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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:

Citizens Advice Bureau
Trading Standards Departments

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Last updated 12 July 2005


Department of Trade and Industry

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