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FACTSHEET and Frequently Asked
Questions (FAQs)
Subject:
Exclusion
Clauses in Contracts.
Relevant
or Related Legislation:
Unfair Contract Terms Act 1977,
Consumer Transactions (Restrictions on Statements) Order 1976.
Key
Facts:
• A trader cannot by the use of an exclusion clause in
the contract exclude his liability for death or personal injury
resulting from negligence.
• A
clause in the contract restricting liability for other
loss or damage resulting from negligence can be used providing the
exclusion satisfies the test of reasonableness.
•
A
trader can only include a clause in the contract requiring a consumer to
indemnify him against any loss he may incur through negligence or breach
of contract if he can show that the clause satisfies the test of
reasonableness.
•
If a
trader is selling or hiring goods to a consumer he cannot use a
contractual term or condition to restrict or exclude his legal
obligations to provide goods which are as described and of satisfactory
quality.
• It is an offence for a trader selling goods to use an
exclusion clause which purports to restrict the right of consumers to
goods which are as described and are of satisfactory quality.
• If a
trader is selling or hiring goods to a person who is not a consumer he
can only restrict or exclude his legal liability to provide goods which
are as described and of satisfactory quality if the clause in question
satisfies the test of reasonableness.
• When a
trader is providing a consumer with a service he can only restrict or
exclude his liability for breach of contract or allow himself to provide
an inadequate service if he can show that the term or condition
satisfies the test of reasonableness.
•
When a
trader undertakes to provide a service for any person (whether or
not a consumer) on his own written terms of business he similarly can
only use those written terms to exclude or restrict his liability for
breach of contract or allow himself to provide an inadequate service if
he can show that the term in question satisfies the test or
reasonableness.
•
Ultimately,
whether or not a term is unreasonable is something that only
a court can decide. If a
term were to be challenged it would be for the party seeking to impose
it to demonstrate to the court that it was reasonable.
Frequently
Asked Questions (FAQs)
Q1. What is a consumer?
Q2. How do I tell whether an exclusion clause is reasonable?
Q3. How do I challenge an exclusion clause?
Q4. Why doesn’t the Act prohibit all exclusion clauses?
Q5. Why doesn’t the Act deal with other unfair terms?
Q6. Are there any contracts the Act doesn’t apply to?
Q7. Can I get help and advice about a particular exclusion
clause?
Q1.
What is a consumer?
A
consumer is defined as a person who is not acting in the course of a
business.
Q2.
How can I tell whether an exclusion clause is reasonable?
If you are consumer, any
exclusion clause that restricts a trader’s obligation to you for
breach of contract or otherwise providing an inadequate service, is
likely to be considered unreasonable particularly if the clause is one
of his standard terms and conditions. If you come across such a clause
in a contract you have entered into you should take advice immediately.
Q3. How do I challenge an exclusion
clause?
If
necessary you can challenge the clause in the courts. It is for the
trader to show that it is reasonable.
Q4.
Why doesn’t the Act prohibit
all exclusion clauses?
The
Act is drawn up in the way that it is so that commercial parties remain
free to conclude contracts between themselves on such terms as they
wish. It would be an
infringement of their freedom if the law were to prevent them agreeing a
contract term about quality that both parties were prepared to accept.
But, in relation to consumers their rights in relation to goods
cannot be excluded and there is limited scope for valid exclusion
clauses for services particularly when the requirements of the Unfair
Terms in Consumer Contracts Regulations 1999 (see separate Fact
Sheet)
are taken into account.
Q5. Why doesn’t the Act deal with
other unfair terms?
The
Act was designed to deal with the problem of unfair exclusion clauses.
There is separate legislation (the Unfair Terms in Consumer
Contracts Regulations 1999 (see separate Fact
Sheet) that deals with
unfair terms in consumer contracts.
Q6. Are there any contracts the
Act doesn’t apply to?
The
Act does not extend to contracts of insurance; contracts in relation to
the transfer of land; contracts that relate to the creation or transfer
or termination of a right in any patent, copyright, registered design,
technical or commercial information or other intellectual property;
contracts in relation to the formation or dissolution of companies; and
contracts relating to the creation or transfer of any right or interest
in securities.
Q7. Can I get help and advice about a particular exclusion
clause?
Your local Citizens Advice
Bureau or Trading Standards Department can provide help and advice.
Contacts:
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