The Unfair Contract Terms Act 1997 - Essay Example

The unfair contract terms act 1997 The unfair contract terms act 1997 The unfair contract terms act 1997, is enactment that was made by the United Kingdom’s legislative branch of government in 1997. The act provides terms and conditions associated with contracts. The main objective of the act is to ensure fairness in contracts among the parties subscribed to it. It controls the actions of the parties involved in a contract. There are various forms of contracts regulated by this enactment for instance, Business -Business contract, consumer –business contract and others. The act is majorly skewed towards controlling declaimers of liability. Every member in the contract is expected to play his or her relevant obligation in ensuring that the contractual terms and conditions are not breached. The contracts also define the consequences associated with breaching of the terms and conditions that sustains the contract. This act is always deployed in conjunction with the unfair terms in consumer contacts regulation (UTCCR) 1999, the Sales Goods Act 1979 and the supply of goods and services Act 1982. The three enactments are inseparable .However; the enactment has manifested a lot of weaknesses that makes it unfair to the individual members of the contract. This includes the following. Negligence, which is one of the factors in the enactment, has given freedom the insurance companies to deny the liability in case of a tragedy subscribed for in the insurance contract (Eaglestone,2004). Insurance companies are expected to compensate individual or company in case ofan accident. Always individuals subscribe to the service periodically in order to be protected during the times of crisis. Inmost cases these companies take an excuse of reckless nesses to evade the liability. This is common in vehicles indulged in accidents. It is unfair todeny responsibility in which somebody is paying for. Under such a situation, the client is fixed falsely for falling into tragedy. The act does not give consumers the right to take part in solving problems arising from their contracts (Kidner,2005). The business is the only party mandated to provide the solutions based on its own interest. For instances, in case a customer defaults to clear the loans, the institution itself is the only party that sets the penalties without involving the customers in such decisions. Also, the kind of penalties sometimes imposed on the consumers are very heavy to be cleared easily. In most cases the states force people, especially the government workers to join such contracts. In facts several nations have made it one of the employment qualifications in the job market. Those who have subscribed stand better chances of being employed. This is very common in democratic nations.Peopleshould be left to make their own free decisions without being manipulated or influenced by any person. Also, the governmentpressurizes the workers to contribute to the contracting institutions such as pensionplans, health insurance policy and others, without consideringthe level of their salaries. This leaves them earning very small amounts of money which cannot benefit their economic welfares. Also, the businesses are granted right to terminate the contracts any time they feel like, without necessarily considering the consumers decisions. This is mostly seen in stock exchange market ,where the company can decide to take back the bonds or securities from shareholders, with unreasonable compensation. Specific policies are not given by the enactment to provide for the directions on how to officially terminate contracts. In some instances, termination is associated with a lot of loss to the consumers, especially where they had invested a lot in the contractual business. The complexities of this act propelled further by the legislation of other acts which contain clauses that are almost similar to it make it even more complicated.The enactment of Unfair Terms in Consumer Contracts Regulations in the year 1999 adds that, contract terms should be stated in ‘plain’ intelligible. The two acts seek to control same areas of trade but using different clauses. This causes contradiction even whenever cases are presented before the law courts. Under Unfair Contract Terms of 1977, individual consumers and businesses are protected differently.A consumer contract excluding liability would be rendered invalid. The case for a business enterprise is however different as the business formulates its own terms. Some individuals in the society therefore unknowingly end up agreeing to the terms of the contract without the knowledge of what the terms of the contract involve. Another major important issue to note here is that this act has separate provisions for Scotland. Since England,Wales,North Ireland and Scotland all are united under the United Kingdom; it is therefore leaves questions in one’s mind why should some regions have different provisions of the same act from others. The act allows the government to intervene in matters affecting the consumers. For instance, in the market, the government interference through fixing prices and other fiscal and monetary policies leading to market rigidity and lack of freedom in the market. Democracyallows elderly peopleto makes decisions on issues affecting them like market of pricing. The market forces should be left to act and regulatethe pricing. The act also being allowed to be used with the exclusion clauses they contain tend to conflict with the principles of the English law.The principle of freedom of contract allows adults of full capacity to make contracts and at the same time respect thoseterms contained in the contract however unwelcome they can.The establishment of this act therefore sought to balance the freedom against any form of injustices which might arise.It restricts the ability of an individual to exclude his or her liability in the case of supply of defective goods or goods of low qualitysince the seller is deemed to lack any right to sell the goods. The act also tries to exclude liabilityon the basis of misinterpretation and its ability to pass the test of reasonableness. The treatment of this exclusion clause in the act simply depends on whether the affected party is a business or a dealing consumer.It is this complexity of the whole matter that leaves many key terms in the act undefined. For instance, the definition of the term ‘consumer’ is entirely left in the hands of the court dealing with the case. UCTA 1977 brought about the issue of reasonableness. This act does not in any way define what to be reasonable means but only