English sales law is driven by the need for fairness and reasonableness rather than by the needs and practices of traders. Discuss.

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As this essay will show, English sales law is mainly driven by the need for fairness and reasonableness rather than by the needs and practices of traders.  The law even sees fit to intervene in respect of traders conducting business solely with each other rather than leave them to their own devices.

There are various factors influencing the application of English sales law including whether the consumer is purchasing as a business person or whether two businesses are dealing with each other.  There are other forms of sale arrangements, such as, consumer to consumer, consumer credit, tenders, auctions etc, that are outside the scope of this essay, as too are the laws which apply to the sale of services.    The principal focus will instead be on explaining the main legislation governing English sales law, namely; the Unfair Contract Terms Act 1977 (UCTA), the Sale of Goods Act 1979 (SGA) and also various regulations that are in force to ensure that consumers are protected from traders and traders are protected from themselves.  In order to ensure a full discussion of the sale of goods this essay will also look at the application and effect of common law.

The Unfair Contract Terms Act 1977

The theory of freedom to contract is based on the premise that the terms of a sale are essentially for the parties to agree, however, where consumers are involved the law will prevent the inclusion of unfair terms and will imply certain terms into some contracts.  In other words the need for freedom must be set against the value of ‘protecting the weak, the foolish, and the thoughtless from imposition and oppression’. 

A consumer can be defined as a person who is not purchasing in the course of their business although it does have different definitions under different acts.  UCTA applies to unfair terms in contracts whether they are consumer contracts or business-to-business contracts, although, as shown below, Parliament has seen fit to give the former type of contract much more attention than the latter.   UCTA will affect clauses in contracts that purport to exclude, avoid or restrict liability.   The types of terms which will be ineffective under UCTA include:

(i) a term in a consumer or business-to-business contract restricting or excluding liability for  personal injury or death caused by the seller’s negligence (s. 2(1));  (ii) a term in a consumer or business-to-business contract excluding liability for breach of the statutory implied terms for good title (s. 6(1)); (iii) a term in a consumer contract  excluding liability for breaching statutory implied terms relating to satisfactory quality, fitness for purpose, correspondence with sample or description.    

Under section 4 UCTA, a term that requires a consumer to indemnify a third party for liability incurred by that party for breach of contract or negligence is prohibited.  

Pursuant to section 11 UCTA a “reasonableness” test is used in order to determine the status of the term. The following sorts of terms are enforceable only if they pass the reasonableness test: (a) a term in a consumer contract or business contract on standard terms excluding or restricting liability for negligence (other than for death or personal injury) (s. 2(2)) and (b) a term by which the seller excludes or restricts liability for breach of contract, claims to be entitled to perform a markedly different contract, or claims to be entitled to no performance of the contract (s. 3).

The courts will make a determination on the matter of reasonableness rather than the parties themselves, but Schedule 2 of UCTA provides useful guidance for assessing whether a term is reasonable.  The guidance covers fundamental issues such as the bargaining power of the parties, whether the consumer was given an inducement to agree the term, whether the consumer should have known or did know of the term’s existence, and whether the goods were made to the specific instructions of the consumer. In addition, if a term restricts or excludes liability if a condition is not complied with, the guidance covers whether it was reasonable at the time of the contract to expect that compliance was practicable.  The factor of bargaining power was examined in the London Borough of Southwark where the court rejected the council’s allegation that the software was of unsatisfactory quality and not fit for purpose, and declared the exclusion clause was reasonable - mainly because the parties were almost equals and because they had engaged in prolonged negotiations via lawyers.  The Court of Appeal recently held that an exclusion clause which had the effect of excluding a party's right to set off claims and a time-bar on issuing claims did pass the reasonableness test, because even though Rock was small in terms of corporate size it was commercially experienced and had traded with Rohlig for years under the same standard terms.    

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The issue of reasonableness is also affected by section 3 Misrepresentation Act 1967 which asserts that any term seeking to restrict or exclude liability for misrepresentation before the contract was made or excludes a remedy for misrepresentation will need to pass the UCTA reasonableness test if it is to be enforceable.

The principle that terms must be fair under English sales law is further enabled by the Unfair Terms in Consumer Contracts Regulations (UTCCR). In accordance with Schedule 2 UTCCR, terms may be unfair if they allow the seller to unilaterally alter the terms without a valid reason that is stated ...

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