§ Mr. Robert Taylorasked the Secretary of State for Prices and Consumer Protection on what grounds he based his decision not to refer the question of joint and several liability of partners to the Law Commission, in view of the anticipated effect of Section 11(4) of the Unfair Contract Terms Act 1977.
§ Mr. John FraserI have considered very carefully the suggestion that, under Section 11(4), hardship might arise where one partner in a firm is a person of substance, if all the partners were therefore to be held liable to a similar level despite the fact that they had been unable to obtain appropriate insurance cover. In my view, where the partnership is an ordinary one, the contract containing the clause which limits liability will not be made with the partnership as an entity, but with each partner whose liability will, by virtue of their being partners, be joint. This means that even if the court applies the test of reasonableness by reference to the aggregate wealth of all the partners, the incidence of the partners being jointly liable would preserve the resulting financial position of the poorer ones because of their right to contribution from the richer ones.
I do not, however, think that the question of applying the aggregate wealth of all the partners should arise. It seems much more likely that the criterion of available resources would be applied by the court in relation to each partner who is sued. The clause would presumably be held unreasonable as against the richer partners while being held reasonable in favour of the poorer ones. So the poorer 512W ones would not have to pay more than the limit and would not be driven into bankruptcy.
One of the advantages of the test of reasonableness is that it leaves matters of this kind to the good sense of the courts. I believe, therefore, that we should wait and see how the Act works in practice before we consider whether a reference to the Law Commission is necessary.