Contract Law

There are a number of different contractual arrangements that businesses can enter into. The most common are those that relate to the supply of goods and/or services and are entered into by businesses with consumers and other entities that are not of a commercial nature.  Regardless of the type of contract, they will all be subject to any obligations imposed by contract law, such as the requirement for offer, acceptance and consideration. However, there are a number of differences in the way business to business contracts are treated by the law when compared to business to consumer contracts.

Statutory Protection

These differences relate to the statutory protection offered. It is important that businesses are aware of the extra obligations that consumers may be entitled to so that they can ensure that they do not fall foul of legislation. A legal expert will be able to provide further advice with regard to any applicable compliance for consumer contracts whether it is in relation to the laws of advertising, legislation relating to the use of unfair contract terms, credit and pricing and any other relevant legislation which may be applicable to a specific area of business. For example, businesses to consumer contracts are subject to Distance Selling Regulations which apply to all businesses involved in the sale of goods and/or services online or otherwise. As part of these regulations, the consumers are entitled to certain cooling off periods depending on the circumstances. Other legislation that will be applicable in business to consumer contracts includes certain parts of the Sale of Goods Act and the Supply of Goods and Services Act (where applicable) and there are extra provisions relating to liability that cannot be excluded under consumer contracts (where they sometimes can be in business to business contracts). Another example of statute that does not apply in business to business contracts is the Consumer Credit Act, which does not always apply when limited companies are involved.

Unfair Terms

Perhaps the most important differences relate to unfair contract terms in contracts.  Although the Unfair Contract Terms Act of 1977 (“UCTA”) applies to both business to business contracts and business to consumer contracts (with certain exceptions), the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCC”) applies only to consumer contracts. Although both sets of legislation overlap in certain areas, there are some clear differences. The UTCC is only applicable where there has not been individual negotiation on the contract whereas this restriction does not apply to UCTA. Further, under UTCC there are no defined categories with regard to what can be defined as an unfair term. This is different to UCTA which provides clear categories as to what is likely to be considered unfair. As an extension of this, under the UTCC one must prove that terms are unfair by analysing the relevant rights of each of the concerned parties and applying a test of fairness, which is different to the rest of reasonableness applied under UCTA. The practical importance of this is that consumers have more protection from unfair terms which means that businesses have to ensure that nothing in their standard terms and conditions will be deemed to be unfair.

Equal Footing

Case law has shown that with regard to unfair terms, the courts are less likely to consider the parties to be on an unequal footing in business to business contracts. This is because of the presumption that in most cases the businesses would have the benefit of legal advice and therefore are responsible for any consequences arising out of agreement to a contract. This differs from consumers, as the courts are more likely to find a term to be unfair if one of the parties is a consumer who is not expected to have the same access to legal advice, and it is therefore imperative to ensure that contractual arrangements for contracts with a consumer do not contain unfair terms as this can lead to the potential of costly litigation.

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