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GAZETTE
SEPTEMBER 1981
"It should be noted that by virtue of this provision
various sales where the buyer does not in his
business deal in the goods concerned, and therefore
may be no better able to judge the goods than a
private purchaser, will not be consumer sales. Thus
a farmer buying a tractor, or a doctor buying a car
or a typewriter for professional use or wallpaper for
his surgery .. . could be regarded as effectively
private purchasers. It seems probable, however,
that they are not to be treated as such, at any rate
where the article is bought solely for use in
connection with business or professional activities
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The second problem that arises is to determine when,
exactly, a term exempts all or any of the provisions of
sections 13, 14 or 15. In this regard, one must look to
section 55 (6) of the Table inserted by section 22. This
sub-section says that:
"Any reference . . . to a term exempting from all or
any of the provisions of any section of this Act is a
reference to a term which purports tp exclude or
restrict, or has the effect of excluding or restricting,
the operation of all or any of the provisions of that
section, or the exercise of a right conferred by any
provision of that section, or any liability of the seller
for breach of a condition or warranty implied by
any provision of that section."
This sub-section deserves careful scrutiny. It will be noted
that a term of a contract exempts the implied terms if it
"has the effect of excluding or restricting" any liability of
the seller for their breach. This is particularly significant
in relation to clauses in condistions of sale which purport
to limit the seller's liability for a breach of contract to a
fixed sum. If such a clause limits to a fixed amount the
liability of the seller for breach of the implied condition as
to, say, the quality of the goods, then it seems that such a
clause would be void where the buyer deals as consumer
and would be unenforceable in any other case unless
shown to be fair and reasonable.
When is an exclusion clause fair and reasonable?
If, as is often the case, conditions of sale are being drafted
to deal with non-consumer transactions, then obviously it
is important to be able to advise a client as to when
clauses in the conditions excluding the statutory implied
terms will be considered fair and reasonable and therefore
enforceable. The criteria for determining whether terms
are fair and reasonable are set out in the Schedule to the
1980 Act. It is provided there that the test to be applied is
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
contemplation of the parties when the contract was
made." The Schedule requires that consideration be had
for the following matters where they appear relevant:
(a) the strength of the bargaining positions of the
parties relative to each other, taking into account
(among other things) alternative means by which
the customer's requirements could have been
met;
(b) whether the customer received an inducement to
agree to the term, or in accepting it had an
opportunity of entering into a similar contract
with other persons, but without having to accept
a similar term;
(c) whether the customer knew or ought reasonably
to have known of the existence and extent of the
term (having regard, among other things, to any
custom of the trade and any previous course of
dealing between the parties);
(d) 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;
(e) whether any goods involved were manufactured,
processed or adapted to the special order of the
customer.
It is clearly impossible to lay down any one, all-embracing
rule for determining the fairness and reasonableness of a
term; each case is going to have to be considered on its
own facts. Before the draftsman of conditions of sale can
fully advise a client in this regard, careful consideration is
going to have to be given to the client's business, the
terms on which he deals with customers, the terms on
which his competitors deal, whether a particular
transaction has any special features, the state of the
market for the goods being sold and, perhaps most
important of all, the relative bargaining strengths of the
parties. On the whole, though, it seems fair to say that
where the client sells goods in an open market situation to
non-consumer customers who are free to pick and choose,
then it ought to be fair and reasonable to exclude the
statutory implied terms.
The problems caused by section 11(4)
A major difficulty for the draftsman of conditions of sale
is presented by section 11(4) of the 1980 Act. This sub-
section provides that it is an offence for a person in the
course of a business to furnish to a buyer (interalia) any
document including a statement, irrespective of its legal
effect, which sets out, limits or describes rights conferred
on the buyer or liabilities to the buyer in relation to the
goods acquired by him. Such a statement will be
permissible, however, if it is accompanied by a clear and
conspicious declaration that the contractual rights which
the buyer enjoys by virtue of sections 12, 13, 14 and 15
of the 1893 Act (as amended) are in no way prejudiced by
it. This provision seems to raise a serious contradiction
within the Act itself. On the one hand, section 55(4) of
the 1893 Act (as amended) provides that, in the case of a
non-consumer sale, the seller can contract out of certain
implied terms where it is fair and reasonable. On the other
hand, section 11 (4) says that it is an offence to furnish a
statement in the course of a business to a buyer which
describes his rights or liabilities, unless that statement
declares that it in no way prejudices the statutory implied
terms. This is some conundrum. It may have been that
the intention of the legislature in enacting section 11 (4)
was to proscribe statements which derogate from the
buyer's contractual rights under the Act where the buyer
is an ordinary consumer. Such a conclusion would appear
to be in accordance with the policy of the Act. Yet the
draftsman of conditions of sale is faced with the difficulty
that section 11(4) prohibits the furnishing of the
objectionable statement to a "buyer" and not simply to a
"buyer dealing as consumer." But if it is argued that the
section 11(4) offence applies to both consumer and non-
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