Just like buses, one waits for a while and then two cases come along at once regarding the application of the Unfair Contract Terms Act (UCTA).

Earlier this year, we published an article regarding the case of Pinewood Technologies Asia Pacific Ltd v Pinewood Technologies Plc in which the reasonableness of an exclusion was considered by the High Court. Less than a month later, the Court of Appeal has considered the reasonableness of an exclusion of implied terms in the case of Last Bus Ltd v Dawsongroup Bus and Coach Ltd.

The case concerned a hire purchase agreement between the parties for the hire of buses. The agreement was on Dawson’s (the hirer and defendant in this case) standard terms and contained a provision which excluded any conditions and warranties, whether express or implied by law (including the implied term as to satisfactory quality in section 10(2) of the Supply of Goods (Implied Terms) Act 1973):

… the Customer [Last Bus] agrees that all such representations, conditions and warranties whether express or implied by law are excluded.

Last Bus (the hiree and claimant in this case) argued that the buses were not of satisfactory quality on the basis that, due to defects, they were liable to (and, in four cases, did) catch fire. Last Bus brought a claim against Dawson for damages in the sum of over £10million for breach of the implied term as to satisfactory quality (because I think we can all agree that a flammable bus isn’t ideal).

When the case reached the High Court last year for summary judgment, the judge concluded that, given the parties were of equal bargaining power, the exclusion was reasonable under UCTA and, accordingly, the case was summarily dismissed. 

The claimant appealed this decision to the Court of Appeal which found:

  1. The High Court judge was wrong to have measured the reasonableness of the exclusion clause by reference to the parties’ bargaining powers; instead, the question was whether the parties were on equal footing when it came to the agreement itself (which, as mentioned, was on the hirer’s standard terms and conditions). The Court of Appeal found that it was unlikely that the defendant would have contracted without the exclusion clause and there were no materially different terms in the market, meaning the claimant had very little choice but to agree to the exclusion clause (and, therefore, very little bargaining power).
  2. The High Court should have considered that the blanket exclusion left the claimant without a remedy. Therefore, such a term was deemed to be prima facie unreasonable under UCTA.
  3. The High Court was wrong to determine that a trial was unnecessary as many of the facts of the case required further investigation.

This case adds more weight to the principle that, no matter how tempting it may be to draft wide exclusions of liability on behalf of a supplier (particularly in standard terms or terms of service which are unlikely to be negotiated) in an attempt to protect their interests, such broadly drafted clauses can do more harm than good. It is also a cautionary tale when it comes to businesses assessing their ‘bargaining power’ in potential deals.  With the judge shining a light on the agreement in question rather than the size or sophistication of the parties, it serves as a reminder that inequality of bargaining power is just one of the factors the court considers – and it may have less significance than expected or anticipated.