At present unfair contract terms are governed by two separate pieces of legislation; the Unfair Contract Terms Act 1977 (UCTA); and the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR). In January 2001, the Law Commission were asked to rewrite the law of unfair contract terms as a single regime, creating an Unfair Contract Terms draft Bill applicable to the whole of the UK.
Until the 1970's there was no statutory control upon this area and the exemption clause was given effect. Even when the courts attempted to deal with the problem, ultimately the common law proved unequal to the ingenuity of those who sought the protection from the exemption clause. However, judicial control was prevailing, attacking exemption clauses on incorporation and interpretation initially. The judiciary, particularly Lord Denning MR, then developed an additional weapon in the fight against exemption clauses; the doctrine of fundamental breach. According to the doctrine, no exemption clause, however unambiguous, could, as a matter of law, protect a party from liability for a serious or fundamental breach of contract. This doctrine was buried in the House of Lords case Photo Production Ltd v. Securicor Transport Ltd, however the courts continued to apply this wherever convenient, thereon referring to it as a ‘serious breach'.
Finally in the 1970's, Parliament stepped in, introducing detailed legislation grafted on the pre-existing common law rules, somewhat maintaining the doctrine of ‘serious breach'. UCTA, despite its broad title, is concerned with ‘contractual provisions and notices seeking to limit or exclude liability' (including non-contractual terms and notices), removing the need to stretch the common law through ‘strained construction'.
Although UCTA is considered a major landmark in the development of contract law, curbing the effectiveness of many exemption clauses, it has been widely criticised for numerous reasons (only some of which will be addressed). UCTA...