Unfair Terms in Contracts

Current project status

• Initiation: Could include discussing scope and terms of reference with lead Government Department
• Pre-consultation: Could include approaching interest groups and specialists, producing scoping and issues papers, finalising terms of project
• Consultation: Likely to include consultation events and paper, making provisional proposals for comment
• Policy development: Will include analysis of consultation responses. Could include further issues papers and consultation on draft Bill
• Reported: Usually recommendations for law reform but can be advice to government, scoping report or other recommendations

This project is complete. We made recommendations in 2005. In 2013, we revised those recommendations as part of our project on unfair terms in consumer contracts (see project page Unfair Terms in Consumer Contracts). Some of our revised recommendations were implemented in Part 2 of the Consumer Rights Act 2015. Our recommendations to protect small businesses were accepted in principle but have not been implemented.

In 2001, the Department of Trade and Industry asked the Law Commission and Scottish Law Commission to rewrite the law of unfair contract terms as a single regime, in clearer and more accessible language. We were also asked to consider whether the law should do more to protect businesses, particularly small businesses.

The project responded to concerns that the law on unfair contract terms was unnecessarily complicated and difficult to understand. It was covered by two pieces of legislation: the Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contracts Regulations 1999. The two laws contained inconsistent and overlapping provisions, using different language and concepts to produce similar but not identical effects.

The 2005 Report

Following our 2002 consultation, we published a final report on 24 February 2005, Unfair Terms in Contracts, and draft Bill. The two Law Commissions recommended a single, unified piece of legislation, which preserves the existing level of consumer protection. We also recommended improved protection for the smallest and most vulnerable businesses (employing 9 or fewer staff).