Unfair Terms in Consumer Contracts Regulation 1999 - Essay Example

? Contract Law Introduction An exclusion clause is a ment that attempts to limit or exclude the liability of a party. It provides that a party will not be liable is some circumstances of the other party they tend to limit or defeat liability. Hirobe (2001, p. 64) argues that a valid exclusion clause should be incorporated into the contract or agreement and the wording should be clear and cover the liability intended. The party intending to rely on the clause should show its incorporation into the agreement. It becomes sufficient incorporation if the other party knows the existence of the clause Wishart (2005, p. 78). The exclusion should also conform to the relevant statutes that are the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulation 1999. Legislation The legislations that govern the limitation clauses are Unfair Terms in Consumer Contracts Regulation 1999 and the Unfair Contract Terms Act 1977. Exclusion clause 1. Urban Farm Products Limited does not restrict liability for damage, loss, death, or injury caused by its negligence. 2. URBAN FARM PRODUCTS LIMITED SHALL NOT BE LIABLE TO VISITORS FOR LOSS OR DAMAGE OF PERSONAL BELONGINGS AND INJURY DUE TO THE VISITORS NEGLIGENCE DURING THE VISIT. Explanatory notes Clause 1 limits the ambition of the exclusion clause which is essential to ensure that the exclusion of liability clause does not fail or is rendered unenforceable by operation of section 2(1) of the Unfair Contract Terms Act 1977. Section two (1) of the Unfair Contract Terms Act provides that exclusion of liability in negligence cannot be restricted in the course of business for personal injury or death by a provision in the contract. It becomes unreasonable to restrict the liability in negligence of Urban Farm Products Limited, clause 1 deals with this element. The liability of Urban Farm Products Limited cannot be restricted. The aim of clauses one is for reasonableness and fairness, any other clause is subject to clause 1. If any loss, or damage that occur because of the negligence of Urban Farm Products Limited, then the exclusion will not apply. For a clause to be effective, it should pass the reasonableness test by the Unfair Contract Terms Act. The exclusion clause should also be legal and fall within the requirements by statute. The Unfair Contract Terms Act 1977 at section 11 provides for the prerequisites of reasonableness; it provides that for a term to be included, it should be a fair and a reasonable one in relation to the circumstances known or ought to be known. Subsection two goes ahead to clarify the guidelines applied in the determination of reasonableness. Subsection (4) provides that where the provision seeks to exclude liability but seeks to limit the liability, the court should look at it from two points: the extent of insurance cover for the party to relying on the exclusion clause and the resources available to meet the liability. Subsection (5) states it is up to the party wants to rely on the clause, to prove sufficient notice of the existence of the clause. The party intending to rely on the exclusion clause should make sure they did enough to draw attention to that clause: (1) There should be proper and sufficient notice where the contract has an exclusion clause incorporate into it. If the exclusion clause sits at the back of the document, a note to that effect should be in front of the document. (2) The other must be aware of the exclusion clause before entering into the contract. (3) The notice provided should be reasonably sufficient. Reasonableness and sufficiency depend on the parties' situation and the circumstances. In its decisions on matters of exclusion clauses, the courts have held that attention be brought to the existence of these clauses by clear words on the contract. Clause 2 is the proper exclusion clause and aims at limiting the scope of Urban Farm Products Limited liability by the exclusion of aspects of loss or damage. Section 2 (2) provides that liability for negligence can be excluded for any other damage or loss so long as the term or notice meets the prerequisites of reasonableness. In construing exclusion clauses, the wording is precise to avoid any doubt. The courts will always provide exclusion clauses with the narrowest interpretation that is possible. If there are any ambiguities, which exist, or uncertainties in the exclusion clause, the courts will interpret the clause contra proferentem; this is against the party who construed the exclusion clause. Section 11 (1) of the Unfair Contract Terms Act 1977 provides for the prerequisite for consideration of reasonableness. However, if the term in question shall have been a reasonable and a fair one for it to be inclusive in regard to the conditions which ought reasonably to be known or known, at the time of contracting to the parties or in their contemplation. The construction of the