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How are Standard Terms Negotiated Between Parties Under Contract Law?

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It is common practice in formulating a contract for parties to deal on the other party’s standard written terms; something with at Greenaway Scott encounter on regular basis.

However, a recently decided Court of Appeal decision held that negotiated standard terms is not considered dealing on written standard terms for the purposes of the Unfair Contract Terms Act 1977 (UCTA).

Under UCTA a requirement of reasonableness is imposed upon a clause that aims to limit or exclude a party’s liability for breach of contract, provided that the agreement was made on one of the party’s standard terms. However, written terms are not defined under UCTA.

Very often standard terms are negotiated between the parties.

The question must then be asked whether the terms have remained as the standard terms. The negotiations may have caused substantial amendments to the extent that the terms are no longer the standard terms.

In previous cases it was accepted that if the clauses in relation to the liability had not changed then the terms remained as the standard terms. However, in more recent cases the changes to the standard terms have been more narrowly interpreted.

It has now been stated that the terms must be automatically adopted without any opportunity to alter or negotiate for them to remain as the standard terms.

Where standard terms are negotiated and subsequently amended by both parties, there is more chance of the court finding that they are no longer the standard terms, however it will always be a question of fact.

If you would like advice on your standard terms please contact the Commercial team by emailing [email protected] or visit our website at www.greenawayscott.com.