ABSTRACT
So far in this section of the book we have concentrated on the terms of a contract and how these reflect the obligations the parties owe to each other. This chapter shifts the focus to look at how the judiciary has dealt with unfair terms in contracts. As in other chapters, it is important to start by making it clear that different approaches to unfair bargains are apparent from case law and these reflect different conceptions of the role of contract law and notions of what is fair and reasonable. Whilst the classical model of contract recognises that unfairness occurs, the focus is on procedural rather than substantive unfairness. This means that traditionalists have been unwilling to intervene to upset a contract which has been negotiated in a fair way. But even with the introduction of legislation and the development of doctrines to protect the parties against manifestly unfair contracts, it remains the case that contractual terms are not set aside lightly. The courts and legislature will only intervene to mitigate the effects of extreme behaviour. As Atiyah (1979) has explained:
The view that the best contestant should be allowed to get a better outcome has become more contentious since the time when the classical model first came to dominate the law of contract. In truth, the courts have always found it hard to separate questions of unfair negotiations from unfair terms. The growth of welfarism within the law of contract has encouraged the courts and legislature to intervene to limit the autonomy of contracting parties where significant inequalities of bargaining power are reflected in contractual terms. This approach to the subject has been particularly evident in the field of consumer contracts where there has been recognition that the growth of large-scale businesses and standard form contracts means that consumers have no power to either negotiate the terms of the contract or suggest alterations. The courts and legislature have been particularly diligent in their approach to the regulation of exclusion clauses which tend to limit and exclude liability rather than define positive obligations.
