What, if any, are the differences in scope between the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999?

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Josephine Love

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What, if any, are the differences in scope between the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999?

        To fully answer this question we need first to look at the nature of exclusion clauses and the history behind this legislation. It is commonplace for a party drawing up a contract to seek to minimise the amount of liability that may be incurred in the performance of that contract. Contractual clauses that have this effect are usually called “exclusion clauses” or “limitation clauses”. Exclusion clauses often attempt to exclude or limit liability for losses arising out of breach of contract, or for extra-contractual liabilities. Extra-contractual liabilities will often include losses for misrepresentation, or negligence in performing the contract.  

        On the one hand from a business point of view this limit on liability does make sound business sense. It could even be argued that it is logical for the consumer as well, say for example the provider of a service that is ineffective has to pay compensation for all the losses that arise from running a poor service, that cost will simply be passed on to the consumer. Nonetheless whatever the advantages of this argument, there are clearly exclusions that perpetuate an injustice so great that they can't be tolerated in a decent society. The archetypal case of this sort is Thompson v London Midland and Scottish Railway (1930). In this case, an elderly, illiterate woman bought a railway ticket which contained a reference to the railway company's standard terms and conditions. These included a statement that the railway would not accept liability for negligence. During the alighting of the train Mrs Thompson fell and broke her leg. When she sued the railway in negligence, the exclusion clause was upheld, to the amazement of almost everybody. Mrs Thompson was an adult of full capacity, despite being unable to read, and had the notional freedom to either enter the contact or refrain. The courts had begun to develop common-law rules that helped exclusion clauses to be brought under control, however, cases like this made it clear that some sort of control was required.

        When the Unfair Contract Terms Act (1977) (`UCTA') was drafted, it tried to balance freedom of contract (the long established principle that adults of full capacity who make contracts with each other should abide by them) against the need to prevent injustice. The UCTA deals with a limited set of precise types of exclusion, only exemption clauses. For example, it strikes out any attempt disclaim liability for death or injury, and this would probably have allowed Mrs Thompson to win her case. Efforts to disclaim liability for losses caused by negligence will be struck out if they don't pass the test of “reasonableness”. Another main point is that the UTCA restricts those who wish to exclude liability for selling poor-quality, defective goods, or goods that the seller doesn't have a right to sell, say if they are stolen. Finally, it makes attempts to exclude liability for misrepresentation subject to a test of reasonableness. Whereas so far we have only looked at the English Law, at the same time the EC was also looking at legislation to control these types of clauses. This is how the Unfair Terms in Consumer Contracts Regulations 1999, however these two pieces of legislation have a number of important differences.

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         First, UTCCR only benefits with consumers whereas anyone can benefit under the 1977 act but there is most protection for consumers. For the UTCCR purposes, a consumer is any “natural person” acting outside the course of his business.
 In fact, s.3 of the Regulation defines “consumer” as meaning (only) “any natural person who […] is acting for purposes which are outside his trade, business or profession”. The very narrow phrase “natural person” implies that only individuals will benefit from UTCCR, whereas under UCTA business's can trade as consumers if outside of their course of business. However although the UCTA 1977 introduced for the ...

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