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You are here: BAILII >> Databases >> The Law Commission >> UNFAIR TERMS IN CONTRACTS (A Joint Consultation Paper) [2002] EWLC 166(APPENDIX A) (3 July 2002) URL: http://www.bailii.org/ew/other/EWLC/2002/166(APPENDIX_A).html Cite as: [2002] EWLC 166(APPENDIX A) |
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APPENDIX AA.1 This appendix identifies some notable examples of protection afforded to businesses from unfair contractual terms in other jurisdictions. The systems of the following countries are considered: Australia, New Zealand, Canada, the USA, France, Germany, the Netherlands and Sweden. This is not a comprehensive study and is intended simply to highlight some of the various methods of protection that exist. A.2 There are three approaches taken to unfair terms in business-to-business contracts:
PROTECTION FROM UNFAIR TERMS AFFORDED TO BUSINESSES IN OTHER JURISDICTIONS
(1) the business is treated as a consumer for the purposes of legislation;
(2) there are discrete controls governing business-to-business contracts; and
(3) pro-active preventive measures exist to reduce the need for litigation.
Most countries appear to utilise at least two of these methods of control.
1. Australia
A.3 There are controls on unfair terms in business-to-business contracts at both federal and state level in Australia. Certain sections of the federal Trade Practices Act 1974 treat businesses as consumers in certain circumstances, and some states have enacted the relevant sections in their own legislation. There are also provisions in the federal Act that deal specifically with unconscionable conduct in business-to-business contracts and include mechanisms to prevent such conduct continuing.Businesses treated as consumers
A.4 At federal level, the Trade Practices Act 1974 (the "1974 federal Act") implies various provisions into consumer contracts for sale, exchange, lease-hire or hire-purchase that are similar in effect to those implied by SOGITA in the UK.[1] Any term that attempts to exclude these provisions is void.[2] Some businesses will fall within the definition of a "consumer" because that definition is framed in terms of the goods or services concerned, their price and the use for which they are intended, rather than the status of the parties to the contract. Section 4B(1) provides:For the purposes of this Act, unless the contrary intention appears:
(a) a person shall be taken to have acquired goods as a consumer if, and only if:
(i) the price of the goods did not exceed the prescribed amount [currently $40,000[3]]; or
(ii) where that price exceeded the prescribed amount – the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption or the goods consisted of a commercial vehicle;
and the person did not acquire the goods, or hold himself or herself out as acquiring the goods, for the purpose of re-supply or for the purpose of using them up or transforming them, in trade or commerce, in the course of a process of production or manufacture or of repairing or treating other goods or fixtures on land; and
(b) a person shall be taken to have acquired particular services as a consumer if, and only if:
(i) the price of the services did not exceed the prescribed amount [$40,000[4]]; or
A.5 With the exception of the provisions as to title, encumbrances and quiet possession, corporations[6] can limit liability for breach of the warranties or conditions provided for by the Act to certain remedies.[7] However, any limitation must be reasonable and cannot apply to contracts for the supply of goods or services ordinarily acquired for personal, domestic or household use or consumption. A.6 In September 1983 the state and federal Ministers for Consumer Affairs agreed to uniform legislation. However, only the resulting legislation of Western Australia[8] and the Northern Territory[9] incorporated regulation of implied warranties.[10] In Western Australia the approach is identical to that of the federal Act.[11] In the Northern Territory, there is no value threshold; a contract will be a consumer contract (in relation to warranties) if the goods are not acquired, or held out as being acquired, for the purpose of re-supplying them, using them up or transforming them in the course of a business, or in connection with the repair or treatment of other goods or fixtures on land.[12] The relevant implied undertakings, and the prohibition on their exclusion, are the same as in the federal statute,[13] but reasonable limitation is not confined to contracts where a corporation is the supplier.[14] A.7 One further method of protection is contained in the Contracts Review Act 1980 of New South Wales, which protects persons from using unjust[15] contracts or provisions. Under section 7 there are various avenues available to the court on a finding of an unjust contract or contractual provision,[16] but relief will only be granted in relation to contracts that are not entered into in the course of or for the purpose of a trade, business or profession. The one exception is persons involved in farming undertakings, who are afforded protection under the Act if the undertaking is carried on wholly or principally in New South Wales.[17](ii) where that price exceeded the prescribed amount – the services were of a kind ordinarily acquired for personal, domestic or household use or consumption.[5]
Discrete controls on business-to-business contracts
