British Fermentation Products Ltd v Compair Reavell Ltd
Citations:  2 All ER (Comm) 389;  BLR 352; (2000) 2 TCLR 704;  CLY 843.
The claimant contracted the defendant to supply and install an air compressor at their premises. The parties contract incorporated the Contract Form C standard terms of the Institute of Mechanical Engineers Model Form of General Conditions.
Those terms included a clause which stated that if a defect resulting from ‘faulty materials, workmanship, or design’ appeared in the goods within 12 months of delivery, the claimant would return them and the defendant would enact repairs or (if the claimant chose) supply a replacement. This was stated to be in lieu of ‘any warranty or condition or condition implied by law as to the quality of fitness for any particular purpose of the goods’. Accordingly, the defendant was not to be liable ‘for any defects in the goods or for any damage, loss, death or injury (other than death or personal injury caused by…negligence…)…resulting from such defects or from any work done in connection therewith.’
The claimant alleged that there was a fault in the compressor. The defendant tried to enact repairs, but was unsuccessful. The claimant did not reject the returned compressor or demand a replacement. Instead, they sued for breach of contract, claiming damages for the loss of capacity and the increased cost of running the faulty processor. The defendant relied on the above clause as excluding their liability.
- Did the clause exclude the defendant’s liability for breaches of express clauses of the contract in circumstances where the defendant had failed to enact repairs?
- Was the exclusion clause void for unreasonableness under s.3 of the Unfair Contract Terms Act 1977?
Section 3 of UCTA applies where where one of the contracting parties deals on the other’s ‘written standard terms of business’.
The High Court held that the exclusion clause applied to cases where the defendant was in breach of the contract’s express terms. It also applied where the defendant had tried and failed to enact repairs. The clause was not limited to cases in which the defendant breached statutory implied terms (such as the quality term under the Sale of Goods Act 1979).
The clause was not void under s.3. The claimant had not proven that the Contract Form C was the defendant’s written standard terms of business. Even if this were not the case, the court considered that the term was reasonable.
When this case was decided, s.3 also required to ‘deal as a consumer’. This element of the provision was removed following the enactment of the Consumer Rights Act 2015. The claimant in this case also failed to show that s.3 was applicable because they were not dealing as a consumer. A modern business seeking to apply s.3 would not have the same problem.
This Case is Authority For…
Section 3 of the Unfair Contract Terms Act 1977 only applies to the defendant’s written standard terms. Where the contract follows a model set of terms provided by a third-party, the claimant must show that the defendant adopted them as their standard terms of business.
This requires the model contract to be ‘invariably or at least usually used by the party in question’. This can be demonstrated by past practice or express words: ‘My standard terms of business are on the terms of the [model contract]’.
Bowsher J declined to hold that this is the only matter the claimant must prove to bring a model contract within the remit of s.3: ‘I leave open the question what would be the position where there is such proof, and whether such proof either alone or with other features would make section 3 of the Act applicable.’
The court considered the following factors relevant to their finding that the clause was reasonable:
- The clause did not completely exclude liability. The defendant was still liable to repair the goods and could, at the claimant’s option, be liable to pay for substitute goods.
- The clause was narrow. It merely excluded liability for consequential loss if the claimant chose to keep the fault goods after a failed attempt at repair.
- The claimant had the opportunity to reject the goods and force the defendant to pay for a replacement. They chose not to, to minimise loss of production. This was a choice which was foreseeable at the time of contracting.
- The parties had equal bargaining power.
- The claimant could have gone elsewhere had they not liked the defendant’s terms.
- The fact that the goods were made to order (one of the factors mentioned in Schedule 2 of UCTA) was less relevant in this case. The court noted that this factor is most relevant where it limits the remedies available to the consumer. The claimant in this case had ample remedies.
The judge noted that he could not derive much assistance from past cases involving similar clauses. Each clause must be decided on its own merits in its particular context.