Standard of Protection against Unfair Standard Contract Terms - Essay Example

? Contract Law Module Module Number: Academic Year: Seminar Essay Question: It took a long time, but there is now a good standard of protection against unfair standard contract terms imposed by one party on the other: Critical discussion of the issue with reference to Common Laws and Case Law examples. Student Number: Unfair Standard Terms in Contract Contract is a pledge which is validly allowed by law. Two parties usually enter into contract for purposes of business. The drawing of such an agreement can only be achieved if the relevant parties involved consent, in which case, one of them basically puts forward an offer and the other accepts. In the past, one party to a contract could violate the contract by exploiting the loopholes in the English Law. But today, legal safeguards are in place to stem such practices (Gretchen 2000, p.67). UK has various statutes stating that when one of the parties to a contract disobeys the contract, the other is at liberty to seek legal redress. Contract law encompasses issues as whether a validly executed contract is in place, what it entails, whether the actions of a party amounts to contract violation, and the level of compensation that a victim of contract violation is entitled to. Historical development Standard clauses were in a contract conceived out of the need for discipline among parties in business practices; however, it was insignificant in pre-commercial practices (Howells, and Weatherill, 2005p.p.101). In ancient times, the largely primitive societies employed other methods of implementing the dedication of parties to an agreement. Before the advent of contract law, deals and promises between individuals were done through familial connections or under religious organizations. In the ancient system premised upon barter, transactions were self-enforcing since transactions would be deemed complete by both parties at once. In contrast, Blythe (2005, p.77) argued that many parties is such transactions would notice problems with the commodities after the transaction was complete, but these historical challenges have been usually arbitrated through property law. The lack of fair standard terms in contact law would complicate the issue, since clear rules guiding the promise such as the conduct of both parties was lacking. In the ancient English law, the then primitive society continued to employ notions of issues to do with property instead of a pledge (Gretchen 2000, p.67). In the society’s ancient forms of transactions involving informal contracts, familial connections helped in securing the credit in as much the same way as when a community or an ethnic group provided hostages for the period within which the debt was to be settled. Other types of security included promising a property such as land or giving away individuals as pawns (Bar 2004, p.54). Some credit options were basically commonly accepted across board: livestock, for example, would be assigned to a concierge whose services were paid with a fixed proportion of the animal’s young ones. The problems arising from the quantification of values of assets impacted the enforceability of the largely casual agreements, especially following the expansion of business transactions beyond familial connections in the second half of the twentieth century. These business activities eventually led the development of solid, enforceable, binding laws of contracts in the modern United Kingdom (Heidemann 2007, p.35). Modern statutes put in place enforceable promises, which basically went hand in hand with the expansion of the country’s market economy. In contrast though, cases of violations of standard terms of contract even after the enactment of the first major contract law in 1977 persisted. The Unfair Contract Terms Act 1977, which basically aimed to streamline the behaviour of parties in a contract were still rampant in the United Kingdom (Forte 1999, p.121). Legal safeguards The English law of contract has sections dealing with unfair standard terms (DiMatteo, Saintier, and Rowley 2013, pp.67-89). These provisions are enshrined in three primary statutes, with the Office of Fair Trading (OFT) assuming the mandate of ensuring compliance. The first major statute, which currently protects parties to a contract from unfair standard terms, is the Unfair Contract Terms Act (UCTA) 1977. All contracts with exclusion clauses are well taken care of under the Act. Secondly, the Unfair Terms in Consumer Contracts Regulations 1999 takes into consideration further provisions for contracts involving consumers. Finally, unfair business practices of parties to a contract are well taken care of under the Consumer Protection from Unfair Trading Regulations 2008. Toward the sunset years of the twentieth century, English Parliament ratified its first detailed legislation that inserted the principle of contractual liberty into the UCTA 1977. Stuyck (2005, p.528) noted that the subject of unfair standard terms in a contract is broad, and could as well encompass particular contracts touching on the Consumer Credit Act 1974, the Landlord and Tenant Act 1985, and the Employment Rights Act 1996. Laws aimed at safeguarding the interests of consumers are also commonly being tailored to be in line with the European Union. For example, EU laws such as Airline Compensation Regulation, and the EU Electronic Commerce Directive have had a huge impact on English consumer protection laws. UCTA 1977 The UCTA 1977 states guidelines that provide new ways of handling unfair standard terms, which have not otherwise been captured in the common law or parliamentary Acts. Generally, if sections limit liability, especially slackness on the part of one party, the case has to meet the “reasonableness test” specified in section 2(2) and 11(2). Stuyck (2005, p.528) indicates that this section considers the capability of any of the parties to obtain insurance, their ability to negotiate a fair deal and their probable supply options as well as the transparency of the terms. In Section 2(1), for example, the Act voids any clause in a contract that reduces burden for the death or injury to a party’s person. The 1982 case; George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1982] EWCA Civ 5, [1983] 2 AC 803 is a typical scenario where the protection of a party to a contract played out. George Mitchel Limited, a cabbage farmer, was favoured by the ruling upholding that a provision limiting the burden of defective seeds on the seller to losses incurred