Peter is a musician and makes copies of his own music which he sells via the internet. He needs a new machine to speed up the copying of his music. He contacts Music Copy Machines Ltd who recommends a machine which they claim is more than 10 times quicker than his old machine. Peter buys this machine for cash and takes it with him. When he tried it, he found it to be no quicker than his old one. He also found that it started making loud grinding noises when it was being used.

Peter returns the machine to the store and asks for his money back. The store manager, Mr Grumpy, reminds him that the contract he signed contained a clause stating: “Music Copy Machines Ltd excludes all conditions relating to the quality or description of equipment purchased”. Peter tells him that when he signed it, he wasn’t wearing his glasses and therefore didn’t read the clause. Mr Grumpy then pointed out that it was his company’s policy to post a copy of contracts to customers immediately following purchase and therefore Peter would have been aware of the clause from this. Peter says that he did receive a copy of the contract, containing this clause, and that although he read it, he didn’t appreciate its significance until now.

Advise Peter.

Answer

This question is about exclusion clauses. You will need to consider the following issues:

• Has the exclusion clause been incorporated into the contract?
• What is the clause attempting to achieve?
• Are the sellers able to exclude their liability?

Before addressing the substance of the question, you will need to identify whether the contract is governed by the Sale of Goods Act 1979 or the Consumer Rights Act 2015. Since Peter sells copies of his music he is not a consumer which is “an individual acting for purposes that are wholly or mainly outside his trade, business, craft or profession” (s 2(3) CRA 2015). The contract will, therefore, be governed by the Sale of Goods Act 1979.

Has the clause been incorporated into the contract?

You should point out that only if the clause has been incorporated into the contract will it become a term of the contract. In this case, Peter signed the contract and, therefore, on the face of it, it has been properly incorporated. You should cite the general rule that provides that if a party to a contract signs it, then he will be bound by its terms whether or not he has read them or understood them (L’Estrange v Graucob Ltd [1934] 2 KB 394). You could add that that the “incorporation by signature” rule does not apply in cases where the seller has misrepresented the nature of the document that the buyer has signed (Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805) although this is not an issue in this case.

You should also deal with the copy of the contract that was posted to Peter immediately following purchase and point out that as this came after the contract was entered into it is a post-contractual document and has no effect, whether or not Peter read it (Olley v Marlborough Court Ltd [1949] 1 KB 532; Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163).

What is the clause attempting to achieve?

The clause is attempting to exclude all conditions relating to the quality or description of the equipment purchased. In this case, the conditions will be those imposed by ss 13 and 14 of the SGA 1979. You should also point out that the conditions as to quality and fitness for purpose contained in s 14 will only be implied if the seller has sold the goods in the course of a business but the condition as to description contained in s 13 will apply irrespective of the status of the seller.

You should also point out that as the clause is attempting to exclude all such liability the courts may well treat it as a particularly onerous clause and will require a greater degree of notice to be given. Unless such specific notice has been given, they will not be incorporated and therefore will not have contractual effect (Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433). You could also refer to the so-called “red hand” test from Spurling Ltd v Bradshaw [1956] 1 WLR 461.

You should also note that the clause does not attempt to exclude misrepresentation and therefore will not be effective in excluding liability for if misrepresentation is established (see the principle in Andrews Bros (Bournemouth) Ltd v Singer & Co Ltd [1934] 1KB 17).

Are the sellers able to exclude their liability?

This will depend on whether Peter has dealt as a consumer. You should consider s 12(1) UCTA 1977. It seems likely that Peter has not dealt as a consumer. This is because s 12 defines consumer status by reference to the transaction itself and not by reference to the individual. Therefore, the sellers will be able to exclude liability for the implied terms but only if reasonable. Terms which may be excluded or restricted only if reasonable are subject to s 11(1) UCTA which lays down guidance as to the meaning of reasonableness for these purposes. It is for the party claiming that the term satisfies the requirement of reasonableness to show that it does (s 11(5) UCTA)). Under s 11(1) UCTA the court should ask itself whether the term is “a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.” You also need to consider the guidelines for the application of reasonableness in Schedule 2 of UCTA.