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The Edinburgh Law School

CONTRACT AT SCOTS LAW CONFERENCE

DAVID CABRELLISENIOR LECTURER IN COMMERCIAL

LAW

Latest Developments in the law of Unfair Contract Terms

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CONTRACT AT SCOTS LAW CONFERENCE 2014

DAVID CABRELLI

LATEST DEVELOPMENTS IN THE LAW OF UNFAIR CONTRACT TERMS

27 TH OCTOBER 2014

Introduction

In this presentation, I will address the following issues:

1. Recent case law on the Unfair Contract Terms Act 1977 (“UCTA”);

2. Recent case law on the Unfair Terms in Consumer Contract Regulations 1999 (“UTCCR” or “the Regulations”);1 and

3. Law reform – the Consumer Rights Act.

1. Unfair Contract Terms Act 1977 (“UCTA”)

(a) UCTA, ss15-17 and 20-21 provides that UCTA applies to clauses attempting to (1) exclude or limit liability in a contract or contractual notice or (2) to render no contractual performance, or to render a performance substantially different from that which was reasonably expected from the contract.

Recent trends:

Langstane Housing Association Ltd. v Riverside Construction (Aberdeen) Ltd., Ramsay & Chalmers and others [2009] CSOH 52; 2009 SCLR 639 – ‘net contribution’ clause in a contract between a consulting engineer and a purchaser of a property.2

Grant Estates Ltd. v The Royal Bank of Scotland plc [2012] CSOH 133; [2012] GWD 29-588 – contractual provision in interest rate swap agreement (a) defining the scope of the service offered by RBS and (b) negating (i) the relationship of financial adviser and advisee and (ii) an assumption of a general or specific duty on the part of the former.

Nautch Ltd. v Mortgage Express [2012] EWHC 4136 (Ch) – provision in an interest-only fixed-rate mortgage enabling the lender to convert a long-term loan into a loan

1 SI 1999/2083.2 See also West v Ian Finlay and Associates [2014] EWCA Civ 316; [2014] BLR 324.

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repayable on demand did not contravene section 3(2)(b) of UCTA which is the equivalent of section 17(1)(b) of UCTA in Scots law, and provides as follows:

Section 3 Liability arising in contract

(1) This section applies as between contracting parties where one of them deals as consumer or on the other’s written standard terms of business.

(2) As against that party, the other cannot by reference to any contract term—

(b) claim to be entitled—

(i) to render a contractual performance substantially different from that which was reasonably expected of him, or

(ii) in respect of the whole or any part of his contractual obligation, to render no performance at all,

Except in so far as (in any of the cases mentioned above in this subsection) the contract term satisfies the requirement of reasonableness.

(b) UCTA only applies to certain contracts: e.g. sale of goods, hire-purchase, services, employment. It does not apply to insurance contracts and contracts for the sale of heritage (s 15).

(c) UCTA only applies to attempts by businesses to exclude/limit liability in respect of a breach of any obligation in delict, contract, statute, unjustified enrichment, etc. It does not apply to private transactions except in relation to attempts to exclude liability for defects of title in contracts for the sale of goods or of hire-purchase (s 20(1)).

Section 16 Liability for breach of duty

(1) Subject to subsection (1A) below, where a term of a contract, or a provision of a notice given to persons generally or to particular persons, purports to exclude or restrict liability for breach of duty arising in the course of any business or from the occupation of any premises used for business purposes of the occupier, that term or provision—

(a) shall be void in any case where such exclusion or restriction is in respect of death or personal injury;

(b) shall, in any other case, have no effect if it was not fair and reasonable to incorporate the term in the contract or, as the case may be, if it is not fair and reasonable to allow reliance on the provision…

Section 17 Control of unreasonable exemptions in consumer or standard form contracts

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(1) Any term of a contract which is a consumer contract or a standard form contract shall have no effect for the purpose of enabling a party to the contract—

(a) who is in breach of a contractual obligation, to exclude or restrict any liability of his to the consumer or customer in respect of the breach;

(b) in respect of a contractual obligation, to render no performance, or to render a performance substantially different from that which the consumer or customer reasonably expected from the contract,

if it was not fair and reasonable to incorporate the term in the contract.

