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S. I. Extracts

The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) P41


Unfair Terms

5. - (1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.


(2) 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.


Assessment of unfair terms

6. - (1) Without prejudice to regulation 12, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent.


(2) If there is doubt about the meaning of a written term, the interpretation which is most favourable to the consumer shall prevail but this rule shall not apply in proceedings brought under regulation 12.


Effect of unfair term

8. - (1) An unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer.


(2) The contract shall continue to bind the parties if it is capable of continuing in existence without the unfair term.


Injunctions to prevent continued use of unfair terms

12. - (1) The Director or, subject to paragraph (2), any qualifying body may apply for an injunction (including an interim injunction) against any person appearing to the Director or that body to be using, or recommending use of, an unfair term drawn up for general use in contracts concluded with consumers.


(3) The Director may arrange for the dissemination in such form and manner as he considers appropriate of such information and advice concerning the operation of these Regulations as may appear to him to be expedient to give to the public and to all persons likely to be affected by these Regulations.


PART TWO


11. Consumers' Association.

SCHEDULE 2

Regulation 5(5)


INDICATIVE AND NON-EXHAUSTIVE LIST OF TERMS WHICH MAY BE REGARDED AS UNFAIR


(b) inappropriately excluding or limiting the legal rights of the consumer vis-à-vis the seller or supplier or another party in the event of total or partial non-performance or inadequate performance by the seller or supplier of any of the contractual obligations, including the option of offsetting a debt owed to the seller or supplier against any claim which the consumer may have against him;


(d) permitting the seller or supplier to retain sums paid by the consumer where the latter decides not to conclude or perform the contract, without providing for the consumer to receive compensation of an equivalent amount from the seller or supplier where the latter is the party cancelling the contract;


(i) irrevocably binding the consumer to terms with which he had no real opportunity of becoming acquainted before the conclusion of the contract;


(m) giving the seller or supplier the right to determine whether the goods or services supplied are in conformity with the contract, or giving him the exclusive right to interpret any term of the contract;


(q) excluding or hindering the consumer's right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions, unduly restricting the evidence available to him or imposing on him a burden of proof which, according to the applicable law, should lie with another party to the contract.


Unfair Contract Terms Act 1977 (UCTA) P21


(1) For the purposes of this Part of this Act, “negligence” means the breach—

(a) 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;


2 Negligence liability


(2) In the case of other loss or damage, a person cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness.



(3) Where a contract term or notice purports to exclude or restrict liability for negligence a person’s agreement to or awareness of it is not of itself to be taken as indicating his voluntary acceptance of any risk.



3 Liability arising in contract

(1) This section applies as between contracting parties where one of them deals as consumer or on the other’s written standard terms of business.

(2) As against that party, the other cannot by reference to any contract term—

(a) when himself in breach of contract, exclude or restrict any liability of his in respect of the breach; or

(b) claim to be entitled—

(i) to render a contractual performance substantially different from that which was reasonably expected of him, or

(ii) in respect of the whole or any part of his contractual obligation, to render no performance at all,



except in so far as (in any of the cases mentioned above in this subsection) the contract term satisfies the requirement of reasonableness.


5 "Guarantee" of consumer goods


(b) anything in writing is a guarantee if it contains or purports to contain some promise or assurance (however worded or presented) that defects will be made good by complete or partial replacement, or by repair, monetary compensation or otherwise.


9 Effect of breach

(1) Where for reliance upon it a contract term has to satisfy the requirement of reasonableness, it may be found to do so and be given effect accordingly notwithstanding that the contract has been terminated either by breach or by a party electing to treat it as repudiated.


11 The "reasonableness" test

(1) In relation to a contract term, the requirement of reasonableness for the purposes of this Part of this Act, section 3 of the Misrepresentation Act 1967 and section 3 of the Misrepresentation Act (Northern Ireland) 1967 is that the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.


"GUIDELINES" FOR APPLICATION OF REASONABLENESS TEST P39



Misrepresentation Act 1967 P52



1. Removal of certain bars to rescission for innocent misrepresentation

Where a person has entered into a contract after a misrepresentation has been made to him, and—

(a) the misrepresentation has become a term of the contract; or

(b) the contract has been performed;

or both, then, if otherwise he would be entitled to rescind the contract without alleging fraud, he shall be so entitled, subject to the provisions of this Act, notwithstanding the matters mentioned in paragraphs (a) and (b) of this section.

