Unfair Contract Terms : Freedom of Contract: CRA 2015 Essay Plan PDF

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Unfair Contract Terms / Freedom of Contract/ CRA 2015 Essay Plan The Consumer Rights Act 2015 (Hereinafter CRA 2015), supplanted three pieces of consumer legislation. The Sale of Goods Act 1979, the Supply of Goods and Services Act 1982 and the Unfair Terms in Consumer Contracts Regulations 1999 have since been replaced by the CRA 2015. Despite the CRA 2015 at times undermining a consumer’s right to freedom of contract, the legislation upholds the balance of commercial freedom and the rights of vulnerable parties by offering good faith, clarity and limits liability. Unfair Terms In S.62(4) of the CRA 2015, it states that ‘a term is unfair if, contrary to the requirement of good faith, it causes significant imbalance in the parties’ rights and obligations’ under that contractual agreement. The doctrine of good faith is outlined by the European Commission as a ‘standard of conduct characterised by honesty, openness and consideration for the interests of the other party’. In addition, the Act determines unfairness by compelling the courts to ‘take into account the nature of the subject matter…[and] all the circumstances existing when the term was agreed’. In Health & Case Management Ltd v The Physiotherapy Network Ltd (2018), there was a bona fide express term within the contract between the claimant and defendant. In the contract, it required HCML exclusively referring their patients to TPNL. However, HCML breached this clause and were referring patients to other clinics without TPNL’s knowledge. They were found guilty of breaching their obligation, rendering the terms unfair. Furthermore, CRA 2015 prevents unreasonable conduct and supports contractual terms. Unfair Terms (Freedom of Contract)

However, S.62(4) of the CRA 2015 requires good faith to exist between parties in order for a contractual term to be considered fair. However, Bridge describes good faith as an ‘imperfect translation of ethical standard[s] into legal ideology’. Therefore, good faith is inconsistent with the common law principle of freedom of contract. This fundamental principle is integral to the formation of contract. For good faith to interfere with this would be seen as a betrayal to this freedom. The ruling in Printing and Numerical Registration Co v Sampson [1985] outlines that parties should have the ‘upmost liberty of contracting, and…their contracts

when entered into freely and voluntarily shall be held sacred and enforced by Courts of Justice’. Similarly, in MSC Mediterranean v Cottonex [2016], there was a notable reluctance to apply good faith as it undermined the terms of the parties’ contract. Lord Justice MooreBick’s (repudiating the ‘liberal approach’ of Arnold v Britton [2015]) ratio found that judges should not look for a ‘general organising principle’ such as good faith to be universally applied to every contractual dispute. Therefore, the preservation of freedom of contract must be paramount. If parties wished to implement good faith, they would’ve expressly said so and they should have the liberty to exclude good faith obligations if they should please. Hence, the courts of the United Kingdom should respect the parties’ liberties and should not enforce an invoking of good faith. It can subvert the core principles of freedom of contract, thus undermining the terms of potential contracts. However, in a commercial contract, good faith tends to be an implied term, therefore, freedom of contract will not be infringed if there’s a general assumption that good faith is present. Santier argues that the courts ‘are more at ease with good faith [when] it arises [with] implied terms.’ This is evident In Yam Seng Pte Ltd v International Trade Corporation (2013) whereby ITC had breached its contractual obligations by threatening to use another distributer of products instead of Yam Seng Pte. Justice Leggatt stated that the ‘there was an implied term…that the parties would deal…in good faith’, ruling in favour of Yam Seng. Furthermore, with the omnipresence of implied good faith operating in tandem with the CRA 2015, it is futile to suggest freedom of contract is breached.

Clarity According to S.68 of the CRA 2015, in a contractual agreement, the terms between parties must be ‘in plain and intelligible language and… legible’. Moreover, it is evident that the CRA 2015 facilitates transparency within a contract, ultimately upholding fairness between the parties. Additionally, despite occurring before the inception of the CRA 2015, in AEG(UK) Ltd v Logic Resource Ltd [1996], the Court of Appeal held that enough effort must be made to draw the other party’s attention to a term that may seem ambiguous. However, Prior to the enactment of the CRA 2015, the European Court of Justice in Kásler v OTP Jelzálogbank Zrt (2014) ruled that transparency of terms should not be ‘reduced merely to their being formally and grammatically intelligible’ and must be considered in a broader manner along with economic consequences and the nature of the parties’ relationship must be clear and intelligible. Nevertheless, the Commission and Market Authority, compelled under

S.68 of the CRA 2015, enforces consumer rights through seeking court injunctions to prevent potential exploitation of ambiguous contractual terms. Hence, it is evident that the CRA 2015 protects vulnerable parties whilst upholding commercial freedom by offering transparency. Liability S.65 of the CRA 2015 can limit and exclude liability within a consumer contract. This Act aims restrict the power of exemption clauses, creating fairness within the contract. With the existence of exemption clauses, there already exists an inequality between the two parties, often with one party feeling aggrieved. With the CRA 2015, the burden of monetary liability could potentially be shared between the two sides, upholding both parties’ terms. Despite being limited between by Contra Proferentem and the CRA 2015, Rajski argues that Limitation Clauses can be used to ‘diminish [one’s] liability [making them] independent of fault’. In Photo Productions Ltd v Securicor Transport Ltd (1980), Securicor included a limitation clause whereby they would not be ‘responsible for any injurious act…by any employee…unless [the incident] could’ve been foreseen and avoided.’ The House of Lords affirmed the validity of this clause, resulting in Securicor not having to pay £615,000 of damages. S.65 of the CRA 2015 can facilitate improved contractual relations and when necessary, could encourage both parties to share the monetary liability of a contract. Conclusion The CRA 2015 facilitates a balance between commercial freedom and protects vulnerable parties. Despite this legislation at times restricting the fundamental concept of freedom of contract with the implementation of good faith, it aims to establish fairness between parties as opposed to restricting them. Moreover, the CRA 2015 offers clarity, protection against unfair terms and limits the liability of potentially exploitative parties....