(2) In this section “customer” means a party to a standard form contract who deals on the basis of written standard terms of business of the other party to the contract who himself deals in the course of a business…

Section 25 interpretation of Part II

(1) In this Part of this Act—

“breach of duty” means the breach—

(a) of any obligation, arising from the express or implied terms of a contract, to take reasonable care or exercise reasonable skill in the performance of the contract;

(b) of any common law duty to take reasonable care or exercise reasonable skill;

(c) of the duty of reasonable care imposed by section 2(1) of the Occupiers’ Liability (Scotland) Act 1960;

“business” includes a profession and the activities of any government department or local or public authority;

“consumer” has the meaning assigned to that expression in the definition in this section of “consumer contract”;

“consumer contract” means subject to subsections (1A) and (1B) below, a contract in which—

(a) one party to the contract deals, and the other party to the contract (“the consumer”) does not deal or hold himself out as dealing, in the course of a business, and

(b) in the case of a contract such as is mentioned in section 15(2)(a) of this Act, the goods are of a type ordinarily supplied for private use of consumption;

and for the purposes of this Part of this Act the onus of proving that a contract is not to be regarded as a consumer contract shall lie on the party so contending…

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Section 16(1)(a):

Brown v East Lothian Council 2013 SLT 721.

Sections 16(1)(b) and 17(1): ‘Fairness and reasonableness’:

(1) Clause limiting liability to specific sum where firm negligent:

Hirtenstein v Hill Dickinson LLP [2014] EWHC 2711 (Comm) – commercial contract between law firm and client engaged in the purchase of a yacht. The law firm failed to obtain a personal guarantee from the beneficial owner of the seller regarding the condition of the yacht and the client purchaser suffered loss when it emerged after the sale that the yacht was defective. The client sued Hill Dickinson for professional negligence.

Clause headed ‘Limitation of Liability’ in Hill Dickinson’s standard terms provided that “Hill Dickinson LLP's liability for any one claim or series of connected claims shall not exceed £3 million.” Hill Dickinson sought to rely on that clause when they were sued for professional negligence.

Held to be unfair and unreasonable:

Mr Justice Leggatt held that the clause was broad enough to constitute an attempt to limit Hill Dickinson’s liability for negligence;

Although both parties were of equal bargaining power, by the time that Hill Dickinson’s standard terms and conditions had been sent to the client, owing to the tightness of the timescale to get the deal done, there was no realistic possibility of the client switching solicitors if he did not want to lose the deal;

Hill Dickinson failed to bring the limitation clause specifically to the client’s attention and it was not mentioned in the retainer letter or in telephone conversations between Hill Dickinson and the client; and

Paragraph 2.07 of the Solicitor’s Code of Conduct requires firms of solicitors to bring limitation clause to the client’s attention. Since this was not done here, Hill Dickinson were in breach of the solicitors’ professional code.

(2) ‘No set-off’ clause:

Axa Sun Life Services plc v Campbell Martin Ltd. [2011] EWCA Civ 133; [2011] 2 Lloyd's Rep. 1 – commercial agency contract contained a clause preventing agent from offsetting sums owed by principal and any damages claim the agent may have against the principal.

Held to be unreasonable because it precluded set-off of admitted credits and overpayments. This is in line with the decisions in Stewart Gill v Horatio Myer [1992] 1 QB 600 at 606–609 per Lord Donaldson MR and Stuart Smith LJ and Esso Petroleum Co Ltd v Milton [1997] 2 Al ER 593, 603 and 608 per Simon Brown LJ and Sir John Balcombe.

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FG Wilson (Engineering) Ltd. v John Holt and Company (Liverpool) Ltd. [2013] 1 All ER (Comm) 323 1 – contract for the sale of generators by FG Wilson to Holt based on former’s standard terms and conditions contained a no set-off clause. Delivery of the generators was taken by Holt, but no payment was tendered to FG Wilson. Holt had a claim against FG Wilson in respect of alleged breaches of a distributor agreement. In proceedings brought by FG Wilson against Holt, Holt submitted that the no set-off clause did not satisfy the test of reasonableness under UCTA, since it precluded the offset of admitted credits and overpayments, relying on Stewart Gill v Horatio Myer [1992] 1 QB 600 at 606–609 per Lord Donaldson MR and Stuart Smith LJ, Esso Petroleum Co Ltd v Milton [1997] 2 Al ER 593, 603 and 608 per Simon Brown LJ and Sir John Balcombe and Axa Sun Life Services plc v Campbell Martin Ltd. [2011] EWCA Civ 133; [2011] 2 Lloyd's Rep. 1.

