Thursday, 1 January 2009

The Requirement of Reasonableness

Exclusion clauses subject to reasonableness

S.6(3) states that as against a person dealing otherwise than as consumer liability for breach of the obligations arising from ss.13, 14 or 15 of the Sale of Goods Act 1979 can be excluded or restricted by reference to a contract term, but only in so far as the term satisfies the requirement of reasonableness.


Under s11(1) the requirement of reasonableness is that "the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made."

Section 11(2) provides that, in determining whether the clause is a reasonable one for the purposes of ss6 and 7, regard shall be had to the Guidelines set out in Schedule 2 of the Act, which are as follows:

(1) The bargaining strengths of the parties relative to each other and the availability of alternative supplies.

(2) Whether the customer received an inducement to agree to the term. (The supplier may have offered the customer a choice: a lower price but subject to an exemption clause or a higher price without the exemption.)

(3) Whether the customer knew or ought reasonably to have known of the existence and extent of the term.

(4) Where the term excludes or restricts any relevant liability if some condition is not complied with, whether it was reasonable at the time of the contract to expect that compliance with that condition would be practicable.

(5) Whether the goods were manufactured, processed or adapted to the special order of the custom

The Regulations apply, with certain exceptions, to unfair terms in contracts concluded between a consumer and a seller or supplier and provide that an unfair term is one which has not been individually negotiated and which, contrary to the requirement of good faith, causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer. An unfair term shall not be binding on the consumer.

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