Part IX
provisional proposals and questions for consultees
9.1
We set out below our provisional proposals and the questions
on which we invite the views of consultees. Some consultees may not wish to
comment on all issues; their views are no less welcome. We would be grateful
for comments not only on the matters specifically listed below, but also on any
other points raised by this consultation paper. It would be very helpful if,
when responding, consultees could indicate either the paragraph of this Part to
which their remarks relate, or the paragraph of this consultation paper in
which the issue was originally raised.
The impact of our proposals
9.2
We invite comments on the practical and economic impact that
our proposals would have on both consumers and businesses.(Paragraph 2.41)
Consumer
contracts
Models for the replacement regime
9.3
There should be a single piece of legislation for the whole of
the UK.(Paragraph 4.17)
9.4
So far as possible, the new unified regime should be clearer
and more accessible to the reader than the present instruments. (Paragraph
4.19)
9.5
With the exception of UCTA section 5 [s 19], the additional
protection given by UCTA to consumers, beyond that given by UTCCR, should be
maintained. If consultees disagree, which other additional protection would
they do away with? (Paragraph 4.29)
Incorporation of other statutory and
common law rules
9.6
To incorporate other statutory and common law rules applying
to potentially “unfair” terms in consumer contracts into the proposed
legislation would not be appropriate as part of this exercise, with the
exception of any changes necessitated by SCGD. (Paragraph 4.32)
Terms of no effect
9.7
The terms set out below, at least in substance, should
continue to be of no effect under the new regime:
(1)
exclusions or restrictions of business liability for death or
personal injury caused by negligence [breach of duty] (in any type of
contract);
(2)
exclusions or restrictions of liability for breach of the
implied terms as to title in contracts for sale, hire-purchase or other
transfer of property in goods;
(3)
exclusions or restrictions of liability for breach of the
implied terms as to description, quality etc in contracts for the supply of
goods to a consumer; and
(4)
terms which, in relation to any of the kinds of liability in
(1)–(3) above,
(a)
make the liability or its enforcement subject to restrictive
or onerous conditions;
(b)
exclude or restrict any right or remedy in respect of the
liability, or subject a person to any prejudice in consequence of his pursuing
any such right or remedy; or
(c)
exclude or restrict rules of evidence or procedure. (Paragraph
4.35)
9.8
In relation to consumers, the terms listed in paragraph 9.7
should be of no effect even if they relate to the creation, transfer or
termination of an interest in land, and would therefore be exempt from control
under UCTA. (Paragraph 4.37)
9.9
If consultees believe that there is a case for any other kind
of term found in a consumer contract to be made automatically of no effect,
they are invited to submit a reasoned case for its inclusion in the list.
(Paragraph 4.39)
Terms which must be “fair” or “fair
and reasonable”
9.10
Other terms in consumer contracts will be required to satisfy
a “fairness” test. (Paragraph 4.40)
Individually negotiated terms
9.11
The new regime should apply to both negotiated and
non-negotiated terms. We particularly invite comments on the practical and
economic impact that this proposal would have. (Paragraph 4.54)
Terms not subject to control
“Core terms”
9.12
(1) The new
legislation should exclude the main subject matter from the scope of review, but
(2)
only in so far as
(a)
it is not substantially different from what the consumer
should reasonably expect, and
(b)
it is stated in plain language (and is otherwise
“transparent”: see paragraph 9.24 below). (Paragraph 4.60)
9.13
The adequacy of the price should not be reviewable under the
legislation, where
(1)
having to make the payment, or the way in which it is
calculated, is not substantially different from what the consumer, in the light
of what he was told when or before the contract was made and all the other
circumstances, should reasonably expect, and
(2)
the price is not one contained in a subsidiary term,
provided that the
price is stated in plain language (and is otherwise “transparent” : see
paragraph 9.24 below). (Paragraph 4.68)
9.14
Terms required or authorised by an international convention to
which the UK is party should be exempt from the new “reasonableness” regime,
but not terms which merely reflect the principles of such a convention.
(Paragraph 4.70)
Mandatory and permitted terms
9.15
The exemption for terms which reflect what would be the law in
the absence of contrary agreement should not apply unless the terms are in
plain language (and are otherwise “transparent”: see paragraph 9.24 below).(Paragraph 4.73)
9.16
A term should not be exempt merely because it represents the
law of another Member State.(Paragraph
4.74)
9.17
Terms required by regulators should be exempt, but not those
merely approved by a regulator. (Paragraph 4.76)
Excluded contracts
9.18
The new legislation should make it clear that it applies where
the consumer is the seller or supplier. (Paragraph 4.78)
9.19
We invite views on
(1)
whether contracts of employment should be covered by the new
regime at all; and
(2)
if so, whether they should count as consumer contracts, or as
business-to-business contracts, or as a separate category subject to some (but
not necessarily all) of the controls that apply to consumer contracts.
