This chapter deals primarily with situations where there is an attempt to exclude or limit liability for breach of contract (or for the tort of negligence) by including exclusion or limitation clauses in a contract. We will also consider more 236broadly ‘unfair’ terms in consumer contracts following the Consumer Rights Act (CRA) 2015. As such this chapter deals with an area governed by both common law and statute. The statutory provisions were developed in the latter half of the twentieth century and, overall, have tended to have a more protective stance in relation to consumers. The common law rules were developed earlier, broadly, to deal with imbalances in bargaining power between the parties. We examine the common law rules first, followed by the statutory rules:
Rules of incorporation. Was the clause part of the contract? Was appropriate notice of it given to the other party?
Rule of construction. Does the clause cover the breach that has occurred?
Unfair Contract Terms Act (UCTA) 1977. This statute renders some exclusion/ limitation clauses ineffective (for example, clauses which attempt to exclude liability for death or personal injury caused by negligence). Other clauses are subject to a test of ‘reasonableness’.
Originally UCTA 1977 had provisions regulating the use of, for example, exclusion/limitation clauses in consumer and non-consumer contracts. Nevertheless case law on the Act tended, for example, to allow businesses more freedom to exclude liability when contracting with each other than in contracts with consumers.
Following the Consumer Rights Act (CRA) 2015 there is a much clearer separation between consumer and non-consumer contracts: broadly the CRA 2015 regulates consumer contracts and, for present purposes, an amended UCTA 1977 regulates non-business contracts.
The CRA 2015 imposes a requirement of ‘fairness’ on many terms in consumer contracts. ‘Good faith’ is part of the test of fairness.