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 very first time the distinction between “consumer and “non consumer” the very definition of “consumer” in the UCTA leaves a lot to the interpretation the judges, so here we see the difference between the 1977 Act and the 1999 Regulations. In most instances it is not necessarily obvious what a consumer is and isn’t, in a number of borderline situations. For example the case of R and B Customs Brokers v UDT the Court of Appeal held that a family firm that bought a car, partly for work and partly for social use, was a consumer for the purposes of UCTA. It isn't necessarily obvious what a consumer may be, in a number of borderline situations. Thus in R and B Customs Brokers would be excluded, unless they claimed as private individuals. There is, therefore, a difference between a `consumer' for UCTA purposes and for UTCCR purposes. There would, no doubt, be a large number of cases in which whether a person was a `consumer' or not would be decided the same way for both UCTA and UTCCR; but there are cases where it wouldn't. For example, in UCTA a person who buys at auction is, buy definition, not a consumer. However, there is nothing in UTCCR that prevents a private individual buying at auction being a consumer.
So a second important difference is that the UTCCR deals not only with exclusion clauses, but any “unfair” term. The UCTA has a delicate balancing act to perform, that it only deals with exclusion clauses, and these are only one type of onerous contractual clause that causes problems. Consider the infamous case of Interfoto v Stiletto (1989). Here an advertising agency asked a photographic service to produce photographs for a presentation. The photographic service sent 47 transparencies to the agency for inspection, along with a contractual letter which had in its small print the statement that transparencies were to be returned within 14 days. If they were not, the service would levy a charge of £5 per negative per day. The agency forgot about the transparencies for a couple of weeks, and was rather surprised to receive a bill for £3,783. The Court of Appeal held that a term as onerous as this would have to be made very clear if it was to be enforced and the claimants had not done anything to bring it to the defendant's attention. As a result, the claim failed. This process of striking out a clause on the grounds of incomplete “incorporation” was one of the ways that the courts had sought to control exclusion clauses in the pre-UCTA days. While the Interfoto case showed that the courts were prepared to go through the whole process again for other types of onerous clause, this was hardly satisfactory.
In the UTCCR the possibilities of “unfair terms” come to light. An unfair term is any that imbalances rights and obligations significantly to the detriment of the consumer. Like UCTA's notion of “reasonableness”, “unfair” is not defined, but there is guidance. For example, a clause might be unfair if it allows the business to terminate the contract at its discretion, without extending the same freedom to the consumer. Another example is a term allowing the business to vary the contract without the consent of the consumer. This idea of “unfairness” goes much further than UCTA's “unreasonableness”. The UCTA does not prevent a contract containing terms that allow one party to vary its obligations, for example. However, UTCCR does nothing to control onerous terms in non-consumer contracts. This means that the defendants in the Interfoto case would not be able to rely on UTCCR to escape their bill. It still falls to the courts to handle situations like this on a case-by-case basis.
Third, UTCCR applies only to terms that have not been individually negotiated between the parties. A term that has been influenced by the consumer is, by definition, fair. UCTA does not define what it means to be reasonable, but it does give some guidance. Under the UCTA, the test of reasonableness does allow for consideration of whether the term was negotiated, but this is only advisory. A negotiated term can still be deemed unreasonable. The courts are to have regard for, among other things, the relative bargaining positions of the parties, whether the contract is negotiated or in standard form, and whether the party affected by the exclusion clause was offered an incentive to contract on particular terms. This approach allows the courts a lot of flexibility, and some surprisingly draconian exclusion clauses have been upheld. For example, in SAM Business Systems v Hedley and Co a software supplier was allowed to rely on an exclusion clause that allowed it to supply a thoroughly inadequate product. The court decided that the parties were of roughly equal bargaining power, and the purchasers could have attempted to negotiate better terms. The court also recognised that such clauses are ubiquitous in the computing industry. Had the purchaser been a consumer, the reasonableness test would not have applied; the exclusion clause would simply have been struck out, because it attempted to disclaim liability for supplying goods that are not suitable for their purpose.
Fourth the explanation of “unfairness” in UTCCR includes the phrase “contrary to the requirements of good faith”. This seems be tricky as it implies that the draughter of a consumer contract has an obligation to contract in good faith. In English law we do not officially recognise the doctrine of good faith as other countries do. However, UTCCR comes from the EC, and the idea of contractual good faith is less unusual in other parts of Europe. There are very few cases which considers what “good faith” actually is in terms of consumer contracts, so it may be that this phrase adds little to our understanding of unfairness.
So there are clearly two major pieces of legislation that overlap, but not totally. Certain contractual arrangements are caught by both UCTA and UTCCR and handled the same. For example, both UCTA (certainly) and UTCCR (advisedly) would strike out a clause that attempted to disclaim liability for death or injury of a party. Situations like this should not cause any problems. Then there are contractual arrangements that are handled by one of the pieces of legislation and not the other. For example, UTCCR deals with onerous terms in consumer contracts, while these are beyond the remit of UCTA. Some contractual arrangements are within the scope of both UCTA and UTCCR, but are subject to different tests. For example, consider a term in a contract for supply of goods and services that tried to disclaim liability for faulty goods where the manufacturers were to blame for the faults. Such a term would be void under UCTA if the purchaser were a consumer, void unless reasonable under UCTA if the purchaser were a business, void if `unfair' under UTCCR if the purchaser is a consumer, and unaffected by UTCCR if the purchaser is a business. Since `unfair' is not the same as `unreasonable', these complications are even more opaque. Finally, some contractual injustices that cry out for redress are handled neither by UCTA nor UTCCR. For example, a large, powerful business can still impose onerous terms on a small business, and there is no statutory protection against these terms.
Aside from the problems of understanding which types of term in which strain of contract are caught by which piece of legislation, there is the additional problem that UTCCR goes beyond striking out unfair terms: it also establishes certain obligations on the contract those who draught contracts, to write in clear language. This may be no bad thing, but there is no similar rule for business contracts.
To conclude, the law on statutory control of exclusion clauses is in a deplorable phase. Perhaps there needs to be a reassessment of this legislation to unify the UCTA and the UTCCR. More specifically, to amalgamate the rules corresponding to businesses and consumers and to supersede the “fairness” and “reasonable” tests with a common test to apply to all types of contract.
The original version of the Regulations which implement Council Directive 93/13/CEE came into
force on July 1, 1995. Those regulations were revoked and re-enacted with modifications and additions by the 1999 Regulations which came into force in October 1, 1999.
[1988] 1 WLR 321; [1988] 1 A11 ER 847, CA
QB 433; [1988] 2 WLR 615, CA