(Paragraph 4.81)
9.20
The controls should apply to terms in cross-border contracts
for the supply of goods to consumers in the same way as they would apply to the
same terms in a domestic contract. (Paragraph 4.82)
9.21
There should be no special treatment of consumer contracts to
which English or Scots law applies only through the choice of the parties.
(Paragraph 4.86)
The test to be applied
The basic test
9.22
The basic test in the new legislation should be whether,
judged by reference to the time the contract was made, the term is a fair and
reasonable one; it is not necessary to include an explicit reference to good
faith. We ask consultees whether they agree with this and, if not, what test
they think should be used. (Paragraph 4.94)
Factors to be taken into account
9.23
We ask for consultees’ views on our provisional proposal that
the new legislation should contain detailed guidelines on the application of
the “fair and reasonable” test, and on the contents of those guidelines
proposed at paragraphs 4.96 and 4.99 – 4.101 above. (Paragraph 4.103)
Plain and intelligible language
9.24
(1) The factors to be
taken into account in assessing fairness should include whether the contract is “transparent”, in the sense of being
expressed in plain language,
presented in a clear manner and accessible to the consumer.
(2)
Transparency should also be a
condition of exemption for “core” and default terms
(see paragraphs 9.12, 9.13 and 9.15 above). (Paragraph 4.106)
9.25
Whilst lack of transparency should not automatically render a
term unfair, it should be made clear that a term may be found unfair
principally or solely on that ground.(Paragraph
4.109)
9.26
The rule of interpretation in favour of the consumer should be
stated in the new instrument. We would welcome consultees’ views on what form
this statement should take. (Paragraph 4.111)
Indicative lists
9.27
The legislation should include a new version of the indicative
list, containing not only what is required by the Directive but the additional
terms set out in paragraphs 4.113 and 4.116 above. We ask consultees if they
agree with these additions and if there are any other terms which should be
listed. (Paragraph 4.117)
9.28
The indicative list should be reformulated in terms which are
more directly applicable to UK law and more readily comprehensible to UK
readers. (Paragraph 4.121)
9.29
We invite views as to whether the list, and therefore the preventive
powers under UTCCR regulations 10-15, should be extended so as explicitly to
include contract terms which are automatically of no effect under other parts
of the new legislation. (Paragraph 4.124)
9.30
We invite views on whether the reformulated list should refer
to any clause which purports to exclude or restrict a business’s liability for
the death of or personal injury to a consumer and is not covered by the part of
the list dealing with clauses that are automatically of no effect. (Paragraph
4.127)
9.31
Paragraph 1(d) of the indicative list should be replaced by a
reference to a term entitling the business, on withdrawal by the consumer or
termination of the contract because of the consumer’s breach, to retain a
pre-payment which is not reasonable in amount. (Paragraph 4.139)
9.32
The list should contain examples. We invite comments on this
general question as well as on the individual examples discussed at paragraphs
4.125 – 4.142 above, and on the relevant parts of the draft Bill,
in terms of both substance and style.(Paragraph
4.143)
9.33
We invite views as to whether the types of terms listed in
UTCCR Schedule 2(2) should continue to be set out as exceptions to the
indicative list. (Paragraph 4.145)
Burden of showing that term is
reasonable
9.34
We invite views on the question whether (a) the burden of
proving that a term is fair should always rest on the business, or (b) the
consumer should have to show that the term is unfair unless the term in
question is on the list. (The draft in Appendix B contains alternative
formulations on this point.)(Paragraph
4.150)
Ancillary questions
Definitions
9.35
There should be no provision for “mixed” transactions in the
new legislation, and it should be left to the determination of the judge
according to the predominant purpose of each transaction. (Paragraph 4.157)
9.36
The present requirement that, for a contract for the supply of
goods to qualify as a consumer contract, the goods supplied under the contract
should be of a type ordinarily supplied for private use or consumption should not
be retained – whether or not the contract is one of sale (in which case
this requirement must in any event be abandoned so as to comply with SCGD).
(Paragraph 4.161)
9.37
Sales by auction of second-hand goods, where the consumer can
be present at the sale, should continue to be exempted from the absolute ban on
contracting out which applies to other consumer sales. (Paragraph 4.164)
9.38
Sales by competitive tender should no longer be exempted from
counting as “consumer” contracts. (Paragraph 4.165)
9.39
(1) The absolute ban
on contracting out in consumer contracts should apply in favour of a person who is in fact a
consumer even if he has held himself out as making
the contract in the course of a business – whether or not the contract is one of sale (in which case this is
required by SCGD) – and
(2) for the purpose of determining whether a
contract other than one for the sale or
supply of goods is a consumer contract, and is therefore subject to the fair and reasonable test, the definition of a
consumer should include such a person.
