UK: UCTA Sounds the Retreat - Further Developments on Limitation of Liability

Last Updated: 25 July 2003

By Kit Burden and Duncan Pithouse

A recent decision of the Court of Appeal has emphasised the Courts' increasing unwillingness to intervene in the deals struck between commercial entities, and is another case in a recent line supporting the reasonableness of agreed liability provisions.

SUMMARY

In Granville Oil and Chemicals Limited v Davies Turner and Co Limited [2003] EWCA Civ 570, the Court of Appeal held that a standard term requiring a party to bring a claim under the contract within a period of nine months from the date on which the event giving rise to the cause of action occured, or otherwise lose the right to bring such a claim, was a reasonable exclusion or limitation of liability pursuant to the Unfair Contract Terms Act 1977.

FACTS

The case concerned the transportation of paint from Kuwait to Rotherham pursuant to an agreement between the claimant importer and the defendant freight forwarder. The contract was made subject to the British International Freight Association Standard Trading Conditions (1989 edn) (the "BIFA Terms") which included, at clause 30, (a) a requirement on the importer to notify the freight forwarder of any claims within 14 days of the date on which it became aware or ought to have become aware of the cause of action giving rise to the claim, and (b) a requirement to bring formally any claim within nine months of the date on which the event giving rise to the cause of action occured. One of the terms imposed on the freight forwarder was an obligation to effect all risks insurance cover in respect of the consignment whilst it was in transit.

On delivery to the importer in January 2000, the consignment of paint was found to have been damaged in transit. The importer notified the freight forwarder of its claim in accordance with clause 30, but did not formally commence proceedings. The freight forwarder promptly claimed under the all risks insurance policy in respect of the damage. However, underwriters notified the freight forwarder in March 2000 that it was rejecting the claim (on the grounds that the damage was caused by an excepted peril) and subsequently re-affirmed its rejection in June 2000 (albeit on slightly different grounds than before). The freight forwarder failed to tell the importer that the insurance claim had been rejected until 2 August 2000. In November 2001, the importer started proceedings against the freight forwarder for breach of contract in respect of (a) the damage to the consignment and (b) its continuing obligation to insure.

The importer successfully claimed at first instance that the time bar in clause 30 of the BIFA Terms was unreasonable pursuant to the Unfair Contract Terms Act 1977 ("UCTA 1977")1 . The freight forwarder appealed.

THE TEST OF REASONABLENESS

The Court of Appeal considered, drawing from Schedule 2 to UCTA 1977, the following factors relating to the test for reasonableness:

  • The relative strength of the parties' bargaining positions;
  • Whether the importer knew or ought reasonably to have known of the existence and extent of the clause 30; and
  • Whether it was reasonable at the time of entering into the contract to expect that compliance with clause 30 would be practicable.

The Court of Appeal held that the parties were "obviously" of equal bargaining power, since the contract was a commercial contract between commercial parties where the importers could have contracted on terms other than the BIFA Terms. They also noted that the claimant could have effected its own insurance cover.

It was further held, as it was at first instance, that the BIFA Terms had been brought expressly to the importer's attention and, although the importer's export administration manager was unaware of the specific existence of clause 30, it was held that he ought reasonably to have been aware of it. Significantly, the Court concluded that it was for the importer to make itself aware of the terms of the contract, knowing that some terms would apply and had applied in the past to their dealings with freight forwarders.

The substantive issue was whether compliance with clause 30 was practicable given the timescales involved. The Court of Appeal held that, in the circumstances of the case, it was. A claim for damage to goods could be brought promptly because any damage would be ascertainable on delivery. In addition, the freight forwarder had only 12 months to bring a claim against the carrier so as to pass on the liability and the Court felt that, in light of this, a shorter limitation period as between the freight forwarder and its customers was justified. While the claim for breach of the obligation to maintain insurance was slightly different from the damage to goods claim, the Court held that because cargo claims against underwriters can be dealt with quickly in comparison to other insurance claims (and often within four months), the nine month period was reasonable. The Court held that the freight forwarder was under a duty to tell the importer that the underwriters had not met the insurance claim and were in breach of this duty until they did eventually inform the insurer of this on 22 August 2000. It was from this date that the cause of action in respect of the obligation to maintain insurance cover arose and from which the nine month period ran in respect of the insurance claim. However, the importers failed to bring a claim until November 2001, some 14 months after this date and, therefore, outside of the nine month limitation.

Accordingly, the Court held that the appeal was to be granted.

CONCLUSION

In allowing the appeal, Tuckey LJ said in his judgment that he was "pleased to reach this decision". He went on to say that, while he appreciated the benefits of UCTA 1977 in protecting vulnerable consumers, he was "less enthusiastic about [UCTA's] intrusion into contracts between commercial parties of equal bargaining strength, who should generally be considered capable of being able to make contracts of their choosing and expect to be bound by their terms". This statement reflects the growing refusal of the Courts to delve into commercial contracts between commercial parties and supports the approach taken by the Courts in recent cases such as Watford Electronics Ltd v Sanderson CFL Ltd. [2001 EWCA] Civ 317 and Motours Ltd v Eurobell (West Kent) Ltd. [2003] All ER (D) 165 (Jan) both of which dealt with the level of the liability caps.

1 See clause 13 of UCTA 1977 which states that exclusions or restrictions of any liability "making the liability or its enforcement subject to restrictive or onerous conditions" are subject to the reasonableness test.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.