African Export-Import Bank v Shebah Exploration & Production – Case Summary

African Export-Import Bank v Shebah Exploration and Production Co Ltd

Court of Appeal

Citations: [2017] EWCA Civ 845; [2018] 1 WLR 487; [2018] 2 All ER 144; [2018] 1 All ER (Comm) 535; [2017] 2 Lloyd’s Rep 111; [2017] 2 CLC 73; [2017] CLY 508.


The claimant was a lender who entered into a loan agreement with the defendants. The first defendant, a company, was the lender. The other two defendants were guarantors for the loan. The claimant’s lawyers based the loan agreement on a standard form contract recommended by the Loan Market Association. The parties made significant modifications to the standard contract in negotiations. The ultimate contract included an exclusion clause which barred the defendants from relying on any defence of set-off. The company failed to pay back the loan, so the claimant began proceedings to recover the money.

The defendants argued that they had a counter-claim for damages against the claimant which they should be allowed to set-off from the outstanding amount of the loan. They argued that the claimant was not entitled to rely on the exclusion clause. This was because, they argued, the clause fell within the scope of s.3 of the Unfair Contract Terms Act 1977 and was void for unreasonableness. The claimant responded that s.3 was not relevant, because it only applies to contracts made on one parties’ ‘written standard terms of business.’ The claimant argued that the loan agreement was not either parties’ standard terms.

  1. When does a contract constitute ‘written standard terms of business’?

The Court of Appeal held in favour of the claimant. There was no evidence that the loan agreement was made on the claimant’s written standard terms of business. This meant that the defendant was unable to invoke s.3 of UCTA. The exclusion clause therefore barred the defendants from relying on any defence of set-off.

This Case is Authority For…

Written terms are ‘standard’ if one party habitually uses them forwards as the basis for that kind of contract, without substantial variations.

It is possible for written terms to remain ‘standard’ even if there is some negotiation between the parties as to specific terms. However, any amendments must essentially leave the standard terms ‘untouched’. For example, the fact that the parties negotiate a price or the quantity of goods will not prevent a contract being on standard terms.


The court noted that the standard terms do not have to have been developed by one of the parties – it is possible for a party to adopt a third-party’s terms as its own standard form contract. However, ‘neutral’ industry model contracts such as the Loan Market Association contract are not automatically written standard terms. There must be cogent evidence that one party habitually uses the model contract without any possibility of significant negotiation or modification.