The High Court has recently decided that various limitations of liability in standard term contracts were unreasonable under UCTA. (Saint Gobain Building Distribution Ltd (t/a International Decorative Surfaces) v Hillmead Joinery (Swindon) Ltd).
The usual thinking is that limitation of liability clauses have a good chance of passing the reasonableness test if the buyer at least has some remedy, for example, replacement of the goods or a refund. If such remedies are available, then it is often considered reasonable to exclude any liability beyond what is commonly referred to as indirect or consequential loss.
In the
present case, the judge was not prepared to accept clauses whose effect would
deny the buyer of any remedy in certain circumstances, even if total denial
would only occur in those circumstances, and a refund or replacement was
available in other circumstances.
The case
raises a number of old and new points for suppliers to consider:
- Where the UCTA reasonableness test is likely
to apply, it is dangerous to exclude the implied statutory terms without
offering something reasonable as an alternative, for example, a warranty
of compliance with a written specification.
- It may be dangerous for a seller to exclude
"all liability" in certain particular circumstances, even if
some limited liability is accepted in other circumstances. The safer
course may be not to exclude liability completely in any particular
circumstance, but subject all different types of liability to an overall
cap, covered by insurance, and expressed as a generous percentage of the
value of the contract.
- It may be prudent for a seller to accept
liability for some defined forms of loss that might otherwise be
considered indirect and not recoverable, but again subject to an overall
cap.
Dixon Phillips solicitors would be pleased to have an initial, no obligation discussion or meeting with any local business which has a query or concern about commercial law issues.