The current position
The common law went to great lengths to protect a party with weak
bargaining power, whether or not in the position of a consumer, and this is
apparent through the decisions and reasoning in cases which have formed
the common law rules. The situation with the present extensive consumer
law development is that the need to do this has diminished – the courts now
assuming a greater role in interpreting the legislation, particularly where a
wide-ranging word like ‘reasonable’ is involved.
One particular effect of legislation in general is to indicate that since
consumers and those dealing on standard terms are now very well protected,
businesses which negotiate individually may be assumed to know what they
are doing when they enter into contracts with each other. This is especially
true of limitation clauses, as opposed to exclusion clauses, and here the
courts are more willing to agree that it is reasonable for a business to set a
limit on what it can afford to pay in the event of a breach, especially bearing
in mind the ability to insure. This approach was already seen in two cases
involving Securicor, the security firm. In both Photo Production v Securicor
(1980) and Ailsa Craig Fishing Co v Malvern Fishing Co and Securicor
(1983) the House of Lords believed that the parties must have made a
reasonable assessment of the likely loss in reducing their liability by a
limitation clause in each case. The security firm were therefore not liable for
the consequences of a fire in the first case and damage to the hull of a ship
in the second, while they were on security patrol.
The effect of the legislation in general is to restrict the use of unfair terms,
and particularly unfair exemption clauses in consumer contracts. Richard
Stone, an academic expert on contract law, is of the view that the effect of the
legislation is to cut ‘a deep furrow right across the doctrine of freedom of
contract.’ This echoes the appraisal of Lord Denning in George Mitchell v
Finney Lock Seeds (see p. 124), where he said of the reform by statute:
So the idol of ‘freedom of contract’ was shattered. In cases of personal
injury or death, it was not permissible to exclude or restrict liability at
all. In consumer contacts any exemption clause was subject to the test
of reasonableness ... it heralds a revolution in our approach to
exemption clauses; not only where they exclude liability altogether
and also where they limit liability; not only in the specific categories
in the Unfair Contract Terms Act 1977, but in other contracts too.Further reform
It can be seen that there is a fair amount of overlap between the statutory
provisions of the Unfair Contract Terms Act 1977 and the Unfair Terms in
Consumer Contract Regulations 1999. Because of this the Law Commission
128 Contract law
How might the judiciary view appraisal of a legal issue by a politician?