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You are here: BAILII >> Databases >> The Law Commission >> Unfair Terms In Contracts (Report) [2005] EWLC 292(7) (February 2005) URL: http://www.bailii.org/ew/other/EWLC/2005/292(7).html Cite as: [2005] EWLC 292(7) |
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PART 7
INTERNATIONAL CONTRACTS AND CHOICE OF LAW
INTRODUCTION
(1) Section 26 creates an exemption from UCTA's controls for the cross-border sale or supply of goods.
(2) Section 27(1) creates an exemption from UCTA's controls for contracts that are subject to the law of a part of the UK only by virtue of the parties' choice of law (and would otherwise be governed by the law of another country).
(3) Section 27(2) applies UCTA to any contract despite a choice of foreign law if (i) that choice of law has been adopted to evade the provisions of the Act; or (ii) the contract was concluded with a UK-resident consumer who took all necessary steps to conclude the contract in the UK.
CONSUMER CONTRACTS
Cross-border contracts
7.4 At present, UCTA exempts cross-border contracts for the sale or supply of goods.[1] There is no similar exemption in the UTCCR. In the Consultation Paper, we said that the new legislation could not have a blanket exemption for international contracts (such as in UCTA). This is because neither the Directive nor the SCGD provides an exemption for international contracts.[2] Thus no exemption could apply to those parts of the new legislation that implement the Directive. Nor could it apply to legislation within the scope of the SCGD (which covers clauses excluding liability for breach of any of the four implied terms of correspondence and quality in consumer contracts for the sale of goods). We concluded that there should be no exemption for cross-border consumer contracts. Thus UCTA section 26 should not be replicated for consumer contracts of sale or supply of goods.[3]
Choice of the law of a part of the UK in foreign contracts
7.7 UCTA section 27(1) provides that where the law of a part of the UK is chosen by the parties as the governing law but, were it not for that choice, the law of some other country would be the proper law, many of the protections afforded by the Act will not apply. To reproduce section 27(1) in its present form would mean that, in many contracts where the consumer is resident abroad, the supplier would be able to impose a choice of Scots or English law without having to pay regard to the statutory consumer protections. We are bound under the Directive to protect consumers who are resident in other Member States.[4] A provision which allowed suppliers to evade the Directive's regime by imposing an English or Scottish choice of law in cases involving consumers resident in other Member States would not adequately implement its terms.
7.8 We stated in the Consultation Paper[5] that in the new legislation this exemption should not apply to consumer contracts. A large majority of consultees agreed with our provisional proposal that there should be no special treatment of consumer contracts to which the law of a part of the UK applies only through the choice of the parties. We therefore recommend that the consumer contract controls should apply to contracts governed by an English or Scottish choice of law even where the contract has little, or no, connection with the UK.
7.9 We recommend that UCTA section 27(1) should not be replicated for consumer contracts.
Evasion by choice of non-UK law
7.10 The question now to be addressed is when the consumer protection provisions in the new legislation should be applicable notwithstanding the choice of a foreign proper law. UCTA section 27(2) provides that the choice of a foreign law is to be respected unless the choice of law "appears to the court, or arbitrator or arbiter to have been imposed wholly or mainly for the purpose of enabling the party imposing it to evade the operation of this Act";[6] or the consumer was habitually resident in the UK and "the essential steps necessary for the making of the contract were taken there, whether by him or by others on his behalf".[7] Regulation 9 of the UTCCR[8] is a similar provision to UCTA section 27(2)(a). It implements Article 6(2) of the Directive, which imposes an obligation on Member States to ensure that consumers do not lose protection "by virtue of the choice of the law of a non-Member country as the law applicable to the contract" where the contract has a close connection to a Member State. Regulation 9 stays close to the wording of Article 6(2) and also refers to the choice of a non-Member State's law rather than the choice of a non-UK law.
It should be made clear that the rules on unfair clauses in consumer contracts are mandatory so that, if the contract has a close connection to the UK, they will be applied under the Rome Convention despite a choice of another system of law.[9]
7.13 The Rome Convention (which is implemented in the UK by the Contracts (Applicable Law) Act 1990) provides that an express or implied choice of law is to be respected but, in the absence of a choice, the governing law will be the law of the country with which the contract is "most closely connected".[10] However, even where there is an express choice, various articles of the Rome Convention provide for the choice of law to be overridden in relation to certain contractual issues and for the law of another country to be applied. The following Articles may apply to international contracts with consumers:[11]
(1) Article 5(2) provides that a consumer is not to be deprived of the protection afforded by the mandatory rules of his country of habitual residence if:
(a) in that country the conclusion of the contract was preceded by a specific invitation addressed to him or by advertising, and he had taken in that country all the steps necessary on his part for the conclusion of the contract; or
(b) the other party or his agent received the consumer's order in that country; or
(c) the contract is for the sale of goods and the consumer travelled from that country to another country and there gave his order, provided that the consumer's journey was arranged by the seller for the purpose of inducing the consumer to buy.
