5 The Unfair Contract Terms Act 1977 (UCTA 1977)
The introduction to UCTA 1977 states that it is:
An Act to impose further limits on the extent to which under the law of England and Wales and Northern Ireland civil liability for breach of contract, or for negligence or other breach of duty, can be avoided by means of contract terms and otherwise, and under the law of Scotland civil liability can be avoided by means of contract terms.
As a result of the amendments set out in Schedule 4 of CRA 2015, its provisions only apply to business-to-business contracts. Parts 1 and 3 of UCTA 1977 apply to England and Wales. Schedule 1 sets out a number of types of contracts that the key sections in part 1 do not apply to. These include (among others) insurance contracts, contracts relating to interests in land and contracts relating to intellectual property (such as patents and trademarks).
The key sections in relation to exclusion clauses in business-to-business contracts are ss2–7. In these, the term ‘liability’ is defined as ‘business liability’ (other than in s6 of UCTA 1977, as discussed later).
Box 6 What is ‘business liability’?
Business liability is defined in s1 (3) of UCTA 1977 as:
… liability for breach of obligations or duties arising –
- a.from things done or to be done by a person in the course of a business (whether his own business or another’s); or
- b.from the occupation of premises used for business purposes of the occupier.
Section 14 states that the term ‘business’ includes professions and the activities of any government department, or local or public authority.
In other words, UCTA 1977 deals with situations where a business is contracting with another business. It does not apply where two non-businesses are entering into a contract.