Unfair Contract Terms Act 1977

Introduction

The Unfair Contract Terms Act 1977 (UCTA 1977) sets limits on exclusion and limitation clauses in contracts governed by the law of England and Wales. It controls attempts to restrict liability for negligence, breach of contract and misrepresentation, and introduces a central “reasonableness” test for many terms. Some exclusions are void in all circumstances (for example, death or personal injury from negligence), while others are only effective if they are reasonable at the time the contract was made.

Since the Consumer Rights Act 2015 (CRA 2015) came into force, most consumer contracts are dealt with under that Act. UCTA still matters, especially in business-to-business contracts and when parties contract on one side’s standard terms. Understanding how UCTA operates will help you assess risk, draft clearer clauses and resolve disputes with confidence.

What You'll Learn

• When UCTA 1977 applies and what counts as an “exemption” clause
• Clauses that are always void (for death or personal injury) and those that must be reasonable
• How the reasonableness test in section 11 and Schedule 2 is applied in practice
• How UCTA interacts with misrepresentation disclaimers via the Misrepresentation Act 1967
• Where the CRA 2015 takes over, and where UCTA still governs
• Leading cases, including George Mitchell, Goodlife Foods, Last Bus, Springwell and First Tower Trustees
• Practical drafting and litigation tips to improve enforceability and manage risk

Core Concepts

Scope and When UCTA Applies

• Who and what:

  • UCTA mainly regulates business liability. It applies to terms or notices that exclude or limit liability for negligence (s2), and to clauses dealing with implied terms for the sale and supply of goods (ss6–7).
  • Section 3 applies where one party deals on the other’s written standard terms of business. In that situation, any attempt to exclude or limit liability for breach (or to allow substantially different performance/no performance) must be reasonable.

• What counts as an “exemption” clause (s13):

  • Not just outright exclusions. Time bars, caps on liability, “entire agreement” wording that restricts remedies, “no set-off” provisions, and terms making enforcement subject to onerous conditions can all fall within UCTA.

• Key carve-outs and reach:

  • Consumer contracts and consumer notices are mainly governed by the CRA 2015, not UCTA.
  • Some international supply contracts are excluded from parts of UCTA (s26).
  • A foreign law clause will not always sidestep UCTA: section 27 can apply where there is a close connection with the UK.

• Definitions (s1):

  • “Negligence” covers breach of a contractual duty of care and the tort of negligence.
  • “Business liability” means liability arising in the course of a business.

The Reasonableness Test (s11) and Schedule 2

• The test (s11(1)):

  • A term must be “fair and reasonable” to include, having regard to the circumstances which were, or should have been, known to the parties when the contract was made.
  • Assessment is at the time of contracting, not with hindsight.
  • Burden of proof (s11(5)): the party relying on the clause must prove it is reasonable.

• Schedule 2 factors (non-exhaustive):

  • Relative bargaining strength and whether there were practical alternatives.
  • Whether the customer received an inducement (e.g., a lower price) to accept the term.
  • How far the term was brought to the customer’s attention, and whether they knew or should have known about it.
  • Whether it was reasonable to expect compliance with conditions (e.g., strict notice procedures).
  • Whether goods or services were tailored to the customer’s order.

• Common themes in the case law:

  • Negotiated commercial contracts between experienced parties are more likely to pass the test, especially where risk allocation is linked to price and insurance.
  • Clauses that leave one party with no meaningful remedy are vulnerable.
  • Trade practice and how the clause is applied in the market can sway the outcome.

Negligence, Goods and Services: What Can and Cannot Be Excluded

• Negligence (s2):

  • Death or personal injury: exclusion or limitation is void (s2(1)).
  • Other loss (e.g., property damage or economic loss): exclusion or limitation only if reasonable (s2(2)).
  • “At your own risk” wording and notices do not avoid these rules.

• Implied terms for goods and services (ss6–7):

  • For business-to-business sales, exclusions of implied terms as to title are void; other implied terms (quality, fitness for purpose) can only be excluded or limited if reasonable (s6).
  • For hire/hire-purchase/supply of goods, similar controls apply under s7.
  • In consumer contracts, the CRA 2015 prohibits exclusions of key implied terms outright.