(2) Article 3(3) provides that, where the contract is wholly connected to another country, an express choice of law shall not "prejudice the application" of the mandatory rules of that country.
(3) Article 7(2) provides that an express choice of law shall not "restrict the application" of the mandatory rules of the forum where they are mandatory irrespective of the law otherwise applicable to the contract.
7.14 In the course of the project, we considered whether it might be possible to rely on the independent operation of these provisions of the Rome Convention to ensure the application of our consumer protections in all the situations contemplated by Article 6(2) of the Directive, irrespective of the choice of law of a non-Member State. We eventually decided the Rome Convention would not achieve this objective independently. Instead it would be necessary to include express provisions in the new legislation which nullified attempts to evade its consumer protections by means of a choice of foreign law. In part, this is because Article 5(2) is limited in respect of the consumers to whom and the circumstances in which it applies:[12] in part, it is because we thought it necessary to ensure that the new legislative controls should be "mandatory in a conflicts sense".[13]
7.15 In exploring the exact scope and nature of the relevant provisions in the new legislation, we were persuaded by the suggestion that a clause replicating the wording of Article 6(2) (as Regulation 9 of the UTCCR does) would give UK consumers less protection than a clause enforcing UK mandatory provisions in wider circumstances, for instance whenever the consumer is living in the UK and takes the necessary steps to conclude the contract there.[14] This is because UK law gives consumers stronger protection than is required by the Directive and which the consumer would not necessarily have under the law of another Member State. But even if the law of the other Member State is equally or more protective, it will still benefit the consumer to be able to rely on the protection of UK law. As Dr Simon Whittaker said in his initial report for the DTI on the consolidation of unfair terms legislation:
From the point of view of practical consumer protection, the choice of, say, Italian or Dutch law for the regulation of a consumer contract will by no means help a United Kingdom consumer's task in any dispute with a seller or supplier. The substantive law of Italy or the Netherlands may in fact be as protective as United Kingdom law here (it may, indeed, be more so) but it will be difficult and very expensive for a United Kingdom consumer to establish this.
7.18 We would not want to encourage businesses to attempt to evade the restrictions by insisting that the order is placed abroad even though the consumer was the object of a sales pitch in the UK and took all the necessary steps here. Therefore we think it desirable to provide that UK consumers should have the benefit of the new legislation not only when they place their order with the supplier in the UK but also where they take the necessary steps to do so. In these circumstances, we think UK consumers can justifiably expect their own "home" law to apply.[15]
7.19 Thus we recommend that the new legislation should be applied despite a choice of foreign law if:–
(a) when the contract was made, the consumer was living in the United Kingdom and
(b) all the steps necessary for the conclusion of the contract were taken there by the consumer or on his or her behalf.[16]
7.21 We recommend that where the contract is not closely connected to the UK but is nevertheless closely connected to the territory of the Member States, the consumer-protective laws of other Member States should be applied as they would normally be under the existing rules of private international law.[17]
this Act has effect in relation to the contract unless, according to the law of the forum, the provisions of the law of a member State (other than the United Kingdom) which give effect to the Directive have effect in relation to the contract.[18]
7.26 We recommend that the new legislation should presumptively provide that contracts for the sale or supply of goods and services to be delivered or supplied outside the territory of the Member States are not to be regarded as closely connected to the territory of the Member States if the consumer took all steps necessary for the conclusion of the contract overseas.[19]
BUSINESS CONTRACTS
Choice of law of a part of the UK in a foreign contract
7.29 We recommend that the new legislation should contain a provision replicating UCTA section 27(1) in relation to business contracts.[20]
Evasion by choice of non-UK law
7.30 UCTA section 27(2)(a)[21] provides that the protective provisions of the Act apply notwithstanding any choice of foreign law where
The term appears to the court… to have been imposed wholly or mainly for the purpose of enabling the party to evade the operation of [the] Act….
