Statutory Control (AQA A-Level Law): Revision Notes
Statutory Control
Before the introduction of statutory legislation, exclusion clauses were primarily regulated through common law principles developed by judges. This meant that protection for consumers and weaker contracting parties was inconsistent and often inadequate. Parliament intervened to provide greater statutory protection, first through the Unfair Contract Terms Act 1977 and later through the Consumer Rights Act 2015.
The shift from common law to statutory regulation represents a fundamental change in how exclusion clauses are controlled. While judges developed principles to protect weaker parties, Parliament recognised that consistent, comprehensive statutory protection was necessary to ensure fair treatment for all consumers and contracting parties.
Unfair Contract Terms Act 1977
The Unfair Contract Terms Act 1977 (UCTA) was introduced to give consumers and other contracting parties greater protection against unfair exclusion clauses. The Act operates by making certain types of exclusion clauses completely void, while making other clauses valid only if they satisfy a test of reasonableness. This means that even if an exclusion clause has been properly incorporated into a contract, it may still be unenforceable under UCTA.
UCTA takes a dual approach to controlling exclusion clauses: some are prohibited absolutely (void), while others are subject to judicial scrutiny through the reasonableness test. This creates a flexible framework that provides absolute protection where most needed while allowing reasonable exclusions in appropriate circumstances.
Void exclusion clauses
Section 2(1) UCTA provides absolute protection in cases involving death or personal injury. Under this provision, a party cannot rely on any exclusion clause that attempts to exclude or restrict their liability for death or personal injury resulting from negligence. This means such clauses are automatically void and cannot be enforced, regardless of how clearly they are drafted or how reasonable they might appear. The courts will strike down any clause attempting to exclude liability for these most serious consequences.
The protection under Section 2(1) is absolute – there are no exceptions. No matter how well-drafted an exclusion clause is, or how much the parties agreed to it, any attempt to exclude liability for death or personal injury from negligence will be completely unenforceable. This reflects the law's recognition that some risks are simply too serious to allow parties to contract out of responsibility.
This protection is particularly important in situations where one party has significantly more bargaining power than the other.
Worked Example: Gym Membership Contract
A gym cannot include a clause in its membership contract stating it will not be liable if someone dies or is seriously injured due to the gym's negligence in maintaining equipment. Such a clause would be completely unenforceable under s2(1).
Even if the gym clearly displays this clause, and the member signs an agreement acknowledging it, the clause remains void. If the gym negligently fails to maintain a treadmill and a member suffers a serious injury as a result, the gym cannot rely on the exclusion clause to avoid liability.
Valid if reasonable
While some exclusion clauses are automatically void, others may be enforceable if they pass the reasonableness test. This creates a middle ground where clauses are not automatically prohibited but are subject to judicial scrutiny.
Section 2(2) UCTA deals with other types of loss or damage (not death or personal injury). Under this section, a person cannot exclude or restrict their liability for negligence except where the term or notice satisfies the requirement of reasonableness. This means that clauses attempting to exclude liability for property damage or economic loss resulting from negligence must be fair and reasonable to be enforceable.
Section 3 UCTA provides important protection for consumers dealing with businesses on standard form contracts. Where a consumer deals on a business's standard form of contract, the business cannot exclude its liability for breach of contract, or provide a substantially different performance from what was promised, or provide no performance at all, unless these actions satisfy the requirement of reasonableness. This prevents businesses from using their standard terms to avoid their contractual obligations unfairly.
Section 3 is particularly powerful because it covers not just exclusion of liability, but also situations where a business wants to:
- Provide a substantially different performance from what was promised
- Provide no performance at all
- Claim to be entitled to render substantially different or no performance
All of these must satisfy the reasonableness test when dealing with consumers on standard terms.
The test for reasonableness
The Act does not provide a precise definition of what counts as reasonable, leaving this to be determined by the courts on a case-by-case basis. However, guidance is provided in the Act itself.
Section 11(1) UCTA states that a term shall be considered reasonable if it "have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made." This means the court must look at the circumstances at the time the contract was formed, not with the benefit of hindsight after something has gone wrong.
The reasonableness test is assessed at the time of contract formation, not after a dispute arises. Courts cannot use hindsight to judge whether a clause was reasonable. This means factors like whether an accident actually occurred, or the severity of the loss, are irrelevant to assessing reasonableness under s11(1).
When assessing reasonableness, courts typically consider factors such as:
- The relative bargaining positions of the parties
- Whether the customer received any inducement to agree to the term
- Whether the customer knew or ought to have known about the exclusion clause
- Whether it was reasonable to expect compliance with any condition upon which the exclusion depends
- Whether the goods were specially made or adapted to the customer's order
These factors from Schedule 2 UCTA provide guidance but are not exhaustive. Courts have flexibility to consider any relevant circumstances that existed at the time of contract formation. The weight given to each factor will vary depending on the specific case.
Consumer Rights Act 2015
The Consumer Rights Act 2015 (CRA 2015) provides modern, comprehensive protection for consumers entering into contracts with traders. This Act consolidates and updates much of the previous consumer protection legislation, making it clearer and more accessible. It applies specifically to consumer contracts (where one party is a consumer and the other is a trader) and provides important protections against unfair exclusion clauses.
The CRA 2015 represents a significant modernisation of consumer law. It brought together provisions previously scattered across multiple Acts, making consumer rights clearer and easier to understand. Importantly, it applies only to consumer contracts (consumer dealing with trader), whereas UCTA has broader application to business-to-business contracts as well.
