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Published online by Cambridge University Press: 02 January 2018
The Unfair Contract Terms Act 1977 may lead to considerable forced change in a contract. In some cases a contract term can be rendered automatically ineffective and in others a term can become ineffective unless it satisfies the requirement of reasonableness. Obviously the boundaries of such powerful provisions are of great significance and, for the most part, the sections which produce those effects are stated to apply to terms which ‘exclude or restrict liability.
1. Eg ss 2(1) and 6(2).
2. Eg ss 2(2) and 6(3).
3. Eg ss 2, 3.
4. The other extensions in s 13(1) seem relatively unproblematic (although see Stewart and Gill Ltd v Horatio Myer Ltd & Co Ltd[1992] 2 All ER 257) and references in this article to s 13(1) should be taken to be references to that part of the subsection quoted in the text.
5. This is because both types of clause set out the area within which a remedy for breach of contract is available. The same problem does not arise with clauses merely limiting liability. See further text at n 36.
6. Coote Exception Clauses(1964) chs 1 and 10.
7. For the most part the courts assume that there is some basic distinction between clauses which exclude liability and those which define obligations. For an unusual judicial adoption of the view that exclusion clauses are part of the definition of the obligation see Photo Production v Securicor [1980] AC 827 Lord Diplock at 851, but for the more usual view of exclusion clauses as a distinct type of clause see Lord Wilberforce at 842–843.
8. On s 13(1) generally see Coote (1978) 41 MLR 312, Adams (1978) 41 MLR 703, Palmer & Yates ‘The Future of The Unfair Contract Terms Act 1977’ [1981] CLJ 108, Adams & Brownsword ‘The Unfair Contract Terms Act: A Decade of Discretion’ 104 [1988] LQR 94.
9. See text at n 68.
10. [1987] 2 All ER 620.
11. At 625.
12. At 625.
13. Ie a reference to the definition of the obligation.
14. [1989] 2 All ER 514.
15. At 530.
16. At 626.
17. At 626.
18. See also Thompson v T Lohan (Plant Hire) Ltd [1987] 2 All ER 631. A mechanical test may be necessary to set the border which seems to be required by the presence of s 4 in the Unfair Contract Terms Act 1977. Adams & Brownsword, ‘Double Indemnity – Contractual Indemnity Clauses Revisited’ [1988] JBL 146.
19. [1989] [2] All ER 514 Allen (1989) 105 LQR 511.
20. At 530.
21. At 530.
22. [1991] 2 All ER 293.
23. At 301.
24. Browne-Wilkinson V-C at 305, Stuart Smith LJ at 299.
25. At 300–301.
26. See text at n 16.
27. At 301.
28. There is some indication in Smith v Bush [1989] 2 All ER 514 that such a clause would not fall within the Unfair Contract Terms Act 1977. But this is an assumption that is not explained in the light of the ‘but for’ test.
29. Atiyah, P. S. The sale of Goods 8th edn (1990) pp 219–225 Google Scholar. See also Supply of Goods and Services Act 1982 and s 7 of the Unfair Contract Terms Act 1977.
30. There is also criminal liability on the seller who has tried to make use of a clause which is void under s 6(2) (Consumer Transactions (Restrictions of Statements) Order 1976).
31. [1990] 1 All ER 737.
32. T & J Harrison v Knowles and Foster [1918] 1 KB 608.
33. Contrast Cavendish Woodhouse Ltd v Manley (1984) 82 LGR 376 and Hughes v Hall [1981] RTR 430.
34. [1991] 2 All ER 293.
35. Liverpool City Council v Irwin [1976 [2] All ER 39 HL; Tai Hing Cotton Mill Ltd v Lui Chong Hing Bank Ltd [1985] 2 All ER 947.
36. Coote Exception Clauses(1964) chs 1 and 10.
37. Compare the distinction made between liquidated damages and penalty clauses where it is asked whether the clause is a genuine pre-estimate of loss. Dunlop Pneumatic Tyre Co Ltd v New Garage Motor Co [1915] AC 79.
38. See Coote, op cit, at 141: ‘But what the layman understands by a contractual promise is, surely a promise which can be enforced and it is to precisely this question that an exception clause is addressed … In other words it is arguable that the prevailing attitude to exception clauses, with its implicit assumption that promises are to be regarded as contractual even though they were never intended to be enforceable, is at some remove from reality.’ However, contrast the views of the Law Commission, ‘We do not propose to define exemption clauses in general terms; we regard this expression not as a legal term of art but as a convient label for a number of provisions which may be mischievious in broadly the same way. Their mischief is that they deprive or may deprive the person against whom they are invoked …of rights which the promisee reasonably believed the promisor had conferred on him’ (emphasis added). Law Com Rep No 69 (1975), para 146.
39. Law Com Rep No 69(1975), para 145.
40. L'Estrange v F Graucob Ltd [1934] 2 KB 394.
41. Parker v South Eastern Railway Ltd [1877] 2 CPD 416. Adams, , ‘The Standardization of Commercial Contracts, or the Contractualization of Standard Forms’ (1978) 7 Anglo-American LR 136 CrossRefGoogle Scholar.
44. McCutcheon v David McBrayne [1964] 1 WLR 125; Kendall v Lillico [1969] 2 AC 31; Circle Freight v Medeast [1988] 2 Lloyd's Rep 427; Macdonald ‘Incorporation of contract Terms by a Consistent Course of Dealing’ (1988) 8 LS 48.