(Paragraph 4.167)
9.40
It should be made clear in the new legislation that a contract
will be made in the course of a business if it “relates” to the business, even
if it is a contract for the sale of an item not normally sold. (Paragraph 4.169)
9.41
The new legislation should make it clear that contracts with
government departments or local or public authorities may count as consumer
contracts. (Paragraph 4.171)
9.42
The new legislation should refer simply to “contracts”, so
that it may be interpreted in line with any ECJ interpretation of what
constitutes a contract for the purposes of the Directive. (Paragraph 4.175)
Third party beneficiaries
9.43
We propose no change in any of the UK jurisdictions as to the
rules governing the right of third party beneficiaries to challenge unfair
terms in the contracts from which they derive their rights. (Paragraph 4.179)
Effect of invalid exclusion or
restriction
9.44
An equivalent is needed to UTCCR regulation 8 (effect of
unfair term). (Paragraph 4.181)
9.45
The new legislation should state that, where part of a term is
detrimental to the consumer and the rest is not, it is only the detrimental
part that is of no effect if it is unfair. (Paragraph 4.187)
Evasion of the controls
9.46
There should be a provision subjecting terms in “secondary
contracts” to the same controls as if they appeared in the main contract.
Genuine agreements to settle an existing dispute should be exempted. (Paragraph
4.193)
9.47
It should be made clear that the rules on unfair clauses in
consumer contracts are mandatory so that, if the contract has a close
connection to the UK, they will be applied under the Rome Convention despite a
choice of another system of law. (Paragraph 4.195)
Prevention
9.48
To avoid any doubt, the legislation should provide that the
authorised bodies may take steps to prevent a business purporting to use a term
which in practice the business does not effectively incorporate into the
contract, and also any term which is unfair because it is not transparent even
if in substance the term is fair. (Paragraph 4.199)
9.49
We invite views on whether and to what extent the omission of
important information from terms should be subject to preventive control in the
new legislation. (Paragraph 4.201)
9.50
We invite views on the question of who should bear the burden
of proof in preventive proceedings. (Paragraph 4.203)
9.51
The listed bodies should have power to act against the use or
proposal of any non-negotiated term which either would be of no effect or would
be unreasonable under the proposed new regime. We invite views as to whether
they should also have powers to act against practices of negotiating terms which are nonetheless unfair. (Paragraph 4.205)
·
Provisions no longer required
9.52
Section 5 [s 19] of UCTA should not be reproduced in the new
legislation. (Paragraph 4.208)
9.53
Neither part of section 9 [s 22(a), (b)] of UCTA is still
required.(Paragraph 4.210)
9.54
Section 28 of UCTA can now be repealed without replacement.(Paragraph 4.212)
Business
contracts
Terms which are of no effect
9.55
A person who makes a contract to obtain goods or services
“related to”, even if not “in the course of”, his business should be treated as
dealing as a business and not as a consumer. (Paragraph 5.12)
9.56
The substance of UCTA sections 6(1) and 7(3A) [ss 20(1),
21(3A)] should be incorporated into the new legislation. (Paragraph 5.14)
The case for extending the range of
terms subject to a “fairness” test
9.57
A good case can be made for extending the power to challenge
unfair terms in at least some individual business-to-business contracts from
the types of term subject to the reasonableness test of UCTA to the wider range
covered (for consumer contracts) by UTCCR. (Paragraph 5.25)
The range of businesses to be
protected
9.58
It would be better to treat all businesses alike in being able
to benefit from the protection, allowing the courts to take into account the
size of the business, and whether it makes transactions of the kind in question
regularly or only occasionally, in assessing the fairness of the terms
complained of. We ask consultees whether they agree. If not, how would they
prefer to see the protection limited? (Paragraph 5.40)
“Standard” or “non-negotiated” terms, or all terms?
Should any controls apply to
negotiated contracts?
9.59
For business-to-business contracts, the “fairness test” should
be extended to cover the same range of terms as would be subject to the
fairness test under our proposals for consumer contracts, but only where the
term in question “has not been negotiated” or is “standard”.(Paragraph 5.44)
9.60
We would welcome evidence from consultees on whether in
practice there are significant numbers of terms which were not standard, or
which were negotiated, and which are seen as unfair. Our provisional conclusion
is that the controls over negotiated exclusion clauses in UCTA sections 6 and 7
[ss 20(2)(ii), 21(1)(ii)] are not needed and that it would suffice to have
the general fairness test over “standard” or “non-negotiated” terms. (Paragraph
5.47)
“Standard terms” or “not individually
negotiated terms”?