7.31 This section has been criticised on the grounds that it introduces a highly subjective element into the law.[22] We felt that it was important to investigate alternative means by which inappropriate evasion of the new legislation might be prevented. Following a suggestion made by Dr Simon Whittaker in his Report to the DTI, we looked at the possibility of introducing a provision along the lines of Article 3(3) of the Rome Convention. That Article provides that the application of the mandatory rules of the country with which a "situation" is wholly connected shall not be prejudiced by the parties' different choice of law clause in the contract.
7.34 We recommend that the business contracts part of the new legislation should apply notwithstanding a choice of foreign law where the contract is, in every other respect, wholly connected to the UK.[23]
Cross-border contracts
7.35 As we have seen, UCTA section 26 exempts cross-border contracts for the sale or supply of goods. Section 26 has a considerable history. The desirability of such a clause has been considered twice by the Law Commissions[24] and was previously incorporated into the Sale of Goods Act 1893, section 62(1) by the Supply of Goods (Implied Terms) Act 1973, section 7. The language of the section owes much to Article 1 of the Uniform Law on the International Sale of Goods ("ULIS"). Despite the extensive attention the text received prior to its final enactment in UCTA, there are still some significant flaws and the section has recently been criticised by the Court of Appeal.[25]
[(1)] In the first place, where goods are exported from the United Kingdom to another country, it is for the legal system of that country rather than for our own to specify how far contractual freedom should be limited or controlled in the interests of consumers or other purchasers. [(2)] In the second place, contracts of an international character ordinarily involve transactions of some size between parties who are engaged in commerce and who wish to be free to negotiate their own terms. They would stress, and we would agree, that in such contracts contractual freedom is of particular importance. [(3)] In the third place, it has been represented to us by persons with experience of international commerce that it would be undesirable to make proposals which would place United Kingdom exporters under restrictions which would not apply to some of their foreign competitors.[26]
The Commissions went on to adopt the definition of international contract in Article 1 of ULIS as an appropriate model.
7.38 Following the Law Commissions' First Report on Exemption Clauses, the Supply of Goods (Implied Terms) Act 1973, section 7 was enacted incorporating the section supplied by the Commissions based on ULIS. The definition of international contracts thus incorporated was the subject of severe academic criticism in an article by Mr Clifford Hall, International Sales and the Supply of Goods (Implied Terms) Act 1973.[27] Hall made many points against the section – not least that it should not have been adapted so as to apply to individual consumers – but of particular concern to the Law Commissions was his comment that the clause did not match up to their avowed policy objectives. Hall argued that the clause did not protect consumers and other purchasers because many importers into the UK would be able to bring themselves within the definition and so escape the controls. Furthermore, many export contracts would not amount to international contracts.[28] His proposed solution was to redraft the section so as more accurately to identify non-UK contracts, rather than contracts with an international, or cross-border, flavour.
7.39 Even today, the enacted version of section 26 appears to be oddly drafted given the Law Commissions' avowed policy objectives in 1969, which emphasised only the importance of freeing UK exporters from control. On its face, the section applies just as much to UK consumers importing foreign goods for private consumption and to contracts involving the supply of goods within the UK.[29] We have already addressed the need to remove consumer contracts from the ambit of any section exempting international supply contracts. The oddity as regards non-consumer imports remains.
7.40 It is now apparent that the Law Commissions were trying to achieve more than merely to implement the policy objectives outlined in their First Report. This accounts for the apparent departure from those policy objectives. Although the Law Commissions were keen to release UK exporters from restrictions that might make them less competitive in foreign markets, whilst still protecting domestic consumers, they were also mindful of the UK's treaty obligations. Under the Hague Convention on the International Sale of Goods 1964 each state was obliged to respect the autonomy of the international business community by allowing businesses to have their contracts governed by ULIS, unmodified by statutory implied terms or other regulatory adjustments.[30] Thus, the territory-unspecific policy of deregulating the international commercial environment within which large businesses operate was thought to take precedence over the Law Commissions' territory-specific policies of protecting UK consumers (or purchasers) and assisting UK exporters to remain competitive.
Article 12 EC Treaty
7.44 During the consultation exercise it was drawn to our attention that the existing exemption for international contracts, in UCTA section 26, had been the subject of criticism on the grounds that it may amount to unlawful discrimination under Article 12 of the EC Treaty.[31] It was therefore desirable to investigate whether our suggested alternative could be said to be discriminatory.
Within the scope of application of this Treaty, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited.
