Understanding the Legality and Enforceability of Exclusionary Clauses of Contracts

Terms Act 1977 prevents the parties from imposing unconscionable and unfair obligations and liabilities against each other while the Sales of Goods Act 1979 provides protection to the buyer and the seller alike.Since there are limitations when it comes to the clauses of the contract, the parties must be vigilant in protecting their rights. In our hypothetical case, the parties to the contract, Bright Wheel Bicycles Limited (“BWB”), a UK manufacturer of bicycles and Top Gear Trading Ltd (“TGT”), a retailer based in Manchester, entered into a contract of sale of a good whereby BWB is the supplier and TGT the reseller. Some of the bikes supplied by BWB to TGT were returned by the clients of TGT because they were defective. However, TGT complained about the defective bikes, BWB pointed out that their contract absolved BWB of liabilities under certain circumstances. The question now is whether or not clause 4 in the contract between BWB and TGT is legally binding upon the parties. Clause 4 contains several provisions including the warrantee for defects good for one (1) year, the obligation of the supplier to repair, replace or reduce the price of the item sold whenever appropriate and an exclusionary clause which limits the liabilities of the supplier to what has been stipulated in the contract to the exclusion of “all warranties, conditions and other terms implied by statute or common law are, to the fullest extent permitted by law.”According to Section 3 of the Unfair Contract Terms Act (UCTA) 1977, a party that drafted the standard form cannot exclude certain liabilities from breach of such contract or absolve the party from liabilities when the performance of its obligations is substantially or totally different from that what is required or expected of him or her. Moreover, the UCTA so provides that the manufacturer’s guarantee with regards to loss arising from defective goods or negligence of the distributor where the goods involved in the contract are the types that are ordinarilysupplied for private use or consumption.