UCTA 1977

The Unfair Terms in Consumer Contract Regulations 1999 and UCTA 1977



The Unfair Terms in Consumer Contract Regulations 1999 and UCTA 1977

The Unfair Contract Terms Act 1977 does not apply to tenancy agreements and other agreements relating to land (Electricity Supply Nominees v IAH Group [1993] 3 All ER 372).

There has been some debate as to whether or not the Unfair Terms in Consumer Contract Regulations 1999, which relate to the seller of goods and supplier of services, apply to contracts relating to land. The OFT has been of the view that the regulations do apply and has been busy taking steps to ensure that various residential tenancy agreements comply with them. This case confirms that the OFT is correct. (Laing 2004:25-48)

Homeless persons who rejected particular accommodation offered to them by the defendant housing authority brought the claim. There were a number of complaints but one of them was that the tenancy agreement in respect of the accommodation offered did not comply with the regulations. The OFT was made an interested party and took part in the proceedings. Specifically the court held that: (Local Government Ombudsman 2003:)

The 1999 Regulations and the Council Directive 93/13/EEC apply to contracts relating to land, including tenancy agreements. A broad, purposive method of interpretation was used in coming to this conclusion.

The regulations and the Directive apply to public authorities notwithstanding that the activities they are engaging in are carried out in discharge of a statutory obligation to provide housing although this factor might well be relevant when considering the question of fairness.

The defendant as landlord was a supplier

A tenant, who enters into the tenancy agreement for the purpose other than his trade, business or profession, is a consumer.

In the recent case of Barclays Bank Plc v Alfons Kufner, the High Court considered whether or not an experienced businessman was able to rely on unfair contractual terms legislation to protect him from fulfilling his obligations under a guarantee he made to a bank. (Local Government Ombudsman 2004:77-84)

Many lenders' standard loan agreements and guarantees contain clauses which exclude set-off. Similarly, they also contain clauses that exclude or restrict the lender's duty not to impair or release security held for enforcement of a contract with the principle debtor. They are industry standard or boilerplate clauses. This case is therefore of interest to all lenders as the judgment clarifies the limited circumstances in which unfair contractual terms legislation may apply to guarantees. Further, the judgment has confirmed that clauses excluding set-off in a loan agreement are not deemed to be unreasonable under UCTA. (McKendrick 2009:16-20)

However, caution should be observed as, in the circumstances of this case, the parties were perceived to be on equal terms due to Mr Kufner being an experienced businessman who also had the added advantage of legal advice. Not all persons entering in to a loan agreement or a guarantee with a lender will be in such a position. In such circumstances the Court may well have deemed the set-off clause to be unreasonable under ...