Misrepresentation and Non-Reliance Clauses

• The rule:
  • Section 3 of the Misrepresentation Act 1967 (as amended) makes any term excluding or restricting liability for misrepresentation subject to UCTA’s reasonableness test (s11).
• Typical wording caught:
  • “No reliance” and “no representation” clauses, as well as wide “entire agreement” clauses, can restrict misrepresentation remedies and therefore face the reasonableness hurdle.
• Practical line:
  • Clear, tailored wording used between sophisticated parties may be upheld.
  • Boilerplate that conflicts with replies to enquiries or due diligence answers often fails.

Key Examples or Case Studies

• George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] 2 AC 803

  • Seed supplier’s limitation to the invoice price was struck down as unreasonable.
  • Factors: market practice (supplier often paid more in settlement), availability of insurance, and the imbalance created by the clause.

• Goodlife Foods Ltd v Hall Fire Protection Ltd [2018] EWCA Civ 1371

  • Fire suppression contractor limited liability to £10,000 and offered the customer the choice to buy wider protection or arrange insurance.
  • Held reasonable in a commercial context where risk and insurance were addressed openly and the price reflected the allocation.

• Last Bus v Dawsongroup and EvoBus [2023] EWCA Civ 1297

  • Standard form exclusions left the claimant with little or no realistic remedy for serious failings.
  • Court of Appeal held the relevant clause(s) unreasonable. The decision stresses that removing all meaningful recourse typically fails the test.

• Springwell Navigation Corp v JP Morgan Chase Bank [2010] EWCA Civ 1221

  • Non-reliance clauses created a contractual estoppel in a sophisticated investment context.
  • Still subject to reasonableness; upheld on the facts given the parties’ experience and the documents’ clarity.

• First Tower Trustees Ltd v CDS (Superstores International) Ltd [2018] EWCA Civ 1396

  • “No reliance”/entire agreement clause conflicted with specific replies to enquiries.
  • Held unreasonable: the clause would have stripped the tenant of a remedy for inaccurate pre-contract statements.

Practical Applications

• Decide if UCTA applies

  • Is this a business-to-business contract? If consumer-facing, check CRA 2015 first.
  • Are you dealing on one side’s written standard terms (s3)?
  • Is the clause an “exemption” in substance (e.g., time limits, strict notice, caps, no set-off)?

• Work through the reasonableness checklist

  • Timing: judge reasonableness at contract formation.
  • Transparency: was the term clear, prominent and negotiated?
  • Alternatives: was there a real choice (e.g., different pricing for different risk levels)?
  • Insurance: could the party manage the risk through insurance (and at what cost)?
  • Market practice: do competitors adopt similar terms, and how are they applied?

• Drafting tips

  • Never attempt to exclude liability for death or personal injury due to negligence.
  • Avoid wording that removes all meaningful remedies; preserve a baseline remedy.
  • Link liability caps to realistic risk, the contract price and available insurance.
  • Offer options: a standard cap plus a priced option for higher cover.
  • Make non-reliance and entire agreement clauses consistent with pre-contract Q&A and replies to enquiries.
  • Ensure notice and time-bar provisions are practical and not unduly onerous.

• Litigation strategy

  • Evidence matters: gather negotiation records, term sheets, insurance discussions, tender comparisons and industry norms.
  • Remember the burden of proof: the party relying on the clause must show reasonableness.
  • Consider severance: a court may strike out an unreasonable part but leave the rest intact, if the remainder makes sense.

• Procurement and contract management

  • Keep a standard “UCTA-ready” playbook: caps, carve-outs (fraud, deliberate default), insurance positions and alternative packages.
  • Document the commercial rationale for risk allocation at the time of contracting.

• Cross-border points

  • Check s26 (international supply) and s27 (choice of law/close connection). A foreign law clause may not displace UCTA where there is a strong UK connection.

Summary Checklist

• Identify if UCTA 1977 or CRA 2015 governs the contract.
• Classify the term: exclusion, cap, time bar, non-reliance, or “no set-off”.
• Apply section 2:
  • Death/personal injury from negligence: void.
  • Other negligence loss: must be reasonable.
• For goods/services in B2B deals, sections 6–7: exclusions of implied terms require reasonableness.
• Where contracting on standard terms, section 3 applies: exclusions for breach must be reasonable.
• Misrepresentation disclaimers (Misrep Act s3): subject to reasonableness.
• Reasonableness (s11/Schedule 2): assess at formation; consider bargaining strength, alternatives, awareness, practicability and insurance.
• Burden of proof (s11(5)): on the party relying on the clause.
• Avoid clauses that remove all meaningful remedies; link caps to price and insurance.
• Keep documents showing negotiation, alternatives and market practice.

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