A.8 Section 51AC(1)[18] of the 1974 federal Act prohibits unconscionable conduct[19] in business transactions that are worth less than $1 million,[20] but applies only to contracts for the supply or acquisition of goods or services to or from a person other than a public limited company.[21] A.9 Section 51AC(3) provides a non-exhaustive list of factors relevant to the consideration of unconscionability,[22] and in theory the scope of the section is quite wide.[23] However, in practice it appears to be limited to situations where the business is in a position comparable to that of a consumer – for example, where unfair pressure or tactics are exerted on a party not in a position to protect its interests.[24] A.10 On finding unconscionable conduct the court can either grant an injunction,[25] or it can make certain other orders if it considers that they will compensate a party, in whole or in part, for loss or damage or will prevent or reduce any loss or damage.[26]2. New Zealand
A.11 There is no general protection from unfair terms in New Zealand. Instead there is legislation targeting specific contracts such as hire-purchase, insurance, lay-by sales, door-to-door sales and unsolicited goods. Businesses are given protection by(1) legislation relating to guarantees in contracts for the sale or supply of goods and services, where the definition of a consumer is extended to include businesses acting in certain capacities;[27]
(2) legislation regulating credit contracts, which treats certain businesses and consumers alike;[28] and
(3) legislation relating to unfair trading practices, which offers pro-active prevention of such practices by means of application to the court.[29]
Businesses treated as consumers
A.12 The Consumer Guarantees Act 1993 implies, in contracts for the supply of goods, guarantees of title, quality, fitness for particular purpose, compliance with description or sample, reasonable price, and availability of repair facilities and spare parts;[30] and, in contracts for the supply of services, guarantees of reasonable care, skill, fitness for purpose, time of completion, and price.[31] Contracting out of these guarantees is prohibited.[32] The definition of a consumer focuses on the intended use of the goods or services rather than the nature of the purchaser. A business will therefore benefit from protection under the Act if it(a) Acquires from a supplier goods or services of a kind ordinarily acquired for personal, domestic, or household use or consumption; and
(b) Does not acquire the goods or services, or hold [itself] out as acquiring the goods or services, for the purpose of –
(i) Resupplying them in trade; or
(ii) Consuming them in the course of a process of production or manufacture; or
A.13 The guarantees provided by the Act cannot normally be excluded.[34] However, if goods or services are acquired (or expressed to be acquired) by a consumer for the purposes of a business,[35] the supplier can contract out of the guarantees provided that the agreement is in writing, or, if this is not possible because the supplier is unaware of the purchaser's acceptance, the supplier has "clearly displayed the terms and conditions of the service at every place of the supplier's business".[36] As a result, instances of protection actually extending to a business in practice are likely to be few and far between. A.14 The Credit Contracts Act 1981 contains protection for debtors in certain types of credit contracts. Part I offers protection from oppressive terms[37] in all credit contracts, whether between a creditor and a consumer or a creditor and a business. If the court finds a contract to be oppressive, it can re-open the contract and make various orders as to how the parties must proceed.[38](iii) In the case of goods, repairing or treating in trade other goods or fixtures on land.[33]
0.15 Part II of the Act requires disclosure in "controlled credit contracts"[39] and provides penalties for non-disclosure.[40] This part appears to be aimed at protecting small businesses, or those inexperienced in the credit finance industry, as section 15(d)–(m) excludes various types of contracts from the definition of a "controlled credit contract". Many of these exclusions focus on situations where the debtor is either large enough, experienced enough in credit contracts, or entitled to assume that the creditor will protect the debtor's interests.[41]
Pro-active preventive measures
A.16 The Fair Trading Act 1986 prohibits misleading and deceptive conduct in trade[42] generally,[43] and in relation to the "nature, manufacturing process, characteristics, suitability for a purpose, or quantity of goods",[44] the "nature, characteristics, suitability for a purpose, or quantity of services"[45] and the "availability, nature, terms or conditions, or any other matter" relating to offers of employment.[46] There are similar provisions prohibiting false representations in relation to the supply of goods or services, or land.[47] A.17 Contravention of the Act is a criminal offence[48] but a civil remedy is also available. On an application from the Commerce Commission, the court can grant an injunction to prevent both further breaches and future possible breaches of the Act.[49] The Commission can also seek an order that a person in contravention of any of the parts of the Act disclose or publicise information relating to the unfair practice,[50] and the court has further powers to declare contracts void or partially enforceable.[51]3. Canada
A.18 Protection from unfair terms in Canada is either incorporated into consumer protection legislation or only applies to businesses that are in a comparable position to the consumer. There is also some legislation providing pro-active prevention, but it is similarly limited in its scope.Businesses treated as consumers
