Currently each a slave to two masters, commercial lawyers will rejoice at the news that the Law Commission has produced a draft bill amalgamating both the Unfair Contract Terms Act 1977 ("UCTA") and Unfair Terms in Consumer Contracts Regulations 1999 ("UTCCR").
For 6 years, commercial contract lawyers have carefully laid their anti-negligence bread-crumbs as they negotiated their way through the twists, turns, traps and pitfalls of inconsistent and repetitive legislation. UCTA and the UTCCR continue to confuse and obfuscate with different languages and concepts producing effects that are similar but not identical.
Within UCTA alone there is conflict, for it contains two Parts: one for England & Wales and Northern Ireland, and one for Scotland. The two Parts have almost the same effect but use different languages (says the Law Commission report)! As between the legislation, UCTA applies to a small range of contracts and is designed to control only exclusion clauses; and UTCCR covers a much wider range of terms, extending to all terms but subject matter or price.
To silence the baying agony of commercial lawyers' contorted neurons, the Law Commission has produced a draft bill which:
- extends to all the terms;
- continues to exclude liability limitations for death or personal injury, or basic requirements of quality and fitness for purpose;
- includes negotiated clauses as well as standard clauses; and
- in claims brought by consumers, ensures the burden of proof lies with the business.
These proposals do not significantly change the current regime, yet small business will be dancing in the street (with commercial lawyers) if the draft is accepted by parliament. By their lesser bargaining power and tighter margins, small business may be forced into unfair contracts, sometimes simply in order to survive! Such unfair terms in unfair contracts may be permissible in law as they are standard terms in business-to-business contracts.
No more must small business suffer in this way - the draft Bill includes special protection for “micro businesses” which are businesses with nine or less staff. These micro businesses will be able to challenge any standard term unaltered by negotiation, or that is not the subject matter or price. Exceptions to this are contracts for financial services, contracts over £500,000 and situations where the apparently small business is associated with other businesses to create a group with more than nine employees.
The Law Commission calls for a well-resourced organisation to use preventive powers to protect small businesses. The Law Commission notes that such resources are currently unavailable. Corporate Blawg UK believes that instead of the DTI using tax-payers money to set up new quangos, the DTI should encourage small businesses to seek professional legal advice in regard of contractual matters.
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