Exclusion clauses
Exclusion clauses

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Exclusion clauses

7 The Consumer Rights Act 2015 (‘the Act’) in general

So far we have been examining the effect of the Act in relation to effectiveness of exclusion clauses. In 2005, the Law Commission and the Scottish Law Commission produced a report on unfair terms in contracts, recommending that provisions affecting consumers in UCTA 1977 and UTCCR 1999 should be replaced by a single Act of Parliament. In 2013, these recommendations were reviewed and updated to become part of the CRA 2015. In this section there is an opportunity to research the Act’s impact on exclusion clauses.

It is worthwhile reflecting on the purposes behind the Act by considering its legislative history.

Described image
Figure 14 The Law Commission

Activity 8 The impact of the Act

Timing: You should allow yourself 2 hours and 45 minutes to do this activity.
  • a.Using a search engine of your choice find and read the Law Commission’s summary paper entitled Unfair terms in consumer contracts: Advice to the Department of Business, Innovation and Skills (Law Com Summary, 2013). Create a spider diagram to set out the key changes recommended in this paper.

Comment

The paper recommended the following changes:

The core exemption

  • The price or main subject matter terms should be exempt from review only if they are transparent and prominent, with definitions given of both these words.
  • The amount of the price should be exempt from review (subject to being transparent and prominent) but other aspects of price terms, such as timing, could be assessed for fairness (the excluded assessment construction).
  • The main subject matter exemption applies to all aspects of the term (subject to being transparent and prominent).

The grey list

  • The grey list should be retained and three additions made. All terms on it should be assessable for fairness.

Other terms

  • The Bill will apply to negotiated terms as well as standard forms of contract.
  • All terms are required to be ‘transparent’ and whether or not a term is transparent is an important factor to consider in whether it is unfair.
  • Any terms excluding or restricting liability for causing death or personal injury by negligence will be considered unfair.
  • As well as contract terms, notices which exclude a trader’s liability to a consumer will be covered. For example, end-user agreements for computer software.

Scope

  • A new definition of a consumer will be introduced.
  • All references to ‘dealing as a consumer’ will be removed from UCTA 1977 so it will only apply to business-to-business contracts.
  • The courts will be able to introduce questions of fairness of their own motion (without the argument being raised by one of the parties).
  • Terms will be exempt from review if they merely reflect the existing law.
  • b.Now you have researched the original proposals for reform, you need to find out to what extent these were implemented by the introduction of the 2015 Act.

    This video clip shows the Act being introduced to Parliament for its second reading as a Bill. The UK Parliament’s [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] website (2015) gives the most up-to-date information on the progress of Bills. You can also find information on the relevant government department’s web page. In this case, it is the Department for Business, Innovation and Skills (UK Government, 2015b).

    Using these (and other appropriate) legal resources, answer the following questions.

Download this video clip.Video player: Introduction of the Consumer Rights Bill for its first reading
Skip transcript: Introduction of the Consumer Rights Bill for its first reading

Transcript: Introduction of the Consumer Rights Bill for its first reading

Speaker
The context in which we’re bringing in this legislation is a determination to build and enhance a climate of trust within which British business operates, indeed restoring trusts, which is often needed in markets and market transactions.
The consumer law reforms, which we’re talking about today, lie at the heart of a crusade towards trusted business, trusted capitalism, and we see it as part of an overarching overhaul of UK competition and consumer legislation.
We can’t expect consumers to be confident, when they don’t understand their rights or when they find it hard to know where they’re entitled to if something goes wrong, and unclear rights and remedies mean that businesses also find it costly to understand their responsibilities.
We seek in this legislation to address those concerns, because we’re here, setting out in one place key consumer rights, what consumers are entitled to.
It covers goods, services, and for the first time, digital content, such as ebooks and software. We estimate on an impact assessment a value of something at the order of 4 billion over a 10-year period.
Of course, it involves strengthening statute and does involve regulation, but overall, this is a deregulatory measure, and it is positive in its impact on business. It makes it easier for business to understand what should happen when a problem arises, stops problems escalating with all the associated costs and development of disputes.
It helps to create a level playing field for business, so it is pro-consumer, but it’s also pro-business.
End transcript: Introduction of the Consumer Rights Bill for its first reading
Introduction of the Consumer Rights Bill for its first reading
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  • i.Which part of the CRA 2015 deals with unfair contract terms?
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Comment

Part 2 deals with unfair terms. Part 1 of schedule 2 contains the amended ‘grey list’. The definition of a ‘consumer’ is given in s2(3) of part 1.

  • ii.Read the parts of the CRA 2015 which deal with unfair contract terms. Using the Comment to Part A of this activity as a checklist, have all of the Law Commission’s recommendations been implemented? Are there any other key changes?
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Comment

The Law Commission’s proposals have all been incorporated into the CRA 2015. One change is that it is the ‘appropriateness’, not the ‘amount’ of the price that is exempt for review under the core exemption (s64(1)(b) of the CRA 2015).

The definition of a consumer is given in s2(3) of the CRA 2015 as:

… an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession.

The test for unfairness in regs 5(1) and 6(1) of UTCCR 1999 is reused by the CRA 2015 (ss62(4) and (5) of the CRA 2015). As in reg 8 of UTCCR 1999, where a term is held to be unfair (and therefore invalid) the rest of the contract continues as far as is practicable (s67 of the CRA 2015).

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