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Report No. 199

Fair and Reasonable Test: (procedural)

Section 14 of the Bill refers to the 'fair and reasonable test' and contains the manner in which both 'procedural' and 'substantive' aspects of unfairness have to be tested. So far as the procedural aspects are concerned section 14(4) refers to the following:

"Section 14(4)(l): the knowledge and understanding of the party adversely affected by the term; and

(i) the strength of the parties' bargaining position,

(rest of the clauses (a), (b) of subsection (1), clauses (a) and (b) of subsection (2), (a) to (d) of clause (3), clause (a) to (g) and (j) of subsection (4) deal with 'substantive fairness' which we shall refer to in the next chapter).

As far as the time at which fairness or reasonableness is to be reckoned, para 3.96 of the Report reiterates that it is the time of the contract that is relevant and one has to take into account the substance and effect of the terms in all the circumstances of the contract.

Non-negotiated terms:

In regard to non-negotiated terms included in a standard term contract, section 11 of the Bill states that if a term not negotiated is detrimental to a party, the other party cannot rely on it unless it is 'fair and reasonable'. The 'fair and reasonable' test is to be treated as satisfied if the term is (a) transparent, (b) substantially the same as the other party reasonably expected etc. These are procedural in nature.



Unfair (Procedural and Substantive) Terms in Contract Back




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