Lecture 12
UCTA Pt2 The Test of Reasonableness
UCTA 1997: Recap
• UCTA applies only to business-to-business contracts.
• It invalidates certain types of terms: terms purporting to exclude liability for negligently causing
injury or death or, in sales, for breach of the implies warranty of the title.
• It provides that certain other terms are valid only if they satisfy the ‘requirement of
reasonableness’. Those are:
• Exclusions of liability for negligence
• Exclusions of the implied warranties under the Sale of Goods Act 1979 of the quality, description
• Exclusions for breach of contract, or terms allowing performance ‘substantially different’ from
expected.
Requirement of reasonableness (s11 and Schedule 2)
• The “requirement of reasonableness”: the term must have been a “fair and reasonable one” to
include (s 11)
• For relevant factors see UCTA Schedule 2. These include, eg, bargaining power and whether
customer ought to have known of the term.
• S 11(4) addresses monetary limits on liability: it states that regard must be had to the resources
of party to meet the liability and whether it could be covered by insurance.
• The assessment of reasonableness is “highly fact specific” (Bates v Post Office)
Satisfying the requirement of reasonableness
• In Goodlife Foods v Hall Fire Protection 2018, a clause excluding all liability, including for
negligence, of the supplier of a fire prevention system was upheld as reasonable
• The judge held
• parties were of approximately equal bargaining power
• Customer was in ‘the best position to place its own insurance’
• the clause was ‘not buried away in a raft of small print’
(n) example
• Contrast Bates v Post Office, where several clauses relied on by the Post Office failed the test of
reasonableness.
• Fraser J held the parties were “not remotely equal. In fact, they are almost uniquely unequal”
CRA 2015
CRA 2015 Scope
1
UCTA Pt2 The Test of Reasonableness
UCTA 1997: Recap
• UCTA applies only to business-to-business contracts.
• It invalidates certain types of terms: terms purporting to exclude liability for negligently causing
injury or death or, in sales, for breach of the implies warranty of the title.
• It provides that certain other terms are valid only if they satisfy the ‘requirement of
reasonableness’. Those are:
• Exclusions of liability for negligence
• Exclusions of the implied warranties under the Sale of Goods Act 1979 of the quality, description
• Exclusions for breach of contract, or terms allowing performance ‘substantially different’ from
expected.
Requirement of reasonableness (s11 and Schedule 2)
• The “requirement of reasonableness”: the term must have been a “fair and reasonable one” to
include (s 11)
• For relevant factors see UCTA Schedule 2. These include, eg, bargaining power and whether
customer ought to have known of the term.
• S 11(4) addresses monetary limits on liability: it states that regard must be had to the resources
of party to meet the liability and whether it could be covered by insurance.
• The assessment of reasonableness is “highly fact specific” (Bates v Post Office)
Satisfying the requirement of reasonableness
• In Goodlife Foods v Hall Fire Protection 2018, a clause excluding all liability, including for
negligence, of the supplier of a fire prevention system was upheld as reasonable
• The judge held
• parties were of approximately equal bargaining power
• Customer was in ‘the best position to place its own insurance’
• the clause was ‘not buried away in a raft of small print’
(n) example
• Contrast Bates v Post Office, where several clauses relied on by the Post Office failed the test of
reasonableness.
• Fraser J held the parties were “not remotely equal. In fact, they are almost uniquely unequal”
CRA 2015
CRA 2015 Scope
1
