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Report No. 199

UTCCR (1999): (procedural unfairness)

Under the (UK) Unfair Terms Consumer Contracts Regulation, 1999, (UTCCR) - Regulation 5(1) stated that a 'contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to requirement of good faith, it causes a significant imbalance in the party's rights and obligations under the contract, to the detriment of the consumer. Regulation 5(2) states that a term shall always be regarded as not having been individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term. Regulation 5(4) puts the onus on the supplier to prove that a term was individually negotiated to show that it was no unfair.

Regulation 6 refers to the need to consider the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it was dependent.

Schedule 2 of the Regulation refers to several guidelines to be considered while judging unfairness but they all deal with substantive unfairness. (In the UK Law Commission Report, 2004, in para 3.91, it was suggested that 'good faith' clause has to be omitted).

The New Draft Bill, 2004 (UK & Scottish Law Commission): (procedural unfairness)

The Draft Bill, 2004 annexed to the Law Commission Report deals with several matters concerning procedural unfairness.

Part 1 deals with 'Business Liability for Negligence'; Part 2 with 'Consumer Contracts'; Part 3 with 'Non-Consumer Contracts' which deals with Business Contracts, small Business Contracts, Employment Contracts and Private Contracts; Part 4 deals with 'the 'Fair and Reasonable' Test; Part 5 deals with Choice of Law; Part 6 with "Miscellaneous and Supplementary".

Schedule 1 deals with 'Consumer Contract Terms etc.: Regulation and Enforcement'; Schedule 2 deals with 'contract terms which may be regarded as not fair and reasonable'; Schedule 3 deals with Exception; Schedule 4 deals with calculating the number of employees in a Business; Schedule 5 deals with 'minor and consequential amendments'.

We shall, however, refer to a few provisions of the Bill which deal with 'procedural' unfairness.

Terms as to subject matter, price:

Sub-sections (2) to (4) of section 4 of the Bill require that in respect of 'Consumer' contracts, the subject matter and the price are unfair if they are not transparent and as reasonably expected by the consumer. These are procedural safeguards.

Unfair (Procedural and Substantive) Terms in Contract Back

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