Contract Law - The Involvement of the Courts in Cases Where There Is a Disagreement Between Both the Parties - Assignment Example

Contract Law Introduction Companies dealing with products and services are required to comply with a number of regulations that are both old and new.Among the many regulations which span as many as 3 decades ago, there are many related to exemption clauses, a common feature in the case of contracts. Such exemption clauses are supposed to be prepared in a very careful manner so as to avoid any problems1. Such exemption clauses can be classified into two distinct categories based on those that exclude liability for any specific breaches of contract and those that look to limit the degree of liability to a specific point or associate it with a specific type of loss. In the case of standard contracts, it is not always straightforward to recognize any exemption clauses. For instance, in the case of the supplier, the contract may state that the supplier is not liable to pay any damages in case of a delay in delivery for a specified period beyond the date stated in the contract. In this context, it is important to incorporate exemption clauses as terms under the contract and make it an integral part of the component2. As such, any clause appearing in any other document or communication that states the same purpose is not considered as incorporated and is therefore not accepted as an exemption clause under the contract. In this context, it is important to discuss the issue of whether there is a requirement to stress the meaning of exemption clauses in standard contracts under law. In order to analyze this, the discussion will make extensive use of the provisions of the ‘Unfair Contract Terms Act 1977’ as well as the ‘Unfair Terms in Consumer Contracts Regulations 1999’. Discussion In several cases, a party to the contract does include a term that is meant to exclude or minimize the liability in the event that the contract is breached as mentioned in the above example. In such cases, the term under the contract might read as ‘the (company) will not be liable for any damage caused to the goods after a period of 7 days from the date of dispatch’. In other cases, the terms could be stated as ‘the (company) will not be subject to a liability of more than $50 in the event of a breach of contract’3. In both cases, the party mentioned as (company) is seeking to minimize any losses that may occur due to forced beyond its control and is looking to reduce its liabilities as such. However, such terms of exemption care not always acceptable amongst parties or otherwise the parties do not manage to reach to an agreeable compromise on the contractual terms. In many cases, problems arise when the parties possess an unequal bargaining power such as in the instance where one of the parties is a big company while the other is the ordinary customer. In such cases, there is every likelihood that the stronger of the two parties would seek to gain an undue advantage over the weaker one by way of the terms set in the contract4. In such cases, the weaker party does not have a favorable position to negotiate the terms on an equal ground. The law has played its best at defining a level playing field in this scenario and by relying on the use of exemption clauses; the party has to prove that the other party has agreed to the terms of the clause specifically at the instant of reaching the agreement. The Unfair Contract Terms Act of 1977 has several provisions that state the purpose of exemption clauses. Firstly, it states that liability cannot be excluded under any circumstances in the case of personal injury or death, which result due to any negligence5. This means that the contract does not have to have a provision to state any exemptions otherwise in this regard. Further, it is stated under the act that all exemption clauses need to be reasonable and fair. In cases of conflict of interest, the court has the power to deem a term as void if it believes the term to be unreasonable. Thus, there is no need for the parties to argue over the interpretation of the terms of the exemption clauses as the final decision lays in the hands of the court6. In other cases, any goods that are found to be defective and not conforming to the terms of the contract that specify the agreeable levels of the quality of the product will not be excluded from any liability under any circumstances. Thus, the consumer has been given the highest power to derive the benefit of compromise on the quality by the supplier thereby negating the requirement to specify any provisions that exclusively set the levels for the product that can be termed as defective7. In addition, it is not possible to alter the contracts in a unilateral fashion without prior consent from the other party. In this context, the word ‘reasonable’ means that the terms must be reasonable and fair with regards to the circumstances and must be known to either parties at the time the contract is signed. Pre-printed contracts are often used by businesses to specify the terms of a contract in instances such as in the case of order forms where the terms of the standard contract can be found printed behind. These terms of the company are however not open to be negotiated. To the common man, this many not make much sense from a commercial perspective. Businesses cannot conduct any negotiation with the customers by preparing a specific contract for each entity8. Despite this, standards terms are often difficult to interpret for customers and often can result in them being bound to terms that they could not perceive as existing beforehand. In such cases, a question arises as to the terms of an exclusion clause that is included as part of a standard contract. To protect customers from being subjected to difficult-to-understand and unfair terms as part of standard contracts, the ‘unfair Terms in Consumer Contracts Regulations 1999’ has been provided that allows the court to examine terms that are suspected to be unfair. In cases where it is believed to be so by the courts, the terms are no longer stand binding on the customer9. In this context, terms are deemed ‘unfair’ in cases where an undue amount of burden is put on the consumer and thereby is working towards degrading their statutory rights. In line with the Unfair contract terms act 1977, the liability stands excluded in the case of injury or death caused as a result of negligence. Terms that seek to limit the rights bestowed to the consumer under a situation where the performance of the supplier is found to be partial or negligible can be treated as a case of unfair practice in the case of the latter. Punitive cancellations also lead to the consideration of unfair terms and changes in prices of the products or service without adequate references for the consumer can also be treated as exclusions to the liability10. In all these cases, the standing of the exemption clauses thus stands no ground if any of these above points are found to be true on the part of the supplier, thus eliminating the need to strain on the interpretation of related exemption clauses in this regard. The regulations under this act also provide powers to the Director General of Fair Trading thus making them responsible for investigating into any unfair use of contract terms11. In instances where a breach is detected, the director general can seek an injunction thus preventing a continued use of the contract. Conclusion As can be understood from the above discussion of the ‘Unfair contract terms act 1977’ and the ‘Unfair terms in Consumer contracts regulations 1999’, the provisions of both these acts call for the involvement of the courts in cases where there is a disagreement between both the parties and provide the sole deciding authority to the courts to decide the terms which are clear and fair and those that do not satisfy these criteria. The same applies even to the exemption clauses that are sometimes included as part of these contracts. Both these laws have provisions that seek to provide a fair deal to both the parties and cover various possibilities where a breach can occur with a party having an undue advantage over the other. To provide for such cases, the acts have specific guidelines on acting in an appropriate manner and state clearly as to what is valid and who holds the ultimate authority in deciding in cases of matters where there is no common understanding. As such, by way of both these acts, it is not found to be necessary to stress exquisitely on the meaning of an exemption clause as the provisions under them provide for such considerations. Bibliography 1. Richard Stone, The modern law of contract (Routledge Cavendish, London 2005) 156. 2. Roger Halson, Contract law (Pearson, New York 2001) 28. 3. Laurence Koffman, The Law of Contract (Oxford University Press 2007) 39. 4. David Oughton, Sourcebook on Contract Law (Routledge, London 2005) 62-64. 5. Mary Charman, Contract law (Willian, Boston 2005) 126. 6. David Kelly, Business law (Routledge Cavendish, London 2005) 240. 7. Alix Adams, Law for business students (Prentice, New York 2006) 105-106. 8. Denis Keenan, Smith & Keenans English law: text and cases (Pearson, New York 2007) 86. Read More