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What does "it" refer to? What is "this precondition"?

Prof Richard Taylor, Damian Taylor. Contract Law Directions (6 edn, 2019). p 125.

6.6.2 Case law under the UTCCR

In order to understand the CRA provisions it is necessary to consider first the case law under the UTCCR which were in force for two decades starting in 1995. The UTCCR, as their name suggests, only ever applied to ‘consumer contracts’ and a consumer was defined in reg.3 as a natural person (contrast the peculiar position under UCTA following R & B Customs Brokers v United Dominions Trust (1988) whereby a company could in some circumstances be ‘dealing as a consumer’). Furthermore, the Regulations only applied to terms which had not been ‘individually negotiated’ (reg.5(1)) which, whilst being a rather similar concept to ‘written standard terms’ in s.3 UCTA, performed a much broader function in the Regulations since it was a precondition for their operation rather than being one of the criteria for the operation of a particular section (this precondition no longer applies under the CRA). Where the Regulations did apply, they did not automatically invalidate any particular type of term and, rather than imposing a test of ‘reasonableness’, they asked whether the term was ‘unfair’. A term was ‘unfair’ under reg.5 if ‘contrary to the requirements of good faith, it causes a significant imbalance in the party’s rights and obligations arising under the contract, to the detriment of the consumer’ (this remains the test under s.62(4) CRA).

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