7.46 Article 12 has been given a wide interpretation by the ECJ in several different contexts. First, it is clear that it applies to legal as well as natural persons.[32] Secondly, "nationality" here encompasses residence and domicile as well as nationality proper.[33] Thirdly, it is likely that "all that matters for indirect discrimination is that the clear majority of those disadvantaged by the provision are foreign nationals".[34]
7.47 Given that section 26 removes the UCTA controls which predominantly (but not wholly) benefit the purchaser,[35] it has been argued that the effect is to put a buyer in another state at a disadvantage compared with a buyer in the UK. Whereas British buyers can object to exclusion clauses in their contracts, the overseas resident buyer cannot.[36] In short, there will be circumstances where, when dealing with a UK seller, buyers will be protected if they are based in the UK but not protected if they are based abroad. In the light of the wide interpretation that Article 12 has received, this begins plausibly to look like discrimination.
7.48 Yet the issue is not as simple as first appears. For example, section 26 applies equally to contracts between British purchasers and foreign sellers, when the goods are to be imported into the UK.[37] The threshold criterion for the application of section 26 is the movement of goods across borders or the fact that negotiation and agreement take place at a distance: in either case the parties must also be resident in different states. A contract between a UK buyer and a foreign supplier will often also amount to an international supply contract. This means that a UK business buying imported goods may find itself subject to a valid exemption clause just as much as a foreign purchaser would in an export contract from the UK. It began to look to us as though the issue concealed at the heart of the question of discrimination is what is being subjected to comparison.
7.49 First, let us compare the situation of (i) a UK supplier supplying a UK business with (ii) a UK supplier supplying, say, a German business. Although there could be said to be discrimination between the two buyers because only the latter contract is likely to be exempt from UCTA's controls, we think that the arguments are not clear-cut. It could be argued that it is not particularly relevant to compare purchasers in two different markets. The overseas purchaser will very likely be protected by the laws of its "home" state when it buys from a UK supplier whereas a UK purchaser must rely entirely on the protections afforded by UCTA.[38]
(1) If two sellers, one in the UK and one in France, are competing to supply the same buyer in the UK (in each case under English law), then section 26 produces the result that the buyer can challenge the terms in the contract with the UK seller but not those in any contract with the French seller. There would seem to be discrimination against the English seller.
(2) However, if the same two sellers are competing to sell (again under English law) to a buyer in France, then section 26 and section 27(1) taken together mean that the sellers can compete on equal terms. The English seller's terms would be exempt from UCTA by virtue of section 26 while the French seller's terms would be exempt by virtue of section 27.
Were section 26 to be repealed, the position would be the other way about, with discrimination in case (2) but not in case (1).
7.57 Therefore we recommend replacing section 26 with a clause creating an exemption for business contracts for the supply of goods[39] to be delivered overseas. The controls will still apply to business contracts for the supply of goods to be delivered in the UK, whether the seller is in the UK or overseas.
7.58 We recommend replacing UCTA section 26 in the new legislation with a clause creating an exemption for business contracts under which goods are exported overseas.[40]
SMALL BUSINESS CONTRACTS
Cross-border contracts
7.61 We recommend that the intended replacement for UCTA section 26 (exempting business contracts for the supply of goods abroad) should also operate to exempt relevant contracts from the small business controls.[41]
Choice of law of a part of the UK in a foreign contract
Evasion by choice of non-UK law
when the contract was made, the small business had a place of business in the United Kingdom and
(a) the making of the contract was preceded by an invitation addressed specifically to the small business, or by advertising, about the main subject matter of the contract and all the steps necessary for the conclusion of the contract were taken in the United Kingdom by the small business through its place of business there or on its behalf; or
(b) the small business's order was received by or on behalf of the other business in the United Kingdom.
