Unfair Contract Terms Act: UCTA in Singapore

The Unfair Contract Terms Act (referred to as UCTA by business and legal insiders) is a body of law designed to primarily protect consumers who may be prejudiced by the weaker bargaining positions they occupy in most consumer transactions.

More generally, the preamble to UCTA reads as follows:

“An Act to impose further limits on the extent to which civil liability for breach of contract, or for negligence or other breach of duty, can be avoided by means of contract terms and otherwise”.

Negligence Liability: Section 2 of UCTA

UCTA prohibits a person from using a contract term or notice to exclude his own liability for negligent acts causing death or personal injury on another. For instance, an amusement park operator is unable to rely on a signboard disclaiming liability for rollercoaster failure leading to personal harm to the visitor.

In contrast, for loss or damage beyond death or personal injury, exclusion clauses are valid insofar as they are reasonable. UCTA itself defines reasonableness – see below at Glossary.

Contractual Liability: Section 3 of UCTA

In the case of a consumer dealing with a business entity, if the transaction is entered into using the latter’s standard form (for instance, when you sign up with a telco on their standard contract), section 3 applies. This section disallows the business from using its standard contractual terms to

1. Exclude its own liability for breaches of terms;
2. Excluding or limiting its own liability for breaches of terms, and
3. Relying on a term to render a different kind of service from that which was reasonably expected of him, or not service at all,

unless the standard contractual term is reasonable. Once again, reasonableness rears its amorphous head!

Indemnity Clauses: Section 4 of UCTA

Additionally, section 4 applies to protect consumers from being made to indemnify another person in respect of liability that may be incurred by the other for negligence or breach of contract, except in so far as the contract term satisfies the requirement of reasonableness.

For instance, this could apply in the case of a loan guarantee – whether an indemnity clause is reasonable would depend on the usual banking practice in the industry.

Consumer Products: Section 5 of UCTA

Consumer products are generally products used for private consumption, as opposed to business use. For instance, a bottle of Yakult is a consumer product.

The manufacturer or retailer cannot rely on a term or notice (usually printed on the product itself) to exclude liability for product defect or negligent manufacturing or distribution.

Sale and Hire-Purchase: Section 6 of UCTA

Various liabilities for breach of the obligation in a sale and hire-purchase contract cannot be excluded or restricted. For more details, do refer to section 6 of UCTA. These obligations include, in general, implied assurances that:

• The seller or owner that he has good title to the goods
• The goods in question are of good quality
• The goods are usable for their general purpose
• The goods conform to their marketing descriptions

Goods that Require Transfer of Possession or Ownership: Section 7 of UCTA

Similarly, section 7 of UCTA imposes restrictions on the use of contractual clauses to exclude or limit liability in certain situations concerning contracts transferring possession or ownership.

Similar to section 6, section 7 is designed to protect the party from unreasonable terms that take away that party’s rights, such as the implied assurances mentioned above.

Special Contracts

Certain contracts, such as contracts for insurance, do not fall within the purview of the UCTA. These limitations are outlined in the First Schedule of UCTA.

Glossary

1. Reasonableness: UCTA supplies a rather vacuous definition of “reasonableness”, where the context must be consulted to determine whether a term is reasonable. Section 11 provides that whether a term is fair and reasonable depends on the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.
2. Consumer: Generally, a person is a consumer if he does not enter into the transaction for business, while the other party does so. See section 12 for more details to the definition.
3. Excluding liability: This refers to the use of a contract term or notices to protect a party, so much so that he is not at all liable to pay compensation or give the performance, when he, for instance, breaches the contract or acts negligently.
4. Limiting or restricting liability: This is similar to the exclusion of liability. It refers to the use of a term or notice to limit the extent of his liability. For instance, an amusement park operator may attempt to rely on a notice to cap his liability for rollercoaster failure to a quantum of $100,000 as compensation payable to a victim.