2. Damages for misrepresentation

(1) Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true.



(2) Where a person has entered into a contract after a misrepresentation has been made to him

otherwise than fraudulently, and he would be entitled, by reason of the misrepresentation, to rescind the contract, then, if it is claimed, in any proceedings arising out of the contract, that the contract ought to be or has been rescinded the court or arbitrator may declare the contract subsisting and award damages in lieu of rescission, if of opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract were upheld, as well as to the loss that rescission would cause to the other party.

(3) Damages may be awarded against a person under subsection (2) of this section whether or not he is liable to damages under subsection (1) thereof, but where he is so liable any award under the said subsection (2) shall be taken into account in assessing his liability under the said subsection (1).

3. Avoidance of provision excluding liability for misrepresentation

If a contract contains a term which would exclude or restrict—

(a) any liability to which a party to a contract may be subject by reason of any

misrepresentation made by him before the contract was made; or

(b) any remedy available to another party to the contract by reason of such a

misrepresentation,

that term shall be of no effect except in so far as it satisfies the requirement of reasonableness as stated in section 11(1) of the Unfair Contract Terms Act 1977; and it is for those claiming that the term satisfies that requirement to show that it does.


Contracts (Rights Of Third Parties) Act 1999 Chapter 31 P10


Section 1 provides that a third party may in his own right enforce a term of a contract if:

(a) the contract expressly provides that he may, or

(b) the term purports to confer a benefit on him (except where on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party).

There shall be available to the third party any remedy that would have been available to him in an action for breach of contract if he had been a party to the contract: s1(5).


Concerning the privity rule P53


A) PRIVITY OF CONTRACT

1. THE DOCTRINE OF PRIVITY

"The doctrine of privity means that a contract cannot, as a general rule, confer rights or impose obligations arising under it on any person except the parties to it." (GH Treitel, The Law of Contract)

The common law reasoned that:

1. Only a promisee may enforce the promise meaning that if the third party is not a promisee he is not privy to the contract. See:

Dunlop Tyre Co v Selfridge [1915] AC 847 - The plaintiffs sold tyres to Dew & Co, wholesale distributors, on terms that Dew would obtain an undertaking from retailers that they should not sell below the plaintiffs' list price. Dew sold some of the tyres to the defendants, who retailed them below list price. The plaintiffs sought an injunction and damages. The action failed because although there was a contract between the defendants and Dew, the plaintiffs were not a party to it and "only a person who is a party to a contract can sue on it," (per Lord Haldane).

2. There is the principle that consideration must move from the promisee. See:

Tweddle v Atkinson (1861) 1 B&S 393 - The fathers of a husband and wife agreed in writing that both should pay money to the husband, adding that the husband should have the power to sue them for the respective sums. The husband's claim against his wife's fathers' estate was dismissed, the court justifying the decision largely because no consideration moved from the husband.

2. EXCEPTIONS

If the doctrine of privity was inflexibly applied it would cause considerable injustice and inconvenience. Many exceptions to it have therefore been developed.

A) COLLATERAL CONTRACTS

A contract between two parties may be accompanied by a collateral contract between one of them and a third person relating to the same subject-matter. For example:

Shanklin Pier v Detel Products [1951] 2 KB 854. The plaintiffs had employed contractors to paint a pier. They told them to buy paint made by the defendants. The defendants had told them that the paint would last for seven years. It only lasted for three months. The court decided that the plaintiffs could sue the defendants on a collateral contract. They had provided consideration for the defendants' promise by entering into an agreement with the contractors, which entailed the purchase of the defendants' paint.

There must, however, be an intention to create a collateral contract before that contract can be formed

B) AGENCY

The concept of agency is an exception to the doctrine of privity in that an agent may contract on behalf of his principal with a third party and form a binding contract between the principal and third party.

