Unfair contract terms

[Project now completed.  Please see the subsequent Advice on Unfair Terms in Consumer Contracts (2013).]

Professor Joseph Thomson

Team members
Gillian Swanson, Project Manager

Currently, there are two major pieces of legislation dealing with unfair terms in contracts: the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999. Although the two regimes have separate scopes of application and use different concepts and terminology, they overlap to some extent. One aim of this joint project with the Law Commission for England and Wales was to consider how to replace the existing provisions with a single unified statute setting out the law on unfair terms in contracts in a clear and accessible way. An additional concern was the level of protection available to businesses.

A joint Report on Unfair Terms in Contracts (Scot Law Com No 199) was published in February 2005. The draft Bill annexed to the Report sets out the law on unfair terms in a clear and accessible way that consumer advisors and businesses will find easier to understand. Guidelines are included on how to decide whether a contract term is unfair. The term's transparency, its substance and effect and the circumstances in which the contract was made are to be taken into account. Consultation demonstrated strong support for greater protection for small businesses. The small business (one with fewer than nine employees) is often unaware of the significance of the contractual terms in the other party's "small print" or is unable to avoid having to accept those terms. Following further consultation, the Report recommends (subject to certain exceptions) a separate scheme to protect small businesses by allowing them to challenge a wider range of non-negotiated terms.

For further information, please contact info@scotlawcom.gov.uk.

Page archive date: 24 February 2005