High Court held the clause was fair and reasonable:

it had been reasonable and legitimate for FG Wilson to have sought to protect its cash flow with a no set-off clause;

the no set-off clause was not unusual or onerous in its scope; Holt was a substantial and sophisticated commercial concern; Although FG Wilson was a much larger organisation than Holt, the relative

size of the parties in corporate terms was not a significant factor. More important was the fact that they were of equal bargaining strength;

Holt ought to have known that FG Wilson’s standard terms and conditions included the no set-off clause, since they had had a long-standing relationship since 2004;

Holt had negotiated a departure from FG Wilson’s standard credit terms in the standard terms and conditions, but had made no attempt to negotiate or object to the set-off clause;

FG Wilson would have been unable to secure any credit insurance cover in the marketplace if it had supplied generators without a no set-off clause; and

The fact that a no set-off clause is sufficiently broad to cover admitted credits or overpayments is not of itself a bar to a finding of reasonableness: Röhlig (UK) Ltd. v Rock Unique Ltd. [2011] 2 All ER (Comm) 1161.

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2. Unfair Terms in Consumer Contract Regulations (“UTCCR”)

(a) Regulation 4(1) of the UTCCR provides that it applies to non-negotiated unfair terms in contracts concluded between a seller or supplier and a consumer. See the definition of ‘consumer’ and ‘seller or supplier’ in regulation 3 of the UTCCR:

Regulation 3 Interpretation

(1) In these Regulations—

… “consumer” means any natural person who, in contracts covered by these Regulations, is acting for purposes which are outside his trade, business or profession…

“seller or supplier” means any natural or legal person who, in contracts covered by these Regulations, is acting for purposes relating to his trade, business or profession, whether publicly owned or privately owned…

Regulation 4 Terms to which these Regulations apply

(1) These Regulations apply in relation to unfair terms in contracts concluded between a seller or a supplier and a consumer…

What contracts are covered by the UTCCR?

Asbeek Brusse v Jahani BV [2013] HLR 38 - the Court of Justice of the European Union (“CJEU”) had cause to consider whether the Unfair Terms in Consumer Contracts Directive (“the Directive”),3 on which the UTCCR are based, applied only to contracts concluded between sellers/suppliers and consumers, or whether the Directive was of broader coverage. Essentially the question in this case was whether the Directive subjected landlords under residential tenancy agreements to a measure of control on the basis that they were sellers or suppliers?

Ultimately, it was held that it did as the key issue was whether one of the parties was acting for purposes relating to its trade, business or profession and the other was not. It was not relevant to consider whether the party acting for purposes relating to its trade, business or profession was a seller or supplier of goods or services. Whether this interpretation of the Directive can be reconciled with the terms of regulation 4(1) of the UTCCR above is a moot point. Of course, this domestic provision will have to be read down in accordance with this case.

Consumer?

Nationwide Building Society v Christie and Snell [2013] EWHC 127 (Ch) – Mr Snell entered into a deed of guarantee and indemnity with Nationwide guaranteeing the payment of debts pursuant to facilities granted by Nationwide to Christie. The facilities were granted to Christie in respect of a partnership between Christie and 3 93/13/EEC.

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Snell whereby they would trade together in business. When Nationwide sought to recover monies from Snell under the guarantee, he sought to challenge it. One of the grounds of challenge was that he had been acting as a consumer and so the terms of the guarantee could be struck down as unfair under the UTCCR. However, the High Court rejected this argument and ruled that Snell was not a consumer. Snell and Christie were acting for business purposes when they formed their partnership and invested in the purchase of property, obtained finance and gave a guarantee in support of that finance.

(b) Regulation 6 of the UTCCR provides that certain contractual terms are excluded from review:

Regulation 6 Assessment of unfair terms

(2) In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate—

(a) to the definition of the main subject matter of the contract, or

(b) to the adequacy of the price or remuneration, as against the goods or services supplied in exchange.