For example, a third party may be able to take the benefit of an exclusion clause by proving that the party imposing the clause was acting as the agent of the third party, thereby bringing the third party into a direct contractual relationship with the plaintiff:

In Scruttons Ltd v Midland Silicones Ltd [1962] AC 446, a bill of lading limited the liability of a shipping company to $500 per package. The defendant stevedores had contracted with the shipping company to unload the plaintiff's goods on the basis that they were to be covered by the exclusion clause in the bill of lading. The plaintiffs were ignorant of the contract between the shipping company and the stevedores. Owing to the stevedores negligence, the cargo was damaged and, when sued, they pleaded the limitation clause in the bill of lading. The House of Lords held that the stevedores could not rely on the clause as there was no privity of contract between the plaintiffs and defendants.
Lord Reid suggested that the stevedores could be brought into a contractual relationship with the owner of the goods through the agency of the carrier provided certain conditions were met: (1) that the bill of lading makes it clear that the stevedore is intended to be protected by the exclusion clauses therein. (2) that the bill of lading makes it clear that the carrier is contracting as agent for the stevedore. (3) the carrier must have authority from the stevedore to act as agent, or perhaps, later ratification by the stevedore would suffice. (4) consideration must move from the stevedore.

Enterprise act 2002, Chapter 40 incl Part 8. P106

211 Domestic infringements

(1) In this Part a domestic infringement is an act or omission which-

(a) is done or made by a person in the course of a business,

(b) falls within subsection (2), and

(c) harms the collective interests of consumers in the United Kingdom.

(2) An act or omission falls within this subsection if it is of a description specified by the Secretary of State by order and consists of any of the following-

(a) a contravention of an enactment which imposes a duty, prohibition or restriction enforceable by criminal proceedings;

(b) an act done or omission made in breach of contract;

(c) an act done or omission made in breach of a non-contractual duty owed to a person by virtue of an enactment or rule of law and enforceable by civil proceedings; (TORT)

(d) an act or omission in respect of which an enactment provides for a remedy or sanction enforceable by civil proceedings;

(e) an act done or omission made by a person supplying or seeking to supply goods or services as a result of which an agreement or security relating to the supply is void or unenforceable to any extent;

(f) an act or omission by which a person supplying or seeking to supply goods or services purports or attempts to exercise a right or remedy relating to the supply in circumstances where the exercise of the right or remedy is restricted or excluded under or by virtue of an enactment;

(g) an act or omission by which a person supplying or seeking to supply goods or services purports or attempts to avoid (to any extent) liability relating to the supply in circumstances where such avoidance is restricted or prevented under an enactment.

(3) But an order under this section may provide that any description of act or omission falling within subsection (2) is not a domestic infringement.

(4) For the purposes of subsection (2) it is immaterial-

212 Community infringements

(1) In this Part a Community infringement is an act or omission which harms the collective interests of consumers and which-

(a) contravenes a listed Directive as given effect by the laws, regulations or administrative provisions of an EEA State, or

(b) contravenes such laws, regulations or administrative provisions which provide additional permitted protections.

(2) The laws, regulations or administrative provisions of an EEA State which give effect to a listed Directive provide additional permitted protections if-

(a) they provide protection for consumers which is in addition to the minimum protection required by the Directive concerned, and

(b) such additional protection is permitted by that Directive.

(3) The Secretary of State may by order specify for the purposes of this section the law in the United Kingdom which-

(a) gives effect to the listed Directives;

(b) provides additional permitted protections.

(4) References to a listed Directive must be construed in accordance with section 210.

(5) An EEA State is a State which is a contracting party to the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 as adjusted by the Protocol signed at Brussels on 17th March 1993.



The Competition Act 1998. P177

Chapter I prohibition

The Chapter I prohibition of the Competition Act 1998 is based on Article 81 of the EC Treaty. It prohibits agreements which affect trade within the United Kingdom and which have as their object or effect the prevention, restriction or distortion of competition within the UK.

Chapter II prohibition

The Chapter II prohibition of the Competition Act 1998 is based on Article 82 of the EC Treaty. It prohibits conduct which amounts to an abuse of a dominant position within the UK (or any part of it) and which  affects trade within the United Kingdom.

(while the company is not strictly in a dominant position as defined by having some 40% of the market share, its inter contractual and business customer relationships have all the effects of that, since a businees customer is refused the right to claim under the money-back guarantee, see last email from 1st defendant.)

Why comply?

Businesses that comply with Chapter I, Chapter II, Article 81 and/or Article 82 will avoid the serious consequences of non-compliance, including:

The Enterprise Act 2002 has increased the importance of compliance by introducing the cartel offence, which criminalises certain anti-competitive agreements. For further information on the criminal offence, and the penalties that may be imposed,

The Consumer Protection (Distance Selling) Regulations 2000 P56



The key features of the regulations are: