CRITICAL DISCUSSION

Critical discussion: whether the law relating to unfair terms and exclusion clauses is in need of reform

Critical discussion: whether the law relating to unfair terms and exclusion clauses is in need of reform

Introduction

The English and Scottish Law Commissions have made radical proposals for simplifying UK law on unfair terms in consumer contracts? combining the Regulations that implement the Directive and the earlier legislation into a single instrument that is to be written in language that would be clear and accessible to consumers and businesspeople (Beale? 2002). The article discusses some of the difficult policy choices involved in combining the different approaches of the two existing instruments? what is needed in order to make the legislation understandable to the lay person? and the extent to which the case of Commission v The Kingdom of the Netherlands requires Member States to use the language of the Directive when implementing it. The Law Commissions also proposed to extend the broader controls found in the Directive to business-to-business contracts? but the proposals did not find favour with the business community (Whittaker? 2000).

Analysis

The Law Commission for England and Wales and the Scottish Law Commission published a joint Consultation Paper on Unfair Terms in Contracts in August 2002 (Law Commissions? 2002). The Consultation period closed on November 8? 2002. The author of this paper is a member of the Law Commission for England and Wales and therefore one of the authors of the commission paper.

The origin of the project lies in the history of unfair terms legislation in the UK (Beale? 2002). This is described briefly in the Consultation Paper. In essence? the first wide-ranging legislation over unfair terms was the Unfair Contract Terms Act 1977 (UCTA). This followed an earlier Report of the Law Commissions but the legislation was to some extent different in substance to what the Law Commissions had recommended and had a different title. The title of UCTA is positively misleading: It applies only to exclusion and limitation of liability clauses?1 broadly defined? and to indemnity clauses in consumer contracts. Thus other types of term - for example clauses allowing the supplier to increase the price payable - were not subject to any statutory control under the Act. In addition? some types of contract? for example contracts of insurance? were altogether exempted from the operation of UCTA (Zweigert? 1998).

When the Directive on Unfair Terms in Consumer Contracts3 was implemented? UCTA was not amended. Instead? Regulations were Journal of Consumer Policy 27: 289-316? 2004.

2004 Kluwer Academic Publishers. Printed in the Netherlands.

made under powers given by European Communities Act 1972? section

2. The Unfair Terms in Consumer Contracts Regulations 1994?4 and the Unfair Terms in Consumer Contracts Regulations 19995 (UTCCR) that subsequently replaced them? are largely a word-for word

''copy-out'' of the Directive.

The legislative approach of implementing the Directive via freestanding Regulations that ''copy out'' the Directive means that there are two overlapping pieces of legislation? as UTCCR apply to exclusion and limitation of liability clauses as much as to other ...