(1) ‘No representations’ clause and a ‘Services’ clause:

Financial Services Authority v Asset L.I.Inc (t/a Asset Land Investment Inc) [2013] EWHC 178 (Ch) upheld on appeal to the Court of Appeal in Asset Land Investment Plc v Financial Conduct Authority [2014] EWCA Civ 435 – this case concerned a ‘no representations’ clause and ‘services’ clause in a ‘land-banking’ contract between a trader and investors/consumers. The telesales branch of the trader would cold-call individuals on their home telephone numbers. If convinced of the investment opportunity, consumers would pay the trader for a plot of land and the trader would arrange for planning permission and onward sale to a developer on the consumer’s behalf, whereupon the consumer would cash in. The contracts were concluded after the consumers had paid for the plots of land. The ‘no representations’ clause and ‘services’ clause were in the following terms:

“The Buyer confirms that there are and have been no representations made by or on behalf of the Seller on the faith of which the Buyer is entering into this Agreement except and to the extent to which such representations are herein expressly set out or form part of written replies by the Solicitors for the Seller to the written Enquiries before Contract raised by the solicitors for the Buyer or the Seller's replies to Property Information Forms.”

“For the avoidance of doubt, the Seller is not obliged to and will not apply for planning permission in relation to the Property or in relation to the land as a whole of which the Property forms part, nor will the Seller provide any other services to the Buyer following the purchase of the Property by the Buyer to the extent that the provision of such services would constitute the carrying on by the Seller of regulated activities for the purposes of the Financial and Services Markets Act 2000 unless the Seller is authorised under that Act and

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permitted by the [Financial Services Authority] to carry on the relevant regulated activities. Notwithstanding the foregoing, the Seller reserves the right to (but is not obliged to) apply for planning permission in relation to any land owned by the Seller which forms part of the land of which the Property forms part.”

It was held that these clauses were not excluded from review under regulation 6 of the UTCCR. Instead, the contracts were for the sale and purchase of land, and that was their main subject matter. These clauses did not relate to the main subject matter or the adequacy of the price for the land supplied in exchange, since there were other clauses in the contract dealing with the payment of the price in exchange for the plots.

(c) Regulation 5 of the UTCCR directs that a term will be unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer. NB that Schedule 2 to the UTCCR lays down an indicative and non-exhaustive list of terms which may (but will not necessarily) be regarded as unfair:

Unfair and fair clauses:

(1) Cancellation clause:

Clipper Ventures Ltd. v Boyde 2013 SCLR 313 – this involved a cancellation term in a contract for the organisation and co-ordination of a world yacht race. The contract imposed an obligation on a consumer crew member to pay a sum of money if he/she terminated the contract prior to the date of the race. Paragraph 1(e) of Schedule 2 to the UTCCR directs that a cancellation clause which requires a defaulting consumer to pay a disproportionately high sum in compensation may regarded as unfair, i.e. it features on the indicative ‘grey’ list. Nonetheless, Sheriff Principal Mhairi Stephen held that the clause was fair - the cancellation charges were staggered on a sliding scale according to the stage in the contract that the consumer decided to terminate. As such, the cancellation charges were deemed to be proportionate. Further, such a sliding scale approach was the common or normal approach to cancellation clauses in such contracts organising and co-ordinating world yacht races. Their inclusion enabled the contractor to arrange for the engagement and hiring of alternative crew members.

(2) ‘Net contribution’ clause in a construction contract limiting the liability of a firm of architects for loss or damage to the employer:

West v Ian Finlay & Associates [2014] EWCA Civ 316; [2014] BLR 3244 - the net contribution clause operated to shift the insolvency risk of the other contractors on the construction project from the firm of architects to the employer client and was set out in the following terms:

4 Contrast this decision with Langstane Housing Association Ltd. v Riverside Construction (Aberdeen) Ltd., Ramsay & Chalmers and others [2009] CSOH 52; 2009 SCLR 639.

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“We confirm that we maintain professional indemnity insurance cover of £1,000,000.00 in respect of any one event. This will be the maximum limit of our liability to you arising out of this Agreement. Any such liability will expire after six years from conclusion of our appointment or (if earlier) practical completion of the construction of the Project. Our liability for loss or damage will be limited to the amount that it is reasonable for us to pay in relation to the contractual responsibilities of other consultants, contractors and specialists appointed by you.”

It was held that this clause was fair and not contrary to the requirements of good faith and reasonableness.

