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Test of Reasonableness Under the Section 11 UCTA

   

Added on  2020-10-22

1 Pages544 Words469 Views
Test of ReasonablenessThe contract of hire purchase is a contract in which the owner of the goods provides the otherperson to hire the goods for a duration of time after payment of installments. Under theagreement of hire purchase the hirer has an option of buying the goods towards the end of theagreement after all the installment is paid. The hire purchase agreement does not amount to acontract of sale rather it is considered as a contract of bailment. The hirer under the contract isnot necessarily buying the goods, which makes this as a contract of bailment, wherein the hirer isentitled to use the goods but is not a legal owner while the terms of the contract subsists. Since,the contract of hiring a bicycle does not fall under the purview of a contract of sale the exclusionof implied terms do not apply, so the test of reasonableness has to be taken into consideration tounderstand the legality of the clause. In any contract the exclusion clause is a term of contract which is inserted with the purpose ofexcluding or limiting the liability of a party for any breach of contract or negligence. Under theUnfair Contract Terms Act, 1977, any individual relying on the exclusion clause is under theobligation to prove that the clause is reasonable. The case of Mitchell v Finney [1983] 2 All ER737, is the House of Lords judgment in which the subjectivity of the reasonableness test wasdetermined. The section 3 of UCTA is related to the relationship wherein one party to thecontract deals as a consumer and the other parties’ written standard terms of business mentionsthat – “any term which excludes or restricts his liability for breach of contract.”Test of ReasonablenessUnder the section 11 UCTA for satisfying the reasonableness test the term of the contract shouldbe fair and reasonable and should be known to the parties when the contract was made. Further,the Schedule 2 of the UCTA provides additional guidelines for reasonableness which comprisesof various factors, for instance the knowledge of the customer of existence of the term etc. In thecase of Regus v Epcot Solutions Ltd. CA 15th April 2008, the Regus Company entered into acontract to provide accommodation to run IT training courses by Epcot. The terms of contractlimited the Regus’ liability if financial losses are suffered by Epcot. The High Court ruled infavor of Epcot by declaring Clause 23 of the contract unreasonable under UCTA whereas theCourt of Appeal reversed the decision and held the clause reasonable. Under the case Goodlife Foods Ltd. v Hall Fire Protection Ltd. (2018), Goodlife owned a frozenfood and the Hall Fire was into selling automatic fire sprinkler systems, both the companiesentered into an agreement for fire detection equipments but still fire broke out and causeddamage to the property. The court held that the Clause 11 of the agreement was an exclusionclause and was reasonable under the UTCA.1

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