Week 10: Unfair Contract Terms

Question 1

What are the two types of damages?

Answer 1

Liquidated Damages: parties have provided what damages will be in breach of contract

Illiquid Damages: parties haven’t agreed damages so judge must make decision

Question 2

What used to be the idea between liquid damages and penalties?

Answer 2

Clauses that were not realistic estimate of losses were seen as penalties and unenforceable.

Question 3

Cases?

Answer 3

ParkingEye v Beavis

£85 fine for overstaying, said it wasn’t genuine pre-estimate. Legitimate interest of the party protected and public policy. Question of burden of proof to show party would’ve agreed to contract

Question 4

Price adjustment clause?

Answer 4

Cavendish Square Holding v El Makdessi

M agreed to restrictive covenant but broke it. price adjustment clause (El Makdessi case). Neither unenforceable. Primary rather than secondary obligations, and not penal in nature.

Question 5

What happens if loss is greater than liquidated damages clause.

Answer 5

Have to take liquidated damages, as per Cellulose Acetate Co v Widnes Foundry

Question 6

What exclusion clauses are there?

Answer 6

1. Exclusion
2. Limitation
3. Indemnity

Exception clause very different. Used in insurance contract, defines when insurance company are liable. Other party may have to do things.

Question 7

What are they good for?

Answer 7

Efficient dealing of mass transactions, like in trains and such

Question 8

Unfair Contract Terms Act 1977?

Answer 8

Stopped unfair exclusion of liability for mainly B2C

Question 9

What does it do?

Answer 9

Gives Judges given general power. Exclude liability for death are completely void. Statutory illegality, reasonability test except for death and personal injury.

Question 10

What issues arose?

Answer 10

EU regulations in 1994 and 1999, so overlap and unclear regime. in 2005 law commission set about fixing this.

Question 11

What was the solution?

Answer 11

The consumer rights Act 2015

Question 12

Office of Fair-Trading v Abbey National plc

Answer 12

UKSC held terms for unplanned overdrafts were fair. Regulation could not be applied. 1977 Act didn’t control price or subject matter.

Question 13

What does the 2015 Act state?

Answer 13

Terms in consumer contract unfair are contrary to good faith, causing significant imbalance in the parties’ rights and obligations arising under the contract to the detriment of the consumer.

Question 14

as per the Portuguese case, what is significant imbalance?

Answer 14

Deprived of an advantage which he would enjoy under national law in the absence of the provision

Question 15

Good faith?

Answer 15

Would consumer have agreed to such a term in individual contract

Question 16

What terms fall prima facie into imbalance?

Answer 16

1. Exemption clauses
2. Clauses giving right to withdrawal unilaterally
3. Clauses giving supplier disproportionate advantage

Question 17

What is severability

Answer 17

Unfair term not binding, but rest of contract does.

Question 18

How are price and subject matter, excluded in the 1977 Act, looked at?

Answer 18

Requiring prominence and transparency. Must draw attention to terms and make them clear.

Question 19

What words for exam?

Answer 19

1. Significant Imbalance
2. Good faith
3. Detriment
4. Transparency
5. Prominence