The clause clearly generated an imbalance in the parties’ rights and obligations. It was so weighted in favour of the firm of architects that it tilted the parties’ rights and obligations in its favour insofar as it granted it a beneficial limitation of liability and imposed on the employer a corresponding disadvantage. It also opened up the employer to a disadvantageous risk, namely the risk in the case of the joint and several liability of the firm of architects and one or more of the other contractors, e.g. where the latter were insolvent;

However, the imbalance was not ‘significant’ for the following reasons:o A clause rendering the firm of architects liable (as between itself and

the employer’s own chosen contractors) only for losses which it can reasonably be held responsible, and which requires the employer to take the insolvency risk of those chosen contractors was reasonable, and indeed to be expected;

o Such net contribution clauses were not unusual in construction projects. Moreover, it was doubtful whether any lawyer advising a commercial party to a building contract would be likely to object to such a term or “press for its deletion”. Rather they would look to protect their interests by insurance or the taking of a performance bond from the main contractor in question;

Moreover, the firm of architects had satisfied the good faith strand of regulation 5 of the UTCCR. Although the firm of architects did not specifically draw the clause to the attention of the employer, the employer was by no means in a weak bargaining position and the firm of architects had displayed openness and fair dealing in relation to the presentation of the clause before the employer in other respects.

(3) ‘No representations’ clause and a ‘Services’ clause:

Financial Services Authority v Asset L.I.Inc (t/a Asset Land Investment Inc) [2013] EWHC 178 (Ch) upheld on appeal to the Court of Appeal in Asset Land Investment Plc v Financial Conduct Authority [2014] EWCA Civ 435 – It was held that these clauses were unfair:

Both clauses operated only in the trader’s favour and against the investor: neither clause purported to prevent the trader from relying on pre-contractual representations or exchanges;

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The effect of the clauses was to tilt the balance of the contract against the consumer/investor because they detracted from the investment potential of the purchase;

Each term was contrary to the requirement of good faith, which “requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's … lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position…” (Director General of Fair Trading v First National Bank Plc [2002] 1 AC 481, 494F per Lord Bingham): by introducing the representations clause and the services clause after investors had paid, the trader did just that;

Although the representations clause provided a mechanism whereby purchasers could have seller's representations recorded and then rely upon them, the clause (i) left the purchaser without a remedy for even fraudulent misrepresentations, and (ii) contemplated a mechanism that would require buyers to engage a solicitor although the trader knew that investors were unlikely to do so and discouraged them from doing so;

The fact that the signature of the contract was witnessed was of no relevance; and

The trader argued that it was “inevitable that in a contract of the sale and purchase of land there will be terms and conditions that are more detailed than can be conveyed in a telesales call”. The judge agreed, but was not convinced that it was inevitable that the more detailed terms would contradict such calls.

(d) What happens if a term is held to be unfair:

Asbeek Brusse v Jahani BV [2013] HLR 38 - Where the national court decides that a penalty clause is unfair, Article 6(1) of the Unfair Terms in Consumer Contracts Directive (“the Directive”),5 does not allow the national court to reduce the amount of the penalty imposed by the clause but requires the court to exclude the application of the clause in its entirety. This is in accordance with the decision of the Court of Justice of the European Union (“CJEU”) in Nemzeti [2012] 3 CMLR 1, where the CJEU decided that where a national court has found a term to be unfair, the Directive demands that that court, of its own motion and also as regards the future, declares that term to be invalid so that the consumer is not bound by it.

5 93/13/EEC.

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3. Law reform – the Consumer Rights Bill

The Consumer Rights Bill was published on 18th June 2014;

Part 2 of the Bill clarifies and consolidates existing consumer legislation on unfair contract terms by removing overlapping provisions which conflict, and in particular,

o amends the ‘grey list’ in Schedule 2 to the UTCCR; o amends the law on the exemption of terms from review currently found

in Regulation 6 of the UTCCR; ando removes the provisions in UCTA which protect consumers.

How will the draft Consumer Rights Bill affect exclusion or limitation clauses in B2B contracts? Essentially, these will continue to be subject to review in accordance with the terms of sections 16 and 17 of UCTA, i.e. in relation to:

o clauses in non-consumer contracts concluded in the course of a business that exclude or restrict liability for financial loss, personal injury or death caused by non-contractual negligence, e.g. under common law implied terms, under statute or the law of unjustified enrichment; or

o clauses in standard form contracts that exclude or restrict liability for breach of a contractual obligation.