A.19 A number of provinces imply terms into consumer contracts similar to those in the SGA 1979[52] and prohibit their exclusion. In some of these statutes the definitions used create protection for certain narrow categories of business-to-business transactions. Saskatchewan treats family farming corporations, and individuals buying goods for agricultural or fishing purposes, as consumers under its Consumer Protection Act 1996.[53] The North West Territories' 1998 legislation of the same name[54] protects businesses party to all contracts for goods or services except(a) a contract of sale of goods that are intended for resale by the buyer in the course of his or her business,
(b) a contract of sale to a retailer of a vending machine or a bottle cooler to be installed in his or her retail establishment,
(c) a contract of sale to a corporation, and
(d) a sale in which the cash price of the goods or services or both exceeds $7,500. [55]
Discrete controls on business-to-business contracts
A.20 In Ontario, the Unconscionable Transactions Relief Act 1990 empowers the courts to re-open a transaction or former settlement and take account; order repayment of excess; or set aside or revise any security given or agreement made in respect of money-lending.[56] Any such transaction can fall within the scope of the Act; but it would appear that only businesses which are in positions comparable to that of a consumer can benefit from the protection, because the Act applies only "where the terms of the bargain are grossly unfair and were procured by the one party as a result of the other's weakness or necessity being taken advantage of."[57]Pro-active preventive measures
A.21 Preventive measures exist in legislation prohibiting unfair trade practices in a number of provinces.[58] In this section we focus on the legislation in Saskatchewan and British Columbia. A.22 In Saskatchewan, Part II of the Consumer Protection Act prohibits "unfair practices"[59] and lists the "taking advantage of a consumer by including in a consumer agreement terms or conditions that are harsh, oppressive or excessively one-sided" as an unfair practice.[60] Business-to-business contracts will gain protection under the Act if the goods involved are "ordinarily used for personal, family or household purposes".[61] A.23 The Act provides for the appointment of a Director,[62] who has powers to investigate possible contraventions of Part II,[63] and section 17 allows a person to enter into a "voluntary compliance agreement" if the Director's provisional finding is that an unfair practice is being committed or is about to be committed. A.24 British Columbia's Trade Practices Act[64] similarly protects consumers from deceptive or unconscionable practices.[65] However, only one form of business is affected by the Act: the protection applies to any form of disposition of personal or real property to an individual for purposes relating to a first time business opportunity scheme. This is a scheme(a) in which the individual has not been previously engaged,
(b) for which the initial payment does not exceed $50,000 or another amount prescribed by the Lieutenant Governor in Council, and
(c) which requires
(i) the expenditure of money and management services by the consumer, and
A.25 There are provisions in the Act (similar to those in the Saskatchewan legislation) establishing a Director and his or her duties and powers.[67] Contravention of the provisions relating to deceptive or unconscionable conduct is an offence.[68](ii) the performance of personal services by the consumer or another person.[66]
4. The USA
A.26 Control of unfair terms in the USA is contained in section 2-302 of the Uniform Commercial Code (the "UCC"), which has been enacted in various forms by all states except Louisiana. The protection is not limited to any particular form of contract, but the approach taken by the courts to business contracts is stricter and more rigorous than the approach taken to consumer contracts.Businesses treated as consumers
A.27 Section 2-302 of the UCC extends the common law doctrine of unconscionability. It provides:A.28 In principle, the section applies to all contracts for the sale of goods, whether between businesses or involving a consumer. However, when applying the section to business contracts the courts examine the relative strengths and vulnerabilities of the parties, finding unconscionability only when one party is in a position of weakness. Examples include large-scale business dealing with uneducated, individual concerns;[70] a party who is inexperienced within the industry in question or with the technical language involved;[71] a lack of any realistic alternatives to the contract;[72] an inability of one party to assess the commercial risk involved;[73] and acceptance of a degree of risk beyond the boundaries of commercial reasonableness.[74] A.29 Whilst the section could potentially apply to any term of the contract – or indeed the contract as a whole – it has not been invoked (except in a few anomalous cases[75]) in any situations that would go beyond the protection afforded in the UK under common law principles or UCTA.If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.[69]
5. France
