Explain the meaning and significance of the provision in Section 11 Sub-section 4 that deals with a contract term seeking to restrict financial liability to a specific sum. How useful are the guidelines for applying the reasonableness test in Schedule 2?

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The reasonableness test outlined in Section 11 of Unfair Contract Terms Act 1977 exists to explain that the terms outlined in a contract should be fair and sensible given the criteria it sets our for reasonability in relationship to the circumstances under which the contract was signed and agreed to; however, it makes it possible that relevant liabilities are left under the judge’s discretion. In Section 11 Sub-section 4, the reasonableness test also puts into consideration whether a specified monetary settlement would be justified, and places a limit for such a settlement.

In Sub-section 4, the limiting of a monetary settlement is justified as it falls into what is reasonable. Defining a ceiling in such matters limits the exploitation of such parties from asking for unreasonable or exaggerated sums of money as a liability.

Schedule 2 serves to further explain the significance of the reasonableness test by offering a criteria under which the reasonableness test can be applied, such as:

1.    1. The strength of each party when bargaining, will one of the parties have the upper hand resulting in an unfair advantage?[1]

2.    2. Did the customer have “no other options” before signing the contract or coerced into such an agreement?[2]

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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 ...

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