Section 31: liability that cannot be excluded or restricted (goods)
Section 31 CRA 2015 protects consumers buying goods by preventing traders from excluding or restricting their statutory rights. Under this provision, terms in contracts to supply goods that relate to the statutory rights under sections 9, 10 and 11 of the Act cannot be excluded or restricted by a trader. These statutory rights include requirements that goods must be of satisfactory quality, fit for purpose, and as described. This means that a trader cannot include a clause saying "we are not responsible if the goods are faulty" or "your statutory rights do not apply" because such clauses would be void under s31.
This section ensures that consumers always retain their fundamental rights regarding the quality and description of goods, regardless of what exclusion clauses a trader might attempt to include in the contract.
Worked Example: Faulty Electronics
A consumer purchases a laptop from an electronics retailer. The contract includes a clause stating: "The seller accepts no liability for defects in quality or fitness for purpose. All statutory rights are excluded."
Under Section 31 CRA 2015, this clause is completely void. The consumer retains their full statutory rights under sections 9, 10 and 11, which require that the laptop must be:
- Of satisfactory quality (s9)
- Fit for purpose (s10)
- As described (s11)
If the laptop is defective, the consumer can claim a remedy regardless of the exclusion clause.
Section 57: liability that cannot be excluded or restricted (services)
Section 57 CRA 2015 provides equivalent protection for consumers receiving services. A term in a contract to supply services that relates to the statutory right under section 49 (requirement to perform services with reasonable care and skill) cannot be excluded or restricted by a trader. This prevents service providers from including clauses that attempt to exclude liability for providing a poor quality service.
Worked Example: Hairdressing Services
A hairdresser cannot include a term stating "we are not responsible if we damage your hair" because this would attempt to exclude their obligation to provide services with reasonable care and skill. Such a clause would be unenforceable under s57.
If the hairdresser negligently applies chemicals incorrectly and damages the client's hair, they cannot rely on the exclusion clause. The statutory right to services performed with reasonable care and skill under section 49 remains fully enforceable.
Section 65: the bar on exclusion or restriction of negligence liability
Section 65 CRA 2015 provides absolute protection similar to s2(1) UCTA but specifically for consumer contracts. Traders cannot rely on any term inserted into a consumer contract or any notice which excludes or restricts liability for death or personal injury resulting from negligence. This is an absolute prohibition with no exceptions.
Additionally, this section makes an important clarification about voluntary assumption of risk. Where a term or notice intends to exclude or restrict a trader's liability for negligence, a person is not to be taken to have voluntarily accepted any risk merely because they agreed to or knew about the term or notice. This prevents traders from arguing that the consumer "accepted the risk" simply by agreeing to the contract or seeing a warning notice. The law recognises that consumers often have little genuine choice but to accept standard terms if they want to receive goods or services.
Voluntary Assumption of Risk
Section 65 explicitly rejects the defence that a consumer "voluntarily accepted the risk" simply by agreeing to an exclusion clause or seeing a warning notice. This is crucial because it recognises the reality of consumer contracting – consumers typically have little bargaining power and must accept standard terms on a "take it or leave it" basis.
A trader cannot argue: "But they signed the contract knowing about the exclusion clause, so they accepted the risk." The law recognises this would undermine consumer protection entirely.
Understanding the differences
It is important to understand how these three sections work together to provide comprehensive protection:
How CRA 2015 Sections Protect Consumers:
- Section 31 protects statutory rights relating to the quality of goods (satisfactory quality, fitness for purpose, description)
- Section 57 protects the statutory right to receive services performed with reasonable care and skill
- Section 65 provides absolute protection against exclusion of liability for death or personal injury from negligence in any consumer contract
All three sections apply to consumer contracts (consumer dealing with trader), but they protect different aspects of the consumer's rights.
Exam guidance
Examination Assessment
This content on statutory control of exclusion clauses will be assessed in your contract law examination. You should be prepared to:
- Explain how UCTA 1977 and CRA 2015 control exclusion clauses through statutory intervention
- Distinguish between clauses that are automatically void and those subject to reasonableness
- Analyse whether specific exclusion clauses in scenario questions would be enforceable under the relevant legislation
- Discuss the differences between UCTA provisions and CRA provisions
- Explain and apply the reasonableness test under s11(1) UCTA
When answering problem questions involving exclusion clauses, always remember to consider both whether the clause has been properly incorporated (common law rules) and whether it is valid under statutory controls (UCTA or CRA). A clause may be properly incorporated but still be unenforceable due to statutory restrictions.
Remember!
Key Points to Remember:
- UCTA 1977 provides consumer protection by making certain exclusion clauses void (death/personal injury from negligence) and subjecting others to a reasonableness test
- Section 2(1) UCTA: exclusion of liability for death or personal injury from negligence is always void
- Sections 2(2) and 3 UCTA: other exclusion clauses must satisfy the reasonableness test to be valid
- CRA 2015 provides comprehensive protection for consumers dealing with traders, preventing exclusion of statutory rights relating to goods (s31) and services (s57)
- Section 65 CRA 2015: mirrors s2(1) UCTA by prohibiting exclusion of liability for death or personal injury from negligence in consumer contracts
- Even if an exclusion clause is properly incorporated into a contract, it may still be unenforceable if it fails to meet statutory requirements