A.30 The Code de la Consommation regulates unfair terms in contracts between "professionals" and "non-professionals or consumers". These terms are not defined in the Code, but until the enactment of Directive 93/13/EEC the French courts treated businesses as consumers if they were engaged in contracts where they had the same level of knowledge as a consumer. For example, the Cour de Cassation held that an estate agent contracting for the installation of a burglar alarm on its premises was a consumer, and a clause that purported to limit the installer's liability was subject to review under the law on abusive clauses.[76] A.31 After 1993, the courts took a more restrictive approach, influenced by the definition of "consumer" in the Directive, which includes only "personne physique".[77] The current approach appears to be that set out by the Cour de Cassation in a 1995 case.[78] The court held that a printing company could not challenge a clause in its contract with EDF (the French electricity company) which limited EDF's liability for power failures. The court stated that the legislation did not apply to contracts for goods or services which are directly related to the business activities of the parties.[79] A.32 The French system has not expressly rejected the notion of treating certain classes of traders on the same footing as consumers for the purposes of protection from unfair terms.6. Germany
A.33 Protection from unfair terms is contained in the German Civil Code (das Bürgerliches Gesetzbuch, the "BGB"). There are provisions relating to general contractual conduct, which treat businesses as consumers,[80] as well as specific provisions relating to standard terms,[81] of which some treat businesses the same as consumers and others deal with businesses separately.[82] There are also pro-active preventive measures in separate legislation.[83]Businesses treated as consumers
General contractual conduct
A.34 Article 157 of the BGB contains a requirement that "Contracts shall be interpreted according to the requirements of good faith, giving consideration to common usage." A.35 Article 138 states that a legal transaction is void if it is against public policy[84] or if a person gains a disproportionate pecuniary advantage by "exploiting the need, inexperience, lack of sound judgment or substantial lack of will power of another".[85] This article will probably affect only small or inexperienced businesses.Standard terms
A.36 Section 2 of Book 2 of the BGB only applies to standard business terms that have not been individually negotiated. Standard business terms are terms which are "pre-established for a multitude of contracts which one party to the contract (the user) presents to the other party upon the conclusion of the contract".[86] A.37 Specific protection from unfair terms is contained in Articles 305(2), 305c and 307–309. However, Articles 305(2),[87] 308[88] and 309[89] do not apply to "standard business terms which are proffered to a businessperson, a legal person governed by public law or a special fund governed by public law."[90] The articles applicable to business-to-business contracts are therefore Articles 305c and 307. A.38 Article 305c prevents surprise clauses from forming part of the contract. These are clauses whichA.39 Article 307(1) provides that standard business terms are invalid if,in the circumstances, in particular in view of the outward appearance of the contract, are so unusual that the contractual partner of the user could not be expected to have reckoned with them.[91]
contrary to the requirement of good faith, they place the contractual partner of the user at an unreasonable disadvantage. An unreasonable disadvantage may also result from the fact that the provision is not clear and comprehensible.
Article 307(2) goes on to provide that, in case of doubt, unreasonable disadvantage is assumed if a provision cannot be reconciled with the essential basic principles of the statutory rule from which it deviates, or so restricts the essential rights or duties arising from the nature of the contract that there is a risk that it will jeopardise the purpose of the contract.
A.40 Although Articles 308 and 309 do not apply to businesses,[92] terms that fall within these provisions are still subject to Article 307, and can be struck down, even in business-to-business contracts, if the test in that article is satisfied.[93]Discrete controls on business-to-business contracts
A.41 Under section 1 of the UKlaG,[94] a party using standard terms which are void under Articles 307–309 of the BGB, or recommending the use of such terms, can be required to stop using them or to retract any such recommendation. Sections 3–4 of the UKlaG define the organisations and institutions which can bring proceedings under section 1.[95]Pro-active preventive measures
A.42 There are two specific forms of protection from unfair terms extended to businesses in the Netherlands: legislation which requires disclosure of standard terms (even if they are not potentially unfair) and legislation which polices the reasonableness of standard terms. (There is also a list of terms that are presumed to be unfair, but this is only of direct application to consumers.) Both forms of protection are extended only to small businesses. Larger businesses are protected only by a general requirement of good faith.[96]7. The Netherlands