9.61
If controls are to be limited to standard terms, the question
should be whether the particular term is standard rather than whether any of
the standard terms have been subject to negotiation.(Paragraph 5.56)
9.62
If controls are to be limited to terms that are in some way
standard, they should apply to any term which has been drafted in advance and
has not been negotiated, whether or not the term is one regularly used by the
proponent. (Paragraph 5.59)
Exemptions from the new regime
“Core” terms
9.63
The same formulation of the “core terms” should apply to
business-to-business contracts as to consumer contracts. (Paragraph 5.61)
Mandatory and permitted terms
9.64
The same rules on mandatory and permitted terms should apply
to business-to-business contracts as to consumer contracts. (Paragraph 5.63)
Excluded contracts
9.65
We are not aware of calls for business-to-business contracts
of the types excluded from UCTA to be brought within the scope of the unfair
terms legislation. We would be interested to hear any evidence suggesting that
any of them should be covered, but provisionally we propose to maintain the
existing exemptions. (Paragraph 5.66)
9.66
We invite views on the question whether international
business-to-business contracts should be exempt from the controls proposed for
domestic contracts. (Paragraph 5.70)
9.67
We invite views on whether the exemption for contracts subject
to the law of a part of the UK only by choice of the parties should continue to
apply to the new regime for business-to-business contracts. (Paragraph 5.72)
9.68
The new regime need not extend to non-contractual agreements
between utility suppliers and businesses. (Paragraph 5.73)
The test to be applied
The basic test
9.69
The same “fair and reasonable” test should apply to
business-to-business contracts as we propose for consumer contracts. (Paragraph
5.75)
Plain and intelligible language
9.70
The factors to be taken into account in assessing fairness
should include whether the contract is transparent, in business-to-business as
well as consumer contracts. (Paragraph 5.79)
9.71
We invite views as to whether, for business-to-business as
well as consumer contracts, transparency should be incorporated into the list
of factors in such a way that a term may be found unfair principally or solely
because of lack of transparency. (Paragraph 5.81)
The list of factors
9.72
A list of factors relevant to the application of the “fair and
reasonable” test would be useful in relation to business-to-business contracts
as well as consumer contracts, particularly to give guidance to businesses as
to how they may ensure that their terms are reasonable. The list should contain
the same factors as that for consumer contracts, though naturally they may
apply somewhat differently in a business context. (Paragraph 5.83)
An indicative list
9.73
The indicative list for business-to-business contracts should
be limited to clauses excluding and restricting liability for breach of
contract or for negligence [breach of duty], but there should be power to add
to the list by Ministerial Order.(Paragraph
5.88)
Burden of proof
9.74
Where a term has not been listed, the burden of proving that a
term in a business-to-business contract is not fair and reasonable should be on
the party disputing the clause. (Paragraph 5.90)
Ancillary questions
9.75
The existing position of third party beneficiaries should be
maintained for business-to-business contracts as well as consumer contracts.
(Paragraph 5.93)
9.76
The rules on secondary contracts, evasion by choice of law,
and the effect of a term being held invalid should be the same for
business-to-business contracts as we have proposed for consumer contracts.
(Paragraph 5.97)
Preventive action
9.77
We invite views on the desirability and the practicability of
extending the preventive controls over unfair terms to business-to-business
contracts. (Paragraph 5.111)
Sale or supply of goods not related to business
9.78
The existing controls over clauses excluding or restricting
implied obligations as to title, etc in contracts for the sale or supply of
goods where the seller or supplier is not acting for business purposes should
be replicated in the new legislation. (Paragraph 6.5)
9.79
Clauses which exclude or restrict liability for breach of the
obligations arising under the SGA 1979 or (for hire-purchase) SOGITA as to
correspondence with description or sample should remain subject to a “fair and
reasonable” test when the sale is between private parties or is by a consumer
to a business, irrespective of whether the clause has been negotiated.
(Paragraph 6.12)
Non-contractual notices excluding business liability
for negligence or breach of duty
9.80
The existing controls over notices which might otherwise
exclude a business’s liability in tort [delict] to persons with whom it does
not have a contractual relationship, and who are killed, injured or harmed by
its negligence [breach of duty], should be retained.(Paragraph 7.3)
9.81
The preventive powers should be extended to cover
non-contractual notices which purport to exclude or restrict a business’s
liability in tort [delict]. (Paragraph 7.7)
Putting the proposed new legislation into clear,
accessible terms
9.82
Do consultees have any suggestions as to how the draft Bill
might be further simplified or made more accessible, particularly to those
without a legal training? (Paragraph 8.64)
9.83
Do consultees consider that the techniques of using a
simplified structure and amplifying what is meant by the clauses should be
pursued in any legislation that is finally recommended? (Paragraph 8.65)