clause should be in a manner that it covers the intended scope of exclusion and all the circumstances are likely to occur because of the breach (Adams & Brownsword 1988, p. 26). Party’s liability can be excluded by the use of clear words. Section 13(1) prohibits a party from disguising an exclusion clause even where the clause works to exclude liability. Clauses that exclude liability are void, and those that limit liability must be reasonable. The Unfair Terms in Consumer Contracts Regulation 1999 protect against unfair terms unfair terms cannot be binding and; therefore, the courts disregarded unfair clauses. A term is unfair if it places undue burdens on the plaintiff or reduces the statutory rights of an individual. A term becomes unfair if it goes against the requirements of genuine faith and results in an imbalance of the rights of the party to the detriment of the aggrieved party. There is a strong line attached to clauses that seek to exclude liability in negligence. The case of Canada Steamship v The King addressed the position where the following guidelines emerged: (1) If the clause exempts from negligence in which case it becomes effective, or (2) If the wording is wide enough according to their regular meaning to cover negligence in that case it is still effective, unless (3) There is some other damage apart from negligence which words could not be construed to any other thing than negligence. The wording should be clear and clearly exclude liability for negligence to reduce ambiguities Wishart (2005, p. 87). According to Hirobe (2001), the breach must also fall within the four corners of the contract. In Photo Productions v Securicor, the court held that the clause to be taken in its natural construction subject to the rule of contra proferentem. The position was also the same in Ailsa case, which distinguished exclusion from limitation – the elements of the latter are not applicable in full rigor of the former. In the case of George Mitchell [1983], the court held that the limitations could not be limited to breach, and declined to read an ambiguity resulting from a process of strained construction. These cases bring out the position of taking the ordinary meaning of terms in exclusion clauses. They do not deny that when construing, there should be legitimate in the language of the clause in questioning relation to the whole contract. However, in Thomas National Transport (1966) the court held that the effect of a clause must be resolved in construing the language that the parties used with context of any necessary implications based on the intention presumed. In its decision, in Ease Faith v Leonine Marine Management (2006), the court applied the eiusdem generis rule: it provides that a general provision becomes qualified by examples in any way that point to a limited interpretation of any word in general. Conclusion Exclusion clauses aim at reducing or limiting the liability of a party when a loss or damage happens; for any exclusion to be valid, the correct construction should be applied (Suff 1997, p. 77). The construction of exclusion clauses must be clear to deny the courts a chance to interpret them against whoever is relying on the exclusion clause. If there exists anticipation of potential losses in that case, the wording should be construed in such a manner as to cover the anticipated losses. Another point is when trying to limit or exclude liability for negligence, it becomes essential to refer to the term ‘negligence’ specifically. A valid exclusion clause must follow the provisions of the legislation of Unfair Terms in Consumer Contracts Regulations 1999 and the Unfair Contract Terms Act 1977. References Adams, B & Brownsword, W 2008, ‘The unfair contract terms act: a decade of discretion’, Kogan publishers, New York. Bright, D 2000, Winning the battle against unfair contract terms, Cengage Learning. Carroll, AR 2006, Opinion writing and drafting in contract law, 5th edn, Routledge. Collins, G 2004, Good faith in European contract law, Cengage learning: New York. Hirobe, I 2001, Japanese pride, American prejudice, Stanford University Press. Jones, H & Benson, C 2006, Publishing law, Taylor & Francis, New Jersey. Koffman, L & Macdonald, E 2007, The law of contract, Oxford University Press, London. Kurer, M 2002, Warranties and disclaimers: limitation of liability in consumer-related transactions, Kluwer Law International. Lawson, RG 2008, Exclusion clauses after the Unfair Contract Terms Act, Oyez Pub. MacDonald, D 2004, Unifying unfair terms legislation, Taylor & Francis, New Jersey. Mc kendrick, K 2005, Contract Law: text, cases and materials, Oxford University Press. Miller, Vandome, A & McBrewster J 2011, Exclusion clause, VDM, New York. Sullivan, R & Hilliard, M 2006, The law of contract, Oxford University Press, London. Suff, M 2007, Essential contract law, Routledge, New Jersey. Wishart, C 2005, Contract law, Oxford University Press. Read More