A.43 Section 3 of Title 5 of Book 6 of the Dutch Civil Code affords protection from unreasonably onerous and surprising written[97] stipulations in standard form contracts.[98] Article 6:233 grants power to annul terms if they are unreasonably onerous to the other party or the user of the standard form contract has not "afforded the other party a reasonable opportunity to take cognisance of the general conditions".[99] To afford such reasonable opportunity, the user of the term simply needs to ensure that the other party has a copy of the terms before or at the time the contract is made,[100] or at least that the other party has been informed of the term before the formation of the contract, and that it is open for inspection on request. The user can either provide a copy personally or else deposit it with the relevant chamber of commerce and industry, or with the registrar of a court, for collection by the other party.[101] A.44 Application of this protection in business-to-business contracts appears to be limited to small businesses or businesses with little experience in the industry in question, because Article 6:235 excludes medium and large businesses (those that employ 50 or more persons, or are obliged to publish their annual accounts[102]) and businesses which regularly use the same or similar general conditions in other contracts. However, businesses which are not protected by section 6:233 may, in exceptional cases, be able to rely on Article 6:248, which provides for a general requirement of good faith in all contracts. It may be contrary to good faith in certain circumstances to invoke a (valid) standard term, and the courts may look to Articles 6:233, 6:236 and 6:237[103] for guidance when applying Article 6:248 to standard terms in such contracts.[104]Businesses treated as consumers
A.45 As in the German system, the Dutch Civil Code also includes lists of clauses that are either automatically unfair[105] or presumed to be unfair[106] in consumer contracts. However, it appears that (as in the German system) terms falling within these lists can still be held invalid in business-to-business contracts under Article 6:233, and the courts will look to these lists for guidance when applying Article 6:233 to business-to-business contracts.Discrete controls on business-to-business contracts
A.46 Certain interest groups can seek a declaration that a stipulation is unreasonably onerous.[107] Such claims lie against either the user of the term or any legal person who promotes its use, but actions can only be brought if the interest group has given the user an opportunity to modify the general conditions after mutual consultation so as to remove the objectionable term.[108] The Court of Appeal in the Hague has exclusive jurisdiction to hear actions,[109] and the judge has authority to indicate the method by which the unreasonably onerous stipulation should be removed.[110] The methods available include prohibiting the use or promotion of the stipulation; ordering revocation of a recommendation to use it; and publication of the decision at the expense of one or more parties.[111] A.47 Furthermore, a party cannot seek to enforce terms that are so closely associated with terms already held onerous that the result would be unreasonable; and a party can seek an order preventing the use of a term that is the subject of declaration proceedings if such use would be unreasonable.[112]Pro-active preventive measures
A.48 There are two forms of protection afforded to businesses in Sweden.[114] The main provision is section 36 of the Contracts Act,[115] which provides a general prohibition against unreasonable terms in contracts. There is also the Terms of Contract between Tradesmen Act,[116] which provides for a pro-active regime to prevent the use of improper terms in contracts between tradesmen. A.49 All of the Swedish legislation is set against a background of consultation and co-operation between interest groups, big business and government. As a result many disputes are resolved before they reach court.8. Sweden[113]
A.50 Section 36 of the Contracts Act was introduced in 1976,[117] and provides that a contract term[118] can be modified or set aside if it is unreasonable. The section also provides that, in considering whether a term is unreasonable, the court should have regard not only to the contents of the agreement and the circumstances at the time it was formed but also to "subsequent circumstances, and circumstances in general".[119] Furthermore, where the term is "of such significance for the agreement that it would be unreasonable to demand the continued enforceability of the remainder of the agreement with its terms unchanged,"[120] the court has the power to modify other parts of the agreement or set it aside completely. A.51 Whilst not ruling out application to other contractual situations, the section is clearly aimed at protecting parties who are in the weaker position in the contract, and recognises that businesses can often be in such a position. Paragraph 2 provides that, when considering the application of the section,Businesses treated as consumers
particular attention shall be paid to the need to protect those parties who, in their capacity as consumers or otherwise, hold an inferior bargaining position in the contractual relationship.[121]
A.52 The Terms of Contract between Tradesmen Act[122] empowers the Market Court, an administrative body, to grant injunctions preventing a tradesman who demands the inclusion of an "improper" term in a contract from using the term, or a term of similar effect, in future contracts.[123] Both associations of tradesmen and the tradesman against whom the term in question was directed can bring a claim,[124] and once again the Act expressly provides that special consideration be given to the need to protect the "person who assumes an inferior position in the contract relationship".[125] However, an injunction should only be granted if it is in the public interest to do so.[126] The court will issue an injunction under the penalty of a fine unless there are special reasons not to do so, and the onus is then on the party who brought the claim to bring proceedings in the ordinary courts for imposition of the fine.[127] Finally, the Market Court is entitled to review a decision to grant an injunction if circumstances have changed or if some other special reason exists.[128] A.53 This Act has rarely been used and there is only one reported case on its effects. In this case, the Market Court prevented the City of Gothenburg from using a clause in a contract for the delivery of energy that gave the city the right unilaterally to alter the price and other terms during the ongoing contractual period.[129]Pro-active preventive measures
