Exclusion Clause

The Unfair Contract Terms Act 1977 renders some exclusion clauses void outright: a person cannot, by reference to any contract term or notice, exclude or restrict liability for death or personal injury resulting from negligence. Other exclusions of liability for negligence, or for breach of contract where one party deals on the other's written standard terms, are subject to a requirement of reasonableness under the Act. In consumer contracts, the Consumer Rights Act 2015 instead applies a fairness test: under s.62, a term is unfair, and therefore not binding on the consumer, if contrary to the requirement of good faith it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer, assessed by reference to the subject matter and all the circumstances existing when the term was agreed.

The two regimes overlap in effect but differ in structure: UCTA's reasonableness test governs business-to-business exclusion and limitation clauses (and some consumer negligence exclusions), while the CRA's fairness test governs terms and notices in consumer contracts and additionally provides, separately, that liability for breach of the statutory rights implied into goods, digital content and services contracts cannot be excluded or restricted at all in a consumer context. Which regime applies therefore depends on whether the counterparty is a business or a consumer, and courts will strike down or refuse to enforce a clause that fails the applicable test even where the clause is clearly drafted and expressly agreed.