The Unfair Contract Terms Act
Restrictions on business-to-business contracts - exclusion clauses and the test of reasonableness and how these apply to your business, including sole traders.
The Unfair Contract Terms Act 1977 (UCTA) cover transactions between businesses. In general, businesses are assumed to be free to enter into whatever contracts they agree between themselves. You should make sure you're happy with the contracts you agree with other businesses.
The UCTA places some restrictions on the contract terms businesses can agree to. It lays down rules for the ways in which vendor businesses can use exclusion clauses to limit liability in certain areas. The business selling the goods or services isn't allowed to exclude liability for:
- death or injury - under any circumstances
- losses or damage caused by negligence - unless to do so is 'reasonable'
- defective or poor quality goods - unless to do so is 'reasonable'
The test of reasonableness
The UCTA doesn't define precisely what 'reasonable' means but does set out guidelines. Courts will usually take into account:
- the information available to both parties when the contract was drawn up
- whether the contract was negotiated or in standard form
- whether the buyer had the bargaining power to negotiate better terms
Consumer vs business contracts
You don't have the same protection as individual consumers when you make purchases exclusively for the use of your business. A term in a consumer contract excluding liability for defective goods would be automatically invalid. But when buying as a business it's up to you to check in advance what terms and conditions you're agreeing to.
The Consumer Rights Act 2015 addresses unfair terms in consumer contracts.
Sole traders count as businesses rather than consumers for any business purchases they make. However, if the trader offers you credit terms up to 拢25,000, you receive the same protection as individuals under the Consumer Credit Act 1974.