We are all familiar with the scenario, given the restricted free time our busy lives concede us:
A lengthy document arrives (very often in electronic form) from the software company, bank or other organisation from which we desire goods and/or services and we simply click the button marked “I accept” without even reading the terms being presented.
Whilst there is considerable statutory protection in such circumstances for people dealing “as consumers” (not contracting in the course of business and contracting for items which are of a type ordinarily supplied for private consumption) a recent decision of the Court of Appeal (Goodlife Foods Limited v Hall Fire Protection Limited  EWCA Civ 1371) has re-emphasised the reluctance on the part of the Courts to intervene in circumstances of this type where dealings are between businesses.
Hall Fire Protection Limited (H) was a company providing automatic fire sprinkler systems. In 2001 H gave a quote to Goodlife Foods Limited (G) for the provision of a fire detection and suppression system to cover one of the multi-purpose fryers used by G to cook food before freezing and despatch to customers.
The quote from H contained – as part of the H’s standard conditions – the following exclusion clause:
“We exclude all liability, loss, damages or expense consequential or otherwise caused to your property, goods, persons or the like, directly or indirectly resulting from our negligence or delay or failure or malfunction of the systems or components provided by [H] for whatever reason. In the case of faulty components we include only for the replacement, free of charge, of those defect[ive] parts.”
Crucially as it subsequently turned out the relevant clause went on to say:
“As an alternative to our basic tender we can provide insurance to cover the above risks. Please ask for the extra cost of the provision of this cover if required.”
The value of the contract was £7,490.
In May 2012 G’s premises was burnt down in a fire, total resulting losses from which were put at around £6.6 million. G alleged that the system installed by H failed to supress the fire – thought to have originated from the fryer – due to a defect in the system and claimed damages.
H sought to rely on the above exclusion clause (and to strike out G’s claim). Whether or not they were entitled to do so was tried as a preliminary issue:
Section 2 of the Unfair Contract Terms Act 1977 (UCTA) provides, in relation to negligence liability:
“A person cannot by reference to any contract term or to a notice give to persons generally or to particular persons exclude or restrict his liability for death or personal injury resulting from negligence;
In the case of other loss or damage a person cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness.”
The reasonableness test is then set out in section 11 UCTA as being:
- That the term shall have been a fair and reasonable one to be included having regard to the circumstances which were or ought reasonably to have been known to or in the contemplation of the parties when the contract was made; and
- That particular attention shall be paid to the matters specified in Schedule 2 UCTA in determining whether a contract term satisfies the term of reasonableness.
The matters listed in Schedule 2 include the strength of the bargaining positions of the two parties relative to each other.
In the trial of the preliminary issue at first instance ( EWHC 767 (TCC)) it was held:
- That the exclusion clause was not particularly onerous or unusual;
- That notice of the clause was fairly and reasonably given to G (and hence it was incorporated into the contract); and
- That, being – in the circumstances – a fair allocation of overall risk between the parties and given the business context and the consideration that G had the opportunity to take legal advice before agreeing to the contract (whether or not they did so), the clause was reasonable.
This view was upheld in the Court of Appeal decision.
Do not assume therefore that just because a clause (particularly a clause excluding liability) is stringent it will not be upheld against you (or, more importantly, your business). Remember: before you click “accept,” read what you are accepting (and, as a counsel of perfection, keep a copy). If the implications of any of the terms are not clear, your current legal advisers should be happy to have a look at them and explain the implications to you.
It is much quicker (and cheaper) to do this before you agree to the contract than trying to battle your way out of difficulties which may arise in the future.
If your current advisers are unable to do this for you (or if you already use Barrett & Co) the Property & Commercial Department at Barrett & Co will be very happy to assist. Please contact them on 0118 958 9711.