As such, UCTA will continue in force and the UTCCR will be repealed, but the former will be stripped of all of its provisions relating to consumer contracts.

Clause 61 defines the scope of application of Part 2 of the Consumer Rights Bill and this is set out below with important elements highlighted in bold:

Clause 61 Contracts and notices covered by this Part

(1) This Part applies to a contract between a trader and a consumer.

(2) This does not include a contract of employment or apprenticeship.

(3) A contract to which this Part applies is referred to in this Part as a consumer contract.

(4) This Part applies to a notice to the extent that it—

(a) relates to rights or obligations as between a trader and a consumer, or

(b) purports to exclude or restrict a trader’s liability to a consumer.

(5) This does not include a notice relating to rights, obligations or liabilities as between an employer and an employee.

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(6) It does not matter for the purposes of subsection (4) whether the notice is expressed to apply to a consumer, as long as it is reasonable to assume it is intended to be seen or heard by a consumer.

(7) A notice to which this Part applies is referred to in this Part as a ‘consumer notice’.

(8) In this section ‘notice’ includes an announcement, whether or not in writing, and any other communication or purported communication.

(9) In this Part, ‘trader’ and ‘consumer’ have the same meanings as in Part 1…

As such, the scope of review is broader than UCTA, since it is not limited to terms of particular contracts that exclude or limit the liability of a trader.

Clause 62 sets out the new ‘fairness’ test and clause 63 and Part I of Schedule 2 lay down a new ‘grey list’ of terms.6

Clause 62 Requirement for contract terms and notices to be fair

(1) An unfair term of a consumer contract is not binding on the consumer.

(2) An unfair consumer notice is not binding on the consumer.

(3) This does not prevent the consumer from relying on the term or notice if the consumer chooses to do so.

(4) A term is unfair if, contrary to the requirement of good faith, it causes a

significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.

(5) Whether a term is fair is to be determined—

(a) taking into account the nature of the subject matter of the contract, and

(b) by reference to all the circumstances existing when the term was agreed and to all of the other terms of the contract or of any other contract on which it depends…

Clause 64 clarifies the law on contractual terms exempted from review. If a term is of the type included in Part 1 of Schedule 2,7 it can be assessed for fairness. If it is not, and in order to determine whether a term is assessable for fairness, the court will first consider whether the term is transparent and prominent. If the term is not transparent and prominent (e.g. if it is in the ‘small print’), it is assessable for fairness. If the term is transparent and prominent, it is exempt from assessment for fairness if it concerns the essential bargain of the contract, which is either:

6 See the Annex.7 See the Annex.

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o The main subject matter of the contract (usually the goods, services or digital content being purchased); or

o The appropriateness (usually the level) of the price payable by comparison with the goods, digital content or services supplied under it.

This provision replaces regulation 6(2) of the UTCCR, and implements the exemption in Article 4(2) of the Directive. Regulation 6(2) was considered in Office of Fair Trading v Abbey National plc [2009] UKSC 6. The Supreme Court concluded that the concepts of main subject matter and price are to be narrowly construed as “the two sides of the quid pro quo inherent in any consumer contract”, that is, the good or service that the trader agrees to provide, and the price that the consumer agrees to pay (Lord Walker at para.39). Reflecting this case law, the effect of this clause is that, if a term concerns other aspects of the price other than the amount, for example the timing of payment, the term may be assessed for fairness, but the amount of the price cannot be assessed.

Clause 65 addresses contractual terms in consumer contracts or consumer notices that exclude or restrict liability for personal injury or death caused by contractual or non-contractual negligence, e.g. under common law implied terms, the law of delict/tort, or under statute. If the exclusion or limitation relates to personal injury or death, then the term is void. However, if the term seeks to exclude or restrict liability for other losses, e.g., financial losses, then unlike the current position in section 16(1)(b) of UCTA, the term is subject to the fairness test under Clause 62. As such, there is no equivalent of section 16(1)(b) of UCTA in Part 2 of the Consumer Rights Bill. Finally, it should be stressed that clause 65 does not apply to contracts of insurance and contracts relating to the creation or transfer of an interest in land, which are excluded from review.

