Chapter 11: Direct Control of Terms

11.5.5.2 Review for Reasonableness

p. 437 on illustrations of the reasonableness test

Suggested Update

• The Court of Appeal upheld the lower court finding that the exclusion was not unreasonable in Goodlife Foods Ltd v Hall Fire Protection Ltd [2018] EWCA 1371). The clause excluded ‘all liability, loss, damage or expense consequential or otherwise caused to your property, goods, persons or the like, directly or indirectly resulting from our negligence or delay or failure or malfunction of the systems or components provided by [the defendant] for whatever reason’. The main factors were:
• The parties were of roughly equal bargaining power; Gross LJ observed, ‘at least in the case of commercial contracts between parties of broadly equal bargaining power, considerations of party autonomy and freedom of contract remain potent.’ 
• The claimant was in the best position to take out insurance given that it was conducting a business which was potentially hazardous in nature and it was in the best place to assess the impact of any fire on its business; Coulson LJ stated that ‘the trend in the UCTA cases decided in recent years has been towards upholding terms freely agreed, particularly if the other party could have contracted elsewhere and has, or was warned to obtain, effective insurance cover.’
• This was ‘a relatively low value contract’ where the potential liability was very high and, liability could arise sometime after performance of the contract.  
• It was not determinative that the defendant appeared to be excluding liability for a ‘core obligation’, as the ‘core obligations’ of the defendant could only be assessed by reference to the contract as a whole, including exclude liability. This reminds us of the debate over whether an exemption of liability is in reality duty-defining.

 

• In contrast, in First Tower Trustees Ltd v CDS (Superstores International) Ltd (2018) the parties were held to be of roughly equal bargaining power and had access to legal advice, but the clause was nonetheless invalid, given the importance that the Court of Appeal attached to pre-contractual enquiries in the context of conveyancing transactions. Again the Court of Appeal refused to interfere with the finding of the first instance judge.