provides some guidelines about the same.The courts are therefore forced to keenly evaluate on the bargaining positions of the parties involved in the case regardless of whether it negotiated or presented in a standard form.The courts also try to examine whether any party in the contract was provided with incentives or benefits on the exclusion clause. This move therefore provides the court with freedom which allows for flexibility during the hearing and the determination of the case. The court however has to uphold to some draconian clauses in the act which provides the guidelines in the areas where the act has exhaustively covered. The case of the of SAM Business versus Hedley and co,asoftware supplier anchored on the exclusion clause which gave it an opportunity to supply what was felt as inadequate product by the buyer.The court decided that the two companies had equal bargaining powers and therefore the buyer must have had an opportunity to negotiate for better terms on his side.The case would have been different had it involved a consumer as the purchaser. The test of reasonableness would not have any chance and the exclusion clause would be irrelevant. This is because someone in this case is trying to avoid incurring any liability for the sub-standard commodities supplied (Ohare,2004) . The Unfair Contract Act is also faced by the problem of dealing entirely with the exclusion clauses (Lawson,2011) . This problem arises from the delicate balancing which this act is entitled to. A good example is contained in the infamous case of Interfoto versus Stilleto in the year 1987.The case involved an advertising agency which sought photographic service to be used in their presentation.The photographic company sent them forty seven transparencies for the purposes of inspection. Alongside the photo transparencies, they sent them a contractual letter which contained astatement that wanted the transparencies sent back within a period of fourteen days. Failure to do so, the agency would charge £5 per negative every single day. The agency forgot about the transparencies for several weeks. They were surprised by a bill £3,783 from the sender agency of the transparencies.The Court of Appeal ruled that the term was onerous and for that matter it would have been made totally clear to the buyer. The claimant however had not done so and therefore his claim failed.This process of reaching at such decisions by the court was based on the incomplete incorporation as a way of seeking to control the exclusion clause. The decision however on the side of the Interfoto seemed hard to agree with. The European Commission issued a directive in 1993 which sought to enact some legislation in order to control onerous clauses.This lead to formulation of the Unfair Terms in Consumer Contracts Regulations (UTCCR) in 1994 which was later amended and released again in the year 1999.This act is different from the Unfair Contract Terms of 1977 in several ways. UTCCR deals with contracts that occur between businesses and consumers.Consumer in this case, is considered as any ‘natural person’ acting outside the course of business.This therefore means any individual under UTCCR is treated as a consumer but not businesses. There are differences in the concept of a ‘consumer’ between the two acts. For instance, a person who buys goods through auctioning is considered as a buy definition and not a consumer by any chance under UCTA. The same case however on the side of UTCCR the same individual is considered a consumer. UTCCR alsodeals with any term in the contract that is unfair apart from focusing on the exclusion clause alone.Any term is considered unfair when negatively impact on the rights and obligations of any consumer.This concept of fairness though not defined has some guidelines provided. For instance it would amount to unfairness whenever a business decides to dissolve the contract at his own will without considering the consumer.The business might also decide to make changes to the contract without the knowledge of the consumer. This action amounts to unfairness. UTCCR is meant to protect the consumer against unfair terms of trade. Any contract in which the consumer is given a chance to influence is considered fair.Under UCTA of 1977, a negotiated term can be still considered unreasonable. The concept of ‘good faith’ which is contained in the English law played a role in the enactment of the UTCCR. This act which was formulated by the European Commission expects the consumers to enter into contracts with good intentions of benefitting from it rather than other ill-advised motives. In conclusion, Unfair Terms Contract Act of 1977 was formulated by the parliament of the United Kingdom with an aim of controlling the terms of contract between individuals and businesses or between businesses themselves. This act is applied closely with the UTCCR act of 1999. The UCTA act of 1977 was however found misleading and inadequate to solve the many cases involving business contracts. The act emphasizes on the concept of reasonableness. However, it fails to give a well cut definition of reasonableness and only provides a guideline of the same. The user of legal jargons makes it difficult for the ordinary citizens to understand the act. It uses exclusion clause to determine the outcome of the case. It seeks to ensure that no party involved in the contract avoids liability in the cases of negligence even through death or personal injury. This case is particularly common in the insurance industries where companies try to evade payment by contradicting their terms (Ohare. This act has been however used alternatively with the Unfair Terms Consumer Control Regulation which determines the state of fairness between a consumer and a business. The act was formulated by the European Commission as a way of reducing the onerous clause as contained in UCTA. It is based on the fact that any contract which the consumer has influenced is fair. The law of good faith as contained in the English law is put into consideration. Bibliography Eaglestone, F. N.2004,The Unfair Contract Terms Act, 1977 and Statement of Insurance Practice: implications for insurers. 2nd ed. Stockport, PH Press. Kidner R.2005, The Unfair Contract Terms Act 1977: Who deals as consumer?. 2nd ed, New York,Penguin. Lawson, R. G.2011,Exclusion clauses and unfair contract terms. 10th ed, London, Sweet & Maxwell . Ohare, Paul. 2004, Allocating risk in IT contracts: A review of the case law on the enforceability of limitations and exclusions under the Unfair Contract Terms Act 1977.Computer Law & Security Review,Vol .20, no.6,pp.466. Read More