Keenan and Riches’BUSINESS LAW

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monopoly supplier, for example, will find it difficult
to justify a wide exclusion clause.
■Whether the customer received an inducement to agree
to the term. The supplier may have offered the cus-
tomer a choice: a lower price, but subject to an exemp-
tion clause, or a higher price without the exemption.
Where a real choice is available, the supplier will
probably be able to show that the exemption clause
was reasonable.
■Whether the customer knew or ought reasonably to have
known of the existence and extent of the term. If the
customer goes into the contract with his eyes wide
open, he may have to accept the exemption clause.
■Where the term excludes or restricts any relevant liabil-
ity if some condition is not complied with, whether it
was reasonable at the time of the contract to expect that
compliance with that condition would be practicable. A
supplier, for example, may limit his liability to defects
which are brought to his attention within a certain
time, e.g. three days. The court will consider whether
compliance with such a time limit is practicable.
■Whether the goods were manufactured, processed or
adapted to the special order of the customer. An exemp-
tion clause may well be reasonable if the customer has
insisted on the supplier complying with detailed
specifications.
The reasonableness of exemption clauses in contracts
other than for the sale or supply of goods must be
judged without the benefit of these criteria. The leading
case on unreasonableness is a decision of the House
of Lords in which the reasonableness test contained in
the sale of goods legislation, which preceded s 6 of the
Unfair Contract Terms Act 1977, was considered.


The following cases provide more recent examples of
the reasonableness test.

Part 3Business transactions


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(a) the defendants had made ex gratiapayments in
similar cases in the past; (b) the breach had occurred as
a result of the defendants’ negligence; and (c) the defend-
ants could have insured against the risk of crop failure
without significantly increasing the price of the seed. In
an attempt to discourage appeals on the question of rea-
sonableness, Lord Bridge indicated that the decision of
the trial judge should be treated with the utmost respect
and should not be interfered with on appeal unless it was
plainly and obviously wrong.

George Mitchell (Chesterhall) Ltdv
Finney Lock Seeds Ltd(1983)
The defendant seed merchants supplied the claimant
farmers with 30 Ib of Dutch winter cabbage seed for a
price of £192. The claimants planted the seed on 63 acres
but the seed was defective and the crop was a total fail-
ure. When the claimants claimed compensation for loss
of the crop (over £60,000), the defendants sought to rely
on a clause in the contract which purported to limit their
liability to replacing the seed or refunding the purchase
price. The House of Lords held that the defendants
could not rely on the clause since it did not satisfy the
reasonableness test. The House referred to the following
factors as indicating that the clause was unreasonable:

St Albans City and District Councilv
International Computers Ltd(1996)
The defendant company supplied the claimant local
authority with a computer software system for adminis-
tering the collection of the Community Charge. The soft-
ware was defective with the result that the local authority
collected far less than it expected. The supply contract
contained a clause limiting the liability for the defend-
ant company to £100,000. The trial judge held that the
limitation clause was not reasonable. The parties did
not enjoy equal bargaining power; the defendant was a
multinational company with large resources. The com-
pany was insured for £50 million and was, therefore,
clearly better able to bear the loss than the local author-
ity’s Community Charge payers. The defendant appealed.
Although the discussions in the Court of Appeal focused
on the amount of damages recoverable, the court also
considered whether the contract had been made on
the company’s written standard terms of business (see
below). Although some negotiations had taken place
between the parties, the company’s conditions were ac-
cepted with a few changes. The contract, therefore, had
been made on the company’s written standard terms of
business.

Britvic Soft Drinks Ltdv Messer UK
Ltd(2002)
The defendants agreed to supply bulk liquid carbon
dioxide (CO 2 ) to the claimants for use in the manufacture
of carbonated soft and alcoholic drinks. The contract
stated that the CO 2 complied with BS 4105. The CO 2 was
in fact contaminated with benzene and the claimants
decided to recall all drinks above a certain level of con-
tamination. The defendants sought to rely on limitation
of liability clauses in the contract. The Court of Appeal
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