7.66 We recommend that small businesses should have the benefit of UK protective legislation in cases where the contract is closely connected to the UK because the small business took the necessary steps to order the goods or services here.[42]
Note 2 It appears that in this respect the SCGD has not been correctly implemented in the UK because the SSGCR leave exclusions of the seller’s obligations to be regulated by UCTA (as amended by the SSGCR) without apparently noticing that UCTA does not apply to international sales contracts. [Back] Note 3 See Consultation Paper, para 4.82, which argued that the rule rendering certain clauses of no effect should apply whether the contract is one of sale (and therefore covered by the SCGD) or of hire (which is not). [Back] Note 4 By virtue of Art 6(2). That is, wherever the contract has a close connection to the territory of the Member States. [Back] Note 5 See paras 4.83 – 4.85. [Back] Note 6 UCTA, s 27(2)(a). [Back] Note 7 UCTA, s 27(2)(b). [Back] Note 8 See para 7.2, above. [Back] Note 9 Consultation Paper, para 4.194. [Back] Note 10 In general (and as specified by Art 4(1) – (2) Rome Convention), a contract has its closest connection with the country where the party who is to effect characteristic performance has their habitual residence or central administration. Where, however, the contract is made in the course of that party’s trade or profession, the country of closest connection is where the principal place of business is situated or, where the contract provides that the contract is to be performed through another place of business, the country where that other place of business is situated. [Back] Note 11 Article 7(1) is not listed here as it does not apply in the UK: Contracts (Applicable Law) Act 1990 s 2(2). It does apply in other Member States, which may be called upon to apply UK law according to their own rules of private international law. [Back] Note 12 Our chief concern was that Art 5(2) will not benefit a consumer who is only temporarily resident in the Member State with which the contract is most closely connected. One aspect of this problem is that habitual residence is quite a stringent requirement: an au pair or student visiting a part of the EU for a year probably would not qualify as habitually resident there. In our opinion, a contract can still be closely connected to the territory of the EU even when a person is within the relevant territory on a temporary basis. Another aspect of the problem is that the circumstances listed in subsections (1) to (3) must occur within the same part of the EU that constitutes the consumer’s habitual residence – and not another part. We think that a contract may be closely connected to the EU when these qualifying requirements occur in different Member States.
We were also concerned about the related issue of how Art 5(2) applies as between the different parts of the UK. Under the Rome Convention, by virtue of Art 19(1), each territorial unit of the UK is treated as a separate country for the purpose of applying the Convention. Therefore, a provision such as Art 5(2) is not engaged unless all the qualifying requirements occurwithin one part of the UK. In the new legislation we would want the statutory protections to apply even where the qualifying requirements occur in different parts of the UK. [Back] Note 13 See Jackson “Mandatory Rules and Rules of ‘ordre public’” in North (ed), Contract Conflicts (Oxford: North-Holland Publishing Company 1982) p 65.
We did consider the possibility that if Art 5(2) could not guarantee the application of the new legislative controls in the range of situations contemplated by Art 6(2) of the Directive, Art 7(2) might operate to cover most of the unprotected cases. However, we no longer think that the independent operation of Art 7(2) can, without more, guarantee the application of the new legislation in these situations.
Art 7(2) applies the mandatory rules of the forum but only such rules as are expressed to be mandatoryirrespective of the governing law of the contract. (The default rule is that a United Kingdom statute does not normally apply to a contract unless the governing law of the contract is English law or Scots law.) Art 7(2) will not be engaged unless the new legislation contains express provisions prohibiting evasion by choice of law. [Back] Note 14 It is not, in fact, safe to assume that the UK courts will always be dealing with a UK consumer. Cases on unfair terms may arise where the consumer is the claimant. An EU consumer is entitled to sue the seller in the courts of the place where the seller is domiciled, by virtue of Art 14 of the Brussels and Lugano Conventions (as amended) (Art 16 of the “Brussels I” Regulation). The UK courts may also have and accept jurisdiction over cases involving consumers domiciled outside the EU/EFTA in accordance with Art 4 of the “Brussels I” Regulation/the Brussels Convention/the Lugano Convention. In such cases, permission to serve the claim form out of the jurisdiction may be required in accordance with the requirements of Civil Procedure Rules, rule 6.20. [Back] Note 15 It will be observed that our recommendations now begin to look very much like the text of Art 5(2) of the Rome Convention. That should not be surprising. We believe that Art 5(2) represents a sound attempt at identifying the circumstances in which consumers are most deserving of the protection of their “home” laws. However, we would want our legislation to apply in