Misrepresentation, Non-Disclosure and Breach ... - Law Commission

WHEN DOES A PARTY CONTRACT ON THE OTHER’S STANDARD TERMS?
5.138 In UCTA, “written standard terms of business” was deliberately left undefined. As
we explained in our joint Consultation Paper on Unfair Terms in Contracts, the
question is simply whether the parties ultimately dealt on one party’s standard
terms, regardless of whether negotiations preceded the conclusion of the
contract. 32 The fact that negotiations resulted in some small amendments to
some of the terms does not prevent the set of terms remaining standard; 33 but at
some undefined point there may be sufficient alteration so that the terms as a
whole are no longer the party’s written standard terms. 34
5.139 In our final report on Unfair Terms we considered whether this approach was
correct. 35 It is not perfect. On the one hand, the fact that some terms had been
altered after negotiation did not necessarily mean that the parties were aware of
the term now in question. On the other, the test makes it possible to challenge a
term that had in fact been negotiated but was ultimately left unchanged. On
balance, however, we thought the UCTA test was as good as any we were able
to devise. We think it would also be an appropriate test to use in a new provision
on standard form insurance contracts.
INDUSTRY STANDARD TERMS
5.140 Difficult questions can arise where a party always contracts on industry-wide
standard terms. If an insurer routinely adopted the agreed industry wording for its
contracts, these would be considered the insurer’s standard terms.
5.141 During consultation for our report on Unfair Terms in Contracts, several
consultees suggested that there should be a special exemption for terms drafted
by a trade association. However, we decided against such an exemption:
The reason is that there can be no guarantee that terms will be fair
simply because they were drawn up by a third party and are used widely
in the relevant market. The terms might have been drawn up by a trade
association that represents the interests of one party and not those of
the other party; and yet may be used in the vast majority of contracts in
the market because, for example, the other party usually lacks the
sophistication or the bargaining power to demand terms more
favourable to it. 36
32 See the discussion in our Joint Consultation Paper on Unfair Terms in Contracts (2002)
Law Com Consultation Paper No 166; Scottish Law Com Discussion Paper No 119, paras
5.49 – 5.53 and St Albans City and District Council v International Computers Ltd [1996] 4
All ER 481.
33 Pegler Ltd v Wang (UK) Ltd [2000] EWHC Technology 127 (25 February 2000): “A
standard term is nonetheless a standard term even though the party putting forward that
term is willing to negotiate some small variations of that term.”
34 Salvage Association v CAP Financial Services Ltd [1995] FSR 654: “[i]n such
circumstances, whether it continues to be correct to describe the terms of the contract
eventually agreed by the parties as the standard terms of business of the party who
originally put them forward will be a question of fact and degree to be decided in all the
circumstances of the particular case.”
35 Unfair Terms in Contract (2005) Law Com No 292; Scot Law Com No 199.
36 Above, at para 5.61.
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