Keenan and Riches’BUSINESS LAW

Schedule 2 to the regulations sets out an indicative,

non-exhaustive list of terms which may be regarded as

unfair. It should not be assumed that terms covered by

the list are automatically unfair; they may be unfair in

some circumstances but fair in different circumstances.

It is also the case that certain terms not covered by the

list may be regarded as unfair. There are 17 examples set

out in Sch 2, including the following terms:

■excluding or limiting the legal liability of a seller

or supplier for the death of or personal injury to a

consumer arising from an act or omission of the seller

or supplier, e.g. ‘products are used at customers’ own

risk’;

■allowing the seller or supplier to keep sums paid by

the consumer in case the consumer decides to can-

cel without providing for the consumer to receive

Part 3Business transactions

296

Unfair Terms in Consumer

Contracts Regulations 1999

The statutory restrictions on the use of exemption
clauses contained in the Unfair Contract Terms Act 1977
have been supplemented by the Unfair Terms in Con-
sumer Contracts Regulations 1999 (SI 1999/2083). The
regulations implement Directive 93/13/EEC on Unfair
Terms in Consumer Contracts. The 1999 regulations
replace, with amendment, the 1994 regulations of the
same name (SI 1994/3159) which came into force on
1 July 1995.
Although there is a certain amount of overlap between
the 1977 Act and the regulations as well as points of
similarity (i.e. the test of reasonableness in the Act and
the tests of fairness in the regulations), there are some
important differences, as illustrated in Fig 9.6.
The above regulations apply, with certain exceptions,
to unfair terms in contracts between a business seller
or supplier and a consumer (reg 4(1)). A consumer is
defined as a natural person who is acting for purposes
outside his trade, business or profession. A business
includes a trade or profession, any government depart-
ment and local and public authorities. The regulations
do not cover terms in non-consumer contracts such as:

■employment contracts;
■agreements dealing with succession rights;
■family law rights;
■the incorporation or organisation of companies or
partnerships.

Also excluded are terms which have been incorporated
to comply with or reflect statutory or regulatory pro-
visions of the UK or the provisions or principles of
international conventions to which either the UK or the
EC is party.
Terms in consumer contracts, which have not been
individually negotiated, will be regarded as unfair if,
contrary to the requirement of good faith, they cause
a significant imbalance in the parties’ rights and obliga-
tions under the contract, to the detriment of the con-
sumer (reg 5(1)). A term will always be regarded as not
having been individually negotiated where it has been
drafted in advance and the consumer has not been able
to influence the substance of the term. The burden of
proof is placed on the trader to show that the term has
been individually negotiated.

Unfair Contract Terms Unfair Terms in Consumer

Act 1977 Contracts Regulations 1999

Mainly exemption clauses All unfair terms

Business and consumer Only consumer contracts

contracts

Negotiated and non- Only non-negotiated

negotiated contracts contracts

Exemptions in contracts Only terms in consumer

and notices contracts

Exemptions are either Unfair terms are rendered

automatically void or voidable

rendered void if

unreasonable

Individual right of Individual right of civil

civil action action and administrative

control by the Office of

Fair Trading and other

qualifying bodies, which

may seek an injunction to

prevent the continued

general use of an

unfair term

Figure 9.6A comparison of the Unfair Contract

Terms Act 1977 and the Unfair Terms in

Consumer Contracts Regulations 1999