The Law of Personal Property - Essay Example

THE LAW OF PERSONAL PROPERTY The view of the common law for a very long time has been that the parties to a contract are free to decide upon the obligations that they intend to be binding upon them, so regulation in context of the content of the contract by courts have been only in exceptional circumstances. However it has been seen that there has been a change in the approach of the courts because of the use of clauses that exclude or limit liability for breach, which have led the court to protect weaker parties to the contract. Further such protection to the weaker parties, essentially consumers has led to intervention by statute in form of Unfair Contract Terms Act 1977, and the Unfair Terms in Consumer Contracts Regulation 1999(UTCCR). The reluctance of the courts to interfere with the terms of the contract has led to the development of rules which relate to the 'incorporation' (whether the clause is a part of the contract) and 'construction' (whether the clause covers the breach). The potential of the approach has been limited by the House of Lords. Incorporation requires any clause to have been incorporated as a term of the contract for it to be effective. Incorporation of clauses, most commonly limited liability clauses may take place through one of the three ways which will be briefly discussed. Firstly it can be through inclusion in the contractual document duly signed by the other party. (L'Estrange v Graucob1) Secondly the clause can be incorporate through provision of reasonable notice at or before the time of contract, so if notice is provided late it will stand void (Chapelton v. Barry UDC2). Finally the clause may be incorporate through a 'course of dealing', which is presumed when exclusion clause had been part of the previous contracts that had been made between the parties. (Kendall (Henry) & Sons v. Lillico (William) & Sons Ltd)3 After establishing the incorporation the next issue is that on proper construction the particular breach which has occurred is covered by the clause. (Andrews v. Singer4) The courts have stated that due to the statutory provisions there is a lesser need for adoption of strained constructions of clauses so as to limit their scope.( Lord Wilberforce in Photo Production Ltd v. Securicor Transport Ltd.) Further at one point in time the Court of Appeal had stated that an exclusion clause would not apply where a fundamental breach had taken place. A fundamental breach has been said to occur when either there has been a breach of a particularly important term or through a breach depriving then entirety of the benefits of the contract to the other party. The exclusion clauses are now regulated by the statutory framework that is Unfair Contract Terms Act 1977(UCTA). It is important to point out that the Act operates alongside the common law and so it remains open to strike down a clause through the rules of common law without the need to take into account the effect of the UCTA. This can be best explained by saying that an argument of incorporation of the clause into the contract can be raised. Thus it can be said that the validity of a clause is entirely dependent on both common law and the statutory controls that is UCTA and Unfair Terms in Consumer Contract Regulations 1999. The main or primary concern of Unfair Contract Terms Act 1977 is to deal with the limitation and exclusion clauses and so it is not concerned with the unfair terms which are prevalent in a contract. The provisions are therefore essential concerned with business liability that the liabilities which arise in the course of a business. So if a private individual has laid down an exclusion clause then this would be subject to the common law rules which have been discussed. The course of business had been construed in R & B Customs Brokers v. UDT5 where it was found that certain contracts which are entered into by a business do not fall within the ambit of 'in the course of business' The different ways of limitation or exclusion of liability are found in s.13. Most of the provisions which have been laid down in the Act apply to various attempts for the avoidance of liability through the statement that certain obligations/duty does not arise. The classic case was that of Smith v. Eric S Bush6 where the surveyor stated that he accepted no responsibility for the accuracy of the valuation of the property which had been provided by him. There are certain types of contract which do not fall within the scope of UCTA that is ss.2-4. These have been listed in Schedule 1 to the Act which includes contract of insurance, contracts relating to intellectual property etc. Therefore the most important question which needs to be considered is whether the Act applies to the specific question. In s.2 UCTA deals with actions for exclusion of liability for negligence. The Act has clearly separated negligence which leads to death or personal injury and negligence leading to loss or damage to property. In s.2 (1) it has been said that if negligence leads to death or personal injury then there is no exclusion or limitation of liability. S.2 (2) of UCTA goes on to deal with negligence which gives rise to loss or damage and states that liability will only be restricted if 'in so far as (it) satisfies the requirement of reasonableness' Exclusion of contractual liability other than through negligence is covered by s.3 of UCTA. The application of this is limited to two situation that is where one of the party to the contract dealt as consumer; or where on of the party dealt on the other's written standard terms of business.