This was a major landmark in fairness to consumers, and had the effect of relieving the court of forming principles as each different case is presented to court. The act is largely built upon the principles already established, and states the law clearly, leaving less room for uncertainty, at least as far as exemption from liability for death or personal injury is concerned. As most of the provisions in the Unfair Contract Terms Act 1977 apply to consumer transactions rather than agreements between businesses, two important concepts are:
• Business liability – stated in section 1(3) as ‘duties arising (a) from things done or to be done in the course of business … or (b) from the occupation of premises used for the business purposes of the occupier’.
Can you think of any other circumstances where an oral statement may override what is within a written contract?
Curtis v Chemical Cleaning and Dyeing Co (1951)
The plaintiff took a wedding dress to be cleaned and was asked to sign a document. On enquiry she was told that it meant that the cleaners would not be liable for damage to sequins and beads. In fact the document contained a clause exempting the cleaners from liability ‘for any damage howsoever arising’. The dress was stained by the cleaners and they tried to rely on their exemption clause. It was held that the misrepresentation had overridden the exemption clause, and the cleaners were liable to the plaintiff for the damage.
Does this place an unfair burden on a sales assistant? What could the assistant do to avoid this? Who would be liable if an untrue statement is made by an assistant?
• A consumer – section 12 defines a consumer as follows: A party to the contract ‘deals as a consumer’ in relation to another party if:
(a) he neither makes the contract in the course of business nor holds himself out as doing so; and
(b) the other party does make the contract in the course of a business; and (c) … the goods passing under or in pursuance of the contract are of a type
ordinarily supplied for private use or consumption.
Most provisions also apply where one party acts on the standard terms of the other. It is also clear that under the Unfair Contract Terms Act 1977 a person normally in business, or even a company can, in some circumstances, act as a consumer.
The main provisions in the Unfair Contract Terms Act 1977 have had a dramatic effect on exemption clauses in consumer contracts. There is very little scope for exploiting a consumer in this way now, and where exemption clauses in these contracts are allowed, it will only be when the court finds them reasonable. The main provisions are:
• A contract term cannot now exclude or restrict liability for death or personal injury resulting from negligence – section 2(1).
• A contract term can only exclude or restrict other liability resulting from negligence if it is reasonable to do so – section 2(2).
• A further provision is that in a consumer contract, or when dealing on one party’s standard business terms, a contract term cannot exclude or restrict liability for non-performance or for performance which is substantially different from what was agreed, unless it is reasonable to do so – section 3.
Reasonableness
The law is quite clear on exemption from liability for death or personal injury in consumer contracts – it is not allowed. However, where an attempt R and B Customs Brokers Co Ltd v United Dominions Trust Ltd (1988) The plaintiff shipping company bought a car partly for business use and partly for private use by the owners. They did not buy cars regularly and this was not an integral part of their business, but peripheral to it, so they were treated by the Court of Appeal on this occasion as consumers.
Feldarol v Hermes Leasing (2004)
A finance company bought a Lamborghini sports car for its managing director, a sports car enthusiast. As the car was mainly for personal use this was held to be a consumer contract.
is made to exclude or limit other liability, the court has to decide if this is reasonable. Reasonableness is interpreted to mean fair given the circumstances known to the parties at the time, and, from the case of Stewart Gill v Horatio Myer Ltd (1992), takes into account the resources available to meet the liability and the possibility of insurance. Other factors which the court may take into account include:
• the bargaining power of the parties, and whether an alternative source was available
• any inducement to agree to the term, for example, a favourable price
• trade custom and previous dealings
• the difficulty of the task
• whether the goods are adapted to the order of the customer.
Three cases follow which show situations where exemption was held to be unreasonable.
Green v Cade (1978)
A consignment of seed potatoes was supplied to a farmer, with a clause in the contract stating that any rejection or complaint must be reported within three days of delivery. The crop failed because the seed potatoes were found to contain a virus. It was held that this requirement was unreasonable regarding a defect which could not be discovered on inspection at the time of delivery.
George Mitchell v Finney Lock Seeds (1983)
In a contract for the supply of cabbage seed, a clause limited the supplier’s liability to the purchase price of about £200. When the cabbage crop failed, this clause was held unreasonable, given that the damage sustained was over £60,000. The courts took the following points into consideration:
• The supplier’s admission that ex gratia payments were sometimes made in such circumstances (this was seen as an admission that the clause was unreasonable).
• The magnitude of the loss.
• The carelessness of the supplier.
• The availability of insurance to the supplier against such claims.
Smith v Bush and Harris v Wyre Forest (1990)
There are really two separate cases here, but the facts were similar. At Court of Appeal level the decisions differed, but on joint appeal to the House of Lords the outcome was the same in both instances. In each case a surveyor attempted to exclude liability for negligence in valuing a property. In the case of Smith v Bush some chimneys had been removed
Similar clauses are commonly found on such packets, sometimes the ‘right’
way up, sometimes at right angles, and always in small print (remember Lord Denning in Thornton – see Chapter 6, pp. 100 and 101). The following case concerns one of these packets.
and the building had not been properly supported, and in the case of Harris v Wyre Forest subsidence occurred, costing more than the value of the property in repair. It was held that the surveyor could not rely on the exemption clause, since the house in each case was of a usual kind, and the task of valuation was not difficult. It was the responsibility of the surveyor to carry out the task with professional care, and in any case insurance could be taken out against claims of negligence.
O’Brien v Mirror Group (2001)
A reader of a newspaper held a winning number on a scratch card.
However, due to a printing error, a large number of other readers had the same winning number on that occasion. The claimant had not read the terms, in another day’s edition of the newspaper, that included a statement that in such a situation winnings would be shared, not paid in full to each winner. Even though the claimant had not actually seen this term, it was held that there had been reasonable opportunity to do so. It was therefore reasonably brought to readers’ attention and it was unreasonable to expect such winnings. The court also took into account the fact that the claimant did not have to do very much to ‘earn’ the winnings. The Mirror Group were therefore held not liable for the large payments.
On the back a packet in which films are sent away for developing the following terms are found, in very very small print, at right angles to the main form which is completed by the customer, ‘The company limits any liability for loss or damage to films to twice the cost of the materials.’
Do you think that this is a reasonable term?