the qualifying circumstances not only where the consumer is habitually resident in the UK (as required by Art 5(2)) but also where he or she is merely resident here. This is a more generous and, we believe, appropriate test. It would enable a student, say, who had come to study in the UK from outside the EU, to rely on the protection afforded by UK law rather than the law of another Member State. [Back] Note 16 See Draft Bill, clause 18. We did consider drafting provisions to echo Art 5(2) of the Rome Convention, which in effect provides that protections afforded by the law of a consumer’s habitual residence cannot be overridden by a choice of foreign law in the circumstances listed. However, in the event we decided to use wording based on UCTA, s 27(2)(b) which was clearly designed to summarise the circumstances listed in Art 5(2)(c). This wording has the virtue of greater simplicity but, strictly speaking, allows a consumer to claim the protection of UK law in circumstances where he or she has sought out a foreign business and placed an order without having been induced to do so by advertising or invitation. We are not aware that the UCTA formulation has caused any problems to date. [Back] Note 17 See Draft Bill, clause 18(2) – (3). [Back] Note 18 See Draft Bill, clause 18(3). [Back] Note 19 See Draft Bill, clause 18(4). [Back] Note 20 See Draft Bill, clause 19(1). [Back] Note 21 UCTA, s 27(2)(b) applies only to consumers. [Back] Note 22 See Hartley, “Consumer Protection Provisions in the EEC Convention” in North (ed), Contract Conflicts (Oxford: North Holland Publishing 1982) at p 121. [Back] Note 23 See Draft Bill, clause 19(2). [Back] Note 24 In the Law Commissions’ First and Second Reports on Exemption Clauses in Contracts (Law Com Nos 24 and 69, Scot Law Com Nos 12 and 39). [Back] Note 25 In Amiri Flight Authority v BAE Systems plc [2003] EWCA Civ 1447. It was also described as “not altogether clear and suffer[ing] from shifts in language” by Hallgarten J in Ocean Chemical Transport Inc v Exnor Craggs Ltd (unreported July 26, 1999, quoted in the Court of Appeal judgment in the same case: [2000] 1 All ER (Comm) 519, 526). [Back] Note 26 Law Com 24, Scot Law Com 12, para 120. [Back] Note 27 (1973) 22 ICLQ 740. [Back] Note 28 Ibid, p 745 - 6. For example, a contract made in London between two French businesses for the export of goods to France would not be an international supply contract within the terms of s 27 because the parties do not have places of business in different States. See also Hartley, supra n 22 at p 120. [Back] Note 29 In the latter case, the act of either offer or acceptance must be done abroad by a party resident there. [Back] Note 30 This was made clear in the Second Report on Exemption Clauses, Law Com No 69. See para 235. [Back] Note 31 See Burbridge, “Selling in the single market – the control of exemption clauses under EC law” [2000] NLJ 1544. [Back] Note 32 See, for example, R v Inland Revenue Comrs , ex p Commerzbank AG Case C-330/91 [1993] 4 All ER 37, [1993] ECR I-4017 (in relation to the former Article 7 EEC Treaty). [Back] Note 33 Burbridge cites Factortame [1992] 2 QB 680 and Cowen v Le Tresor Public [1989] ECR 195 in support of this proposition. [Back] Note 34 Supra, n 31 at 1545. [Back] Note 35 For example, controls over attempts to exclude liability for breach of implied conditions as to title to the goods, their fitness for the purpose, their quality etc. [Back] Note 37 Burbridge’s statement that “clearly the vast majority of buyers who have their place of business… in another state will be non-nationals” is misleading. Section 26 does not require that buyers have their business in another state, merely that the parties are in different states from one another. Therefore, it applies to foreign sellers selling to English purchasers. This was, in fact, Clifford Hall’s objection to the clause (see (1973) ICLQ 740). [Back] Note 38 It could also be argued that to repeal the s 26 exemption would be discriminatory. It would mean that a UK seller to an overseas buyer would, if the contract were subject to English or Scots law, have to comply with UCTA. However, an overseas seller supplying the same overseas buyer, if it was agreed that the contract should be governed by English or Scots law, would be exempt from UCTA by reason of s 27(1). Thus the simple removal of s 26, without additional changes to s 27(1), would not remove discrimination. It would, in effect, shift the discrimination from one party to the other. [Back] Note 39 If the main justification for the exemption is to lift the burden of regulation incumbent upon UK exporters, at first sight it may seem somewhat arbitrary to exclude contracts for services to be performed abroad. On reflection, we believe that extending the international contracts exemption to contracts for the supply of services would present the following problems:
1. It would leave business people relatively unprotected when they make arrangements to travel abroad on business.
2. It would present serious drafting difficulties. The idea of performance in a particular jurisdiction may be easy to apply to engineers and technicians, but it is not so easy to apply to consultants, accountants and lawyers who provide cross-border advice. The difficulty is that with services there is not always something tangible, whereas with goods there is something tangible which can be identified in a particular jurisdiction. [Back] Note 40 See Draft Bill, Sch 3, para 8. [Back]
