Unfair Contract Terms Act

Gillian, the owner of a night club, invites Richard, an electrician with whom she has not contracted before, to visit the club to discuss the installation of new electrical equipment and wiring. After Richard has looked round the club, they agree orally what work should be done. Gillian emphasizes to Richard that she will have to close the club while the work is done and that it must be completed by 1st May. Richard tells Gillian that he will provide her with “a written contract on my usual terms, setting out the work to be done and the materials to be supplied.” On 22nd April Richard does this, just before starting work that day. Gillian puts the document into her filling cabinet without reading it. Richard fails to complete the work until 8th May. As a result, Gillian is unable to re-open the club and injuring Gillian.

Richard installs the electrical wiring negligently. As a result, later on 9th May there is a fire. This causes substantial damage to the club. Gillian is forced to close the club for another three days for repairs and as a result, looses further profits. Gillian informs that she will be suing him. Richard replies by pointing to the following three clauses in the written contract: (1) The electrician and/or his servants will not be liable for any injuries howsoever under this contract. (2) The electrician does not accept liability for any defects in the materials supplied under this contract. (3) The electrician will endeavor to complete the work on time, but reserves the right to take as long as he chooses to complete the work. Advise Gillian as to all possible legal claims which she may have against Richard and in particular, whether or not Richard will be able to rely upon any of the three clauses (above) in the light of both the common law and the Unfair Contract Terms Act 1977.

Issues:

There are three issues that arise in this scenario which are the injury that Gillian encounters when the work is not done on time. Also the negligent installment of the electrical wiring which causes damage to the club and Gillian loses profits because of this. The negligent wiring may be due to faulty equipment creating a third issue. The problem in this case is that Richard in his contract has created three exclusion clauses, which is upheld then leaves no avenue for Gillian to sue; however under the common law and the Unfair Contract Terms Act 1977 (UCTA) she may have an avenue to be compensated.

Legal Application to the Issues:

Common Law:

In order for Gillian and Richard to be bound there needs to be a valid contract, which means that four requirements have to be fulfilled. A valid contract must have the following elements; offer; acceptance; consideration; capacity; and intention. These are present in this contract when Richard offers his work and Gillian accepts verbally. There is also intention because there is an understanding that Richard will turn up to work on a certain day and Gillian will close the night club, which is evidence of consideration as Gillian is at a disadvantage.

This is a valid contract, however the next area to explore is whether the standard terms and conditions apply because Gillian has never worked with Richard and at the verbal contract point does not indicate what his usual terms and conditions are. Under contract law there are only three ways that they can be incorporated which are; by signature even if they are not read ; by notice where there has to be sufficient notice ; and by custom where there has been previous dealings between the parties even if the clause is added in later . In this case there is no signature and also no indication of previous dealings, hence Gillian is not bound by these conditions yet. Therefore one has to consider the case of notice, off hand there is no notice as Richard fails to indicate what these conditions are at the verbal level, however the question is whether the average person would have notice, especially as Richard is an electrician and these could be construed as standard conditions in the business ; but this would be very hard to prove as no notice was given due to Richard giving these terms and conditions after the contract was agreed and giving no indication of their nature at this level . There is one problem under contract law because Gillian has received the contract in her hands and failed to read it, even though every other indicator is against her being bound, which is she has a contract and she failed to read it and if one considers the case of Alderslade v Hendon Laundry Ltd if the exclusion clause can only be construed in negligence and in certain circumstances then it is applicable and as she received the usual terms and conditions before Richard started the work, i.e. she had a chance to end the contract then she is bound by them. However, the case of White v John Warwick & Co has held that liability for negligence will not normally be excluded. Therefore it is still very confusing whether Richard is excluded from the damages that Gillian is seeking, therefore the statutory provisions of the UCTA and Sale and Supply of Services Act 1982 (SGSA).

Statutory Protections:

Is Richard is liable for the damages that Gillian is asking for? In response there is little evidence in whether the exclusion clauses should be supported or not. Under UCTA Section 2 it holds that negligence cannot be excluded in respect to personal and/or death bat all. In relation to other loss/damage liability cannot be excluded unless there is reasonable notice. Section 11 holds that the reasonable test is that the term is fair and reasonable and whether the individual should have reasonably known or in contemplation of when the contract was made. This is similar to the case law discussion; however it is written from the point that negligence can not be excluded except in strict circumstances. There was no real notice in this case, especially when the verbal contract was made. Therefore it is very likely that this clause will not be upheld as the case of Andrews Bros (Bournemouth) Ltd vSinger and Co Ltd holds that exclusion clauses against the party seeking to rely on them.

This is important for the liability in respect to Richard and his employees and any injuries and subsequent economic loss from the negligent wiring. Yet in relation to the damages to Gillian it has to be determined if there is remoteness of damage, whereby monetary compensation can be claimed for a failure to perform a primary obligation as this is a breach and/or the loss for any breach of a secondary obligation . The primary obligation was to wire the nightclub, which Richard did negligently and it is highly likely that Gillian can claim damages under breach of contract.

The secondary obligation was to complete this task by the 1st May, which he did not complete until the 8th May. It has been shown that Gillian may claim for this; however does the exception clause apply? Again we must turn to whether there is reasonable notice to exclude liability and under the SGSA Section 16 where restricting liability for breach of implied terms arising from Sections 13-15 is subject to the reasonable test and provisions of the

UCTA, where the reasonableness test is based upon the common law officious bystander test that is defined in Sir Law v Southern Foundries Ltd which is a stricter test for exclusion clauses where it has to be so reasonable and that the notice is sufficient that the officious bystander would agree to its terms.

This basically holds that there are implied terms such as a reasonable quality of goods and services and that it should be completed in a reasonable quality and should be usable. This means that the exclusion of liability for faulty equipment and liability for faulty work cannot be excluded . This means that these two exclusion clauses cannot be upheld. In respect to the completion of work being late it is questionable, i.e. was there reasonable excuse for delay. Yet it was an express term of the contract and without reasonable excuse this exclusion clause it is possibly not going to be upheld, this is rule from an early common law principle . Yet there is the question whether this is reasonable exclusion for the trade . However, as in the case of Edmund Murray Ltd v BSP International Foundations Ltd it was held that it was not fair and reasonable for the party in breach to rely on an exclusion clause for failing to meet the specifications of the other party. Therefore this again will be subject to the reasonableness test where the test applied to the whole term and to the particular reliance on it . Therefore if it is a specific term of the contract to be finished by the 1st of May and made clear by Gillian, as it was then it is very unlikely it can be excluded even if a trade standard.

Finally, if one considers the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) if the term does not create an unfair balance in detriment to the consumer it can be upheld. Yet as this does create an unfair balance and puts Gillian at a loss then she will be protected from the exclusion clause as a consumer, even though she is acting for her business. However are the circumstances of this delay sufficient enough for Gillian to claim? Even if the electrics were not faulty the work would not have been finished within the time period, therefore there is no reasonable excuse and Richard would be liable for the loss caused by his incompetent work and slow finish.

Summary – Advice to Gillian:

Therefore it is highly likely that Gillian would not be bound by the three exclusion clauses in respect to the new statutory provisions; whereas if there was only reliance on the common law she would probably only not be bound against the negligence clause.