Does UCTA 1977 apply to service contracts?

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Last updated on 21/11/2017

The following Commercial Q&A provides comprehensive and up to date legal information covering:

  • Does UCTA 1977 apply to service contracts?
  • Unfair Contract Terms Act 1977 (UCTA 1977)
  • UCTA 1977 and contracts for the supply of services
  • UCTA 1977 and contracts of service (employment contracts)
  • Treatment of exclusion and limitation clauses where UCTA 1977 applies

Does UCTA 1977 apply to service contracts?

Unfair Contract Terms Act 1977 (UCTA 1977)

In general, the Unfair Contract Terms Act 1977 (UCTA 1977) is primarily concerned with liability as between businesses. It provides protection to varying degrees in respect of specific types of liability. It does not deal with all types of liability (for example the law on penalty clauses is not covered by UCTA 1977), nor does it provide rules on the fairness of contract terms generally.

To determine whether UCTA 1977 applies, it is therefore necessary to consider both the type of contract and the nature of the liability in question, and to consider both of these factors in light of the various provisions for application and exemption within UCTA 1977.

UCTA 1977, s 1(1)(3) provides:

‘(3) In the case of both contract and tort, sections 2 to 7 apply (except where the contrary is stated in section 6(4)) only to business liability, that is liability for breach of obligations or duties arising—

(a) from things done or to be done by a person in the course of a business (whether his own business or another's); or

(b) from the occupation of premises used for business purposes of the occupier;’

However, this must be read subject to the provisions of UCTA 1977, Sch 1 (section 1(2)) which provides that UCTA 1977, ss 2 and 3 do not extend to:

‘(a) any

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Key definition:
Penalty definition
What does Penalty mean?

A penalty clause is one that determines the sum or penalty that must be paid on a contractual breach, but where that sum is greater than the likely loss resulting from that breach. When a sum specified as payable is extravagant or totally out of proportion to the range of possible losses that might be incurred, the provision will be a penalty and unenforceable to the extent that the sum is greater than the party’s actual loss.

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