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Control of Terms - Legislation Flashcards

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1
Q

What is the step by step process for control of terms?

A
  • Decide whether a term has been incorporated
  • Decide whether it is to be interpreted as being applicable
  • Consider whether it goes against legislation
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2
Q

What are the 2 pieces of legislation that directly control terms of contract?

A
  • Unfair Contract Terms ACT 1977 (UCTA)
  • Consumer Rights Act 2015 (CRA)
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3
Q

What are the 10 key differences between the 2 pieces of legislation?
- type of dealing
- consumer covered
- standard form or negotiated
- blacklist / grey list
- review mechanism
- guidelines
- burden of proof
- duty of court to consider
- enforcement mechanism and effect

A

UCTA
1. B2B contracts
2. No
3. some apply only to standard terms; others apply to both
4. only to exemption clauses -> scope of this expanded
5. small blacklist of terms which are absolutely invalid
6. absolute invalidity -> reasonableness test
7. guidelines for applying the reasonablness test
8. on the party seeking to rely on the challenged term to show its reasonableness
9. no duty to consider reasonableness
10. enforced by party seeking to escape the challenged term -> outcome only affects immediate parties

CRA
1. B2C contracts
2. Yes
3. applies to all
4. any term other than core terms
5. larger blacklist and very large grey list of terms which may be regarded as unfair
6. absolute invalidity -> fairness test
7. few guidelines for judging fairness
8. neutral assessment by Court
9. duty to consider fairness even if not raised by parties
10. enforcement by party seeking to escape challenged term or by regulator to prevent the future use of unfair terms

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4
Q

What type of legislation is UCTA?

A

UCTA is a national piece of legislation

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5
Q

What does CRA do?
which part do we care about?

A
  • streamlines and consolidates a number of pieces of consumer legislation
  • Part 2 -> retained EU law
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6
Q

What is the material scope of UCTA and CRA?

A

UCTA doesn’t regulate unfair contractual terms -> only applies to exemption clauses

CRA controls any term other than a core term

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7
Q

What is the scope of UCTA?

A
  • only applies to B2B contracts
  • applies only to limitation of liability and exclusion clauses
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8
Q

What does section 2 UCTA discuss?

A

exemptions of liability for negligence

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9
Q

What does section 3 UCTA discuss?

A

exemptions of liability for breach of contract

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10
Q

What does s.2(1) UCTA say?

A
  • law doesn’t allow businesses to exclude liability to negligence that ends up damaging your person or killing you
  • if such terms exist, they become ineffective = disappear
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11
Q

What does s.2(2) UCTA say?

A
  • regulates other types of loss and damage e.g. property damage
  • not personal injury
  • you can limit / exclude liability if it satisfies the reasonable requirements
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12
Q

What does s.3(1) UCTA say?

A
  • regulates the attempt of one party to exclude / limit liability for breach of contract
  • applies between parties where one of them deals on behalf of their written standard terms of business / contract
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13
Q

Which case supplements s.3(1) of UCTA?

A

African Export-Import Bank v Shebah Exploration & Production Co Ltd [2017]

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14
Q

What are the 4 elements needed to satisfy s.3(1) UCTA?

A
  1. Term must be written -> can’t be an oral agreement
  2. Term must be a term of business -> UCTA can’t do anything if it’s not a term of business
  3. Term must be part of other party’s standard terms of business
  4. the other party is dealing on those written standard terms of business
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15
Q

What does s.3(2)(a) UCTA say?

A

an attempt to limit liability is possible, but has to be reasonable

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16
Q

Which 3 cases are related to s.3(1) UCTA?

A
  • Chester Grosvenor Hotel Co Ltd v Alfred McAlpine Management Ltd (1991)
  • Bates v Post Office (3) [2019]
  • St Albans City and District Council v International Computers Ltd [1996]
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17
Q

Where is negligence defined?

A

s.1(1) of CRA
- includes breach of express or implied term to take reasonable care in performance of contract

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18
Q

Where is the test of reasonableness set out?