after crop failure was unreasonable. The court ruled that the sellers of the seeds, Finney Lock Seeds Limited, were better placed to obtain indemnity for the damages than the unsuspecting buyers. Section 3 of UCTA 1977 debars business organizations from limiting their liability for contract violation if their partners to a contract are consumers (Ewan 2012, p.76). According to section 12 of the law, a consumer is a party whose activities are different from the seller’s in terms of the use of the goods. Moreover, section of the statute 6 further states the implicit provisions of the Sale of Goods Act (SGS) 1979 remain in force when a seller deals with a consumer. The SGA 1979, therefore, binds every business to sell genuine goods to consumer, even if the buyer entered into such contract fully aware of the exclusion terms. Moreover, Section 13 o the law indicates that changes to the direct exemption provisions will still suffice. In Smith v Eric S Bush [1990] UKHL 1 case, for example, the court ruled that a clause limiting the burden of liability on the surveyor who was accused of negligence was void, after the plaintiff’s chimney collapsed. The House of Lords decided that the surveyor could easily access insurance cover as compared to Mr Smith. The order was given despite the fact that a valid contract between the two parties, pursuant to section 13 was lacking. Under the section, consumers are protected from any liability should it occur, since it is generally deemed as unjust on the part of the consumer. Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR 1999) In spite of the existence of UTCCR 1999, few consumers tend to pursue justice due to the difficulty of litigation process, cost, and the likely amount of damages, especially if claims are insignificant (Aronson 2007, p.95). The Office of Fair Trading therefore ensures that consumers’ interests are safeguarded by exercising its jurisdiction to pursue consumer discrimination litigations on behalf of the parties once their receive their details. Whincup (2006, p.81) indicated that the UTCCR 1999 provisions are more all-encompassing than UCTA 1977, in the sense that, it includes any unfair rules, and exemption clauses, but limited in that they are applicable only in consumer contracts. The UTCCR’s (1999) definition of a consumer appears limited, nonetheless. Under the third regulation of UTCCR 1999, a consumer is defined as a natural party and not a legal entity like an organization that enters into contracts with other parties who are not within his or her business. Blythe (2005, p.32) noted that whereas various English laws always provide for more protection, the country enacted the basic regulations into law. Regulation 6(2) provides for a court to evaluate the justice of terms which falls short of defining the gist of the contract, or clauses which refer to value or pay of the item sold. Collins (2003, p.113) suggested that outside such basic terms, an unfair term is defined in the fifth regulation, as a condition which does not satisfy the thresholds of an individually bargained case. Additionally, an unfair term arises if, contrary to the fiduciary role, it yields a significant disparity in the rights and responsibilities of any of the parties. In a case to test unfair terms in loan repayment in the banking sector, the English House of Lords reasserted the need to eliminate unfair terms in favour of the bank. In Director General of Fair Trading v First National Bank plc [2001] UKHL 52 the court held that, provided the intention of protecting consumers from unfair standard contract terms was in force, regulation 6(2) ought to be interpreted carefully. The court’s verdict held that good faith encompasses fair, transparent and honest transactions. All of these implied that the defendant’s practice of surging the interest rate for loan defaulters upwards, in clear disregard for a debt restructuring plan ordered by court could, under rule 6(2), be evaluated for any cases of an injustice. However, under the fifth regulation, the term was found to be fair since it did not result in an inequity situation: the financial institution intended only to receive its rightful interest. Conclusion Standard contract terms have been in place since time immemorial; however, unlike in ancient times, when unfair terms could easily cause an imbalance on one party, modern English law have provisions that protect all parties from such legal repercussions. Today, various pieces of legislation such as the UCTA 1977, the SGA 1979, and the UTCCR 1999, protect parties from unfair contract terms. Court rulings have also played an important role by reining in unfair standard contract terms whenever such claims are brought before judges. Notably, not all victims of unfair contracts have had an opportunity to seek legal redress due to high costs of litigation processes; however, different organizations have stepped in to help such individuals. Bibliography Aronson, Justin Syracuse, “Lessons for the United Kingdom: how registration and prospectus requirements have inhibited condo-hotel investment offerings,” 35 JILC [2007] 95. Bar Von Christian, (2004), The Interaction of Contract Law And Tort And Property Law in Europe: A Comparative Study, Sellier European Law Publishers, London. Blythe, Stephen E., “Contractual Liability of Suppliers of Defective Software: A Comparison of the Law of The United Kingdom and United States,” 26 NJILB [2005]77. Collins Hugh, (2003), The Law of Contract, Cambridge University Press: London. DiMatteo Larry A., Saintier Severine Qi Zhou, and Rowley, Keith, (2013), Commercial Contract Law: Transatlantic Perspectives, Cambridge University Press: London. Ewan McKendrick, (2012), Contract Law: Text, Cases, and Materials, Oxford University Press, Oxford. Forte, A.D.M, (1999), Good Faith in Contract And Property Law, Hart Publishing, London Gretchen Vander Wal, “Contract laws change,” 45 NHF [2000] 67. Heidemann Maren, (2007), Methodology of Uniform Contract Law: The Unidroit Principles in International Legal Doctrine and Practice, Springer, New York. Howells G. Geraint, and Weatherill, Steve, (2005), Consumer Protection Law, Ashgate Publishing, Ltd., New York. Stuyck, Jules, “The Harmonisation of European Contract Law: Implications for European Private Laws, Businesses and Legal Practice,” 44 CMLR [2005] 528. Whincup, H. Michael, (2006), Contract Law and Practice: The English System with Scottish, Commonwealth and Continental Comparisons, Kluwer Law International, London. 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