ABSTRACT
As noted earlier, there is a relatively long history of legislative involvement aimed at curbing the excesses of exemption clauses.32 However, the first statute of general importance came in 1973 with the Supply of Goods (Implied Terms) Act, which controlled the exclusion or restriction of liability for breach of terms implied under the (then) Sale of Goods Act 1893. The 1973 provisions were the product of the first Law Commission Report on Exemption Clauses (Law Com No 24, 1969) and the subsequent (and much more wide ranging) statute, the Unfair Contract Terms Act 1977, again adopted the general approach (and many of the detailed recommendations) of the second Law Commission Report (No 69, 1975) – although, in itself, it was the product of a Private Members’ Bill. The Unfair Contract Terms Act 1977 is now the principal mechanism for the control of exemption clauses, but before examining its provisions, it is instructive to examine some of the comments made by the Law Commission in justifying the need for more wide ranging legislative intervention:
Law Commission, Second Report on Exemption Clauses in Contracts, Law Com No 69, 1975, London: HMSO
11 The Case for Control
It is clear that exemption clauses are much used both in dealings with private individuals and in purely commercial transactions. We are in no doubt that, in many cases, they operate against the public interest and that the prevailing judicial attitude of suspicion, or indeed of hostility, to such clauses is well founded. All too often, they are introduced in ways which result in the party affected by them remaining ignorant of their presence or import until it is too late. That party, even if he knows of the exemption clause, will often be unable to appreciate what he may lose by accepting it. In any case, he may not have sufficient bargaining strength to refuse to accept it. The result is that the risk of carelessness or of failure to achieve satisfactory standards of performance is thrown on to the party who is not responsible for it or who is unable to guard against it. Moreover, by excluding liability for such carelessness or failure, the economic pressures to maintain high standards of performance are reduced. There is no doubt that the misuse of these clauses is objectionable. Some are unjustified. Others, however, may operate fairly or unfairly, efficiently or inefficiently, depending on the circumstances: for example, the cost and practicability of insurance may be factors in determining how liability should be apportioned between two contracting parties. The problem of devising satisfactory methods of controlling the use of these clauses and, indeed, of identifying some of them has proved both difficult and complicated.
