

International supply contracts

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.
The terms of such a contract are not subject to any requirement 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.
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 (b) it is made by parties whose places of business (or, if 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).
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 (c) 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.

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Choice of law clauses

Where the law applicable to a contract is the law of any part of the United Kingdom only by choice of the parties (and 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 law applicable to the contract.
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 operation 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.
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.”.

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Temporary provision for sea carriage of passengers

This section applies to a contract for carriage by sea of a passenger or of a passenger and his luggage where the provisions of the Athens Convention (with or without modification) do not have, in relation to the contract, the force of law in the United Kingdom.
In a case where— (a) the contract is not made in the United Kingdom, and (b) neither the place of departure nor the place of destination under it is in the United Kingdom, a person is not precluded by this Act from excluding or restricting liability for loss or damage, being loss or damage for which the provisions of the Convention would, if they had the force of law in relation to the contract, impose liability on him.
In any other case, a person is not precluded by this Act from excluding or restricting liability for that loss or damage— (a) in so far as the exclusion or restriction would have been effective in that case had the provisions of the Convention had the force of law in relation to the contract; or (b) in such circumstances and to such extent as may be prescribed, by reference to a prescribed term of the contract.
For the purposes of subsection (3) (a), the values which shall be taken to be the official values in the United Kingdom of the amounts (expressed in gold francs) by reference to which liability under the provisions of the Convention is limited shall be such amounts in sterling as the Secretary of State may from time to time by order made by statutory instrument specify.
In this section,— (a) the references to excluding or restricting liability include doing any of those things in relation to the liability which are mentioned in section 13 or section 25 (3) and (5); and (b) “the Athens Convention” means the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974; and (c) “prescribed” means prescribed by the Secretary of State by regulations made by statutory instrument; and a statutory instrument containing the regulations shall be subject to annulment in pursuance of a resolution of either House of Parliament.

Crown Copyright Acknowledged