A vexed question (at least for lawyers) has been whether the Unfair Contracts Terms Act 1977 (UCTA) applies to contracts of employment. Why? Because it would potentially enable aggrieved employees to argue that a contract term is void for unreasonableness. The employer, in Commerzbank AG v Keen, relied on a clause in K’s contract that he had to be in employment as at the date of the bonus actually to receive it. K, relying on UCTA, argued that the clause operated as an unreasonable exclusion. The Court of Appeal unequivocally rejected K’s claim saying that he was not ‘dealing as a consumer’ in relation to his pay arrangement and the bank was entitled to rely on the clause. This means that employers can ordinarily rely on a term in a bonus scheme whereby no bonus will be payable if, at the date of payment, the employee is no longer employed or under notice, given or received. The fact that he or she may have worked effectively for the whole of the bonus year will not matter. The second point of interest in this case concerns the discretionary nature of the bank’s bonus scheme. K argued, again unsuccessfully, that the bank had breached an implied term not to exercise its discretion irrationally or perversely. The court commented that the bank had a wide contractual discretion as to the size of the bonus. The burden was on K to show that no rational bank in the City would have paid him a bonus of less than his line manager recommended. K would also be expected to present independent evidence, expert or otherwise, supporting such a claim (which he had not). Lastly – and this is a cautionary note for employers – the court commented that an employee is generally entitled to know the reason behind a discretionary bonus award. While a failure to explain this will not of itself show irrationality, it could amount to a breach of the duty of trust and confidence.