Report No. 199

Position in United Kingdom:

In U.K., the laws relating to contracts accept the basic principle of freedom of contract i.e. the parties should be free to agree on any terms that they like provided that their agreement is not illegal or otherwise contrary to public policy. In practice, however, there have been restrictions on this principle. The restrictions are justified by the fact that parties may not have sufficient bargaining power to protect their interests or parties are not always sufficiently well informed.

The principal control over unfair terms until 1994 centred on "exclusion" and "limitation of liability" clauses though some legislation to combat with this problem was first passed in the 19th century. The doctrine of common law and the Court of equity were inadequate to deal with the problem that emerged with the development of standard form contracts, essentially the pre-printed contracts drawn up in advance by one party for use on more than one occasion.