Note 1 There are implied undertakings relating to title, encumbrances and quiet possession (s 69); in contracts of sale by description, to conformance with that description (s 70); to quality or fitness (s 71); in contracts of sale by sample, to conformance with the sample (s 72); and in contracts for the supply of services, to care and skill (s 74). Under subsection (3), s 74 does not apply to
services that are, or are to be, provided, granted or conferred under:
(a) a contract for or in relation to the transportation or storage of goods for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported or stored; or
(b) a contract of insurance. [Back] Note 3 Trade Practices Act 1974, s 4B(2)(a). [Back] Note 5 Trade Practices Act 1974, s 4B(1). [Back] Note 6 Section 4 defines a corporation as any body corporate that
(a) is a foreign corporation;
(b) is a trading corporation formed within the limits of Australia or is a financial corporation so formed;
(c) is incorporated in a Territory; or
(d) is the holding company of a body corporate of a kind referred to in paragraph (a), (b) or (c). [Back] Note 7 In the case of goods, replacement or cost of replacement (of the same goods or an equivalent) or the repair or cost of repair of the goods. In the case of services, the supplying of the service again or the cost of having the service supplied again. See s 68A(1)(a) and (b). [Back] Note 8 Fair Trading Act 1987, Part III, ss 33–41, which incorporates the relevant parts of the federal Act into the state’s law. [Back] Note 9 Consumer Affairs and Fair Trading Act 1990, Part V, Div 2, ss 61–71. [Back] Note 10 Victoria’s Goods Act 1958 contains similar provisions to those of the federal Act, but the prescribed amount is $15,000 rather than $40,000, and commercial vehicles are not included (see s 85). The relevant exclusionary provisions are ss 95 (terms excluding the warranties are void) and 97(3) (terms reasonably limiting recovery), which apply to all contracts of sale. [Back] Note 11 Fair Trading Act 1987, s 6. [Back] Note 12 Consumer Affairs and Fair Trading Act 1990, s 5. [Back] Note 13 Sections 62–68. [Back] Note 15 The Contracts Review Act 1980, s 4(1), defines unjust as including “unconscionable, harsh or oppressive”. [Back] Note 16 The court can refuse to enforce any or all of the provisions of the contract; declare the contract void, in whole or in part; make an order varying the contract, in whole or in part; or make an order for execution of a land instrument, either varying the provisions of the instrument or terminating or otherwise affecting its operation or effect (s 7(1)(a)–(d)). [Back] Note 17 Contracts Review Act 1980, s 6(2). [Back] Note 18 There are equivalent provisions to s 51AC in the state legislation. [Back] Note 19 Inserted by the Trade Practices Amendment (Fair Trading) Act 1998. [Back] Note 20 Or an amount prescribed by regulations under s 51AC(7). [Back] Note 21 See s 51AC(1)(a) and (b). [Back] Note 22 Among these are the relative strength of the bargaining positions of the supplier and business consumer; whether there were conditions imposed on the business consumer that were not reasonably necessary for the protection of the legitimate interests of the supplier; whether the business consumer could understand any documents involved; whether there was any undue influence or pressure; and the extent to which the supplier was willing to negotiate with the consumer. See s 51AC(3). [Back] Note 23 It can apply to any contract or term that the court considers to fall within the scope of the considerations listed at s 51AC(3). [Back] Note 24 See, eg, Australian Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd [2000] FCA 1365, paras 39–51. [Back] Note 26 See s 87(1). Section 87(2) lists the various orders available. The court can declare the contract void, in full or in part; vary the contract; refuse to enforce any or all provisions; order a refund of money or return of property; order a payment of damages; order that a party pay for repair or new parts for goods supplied by them; or order the supply of specified services. [Back] Note 27 Consumer Guarantees Act 1993. [Back] Note 28 Credit Contracts Act 1981. [Back] Note 29 Fair Trading Act 1986. [Back] Note 32 Except in business transactions: see para A.13 below. [Back] Note 33 Consumer Guarantees Act 1993, s 2(1) (definition of a consumer). [Back] Note 35 Under s 2(1), “business” means
(a) Any undertaking whether carried on for gain or reward or not; or
(b) Any undertaking in the course of which –
(i) Goods or services are acquired or supplied; or
(ii) Any interest in land is acquired or disposed of –
whether free of charge or not. [Back] Note 36 Section 43(2). If any of the guarantees are excluded other than in accordance with this section, the supplier or manufacturer will be committing an offence under s 13(i) of the Fair Trading Act 1986. [Back] Note 37 Section 9 of the Act defines oppressive as “oppressive, harsh, unjustly burdensome, unconscionable, or in contravention of reasonable standards of commercial practice”. [Back] Note 38 Sections 10–14. The powers of the court (contained in s 14) include an order that an account be taken; a direction that property that is the subject of the contract be transferred, assigned or delivered; and a direction that a party to the contract pay a sum to the other party. [Back] Note 39 Section 15 defines a controlled credit contract as a credit contract
