Unfair Terms in Commercial Contracts:

What to Do If You’re in a Dispute

Disputes over unfair terms in commercial contracts can be disruptive, costly, and damaging to business relationships. If you believe a term in your contract is unreasonable—or you’re facing a claim that your terms are unfair—it’s essential to understand your legal position and act quickly.

What Makes a Term “Unfair” in a Business Contract?

In business-to-business (B2B) contracts, the law generally respects freedom of contract. However, certain clauses can be challenged if they create a significant imbalance or fail the reasonableness test under the Unfair Contract Terms Act 1977 (UCTA).

Commonly disputed terms include:

• Exclusion or limitation of liability for negligence or breach.
• Unilateral variation clauses, allowing one party to change terms without consent.
• Excessive penalties or late payment interest
• Entire exclusion of remedies, leaving one party unable to pursue or defend a claim

The Legal Framework

Unfair Contract Terms Act 1977

UCTA restricts exclusion and limitation clauses in B2B contracts. Key points:

• Liability for death or personal injury caused by negligence cannot be excluded.
• Other exclusions (e.g., for negligence or breach) must pass the reasonableness test, which involves consideration of:
  • The bargaining power of the parties.
  • Whether the term was negotiated or imposed.
  • Availability of insurance.
  • Industry norms.

Consumer Rights Act 2015

This mainly applies to consumer contracts, but if your dispute involves a small business acting as a consumer, it may be relevant.

What Should You Do If You’re in a Dispute?

1. Review the Contract Carefully
   Identify the clause in question and check whether it was clearly incorporated and agreed.
2. Assess Reasonableness
   Consider whether the term is proportionate and justified in the circumstances.
3. Gather Evidence
   Emails, negotiations, and industry standards can all help demonstrate fairness—or lack of it.
4. Seek Legal Advice Early
   Courts look at the overall context, so professional advice is crucial before taking action.

Possible Outcomes

• The term itself may be unenforceable, but the rest of the contract could still stand.
• You may be able to negotiate a settlement to avoid litigation.
• If court action is necessary, the judge will apply the reasonableness test and relevant case law.

Need Help Resolving a Contract Dispute?

Our commercial litigation team specialises in disputes over unfair terms. We can:

• Review your contract and advise on enforceability.
• Represent you in negotiations or court proceedings.
• Help you protect your business interests and minimise risk.

Contact us today for urgent advice.

You can also complete an online enquiry form. One of the Wollens team will contact you as soon as they are available.