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Report No. 103

4.2. Unfair Contract Terms Act, 1977 and its provisions.-

The principles on which English Courts have acted have been criticised1 as follows:-

"First, since they all rest on the admission that the clauses in question are permissible in purpose and content, they invite the draftsman to recur to the attack. Give him time, and he will make the grade. Second, since they do not face the issue, they fail to accumulate either experience or authority in, the needed direction; that of marking out for any given type of transaction what the minimum decencies are which a court will insist upon as essential to an enforceable bargain of a given type, or as being inherent in a bargain of that type.

Third, since they purport to construe and do not really construe, nor are intended to, but are instead tools of intentional and creative misconstruction, they seriously embarrass later efforts at true construction, later efforts to get at the true meaning of those wholly legitimate contracts and clauses which call for their meaning to be got at instead of avoided. The net effect is unnecessary confusion and unpredictability, together with inadequate remedy; and evil persisting that calls for remedy."

Thus, all these attempts have not been found to be of much use and therefore, in 1977, the British Parliament passed the Unfair Contract Terms Act2. The Act provides a statutory definition of the term 'negligence' which is applicable both to tort and breach of contract cases. Under the Act, negligence means-(a) breach of any obligation, arising from the express or implied terms of a contract, to take reasonable care or exercise reasonable skill in the performance of the contract; (b) breach of any common law duty to take reasonable care or exercise reasonable skill (but not any stricter duty); or (c) breach of the common duty of care imposed by the Occupier's Liability Act, 1957. The Act also provides that may clause in a contract which excludes or restricts liability for death or personal injury resulting from negligence shall be absolutely void.

In regard to other types of loss, not being death or physical injury, any restriction or excluding clause shall also be void unless it satisfies the requirement of reasonableness. The reasonableness would depend upon the unfairness of the terms in the light of the circumstances which ought to have been either known to or be in the contemplation of the parties. The Act also provides that a person who deals with the consumer on standard terms will not be allowed to claim the protection of any clause restricting or excluding liability if he himself commits breach. Nor can he claim a substantially different performance from that which the consumer or customer reasonably expected from the contract as equivalent to performance,

1.Prof. Llewellyn, 52 Harvard Law Review 700.

2. The Unfair Contract Terms Act, 1977.

Unfair Terms in Contract Back

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