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100 Chapter 3The terms of the contract

The Unfair Contract Terms Act 1977

Contracts covered by the Act

The important sections of UCTA 1977 apply only to business liability. This is defined by

s. 1 of the Act as liability which arises:

(i) from things done or to be done by a person in the course of a business; or

(ii) from the occupation of premises used for the business purposes of the occupier.

So, in general, a person who is not in business will not be subject to the Act. However,

s. 12(1) SGA 1979 (the implied term as to the right to sell) can never be excluded. Nor can

the corresponding terms in SGITA 1973 and SGSA 1982. Furthermore, a person who is not

in business will be subject to s. 6 UCTA 1977, the effect of which is explained below.

The register of directors

Section 2 – Excluding liability arising from negligence

Section 2(1) provides that no contract term can exclude liability for death or personal injury

arising from negligence.

Section 2(2) provides that liability for other types of loss or damage arising from neglig-

ence, such as damage to goods, can be excluded if the term excluding liability was reasonable.

(Schedule 2 to the Act and s. 11 define what reasonable means, and we will look at these

later in this chapter.)

Earlier in this chapter we examined s. 13 SGSA 1982. It provides that where a service is

supplied in the course of a business, a term is implied that the service is supplied using

reasonable care and skill. Whenever s. 13 SGSA 1982 is breached, the UCTA 1977 regards

Smith vEric S Bush (1989) (House of Lords)

The claimant applied to a building society for a mortgage to buy a house. The building

society employed the defendants to make a survey of the house. The claimant paid £40 to

the building society, who agreed to supply her with a copy of the report. A disclaimer said

that neither the building society nor the surveyors would be liable for any inaccuracies. The

report itself also carried a similar disclaimer. The report said that the house was worth

£16,000 and that no major building work was necessary. Eighteen months later the chim-

neys fell through the roof because a chimney breast had been removed without proper

supports being fitted. The claimant sued the defendants for negligence.

HeldThe defendants were liable to the claimant in the tort of negligence. The disclaimer

which excluded liability had to be reasonable under UCTA s. 2(2). It was not reasonable and

so it did not apply.

CommentIf the claimant had been killed or injured by the falling chimneys then s. 2(1)

UCTA 1977 would have applied. It would not have been possible for any term to exclude

liability for the death or injury if it was caused by negligence. It would not therefore have

been necessary to consider whether or not any term which tried to do so was reasonable.