Question 1

The contra proferentem rule is not applied stringently to clauses which exclude liability altogether.

Accepted Answer

A) True 
 B)False  False

Question 2

A clause purporting to exclude or restrict liability for misrepresentation may be subject to both UCTA 1977 and the Misrepresentation Act 1967.

Accepted Answer

In the United Kingdom, clauses that aim to exclude or restrict liability for misrepresentation are indeed subject to the provisions of both the Unfair Contract Terms Act 1977 (UCTA 1977) and the Misrepresentation Act 1967.

Under the Misrepresentation Act 1967, particularly Section 3, any term that would exclude or restrict liability for misrepresentation must satisfy the test of reasonableness. This means that the clause must be fair and reasonable in the circumstances when the parties entered into the contract. If a court finds that the term is not reasonable, it will not be enforceable.

The Unfair Contract Terms Act 1977 further reinforces this position. UCTA 1977 applies to business-to-business contracts and, to a lesser extent, to business-to-consumer contracts. It stipulates that a business cannot exclude or restrict its liability for death or personal injury resulting from negligence. For other types of loss or damage, any term that aims to limit liability must pass the 'reasonableness test' as set out in Section 11 of UCTA 1977. This test takes into account factors such as the strength of the bargaining positions of the parties, whether the customer received an inducement to agree to the term, and whether the customer knew or ought reasonably to have known of the existence and extent of the term.

When it comes to misrepresentation, Section 2(2) of UCTA 1977 specifically addresses exclusion clauses for misrepresentation. It states that a person cannot by reference to any contract term or to a notice given to persons generally or to particular persons exclude or restrict his liability for misrepresentation, unless the term or notice satisfies the requirement of reasonableness.

Therefore, if a clause in a contract purports to exclude or restrict liability for misrepresentation, it must be assessed under both the Misrepresentation Act 1967 and UCTA 1977 to determine its validity. If it fails the reasonableness test under either Act, it will not be enforceable, and the party making the misrepresentation may still be held liable. It is always advisable for parties to seek legal advice when drafting or agreeing to such clauses to ensure that they are compliant with the relevant legislation.

Question 3

Which of the following statements about the Unfair Contract Terms Act 1977 are correct? Please select all that apply.

Accepted Answer

A)   The Act is concerned with all contract terms which may be thought to be 'unfair'.
B)   The Act is not confined to contractual terms.
C)   The Act applies to both consumer and non-consumer contracts.
D)   Under the Act, terms are only considered unfair if they fail the statutory test of reasonableness. B,D

Question 4

Which of the following factors might be taken into account in assessing whether an exclusion or limitation clause is unreasonable for the purposes of UCTA 1977?

Accepted Answer

A)   The relative strengths of the parties' bargaining positions.
B)   Whether one party received an inducement to agree to the term.
C)   Whether it was reasonable at the time to expect that compliance with a condition which prevented the triggering of an exclusion or limitation clause.
D)   Whether the party knew or ought reasonably to have known of the existence and extent of the term relied on by the other party.

Question 5

What has not changed under the Consumer Rights Act 2015?

Accepted Answer

A)   The requirement of a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer.
B)   The requirement of good faith.
C)   The test of unfairness is no longer limited to terms which have not been individually negotiated (standard terms) 
D)   A term may be excluded from an assessment of fairness only if it is transparent and prominent.
E)   g. Director General of Fair Trading v First National Bank plc) , requiring a 'significant' imbalance in the parties' rights and obligations under the contract.

Question 6

Why is the fundamental breach rule defunct? Please select all that apply.

Accepted Answer

A)   Major difficulties were faced in attempts to describe a 'fundamental' term.
B)   The very nature of the doctrine of fundamental breach made it impossible to construct a rational theory, which undermined legal certainty.
C)   It contradicts a basic principle of contract law; that it is for the parties, and not the court, to make the bargain.
D)   It could be excluded where the contract is affirmed after a fundamental breach has been committed.

Question 7

The court has power at common law to strike down unfair terms in a contract.

Accepted Answer

A) True 
 B)False

Exam 14: The Control of Exclusion Clauses and Unfair Terms