3. 3. Was the customer clearly aware of the terms he or she was abiding to?[3]
4. 4.Was compliance practical? Were there restrictions on the liability in terms of conditions not being met?[4]
5. 5. Did the customer specially order the goods?[5]
The above are all questions that a judge must answer before proceeding to hold a party liable for any disagreements that may occur in the duration of a contract. The courts also use the same criteria to determine if a party had unfairly made themselves not liable for defaulting on the agreement. The meaning and significance for the terms laid out above, is to constitute a fair grounds for the judge’s ruling. Taken into account are the payee’s resources to meet a liability if it arises, and the opportunity to cover himself by insurance.[6]
In the instance that one of the parties has an unfair advantage when the contract was created, or a stronger bargaining position, the stronger party is undoubtedly able to dictate their terms. “The problem of abuse of bargaining power is particularly noticeable when it involves non-negotiable standard form contracts containing clauses limiting or excluding the liability of the party who has drawn up the form.”[7] The weaker party will find it commonplace to sign such a form as they are in no position to negotiate meaning that they did encounter a form of imposition in agreeing to the contract.
If a customer was coerced into the signing of a contract that did not have clear guidelines or stated unfair criteria in favor of the other party, the court must take these conditions into account of the contract signing when ruling for compensation. “The party drawing [up the contract] may insert clauses severely restricting the other’s rights without the other realizing, because he does not have the time to read or the skill to understand the document.”[8] If it is clear that the customer did not enter the agreement on his or her own merit, the judge may rule that the monetary compensation be greater to counterweigh the unfair conditions under which the agreement was entered. “The individual consumer or small businessman may well find that he is given no opportunity to negotiate the one-sided set of terms on which the other will contract, but that he must “take it or leave it”; and even if there is a competitor to whom he can turn he may find himself with similar terms and the same attitude.”[9]
Setting a ceiling for compensation however, lessens the chances that a party will claim to have entered the contract under unreasonable circumstances in the hopes of obtaining an unfair sum. Since compensation will only be awarded if the conditions are reasonable, it must be clear that the contract does not violate the outline set out in schedule 2.
These guidelines are useful because they insure that there is no party unfairly taking advantage of the other and that judges’ rulings are made in a consistent and fair manner. Schedule 2 offers a dimensional analysis of the reasonableness test as oftentimes legislative acts are complex texts that are open to interpretation due to difficult language and general guidelines.[10] As stated in the act’s long title, the entire purpose of the document is to “impose further limits on the extent to which…civil liability for breach of contract, or for negligence or other breach of duty, can be avoided by means of contract terms and otherwise.[11] By answering the questions outlined above, a court can adequately identify the reasonableness of the limits of liabilities in the contract and be able to enforce a decision holding the liable party at fault and meanwhile, protect the party that could have unknowingly signed a contract from a weaker standpoint.
[1] Unfair Contract Terms Act 1977, Pt2, s 2(2)(a).
[2] Unfair Contract Terms Act 1977, Pt2, s 2(2)(b).
[3] Unfair Contract Terms Act 1977, Pt2, s 2(2)(c).
[4] Unfair Contract Terms Act 1977, Pt2, s 2(2)(d).
[5] Unfair Contract Terms Act 1977, Pt2, s 2(2)(e).
[6] Unfair Contract Terms Act 1977, Pt1, s 11(4) (b).
[7] Hugh Beale ‘Unfair Contract Terms Act 1977’ (1978) 5 British Journal of Law and Society 115.
[8] Hugh Beale ‘Unfair Contract Terms Act 1977’ (1978) 5 British Journal of Law and Society 114.
[9] Hugh Beale ‘Unfair Contract Terms Act 1977’ (1978) 5 British Journal of Law and Society 115.
[10] Sharon Hanson, Legal Method and Reasoning(2nd edn, Cavendish Publishing Group 2003) 39.
[11] Unfair Contract Terms Act 1977.