The impact of exclusion clauses on the consumer of goods and services in England and Wales is no longer of any significance. Critically analyse the statutory controls that exist over the use of exclusion clauses and assess the truth of this statement.

by zhilinglim27gmailcom (student)

Exclusion clauses are a clause that is included in a contract which seeks to limit the liability that one party owes to another. The courts recognize that there is a need for businesses to impose a financial ceiling on a contract, in order to limit the risk when entering into a contract. This is generally recognized by the freedom of contract however business, with their unfair bargaining position may take advantage of consumers, hence there exist statutory controls to govern the use of exclusion clauses.

The Unfair Contract Terms Act 1977 has a significant effect on exclusion clauses. It imposes statutory limits on the avoidance of civil liability through exclusion clauses in business contracts. It only works when one of the parties were dealing as a consumer and another is not. It is interpreted widely, including businesses which are dealing as consumers. l However, the control may not extend to exclusion clauses that are not incorporated into the contract. In the case of R & B Custom Brokers case, the defendants was a shipping company who had purchased zlsome cars, which was merely incidental to their business and not integral to it. Hence they were consumers.

Unfair Contract Terms act may have a significant impact as it either renders exclusion clauses ineffective, or subject to the reasonableness test. Courts would take into account whether or not a term is reasonable. zlA reasonable term would be a term that is fair and just after taking into account all the circumstances that was known or ought to be known at the time the contract was concluded. This aimsl to provide consumers more protection as an exclusion clause has to be reasonable subject to the test as well as known at the time it was concluded. This diminished the ...

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Schedule 2 lists out the factors that needs to be taken into account.

The bargaining power of both parties
Had the consumer received an inducement?
Has the consumer known of the exclusion clause
Was compliance with the condition that, if not complied will lead to the exclusion clause
Was the goods manufactured in a special way for the claimant?

s.2 of UCTA states that in exclusion clauses limiting liability of negligence performance, the exclusion clause would need to be voluntary accepted by the person and a person’s awareness and agreement of it is not sufficient. Hence this can be very restricting in the impact of exclusion clause. A consumer can be aware of the exclusion clause but not be bound by it. Under this section a person cannot by reference, exclude liability for death or personal injury. Whereas exclusion clauses relation to loss and damage would be subject to the reasonableness test. This shows that even though a business may have included into it as a standard term , but it falls short of the reasonableness test, it will not apply.

The Unfair Consumer Contract Regulations 1999 is also a statutory control, aims to render ineffective terms that benefit the supplier or seller in favour of the consumer. This also have an impact on the exclusion clauses – which have to be fair.

Regulation 5(1) defines the principle of unfair- which is has not been individually negotiated, causes a significant imbalance in the parties rights and obligations and contrary to the requirement of good faith. For a term to be ‘unfair’ it must be contrary to the requirement of good faith.

There is no guideline on fairness, the courts would have to take into account all the circumstances of the and the nature of the goods supplied r.6(1) This leaves much discretion to the courts. An exclusion clause may potentially have no impact if the courts regard it as not being in ‘plain and intelligible language’ under regulation 7.

However there are still some areas where an exclusion clause would prevail. Concerning core terms and adequacy of the price or remuneration for goods and services provided, terms cannot be assessed whether or not they are fair. The exclusion clause will thus be effective.z

Statutory controls have much impact on the significance of exclusion clauses.