(the second can apply between two business contractors). S.12 of UCTA defines dealing as a consumer by stating that a person is deemed to be a consumer where he does not make the contract in the course of the business nor does he hold himself out as doing so, on the other hand the other party makes the contract in the course of business. Thus if it is found that the contract does fall within the two categories that have been stated above then s.3(2) requires for any exclusion or limitation of liability subject to the requirement of reasonableness. Further it tends to subject the same clauses which allow parties to render a contractual performance which is substantially different from what had been reasonably expected. Ss.6 and 7 contain provision for contracts of sale or supply of goods. These special provision provide that in respect of the statutorily implied terms as to title with regards to such contracts, there is strict prohibition for exclusion of liability. Further on implied terms with regards to description or quality is dependent on the fact as to whether the purchaser was dealing as a consumer or not. As seen above that for an exclusion clause to be valid in various situations UCTA requires for the requirement of reasonableness to be satisfied. This is dealt in s.11 and schedule 2 to the Act. It has been found that the s.11 has not been that useful and the test put forward is whether the clause was a reasonable one to include in the first place, rather than to place emphasis on the fact whether it would be reasonable to allow for reliance on circumstances which have already occurred. (Stewart Gil Ltd v. Horatio Myer & Co. Ltd7) The only considerable help that has been provided is by s.11(4) where it has been said that the resources of the person bringing forward the claim should be taken into account. Further Schedule 2 provides for the factors that should be considered when assessing reasonableness. Moving on to UTCCR, it needs to be pointed out that the regulations have been implemented as a result of a European Directive (93/13/EC). It has been seen that there has been a considerable amount of overlap which tends to occur between the effect of UCTA and the UTCCR with regards to exclusion clauses. Thus the Law Commission is considering the possibility of a single legislation ('Unfair Terms in Contracts')8. However, the importance differences that are found between the two pieces of legislation are that the UTCCR applies only to consumer contracts; by Regulations it has been seen that a 'consumer' is a 'natural person' who acts for non business purposes. Further the approach that had been applied to UCTA in R & B Customs Brokers v. UDT 9does not apply to UTCCR. Apart from individually negotiated contractual clauses UCTA applies to every other clause. Thus it is not limited in dealing with the clauses which exclude or limit liability. Reg.5(1) states the test for fairness by pointing out that a term will be unfair if 'contrary to the requirement of good faith' it ' causes a significant imbalance in the parties' rights and obligation under the contract to the detriment of the consumer'. The main aspects are that of 'good faith' and 'significant imbalance' and their relationship had been agreed upon in Director General of Fair Trading v. First National Bank Plc10. Further Schedule 2 provides for a list of unfair terms, procedural consideration. It needs to be pointed out that the test of fairness does not apply to the main subject matter of the contract. Thus a bad bargain is not tailored against. Regulation 7 points out that the terms of the contract must be in 'plain, intelligible language'. Finally the UTCCR also provides for a supervisory power to Office of Fair Trading which includes power of dealing with complaints that have been lodged, moving on to obtain injunctions preventing use of unfair terms, and monitoring of compliance with regard to court order if any. In summary it can be stated that the application of UCTA 1977 is concerned mainly with exclusion of business liability. There are certain clauses which are rendered invalid and these are those which exclude liability for negligence causing death or personal injury, and those which tend to exclude liability in respect of implied terms in supply of goods contracts with consumers. Certain clauses which are subject to the test of reasonableness are that of liability for negligence due to loss or damage to property and others. The test of reasonableness takes into account various considerations including the inequality in strength of bargain power between parties. On the other hand UTCCR is applied to consumer contract only. Therefore all such term s apart from those defining the bargain should be able to satisfy the test of good faith and avoidance of significant imbalance in the rights to the loss of consumer. Finally the test of intelligibility must be satisfied by all the terms. Thus it can be said that the contracts which generally have exclusion clauses which limit liability will be dependent on UTCCR and UCTA, but it is necessary to state that contracts will generally be deemed enforceable apart from the exclusion clauses. Apart form the fact of the significant differences of operation of UCT and UTCCR it has been argued that a single piece of legislation should be adopted. It is clearly understood that the Regulation was adopted but has been altered thereafter. So there are difficulties which have been faced with the adoption of the regulation but there have been contradiction and for them to be resolve there needs to be a single legislation but it should not be forgotten that the two Acts still have significant differences which should be taken into account when drafting a single piece of legislation as has been taken into consideration by the Law Commission. However it needs to be pointed out that the single piece of legislation but still lead to problems of application and so it can not be dismissed with ease that such amalgamation will be a success. Therefore a clear evaluation of the pros and cons need to be balanced against when taking such an important idea to paper. As has been seen in previous law that there have been significant failures with regards to same piece of legislation, it is quite balanced to argue that such legislation might become a failure and might lead to a number of onerous judgments being formed. The overlap there must be left to be cleared out either by case law or by amendments to the original piece of legislation rather than going for a single piece of legislation. BIBLIOGRAPHY ANSON, W. R., & BEATSON, J. (2002). Anson's law of contract. Oxford, Oxford University Press. POOLE, J. (2006). Casebook on contract law. Oxford, Oxford University Press. CHESHIRE, G. C., FIFOOT, C. H. S., FURMSTON, M. P., & CHESHIRE, G. C. (2001). Cheshire, Fifoot, and Furmston's Law of contract. London, Butterworths/LexisNexis. MCKENDRICK, E. (2007). Contract law. Palgrave Ma PEEL, E., & TREITEL, G. H. (2007). Treitel on the law of contract. London, Sweet & Maxwell. cmillan law masters. Basingstoke, Palgrave Macmillan. ELLIOTT, C., & QUINN, F. (1999). Contract law. Harlow, Longman. ATIYAH, P. S., SMITH, S. A., & ATIYAH, P. S. (2003). Atiyah's introduction to the law of contract. Clarendon law series. Oxford, Clarendon Press. BEALE, H. G., & TALLON, D. (2002). Contract law. Casebooks on the common law of Europe. Oxford [England], Hart Pub. STONE, R. (2005). The modern law of contract. London, Cavendish. Read More