Thursday 1 January 2009

The Requirement of Reasonableness

Exclusion clauses subject to reasonableness


S.6(3) states that as against a person dealing otherwise than as consumer liability for breach of the obligations arising from ss.13, 14 or 15 of the Sale of Goods Act 1979 can be excluded or restricted by reference to a contract term, but only in so far as the term satisfies the requirement of reasonableness.

THE REQUIREMENT OF REASONABLENESS

Under s11(1) the requirement of reasonableness is that "the term shall have been 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."


Section 11(2) provides that, in determining whether the clause is a reasonable one for the purposes of ss6 and 7, regard shall be had to the Guidelines set out in Schedule 2 of the Act, which are as follows:

(1) The bargaining strengths of the parties relative to each other and the availability of alternative supplies.

(2) Whether the customer received an inducement to agree to the term. (The supplier may have offered the customer a choice: a lower price but subject to an exemption clause or a higher price without the exemption.)

(3) Whether the customer knew or ought reasonably to have known of the existence and extent of the term.

(4) Where the term excludes or restricts any relevant liability if some condition is not complied with, whether it was reasonable at the time of the contract to expect that compliance with that condition would be practicable.

(5) Whether the goods were manufactured, processed or adapted to the special order of the custom

The Regulations apply, with certain exceptions, to unfair terms in contracts concluded between a consumer and a seller or supplier and provide that an unfair term is one which has not been individually negotiated and which, contrary to the requirement of good faith, causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer. An unfair term shall not be binding on the consumer.

Am I a consumer?

Peter Symmons and Co v Cook (1981) 131 NLJ 758

The plaintiff firm of surveyors bought a second-hand Rolls Royce from the defendants which developed serious defects after 2,000. It was held that the firm was acting as a consumer and that to buy in the course of a business 'the buying of cars must form at the very least an integral part of the buyer's business or a necessary incidental thereto'. It was emphasised that only in those circumstances could the buyer be said to be on equal footing with his seller in terms of bargaining strength.

R and B Customs Brokers v United Dominion Trusts Ltd [1988] 1 WLR 321

The plaintiff company, which was a shipping agency, bought a car for a director to be used in business and private use. It had bought cars once or twice before. The sale was arranged by the defendant finance company. The contract excluded the implied conditions about merchantable quality. The car leaked badly.

It was held by the Court of Appeal that where a transaction was only incidental to a business activity, a degree of regularity was required before a transaction could be said to be an integral part of the business carried on and so entered into in the course of that business. Since here the car was only the second or third vehicle acquired by the plaintiffs, there was not a sufficient degree of regularity capable of establishing that the contract was anything more than part of a consumer transaction. Therefore, this was a consumer sale and the implied conditions could not be excluded.

RTA v Gill Draper (Huntingdon County Court 16th September 2009)

It was found that Ms Draper, in signing the contract to appoint RTA as the selling agent for her public house, did so as a consumer as she was not in the business of buying or selling businesses.

Tina's Story

I signed up with RTA in Nov 2008.

The sales man was very nice and I assumed the contract was like any other agents contract.

6 months into the agreement I asked to be released from the contract as my house was being repossessed but they refused.

Nearly a year later, I wanted to terminate the agreement as I realised they did not advertise, did not send one potential buyer and after paying £700 plus VAT I never heard from them and always had great difficulty getting in touch with them.

I even pretended to be a 3rd party interested in buying my own business and they said it was not available!

I searched the internet and found the Mirror blog. Then I tried to cancel my agreement with RTA. I wrote an email saying as a single mum of 2 and about to have my family home repossessed and go bankrupt I needed to sell quickly and had to take the property to auction. I wanted to be released from the contract because they did not fulfil their agreement as the sales man mentioned 'national advertising' but my business was never advertised nationally.

They said no.

After a year I found a private buyer and sold the business in Dec 2009, 13 months after signing their agreement, and not having heard from them once except in response to my request to cancel.

I was told by their rep that after a year I was released from the agreement automatically - but then RTA sent me a bill for £17,000 and a threat of legal action if I didn't pay up!

Their contract may be water tight but I am going to attempt to take them to court and 'out' them as small business con men.

It is outragious that they target such people or anyone at all. It is simple to do the job they offer so why do they need to 'steal' our money and bully and indimidate us with threats of legal action?

I am hoping a judge will see them for what they really are and finally do something to stop this.