Driving a reasonable bargain: exclusion of statutorily implied term upheld
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The High Court has held that a provision in a hire purchase agreement excluding all terms implied by law was effective to exclude a statutorily implied term of satisfactory quality. It was also reasonable under the Unfair Contract Terms Act 1977.
Under a hire purchase arrangement Last Bus, an Irish coach operator, would acquire a number of Mercedes coaches from EvoBus on financing terms provided by Dawson. Some of the coaches caught fire, necessitating a more rigorous maintenance regime for the entire fleet. Last Bus claimed damages against Dawson for breach of an implied term under the relevant legislation that the coaches would be of satisfactory quality. Dawson sought summary judgment on the ground that the implied term had been excluded and that this exclusion was reasonable under the Unfair Contract Terms Act 1977.
The relevant provision of the agreement said:
“The Company shall have no liability for selection, inspection or any warranty about the quality, fitness, specifications or description of the Vehicle and the Customer agrees that all such representations, conditions and warranties whether express or implied by law are excluded.”
Last Bus argued that the provision, properly construed, did not exclude the statutory implied term. The court, however, gave short shrift to its suggestion that the phrase “implied by law” only encompassed common law, not statute law.
The court also concluded that the exclusion clause was reasonable:
- There was no inequality of bargaining power between Last Bus and Dawson.
- The clause was market practice in the hire purchase industry.
- Last Bus ought reasonably to have known of the existence of the exclusion given the parties’ extensive dealings. They had agreed on 45 prior contracts over 20 years without Last Bus raising an objection.
- Last Bus did not receive any inducement to agree to the clause.
- Last Bus was a “substantial commercial party” who could have acquired the coaches directly without going through Dawson.
The court therefore dismissed the claim against Dawson.
The case is a reminder that you can exclude some statutorily implied terms, and a useful case study of how the court will assess whether that exclusion is reasonable.
Judgment: Last Bus v Dawsongroup
Update November 2023: The Court of Appeal has overturned the finding that the clause was reasonable and said it needed a full trial, not a summary judgment, to determine that question. On the question of reasonableness the Court of Appeal held the judge was wrong to assume that the parties had equal negotiating power and should have asked himself whether LastBus had any say over the terms (not just the price). On the facts Dawson would not have contracted unless the exclusion was in and there no materially different terms were available in the market. Finally a provision, like this, which left Last Bus without a remedy even if it received no value at all whilst having to pay for the hire, was on the face of it, unreasonable