Unfair Contract Terms Act

Heather has purchased office equipment from Zero previously; she also receives their advertising literature, which states that Zero offer different levels of service and extent to their liability. The advertising also states that their terms and conditions are available by written request. Heather could have sought clarification of their trading terms during her previous dealings. We know Heather did make previous purchases, but we do not know if it was always the "low Cost" option or how often Heather has dealt with Zero.

Assuming their previous transactions were always on the same terms and had been regular, the clause could be incorporated into the contract on the grounds of previous dealings. Stage Two -Construction It is necessary to look at the "words" used in the exclusion clause, and consider; how the courts may construe them in their natural everyday meaning, in comparison to any legal interpretation of the "words"? Generally any wording in a clause, which is ambiguous, would be under the Contra Proferentum rule, meaning it will be construed against the party that included the clause and is seeking to rely on it.

The exclusion clause attempts to restrict liability "howsoever caused". This term is wide enough to include both strict liability and negligence. Canada Steamship Lines Ltd v The King8 introduced a three-part test to clarify the approach in this situation: 1. Do the words used in the clause expressly refer to Negligence? 2. If not, are the words used wide enough to include Negligence? 3. If yes to either above (1 or 2) then consider if negligence is the only reason for liability?

In cases where a party is liable for both strict and negligent liability a court will generally construe the exclusion clause as applying only to the strict liability, White v John Warwick & Co. 9 The exclusion clause in Heather's case sought to limit liability to 1000; when clauses seek to impose a financial limit of liability, courts adopt a flexible approach, they may construe the limitation clause to apply to strict and negligent liability as in George Mitchell Ltd. v Finney Lock Seeds Ltd. 10 Zero's employee was negligent therefore we ought to consider both negligent and strict liability.

The clause states ".. the benefit of this clause shall extend to the company employees.. " There is an ambiguity over the words used, this appears to be a limitation clause but refers to a "benefit" to employees; it could also be construed as only applicable to "employees", possibly interpreting it as free of any financial limitation in regard to the company owner / shareholder and their premises. Heathers company, Cellsoon is a Limited company Heather is likely to be a director or shareholder and so may not be classed as an employee.

This section of the exclusion clause if incorporated into the contract ought to be treated Contra Proferentum, which would mean that because of the ambiguity it could be decided in Heathers favour. Heather was injured; UCTA 1977 S. 2 (1) applies in that Zero cannot limit their liability for injury. The damage to premises was caused by negligence; UCTA 1977 S. 2 (2) only permits a party to restrict their liability for negligence when sufficient notice was given and the clause satisfies the test of reasonableness.

UCTA 1977 S. 6 (3) applies as the transaction was, for the sale of goods, between business entities, which would permit an exclusion clause under the Act, provided it passes reasonableness. The test of reasonableness is covered under UCTA 1977 S. 11 and the further guidance under UCTA 1977 Schedule 2. Zero is a large Plc and heather's business, Cellsoon Ltd, is a smaller business. It would be appropriate to expect a large company to have resources available to cover the liability or to insure itself against a liability.

Cellsoon Ltd could have insured against damage to their property. Heather purchased a "low Cost" machine for her company which offered no after-sales services, the low cost option could be considered an inducement under Schedule 2 (b). Schedule 2 (c), examines if Heathers could reasonably have known of the terms existence through her previous dealings with Zero, this is similar to the common law test of notice via previous dealings. The Sale of Goods Act 1979, imposes a implied liability, for goods to be of satisfactory quality.

Zero cannot limit their liability for goods which are unsafe; the goods heather bought were unsafe and defective, which caused the fire and consequential damage, Rodney was careless in performing his pre-delivery check, therefore the goods were shipped with a safety defect. Zero cannot therefore limit their liability for the consequences. CONCLUSION There is an overlap between the common law approach to exclusion clauses and the statutory provisions of UCTA 1977, but by following the three stage approach it is possible to advise Heather.

Liability cannot be limited in respect of her injury; she will have a claim for this. Provided Zero cannot prove that notice by previous dealings was incorporated and reasonable, they will not be able to rely on the exclusion clause in respect of the damage to Heathers premises. 1464 Words not including 61 Words of case citations.


Unfair Contract Terms Act 1977. www. westlaw. co. uk. (n. d. ). Retrieved February 2011, from https://login. westlaw. co. uk/ www. lexisnexis. com. (n. d. ). Retrieved February 2011, from http://www. lexisnexis. com/uk/ White v John Warwick & Co. Ld. [1953] 1 W. L. R. 1285.