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ANNEX

SCHEDULE 2CONSUMER CONTRACT TERMS WHICH MAY BE REGARDED AS

UNFAIRPART 1

LIST OF TERMS

1 A term which has the object or effect of excluding or limiting the trader’s liability in the event of the death of or personal injury to the consumer resulting from an act or omission of the trader. This does not include a term which is of no effect by virtue of section 65 (exclusion for negligence liability).

2 A term which has the object or effect of inappropriately excluding or limiting the legal rights of the consumer in relation to the trader or another party in the event of total or partial non-performance or inadequate performance by the trader of any of the contractual obligations, including the option of offsetting a debt owed to the trader against any claim which the consumer may have against the trader.

3 A term which has the object or effect of making an agreement binding on the consumer in a case where the provision of services by the trader is subject to a condition whose realisation depends on the trader’s will alone.

4 A term which has the object or effect of permitting the trader to retain sums paid by the consumer where the consumer decides not to conclude or perform the contract, without providing for the consumer to receive compensation of an equivalent amount from the trader where the trader is the party cancelling the contract.

5 A term which has the object or effect of requiring that, where the consumer decides not to conclude or perform the contract, the consumer must pay the trader a disproportionately high sum in compensation or for services which have not been supplied.

6 A term which has the object or effect of requiring a consumer who fails to fulfil his obligations under the contract to pay a disproportionately high sum in compensation.

7 A term which has the object or effect of authorising the trader to dissolve the contract on a discretionary basis where the same facility is not granted to the consumer, or permitting the trader to retain the sums paid for services not yet supplied by the trader where it is the trader who dissolves the contract.

8 A term which has the object or effect of enabling the trader to terminate a contract of indeterminate duration without reasonable notice except where there are serious grounds for doing so. This is subject to paragraphs 21 (financial services contracts) and 24 (contracts for sale of securities, foreign currency etc).

9 A term which has the object or effect of automatically extending a contract of fixed duration where the consumer does not indicate otherwise, when the deadline fixed for the consumer to express a desire not to extend the contract is unreasonably early.

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10 A term which has the object or effect of irrevocably binding the consumer to terms with which the consumer has had no real opportunity of becoming acquainted before the conclusion of the contract.

11 A term which has the object or effect of enabling the trader to alter the terms of the contract unilaterally without a valid reason which is specified in the contract. This is subject to paragraphs 22 (financial services), 23 (contracts which last indefinitely) and 24 (sale of securities, foreign currency etc).

12 A term which has the object or effect of permitting the trader to determine the characteristics of the subject matter of the contract after the consumer has become bound by it. This is subject to paragraph 23 (contracts which last indefinitely).

13 A term which has the object or effect of enabling the trader to alter unilaterally without a valid reason any characteristics of the goods, digital content or services to be provided.

14 A term which has the object or effect of giving the trader to decide the price payable under the contract after the consumer has become bound by it, where no price or method of determining the price is agreed when the consumer becomes bound. This is subject to paragraphs 23 (contracts which last indefinitely) (sale of securities, foreign currency etc) and 25 (price index clauses).

15 A term which has the object or effect of permitting a trader to increase the price of goods, digital content or services without giving the consumer the right to cancel the contract if the final price is too high in relation to the price agreed when the contract was concluded. This is subject to paragraphs 24 (sale of securities, foreign currency etc) and 25 (price index clauses).

16 A term which has the object or effect of giving the trader the right to determine whether the goods, digital content or services supplied are in conformity with the contract, or giving the trader the exclusive right to interpret any term of the contract.

17 A term which has the object or effect of limiting the trader’s obligation to respect commitments undertaken by the trader’s agents or making the trader’s commitments subject to compliance with a particular formality.

18 A term which has the object or effect of obliging the consumer to fulfil all of the consumer’s obligations where the trader does not perform the trader’s obligations.

19 A term which has the object or effect of allowing the trader to transfer the trader’s rights and obligations under the contract, where this may reduce the guarantees for the consumer, without the consumer’s agreement.

20 A term which has the object or effect of excluding or hindering the consumer’s right to take legal action or exercise any other legal remedy, in particular by— (a) requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions,(b) unduly restricting the evidence available to the consumer, or

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(c) imposing on the consumer a burden of proof which, according to theapplicable law, should lie with another party to the contract.

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