The reasonableness of excluding implied terms

(Last Bus Ltd (t/a Dublin Coach) v Dawsongroup Bus and Coach Ltd [2023] EWCA Civ).

Earlier this week, the Court of Appeal ruled that the judge in the High Court was wrong to hold that parties were of equal bargaining position where the Claimant was trading on the Respondent’s standard terms and there were no materially different terms available in the market.

The Claimant had purchased Mercedes Benz coaches that were financed by the Respondent in a series of hire purchase agreements.  These agreements were on the Respondent’s standard terms and contained a clause that excluded the statutory term as to fitness implied by Section 10(2) Supply of Goods (Implied Terms) Act 1973 (i.e. that the goods supplied under the hire agreement are of satisfactory quality).

The Claimant argued that some or all of the coaches supplied to it were not of satisfactory quality and claimed damages for breach of the statutory implied term.

The case concerned the extent to which the exclusion clause satisfied the requirement of reasonableness under section 6(1A)(b) and section 11 of the Unfair Contract Terms Act 1977 (“UCTA”).  In holding the term to be reasonable, the High Court judge attached particular importance to the equality of bargaining position between the parties.

This was contrasted with the position in contracts with consumers who required the full protection offered by UCTA.

Last week, the Court of Appeal confirmed that UCTA is not limited in application to consumer contracts, and applies with full force (subject to the exceptions in Schedule 1) to commercial contracts where one party is dealing on the other’s standard terms or where the contract is one of hire purchase.

The Court held that the clause was prima facie unenforceable, contrary to the High Court judge’s ruling.

The judgment highlights that an assessment of equality of bargaining position depends more on the terms being offered and the availability of alternatives in the market, than on the size and commercial sophistication of the parties.

So bear in mind what they say about buses: if you are waiting for a deal on buses and then two come along at once… the parties are likely to have greater bargaining power over the terms of the contract.  (And if the deal is in relation to a hire purchase agreement, the UCTA will apply with full force).

If you would like advice on your commercial contracts, or a review of your terms and conditions, please do not hesitate to get in touch.

Olivia Leeper – 01328 621475

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