A

s.11 and Schedule 2 CRA

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19
Q

What do lawyers do to get around UCTA?
example

A
  • draft clauses in different ways
  • drafting an exemption clause as duty-defining, you can get around UCTA

duty-defining: Pepe Rio will supply branded alcoholic drinks unless the market price for branded drinks increases in which case non-branded drinks are to be provided

defensive: Pepe Rio are not liable for the supply of non-branded alcoholic drinks where the market price has increased

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20
Q

What are the two ways to draft an exemption clause?

A
  • duty-defining
  • defensive
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21
Q

Which does Coote support?

How are exemption clauses generally viewed?

A

-supports duty-defining view
- the nature of an exclusion clause is to define duties
- generally see exclusion clauses as defensive

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22
Q

What does s.3(2)(b) UCTA say?
- which 3 cases support that?

A
  • parties have to perform the contract as stated
  1. Bates v Post Office (No 3) [2019]
  2. Timeload Ltd v British Telecommunications plc [1995]
  3. Axa Sun Life Services v Campbell Martin Ltd [2011]
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23
Q

What are 2 methods for controlling terms used by UCTA?

A
  1. Outright invalidity
    e.g. s.2(1) liability for death or personal injury caused by negligence
  2. Subject terms to a reasonableness test
    e.g. if clause is found to be unreasonable it will be invalidated
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24
Q