(a) Where the creditor, or one of the creditors, for the time being is a financier acting in the course of his business; or
(b) Which results from an introduction of one of the parties to the contract to another such party by a paid adviser; or
(c) That has been prepared by a paid adviser. [Back] Note 40 Sections 24–30. These include extinguishing various liabilities of the debtor, depending on which class of disclosure has been omitted. [Back] Note 41 Eg a company with paid up capital exceeding $1 million (s 15(d)(iii)); where the credit outstanding is, or will be, $250,000 or more (s 15(f)); where the debtor is a financier (carrying on the business of providing credit or entering into credit contracts in his own name as creditor, or on behalf of or as trustee or nominee for another) (s 15(d)(i)); where the debtor is the Crown, or a local authority or government agency (s 15(d)(ii)); or where the debtor and creditor are part of the same body corporate (s 15(e)). [Back] Note 42 Trade is defined in s 2 as
any trade, business, industry, profession, occupation, activity of commerce, or undertaking relating to the supply or acquisition of goods or services or to the disposition or acquisition of any interest in land. [Back] Note 43 Trade Practices Act 1986, 9. [Back] Note 47 Sections 13 and 14. [Back] Note 52 Implied terms as to title, quiet enjoyment, freedom from encumbrance, merchantable quality, correspondence with description or sample, and fitness for particular purpose. [Back] Note 53 See Consumer Protection Act 1996, c S-50.11, Part III, s 39(d) and (e). [Back] Note 54 Consumer Protection Act 1998 (RSNWT 1998 c 21) Part VI, s 70(1). [Back] Note 55 See the definition of “retail sales” in s 1. There are similar exclusions from the definition of “retail hire purchase”, which is also covered by the Act. There are similar Acts in Nova Scotia, Manitoba, New Brunswick and British Columbia, but the definitions are more restrictive and, it is suggested, apply to even fewer (if any) business-to-business contracts: see Consumer Protection Act 1989, RS c 92m, s 26(1) (Nova Scotia); Consumer Protection Act 1987, RSM c C200, ss 1 and 58 (Manitoba); Consumer Product Warranty and Liability Act 1980, SNB c-18.1, ss 1 and 8 (New Brunswick); and Sale of Goods Act RS 1996, c 410, s 20 (British Columbia). [Back] Note 56 Unconscionable Transactions Relief Act RSO 1990, c U-2, s 2. [Back] Note 57 Adams v Fahrngruber (1976) 10 OR (2d) 96, 102, per Grant J. The court held that the transaction was not harsh or unconscionable because there was no inequality of bargaining power between the two parties and the money was not needed urgently by the borrower. [Back] Note 58 For example, in British Columbia and Newfoundland (Trade Practices Acts: RSBC 1996 c 457 and RSN 1990 c T-7 respectively); in Alberta (Fair Trading Act 1999 c F-1.05); in Ontario and Prince Edward Island (Business Practices Acts: 1990 c B-18 and RSPEI 1988 c B-7 respectively); and in Saskatchewan (Consumer Protection Act 1996 c C-30.1). [Back] Note 61 See s 3(d), which defines goods. Section 3(a) states that a consumer is “an individual that participates or may participate in a transaction involving goods or services”. [Back] Note 63 Sections 10–13. [Back] Note 64 RSBC 1996 c 457. [Back] Note 65 See ss 3 (deceptive acts or practices) and 4 (unconscionable acts or practices). Section 4(3)(e) lists terms or conditions that are so harsh or adverse to the consumer, at the time the contract is entered into, as to be inequitable. [Back] Note 67 Sections 5–17.1. [Back] Note 69 UCC s 2-302(1). [Back] Note 70 Johnson v Mobile Oil Corp 415 F Supp 264 (1976) (ED Mich). The case involved an unconscionable exclusion clause in a franchise agreement between a large oil company and a poorly educated petrol station owner. [Back] Note 71 Weaver v American Oil Co 276 NE 2d 144 (1971) (Ind), a similar situation to Johnson v Mobile Oil Corp (see previous footnote). Arterburn CJ noted the petrol station owner’s limited experience of the industry and that he should not be “expected to know the law or understand the meaning of technical terms”: p 145. [Back] Note 72 Martin v The Joseph Harris Co Inc 767 F 2d 296 (1985) (6th Cir). The objectionable clause (which limited damages to the price of the seeds purchased) was used by all national distributors of seed, giving the farmer little option but to accept it. [Back] Note 73 Trinkle v Schumacher Co 301 NW 2d 255 (1980) (Wis Ct App). In a contract for the sale of fabric, a clause preventing any claims after the fabric had been cut was unconscionable when a latent defect made it impossible to discover whether any claim was necessary until after the fabric had been cut. [Back] Note 74 Martin v The Joseph Harris Co Inc, n 72 above. The farmer was forced to accept the risk of the loss of his crop to a fungus, when the supplier could have easily (and cheaply) treated the seeds to prevent any such risk. [Back] Note 75 Eg Bank of India, Nat Assn v Holyfield 563 SW 2d 438 (1978) (Ark), where an agreement for the hire-purchase of a number of dairy cattle was unconscionable because all the risk passed to the farmer on the day the cattle were delivered. [Back] Note 76 Civ 1ere, 28 April 1987. [Back] Note 78 Civ 1ere, 24 