We have already seen that there has been general domestic legislation in England on unfair contract terms since the Unfair Contract Terms Act 1977,120which applied to both consumer contracts and non-consumer contracts, although the Consumer Rights Act 2015 has now taken over the provisions from the 1977 Act governing consumer contracts, as well as those necessary to implement the Directive on Unfair Terms in Consumer Contracts (1993).121The Consumer Rights Act 2015 therefore now contains the general provisions on unfair contract terms in English law,
elapsed since the prohibited practice took place: Consumer Protection from Unfair Trading Regu- lations 2008 as amended reg 27I(1)–(5).
115Consumer Protection from Unfair Trading Regulations 2008 as amended reg 27I(6) (amended by SI 2015/1629, reg 9(2)), 27I(7).
116Consumer Protection from Unfair Trading Regulations 2008 as amended reg 27J(1)–(3).
117Consumer Protection from Unfair Trading Regulations 2008 as amended reg 27J(4).
118Consumer Protection from Unfair Trading Regulations 2008 as amended reg 27J(5).
119Beale (2015) [38–192]-[38–200], [38–334]-[38–394].
120Above, Sect.1.2.
121Directive 93/13/EEC; above, Sect.1.2.
although there are certain other statutory provisions which also regulate terms, and the parties’freedom to contract out of statutory protections, in particular contexts.122 It is useful, however, to see the general approach which was taken by domestic English law, apart from the implementation of the 1993 Directive, on the questions of (consumers’) bargaining power and transparency of terms.
As already discussed,123the common law took a strong position that it was for the parties, rather than the courts, to determine the terms of the contract, and there was no general judicial control over the terms of the contract based on the inequality of the parties’bargaining power. However, where the issue was not the terms of the contract in general, but in particular clauses which seek to exclude or limit liability, the courts could see that there was a need for caution—not specifically in relation to
“consumers”(who were not recognised as a special category at common law124) but on the basis that a party should not be taken to have agreed to give up or limit claims which he would otherwise have under the contract unless it was sufficiently clear that he did—in effect, an indirect control over the“fairness”of the contract.125To that end, the courts developed two forms of judicial control of, in particular, exclusion of liability clauses126: strict tests to check (a) whether the clause was incorporated into the contract127; and (b) that the clause is sufficiently clear by it language to cover the liability that has arisen.128 The latter is commonly referred to as the contra proferentem rule of construction, but both in effect allocate to the stronger party (the trader, in a consumer contract) the burden of proof of the effectiveness of the clause before he can rely on it in his favour. The fact that this control is based on an inequality of the parties’bargaining power has become clear in recent years: the courts have said explicitly that the contra proferentem rule normally has a very limited role in commercial contracts, negotiated between parties of equal bargaining power.129But another reason for the decline of these (indirect) judicial controls has been the introduction of direct controls over unfair terms by legislation: soon after
122E.g. certain mandatory terms in residential leases for less than 7 years: Landlord and Tenant Act 1985 ss 11, 12; non-excludable liability for damage caused by defect in product: Consumer Protection Act 1987 s 7; non-excludable protections for employees: Employment Rights Act 1996 s 203.
123Above, Sect.1.1.
124Above, Sect.1.1.
125Cartwright (2016), pp. 219–224.
126They recognised that alimitationof liability clause may be more likely to reflect an agreed allocation of risk, and therefore could be read with less hostility than exclusion clauses and indemnity clauses:Ailsa Craig Fishing Co v Malvern Fishing Co Ltd[1983] 1 WLR 964, 966.
127Cartwright (2016), p. 221;Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd[1989]
QB 433, 439 (Bingham LJ, drawing an analogy with the use of a general principle of good faith in civil law systems).
128Cartwright (2016), pp. 221–224.
129K/S Victoria Street v House of Fraser (Stores Management) Ltd[2011] EWCA Civ 904, [2012]
Ch 497 [68];Persimmon Homes Ltd v Ove Arup & Partners[2017] EWCA Civ 373 [52].
the Unfair Contract Terms Act 1977 came into force, the House of Lords already saw it as taking over thefield as regards the policy in relation to unfair contract terms:
This Act applies to consumer contracts and those based on standard terms and enables exception clauses to be applied with regard to what is just and reasonable. It is significant that Parliament refrained from legislating over the wholefield of contract. After this Act, in commercial matters generally, when the parties are not of unequal bargaining power, and when risks are normally borne by insurance, not only is the case for judicial intervention undemonstrated, but there is everything to be said, and this seems to have been Parliament’s intention, for leaving the parties free to apportion the risks as they thinkfit and for respecting their decisions.130
The rationale of the Unfair Contract Terms Act 1977 was based, both implicitly and (in certain of its rules) explicitly on the inequality of bargaining power between the parties. Some provisions gave specific protections to consumers, greater than to non-consumers131; and the general control of clauses excluding and restricting liability for breach of contract was targeted at protecting parties who deal as a consumer or on the other’s written standard terms of business—thus dealing with, in essence, non-negotiated contracts.132 And in determining whether (for certain situations) an exclusion or limitation clause satisfied a test of “reasonableness”, guidelines were provided by the 1977 Act which included both the relative strength of the parties’bargaining positions, and whether the party knew or ought reasonably to have known of the existence and extent of the term (having regard, among other things, to any custom of the trade and any previous course of dealing between the parties).133
The 1977 Act only applied, however, to clauses which excluded or restricted liability: it did not control the fairness of terms more generally. That had to wait for the EC Directive on unfair terms in consumer contracts in 1993,134which was first implemented in the UK in 1994, then re-implemented in 1999135and is now
130Photo Production Ltd v Securicor Transport Ltd [1980] AC 827, 843 (Lord Wilberforce);
similarly at 851 (Lord Diplock).
131See e.g. Unfair Contract Terms Act 1977 (before amendment by the Consumer Rights Act 2015) ss 6(2) and (3), 7(2) and (3) (contracts for sale of goods or hire purchase, or other contracts for transfer of possession or ownership of goods: liability for breach of implied terms relating to conformity of goods with description or sample, or as to their quality orfitness for a particular purpose,could notbe excluded or restricted as against a person dealing as a consumer;couldbe excluded as against a person dealing otherwise than as a consumer,but only in so far as the exclusion or restriction satisfied the“requirement of reasonableness”in s 11).
132Unfair Contract Terms Act 1977 (before amendment by the Consumer Rights Act 2015) s 3 (subjecting such clauses to the“requirement of reasonableness”in s 11).
133Unfair Contract Terms Act 1977 s 11 and Sch 2, which was aimed in particular at non-consumer contracts for the sale or transfer of property in goods (ss 6 and 7), but was treated by the courts as applying more generally, including to those consumer contracts where the test of“reasonableness” was applied.
134Directive 93/13/EEC.
135See above, Sect.1.2.
found in Part 2 of the Consumer Rights Act 2015. Part 1 of the Consumer Rights Act 2015 contains certain specific controls to protect consumers against clauses which are designed to exclude or restrict a trader’s liability for breach of statutory terms in contracts for goods, digital content or services136; these are simply non-excludable as a matter of policy without any further test relating to bargaining power or transparency, and are designed in effect to make the statutory terms mandatory in favour of consumers. However, the general control of unfair terms, contained in Part 2 of the Consumer Rights Act and based on—but extending—the Directive on unfair terms in consumer contracts, has a more nuanced set of tests.