must compensate A for any claim which is made by C
against A. A builder, for example, may get the owner of
a house to agree to indemnify him for any injury or
damage that his work on the house might cause to third
parties. So if the builder negligently demolishes a wall
and injures a next-door neighbour, the builder can call
on the house owner to make good any award of dam-
ages. In some cases, B is required to indemnify A in
respect of a liability that A may be under to B himself.
Such an indemnity clause has the same effect as an
exclusion clause.
Under s 4, indemnity clauses in contracts where one
of the parties deals as a consumer are unenforceable
unless they satisfy the requirement of reasonableness.
Guarantees of consumer goods (s 5)
At one time, it was common practice for guarantees
given with goods to contain a clause exempting the
manufacturer from liability in negligence if the product
proved defective. Under s 5 a manufacturer or distribu-
tor cannot exclude or restrict his liability in negligence
for loss arising from defects in goods ordinarily supplied
for private use or consumption by means of a term or
notice contained in a guarantee. (Manufacturers’ guar-
antees will be examined in Chapter 10 .)
Exemption of implied terms in
contracts of sale and hire-purchase
(s 6)
The original Sale of Goods Act 1893 gave the parties
complete freedom to exclude the implied terms con-
tained in ss 12–15. Retailers often used the opportunity
to deprive consumers of their rights by getting cus-
tomers to sign an order form, which included an exemp-
tion clause hidden in the small print, or by displaying
suitably worded notices at the point of sale. The Molony
Committee on Consumer Protection, which reported in
1962, identified the ease with which the implied terms
could be excluded as a major defect in the Act, and in
1969 the Law Commission made proposals for reform.
The changes were effected by the Supply of Goods
(Implied Terms) Act 1973 and incorporated into the
revised Sale of Goods Act 1979. The implied obligations
as to title contained in s 12 of the Sale of Goods Act 1979
(sale of goods) and s 8 of the Supply of Goods (Implied
Terms) Act 1973 (hire-purchase) cannot be excluded or
restricted by any contract term. The implied terms as
to description, quality, etc. contained in ss 13–15 of
the Sale of Goods Act 1979 (sale of goods) and ss 9–11
of the Supply of Goods (Implied Terms) Act 1973
(hire-purchase) cannot be excluded or restricted by any
contract term against a person dealing as a consumer.
Where the person is not dealing as a consumer, the
exemption clause is subject to the ‘reasonableness test’.Exemption of implied terms in other
contracts for the supply of goods
(s 7)
Terms as to title, description, satisfactory quality, fitness
for purpose and sample are now included in contracts
for the supply of goods by way of hire, exchange or work
and materials contracts by virtue of the Supply of Goods
and Services Act 1982. The implied obligation as to title
contained in s 2 of the 1982 Act (contracts of exchange
or work and materials) cannot be excluded or restricted.
Exclusion clauses relating to title in contracts of hire,
contained in s 7, are subject to the reasonableness test.
The other implied terms cannot be excluded or restricted
at all in consumer contracts but in other transactions the
exemption clause is subject to the reasonableness test.
The complicated provisions of the Unfair Contract Terms
Act 1977 in relation to the exclusion of statutory implied
terms are summarised in Fig 9.5.Exemption of liability for
misrepresentation (s 8)
Section 3 of the Misrepresentation Act 1967, as amended
by s 8 of the Unfair Contract Terms Act 1977, provides
that any clause which excludes or restricts liability for
misrepresentation is ineffective unless it satisfies the
requirement of reasonableness.Cases decided under the Unfair
Contract Terms Act 1977Part 3Business transactions
294
Lally and Wellerv George Bird(1980)The defendant agreed to undertake a house removal for
the claimants for £100.80. The contract contained exemp-
tion clauses which limited the defendant’s liability for
losses or breakages to £10 per article and excluded all
liability unless claims were made within three days. It was
held that these clauses were unreasonable.