January 1995. [Back] Note 79 This formulation has been used in Civ 1ere, 3 January 1996 and 30 January 1996. [Back] Note 80 BGB, Book 1: General Part, s 3: Legal Transactions, Arts 138 and 157. English translations are taken from S L Goren, The German Civil Code (revised ed 1994). [Back] Note 81 Book 2: The Law of Obligations, s 2: Shaping contractual obligations by means of standard business terms. These provisions replaced the Standard Contract Terms Act 1976 (die Gesetz zur Regelung des Rechts der Allegemeinen Geschaftsbedingunged) from 1 January 2002. English translations are taken fromhttp://www.iuscomp.org/gla/statutes/BGB.htm#b2s2. [Back] Note 82 The closest analogy to this paper is that there are discrete controls on business contracts, but the BGB actually excludes businesses from sections that apply to specific contractual clauses. The relevant considerations in a business-to-business contract containing such clauses are therefore different from those in a consumer contract containing the same clauses. [Back] Note 83 The Act on Enjoinment Actions for Violations of Consumer and Other Rights (Gesetz über Unterlassungsklagen bei Verbraucherrechts- und anderen Verstößen (the Unterlassungs-klagengesetz or “UKlaG”)). [Back] Note 87 Art 305(2) provides that a standard term is incorporated into a contract only if the user expressly brings it to the other party’s attention (either directly or by means of a clearly visible sign at the place where the contract is made) and gives the other party a reasonable opportunity to find out what it says, and the other party agrees that it is to apply. [Back] Note 88 Art 308 sets out various types of term which, in standard business terms, are subject to an appraisal of validity. [Back] Note 89 Art 309 sets out various types of term which, in standard business terms, are always invalid. [Back] Note 90 Art 310. “Business person” is defined by Art 14 as
any natural or legal person, or partnership with legal capacity, which, on entering into a legal transaction, acts in exercise of its trade or self-employed professional activity.
A “partnership with legal capacity” is a partnership which possesses the capacity to acquire rights and to enter into obligations. [Back] Note 91 Art 305c(1). Art 305c(2) provides that, in case of doubt, standard business terms are to be interpreted against the user. [Back] Note 92 See para A.37 above. [Back] Note 94 See n 83 above. [Back] Note 95 There is currently no English translation of the UKlaG; the relevant sections of the Act replace the relevant provisions of the Standard Contract Terms Act 1976 (ss 13–22), which were to similar effect. We are grateful to Dr Gerhard Dannemann for the information provided. [Back] Note 96 Contained in Article 6:248 (s 4 of title 5 of Book 6) of the Dutch Civil Code. All English translations are taken from P P C Haanappel and E Mackaay, New Netherlands Civil Code (1990). [Back] Note 97 It is generally accepted that in consumer cases protection should be extended to oral agreements as a result of the courts’ obligation to interpret national law in conformity with directives. [Back] Note 98 Art 6:231. Stipulations that go to the essence of the contract (the translation given is the essence of the prestations, which literally means a payment of money or performance of a service) are expressly excluded from the article, except in consumer contracts if they are unclear. [Back] Note 99 Art 6:233. The latter ground applies even where the standard terms are absolutely reasonable; they can be annulled “en bloc”. [Back] Note 100 Art 6:234(1)(a). [Back] Note 101 Art 6:234(1)(b). In 1999 the Hoge Raad decided (Geurtzen/Kampstaal) that it may be contrary to good faith to invoke Arts 6:233(b) and 6:234(1) in cases where the other party nonetheless knew the contents of the standard terms. In this case (a business-to-business case) the other party, a subcontractor, had previously concluded similar contracts with other parties in which the same conditions (which were the standard conditions of a branch organisation) had applied. [Back] Note 102 See Art 2:360 (company law). The exclusion also extends to companies which are part of a group and are exempted by Art 2:403(1) from the obligation to publish their accounts separately. [Back] Note 103 See para A.45 below. [Back] Note 104 The extent to which large businesses need such protection is seen as a controversial issue. [Back] Note 105 The “black list”; see Art 6:236. [Back] Note 106 The “grey list”; see Art 6:237. [Back] Note 107 Art 6:240(1). The interest groups involved are defined in Art 6:240(3). [Back] Note 113 The regulation of contracts in the other Scandinavian countries is broadly the same. Note that the law on collective regulation of contract terms has not been restricted to standard form contracts. See, eg, T Wilhelmsson, “The Implementation of the EC Directive on Unfair Contract Terms in Finland” (1997) 5 ERPL 151. [Back] Note 114 English translations are taken from Bernitz and Draper, Consumer Protection in Sweden: Legislation, Institutions and Practice (2nd ed 1986). [Back] Note 117 See C Hultmark, “Obligations, Contracts and Sales” in M Bogdan, Swedish Law in the New Millennium (2000) 273, 280. [Back] Note 118 The section also applies to “terms of any other legal relationships than that of contract”: s 36.3. [Back] Note 121 Professor Herre has indicated to us that the section has not been invoked very often by businesses, but has probably influenced a change in business practices and has had a greater impact than the Terms of Contract between Tradesmen Act 1984 (discussed below). [Back]
