What Is The Test Of Reasonableness Under The UCTA 1977?

The 1977 Unfair Contract terms act test of reasonableness is found in section 11 and consists of 5 subsections. Subsection 1 of the act states that “the term shall have been a fair and reasonable one… “ This essentially states what the test aims to achieve, however, it is unclear in a variety of ways ranging from the judges interpretation to the style he operates, Interventionist or relaxed which can lead to inconsistent decisions particularly in the commercial sector. Therefore the test of reasonableness under the UCTA 1977 is unsatisfactory.

An element of the reasonableness test under section 11 that refutes the statement in question is with regard to bargaining positions of the parties when the contract was made. Under schedule 2 it states

This section means that the greater the equality of bargaining power the greater the chances of the exclusion clause passing the reasonableness test. Therefore the courts usually take this factor into consideration when coming to a judgment. This element essentially ensures that the exclusion clause is fair to both parties and thus means that one party cannot use its greater bargaining power to strong-arm another party to accepting the clause. Chadwick Lj set out the importance of this element in Watford Electronics v Sanderson cfl where he states that “unless satisfied that one party has in effect taken an unfair advantage of the other or that a term is so unreasonable that it cannot properly have been understood or considered – the court should not interfere” . This statement highlights the benefits the reasonableness test provides in the sense that it will allow for parties to be the “best judges of their own interests” but courts will also intervene where a clause can be deemed unreasonable and unfair, therefore, the test allows for flexibility as well as an element of firmness with regard to the protection of parties who have entered an agreement

One case that demonstrates the inconsistent approach is that of George Mitchell v Finney Lock seeds where the claimant bought defective cabbage seeds, however, a limitation clause restricted how much he could receive and thus lost an estimated £60,000 + it was held that “it would not be fair or reasonable to allow the appellants to rely on the contractual limitation of their liability” . In this case the judge took a more interventionist approach due to the farmers lack of bargaining power, however, the farmers were not acting as consumers but as a business thus it was inconsistent of the court to offer them consumer protection. This approach wouldn’t be problematic if it was applied to all cases but it hasn’t and thus dissimilar judgments are created thus supporting the point that the reasonableness test under the UCTA 1977 is unsatisfactory. This point is further supported by the case of photo production v Securicor where the clause excluded liability for security guards negligence in the destruction of a factory. In this case the court took a more relaxed approach and opted out of interfering with commercial contracts. This is contrary to the approach in the Mitchell case, which in turn led to a different judgment. Therefore on the basis of the evidence it is apparent that the operation of the reasonableness test under the UCTA is