What does section 3 of the Unfair Contract Terms Act 1977 control?

Section 3 controls exclusion clauses in a party's written standard terms of business. The clause must satisfy the requirement of reasonableness to be effective.

How is reasonableness judged under the Unfair Contract Terms Act 1977?

Section 11 requires the term to have been a fair and reasonable one to include when the contract was made. Later events do not affect the assessment.

What guidelines help decide whether an exclusion clause is reasonable?

The guidelines consider the parties' bargaining strength, any inducement to accept the term, and knowledge of the term. Availability of insurance is relevant to a clause limiting liability to a stated sum.

Which case struck down a limitation clause in a sale of seed?

George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] concerned cabbage seed that produced a worthless crop. A clause limiting liability to the price of the seed was held unreasonable.

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Contract: Express and Implied Terms

Statutory control of exclusion clauses and unfair terms

3 things to know
Components 2 and 3

Overview

Test of fairness for a consumer contract term and grey list of terms.

What you need to know

Answer each one before you reveal it.

Your recallNot started

Numbers

What is the grey list of terms?

Numbers

Which Act first gave a general power to strike down unreasonable exclusion clauses?

Key term

What does section 2 of the Unfair Contract Terms Act 1977 provide?

Questions from this subtopic

Each one with the model answer underneath.

1
Which Act first gave a general power to strike down unreasonable exclusion clauses?
Model answer
The Unfair Contract Terms Act 1977 gave the courts a general power over exclusion clauses. The Act applies to business liability rather than to purely private agreements.
2
What does section 2 of the Unfair Contract Terms Act 1977 provide?
Model answer
Section 2 makes void any attempt to exclude business liability for death or personal injury caused by negligence. Other losses caused by negligence may be excluded only so far as reasonable.
3
What does section 3 of the Unfair Contract Terms Act 1977 control?
Model answer
Section 3 controls exclusion clauses in a party's written standard terms of business. The clause must satisfy the requirement of reasonableness to be effective.
4
How is reasonableness judged under the Unfair Contract Terms Act 1977?
Model answer
Section 11 requires the term to have been a fair and reasonable one to include when the contract was made. Later events do not affect the assessment.
5
What guidelines help decide whether an exclusion clause is reasonable?
Model answer
The guidelines consider the parties' bargaining strength, any inducement to accept the term, and knowledge of the term. Availability of insurance is relevant to a clause limiting liability to a stated sum.
6
Which case struck down a limitation clause in a sale of seed?
Model answer
George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] concerned cabbage seed that produced a worthless crop. A clause limiting liability to the price of the seed was held unreasonable.

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