Checklist to use when checking a term with UCTA

Study These Flashcards
A
  1. Is the term incorporated into the contract?
  2. Is the term properly interpreted & does it apply to the situation?
  3. Which act applies → UCTA or CRA
  4. What type of clause is it, is it covered by s.2(1), s.3?
  5. If it is, is the clause reasonable or not?
25
Where is the reasonableness test found in UCTA?
s.11(1)
26
What does s.11(1), (2) and (4) UCTA say?
all provide tests for reasonableness
27
Where is another place to find guidelines for reasonableness?
Schedule 2
28
How do you know which guideline to use?
- all factors mentioned in the various guidelines are applicable in all cases in which they are relevant - wide discretionary judicial powers
29
Which 4 cases apply to the reasonableness test?
1. Stewart Gill Ltd v Horatio Myer & Co Ltd [1992] 2. Stag Line Ltd v Tyne Ship Repair Group Ltd (The Zinnia) [1984] 3. St Albans City DC v International Computers [1996] 4. Goodlife Foods Ltd v Hall Fire Protection Ltd [2018]
30
What does s.11(5) UCTA say?
- the presumption of unreasonableness - the burden of proof is on the party trying to prove that the term is fair → seems intuitive -> if you’re putting certain terms in the contract, you need to prove that they’re reasonable
31
What is the difference in views between George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] and Photo Production Ltd v Securicor Transport Ltd [1980]?
the former highlights that the weaker party should be protected in negotiations, the latter states that after UCTA, the parties should be left free to do what they want, though only when they are equals
32
Where are the definitions of trader and consumer found in CRA?
s.2(1) -> trader s.2(3) -> consumer
33
What does s.2(4) of CRA state?
states that a trader claiming that an individual is not acting ‘wholly or mainly’ outside their trade must prove it
34
Where is an explanation of the notion of “ ‘wholly or mainly’ outside an individual’s trade” explained?
CRA Explanatory Guidelines para 36 - e.g. a person who buys a kettle and uses it once a week when working from home is still a consumer - a person who buys a printer and 95% of the time is using it for business, is likely to not be held a consumer
35
Where are the blacklisted terms found in CRA? - what are they on?
s.65(1) - personal injury
36
Where are the blacklisted terms for UCTA found?
s.2(1)
37
What does s.31 say?
also has blacklisted terms
38
What does s.62 CRA say?
provides the 'fairness test'
39
What terms are mentioned in s.62(4)? Where are they from?
- significant imbalance' and 'good faith' - EU Directive
40
Which 2 cases discuss the terms ‘significant imbalance’ and ‘good faith’? - How do they each define them?
DG of Fair Trading v First National Bank Plc [2002] -> interpreting the UTCCR but still relevant to CRA - “The requirement of significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties' rights and obligations under the contract significantly in his favour” -> “the imbalance must be to the detriment of the consumer” - The requirement of good faith in this context is one of fair and open dealing. Openness means the terms are expressed fully, clearly and legibly. Disadvantageous terms should be especially prominent. Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's weakness. Parking Eye Ltd v Beavis [2015] -> interpreting UTCCR - “whether the consumer is being deprived of an advantage which he would enjoy under national law in the absence of the contractual provision” → indicates whether there is a significant imbalance
41
What does s.65(5) CRA?
sets out how a term is decided to be fair
42
What is a ‘grey list’? - Where is it found?
- a list of terms likely to be considered unfair - Schedule 2 CRA
43
What type of term is found in the grey list? (7 examples)
- Consumers being denied full redress if things go wrong - consumers being tied into the contract beyond what they would normally expect - the trader not having to perform their obligations - consumers unfairly losing prepayments if contract is ended - trader arbitrarily varying the terms after they have been agreed e.g. so as to supply a different product / raise prices / reduce consumer rights - trader determining the price or subject matter of the contract after the consumer is bound by it - consumers being subject to disproportionate financial sanctions
44
What does CRA control in a consumer contract? - How?
- any non-core term - by subjecting them to a review of fairness
45
What does s.64 CRA say?
- core term exemption - discusses that the terms that make up the subject matter of the contract, or the appropriateness of the price payable are core terms - BUT, the term has to be transparent and prominent, otherwise it is not excluded from assessment under s.62
46
How should the courts interpret the core term exemptions in 64(1)(a) and (b) CRA? - which case is authority for this?
strictly Kásler [2014]
47
Which case helps understand scope of s.64(1)(a) CRA?
- Matei - “the essential obligations of the contract and, as such, characterise it”
48
Which cases (3) help understand s.64(1)(b) CRA?
- DG of Fair Trading v First National Bank Plc [2002] - OFT v Abbey National (and others) [2009] - Matei
49
What does s.64(2) CRA say?
terms must be transparent and prominent if they are to benefit from ‘core exemption’ terms
50
What is clarified in s.64(3) and (4) CRA?
‘transparent’ and ‘prominent’
51
How are ‘transparency’ and ‘prominent’ further clarified by UTCCR and CJEU?
transparency: can be equated with ‘plain intelligible language’ test under UTCCR prominent: new requirement under CRA 2015 / standard for assessment of prominence is the ‘average consumer’ test
52
What is the rationale behind the core term exemption?
- parties are free to shape contracts how they see fit - the idea is that the core term is definitely going to be seen by both parties → the market will deal with any unfair core terms
53
What does s.64(5) CRA say?
states definition of average consumer: a consumer who is reasonably well-informed, observant and circumspect
54
What does s.64(6) CRA say?
Section 64 doesn’t apply to a term of a contract listed in Part 1 of Schedule 2
55
What does s.68 CRA say? - Which case supports it?
Requirement of transparency - Kásler: term should put the consumer in a position in which they can evaluate the economic consequences of the contract
56
What does s.62 CRA say?
a term that is unfair is not binding
57
What does the CRA allow that the UCTA does not with regards to pre-emptive challenges? - Which 2 cases indicate this?
- lays down dual system of both individual challenges and pre-emptive challenges
58
What are pre-emptive challenges?
- applications to the Court to issue an injunction on businesses and prevent the use of unfair terms in their contracts with consumers - considerable investigatory powers - ‘regulators’ may accept undertakings from businesses not to use terms in their contracts → avoid going to court
59
Why are ‘public enforcement’ mechanisms crucial for control of unfair terms? (3)
- consumers aren’t very litigious - often not willing or able to pursue actions through courts to enforce their private law rights - public regulators can take measures individuals cannot → increase effectiveness of control over the use of unfair terms

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