43. [1930] 1 KB 41; Adams, op cit, n 41.
44. It should not be thought that this would not occur in contracts between businessmen. They do not always contract with contract law at the forefront of their minds. The ‘Battle of the Forms’ and the need to recognise incorporation by a course of dealing would seem to indicate this. See also Macaulay, ‘Non-Contractual Relations in Business’ (1963) Am Soc Rev 45 in Sociology of Law (ed Aubert, 1969) 195, Beale, and Dugdale, ‘Contracts between Businessmen: Planning and the use of Contractual Remedies’ (1975) 2 Brit J Law and Soc 45 CrossRefGoogle Scholar.
45. An expectation of breach might affect the care with which all the clauses were considered so that all the clauses might then be seen as part of the definition of the obligation.
46. On objectivity in contract see generally Howarth 1984 [100] LQR 265 De Moor (1990) 106 LQR 632.
47. See text at n 57.
48. Phillips Products v Hyland [1987] [2] All ER 620 at 626 Johnstone v Bloomsbury Health Authority [1991] 2 All ER 293 at 301.
49. Heilbut, Symonds & Co v Buckleton [1913] AC 30.
50. Norman v Bennett [1974] 3 All ER 351.
51. Often a car odometer with the wrong mileage.
52. [1893] AC 351; Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] AC 576. See also J. Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd [1976] 1 WLR 1078; Harling v Eddy [1951] 2 KB 739; Couchman v Hill [1947] KB 554.
53. At 355.
54. See text at n 28.
55. Such a clause is very different to the type of clause in Smith v Bush [1989] 2 All ER 514 stating that an expert's opinion is not to be relied upon. It does not have the innate impedence to inclusion in the parties' reasonable expectations which is caused by the credibility gap occasioned by the professional denying that his expertise is to be relied upon, especially when the expert is well aware that his expertise will be relied upon despite the denial.
56. The Moorcock (1889) 14 PD 64; Shirlaw v Southern Foundaries Ltd [1939] 2 KB 206.
57. Eg Trollope & Colls v North West Metropolitan Regional Hospital Board [1973] 2 All ER 260 at 268.
58. See Johnstone v Bloombury Health Authority [1991] 2 All ER 293.
59. Liverpool City Council v Irwin [1976] 2 All ER 39, HL. Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1985] 2 All ER 947.
60. Atiyah, P. S. The Sale of Goods 8th edn (1990) pp 219–225 Google Scholar. P. S. Atiyah, ‘The move from Agreement to Reliance in English Law and the Exclusion of Liability Relating to Defective Goods’ in Contract Law Today, Harris and Tallon eds. See also Supply of Goods and Services Act 1982 and s 7 of the Unfair Contract Terms Act 1977.
61. See text at n 31.
62. Ashington Piggeries v Christopher Hill [1971] 1 All ER 847, Lord Diplock distinguished descriptive terms which identified the goods from other descriptive terms which did not. The former come within s 13, the latter do not. See also Reardon Smith v Hansen Tangen [1976] 3 All ER 570.
63. T & J Harrison v Knowles and Foster [1918] 1 KB 608; Harlingdon & Leinster Ltd v Christopher Hull Fine Art Ltd [1990] 1 All ER 737.
64. The exclusion of the express term may come within s 3 (2)(b)(i) of the Unfair Contract Terms Act 1977 if the purchaser ‘deals as a consumer’ or on the other party's ‘written standard terms of business’.
65. See s 55 of the Sale of Goods Act 1979.
66. Atiyah, P. S. The Sale of Goods 8th edn(1990) at p 221 Google Scholar.
67. A similar question can arise in relation to misrepresentation as there cannot be an operative misrepresentation without reliance. In the context of misrepresentation, in Cremdean Properties v Nash [1977] EGLR 63, the Court of Appeal had to deal with a clause, part of which said ‘Any intending purchaser … must satisfy himself by inspection or otherwise as to the correctness of each of the statements contained in these particulars’. Bridge LJ commented (at 68–69), ‘That part of the [clause] may have considerable importance when this action comes to trial, as bearing upon the question of fact that will arise at the trial, as to whether the plaintiffs relied upon any misrepresentation. Clearly [that part of the clause] … does not amount even to a purported annulment of any representation.’.
68. The analogy with s 3(2)(b), with its reference to the reasonable expectations of one party might be used as part of the argument that looking to the reasonable expectations of them both will create too much uncertainty.
69. In Cremdean Properties v Nash [1977] Est Gaz Dig 63 in response to the argument that s 3 of the Misrepresentation Act 1967 should be narrowly construed, so that the clause in question fell outside its bounds Scarman LJ said (at 72), ‘Humpty Dumpty would have fallen for this argument. If we were to fall for it, the Misrepresentation Act 1967 would be dashed to pieces which not all the King's lawyers could put together again.’.
70. See n 7. For an example of a case, outside of the context of the Unfair Contract Terms Act 1977, where the court was happy to assume that it could call the clause before it an exclusion clause, despite its form as part of the definition of the obligation, see Evans v Merzario [1976] 1 WLR 1078. For a decent example of a case where the tone of the judgments assume that an exclusion clause does not only exist as a distinct type of clause at the level of form see Chapman v Aberdeen Construction Group plc [1991] IRLR 505.
71. See Cavendish Woodhouse Ltd v Manley (1984) 82 LGR 376.
72. I should like to thank the Editor and Professor Hugh Beale for their comments on an earlier draft of this article.
