The Court of Appeal has held that where standard terms were
inconsistent with those set out in a mortgage offer for a 25 year
"buy-to-let" interest only tracker mortgage, they had not
been incorporated into the contract.
increase the variable rate of interest for any reason and
request repayment of the loan in full on the giving of one
were not inconsistent with the terms of the offer of loan and
were therefore incorporated into the contract and effective.
The Court of Appeal disagreed. It held that it was the mortgage
offer document (the Offer) that set out the terms and conditions of
the particular mortgage and described and defined it.
The Offer gave a firm indication that the rate of interest would
only be varied in accordance with (and so as to reflect) changes to
the Bank of England base rate and that was entirely consistent with
reasonable parties' general understanding of a tracker
mortgage. The reference to the interest rate in the Offer was
integral to the product description. If incorporated, the
lender's standard conditions would provide the lender with the
unilateral right to change the product and meant that there was no
enforceable obligation on the lender to provide the product that
had been agreed. The right to further vary the variable rate as the
lender suggested should have been spelt out in the Offer.
If the clause enabling the lender to request repayment in full
on one month's notice was incorporated, this effectively made
the contract terminable at the lender's will even though there
had been no default by the borrower. The alleged right to terminate
was unqualified and unrestricted. The purpose of the contract was
to provide a 25-year loan. The Offer made it clear that the sum was
repayable in full at the end of the term and the borrower should
ensure sufficient funds were then available to be able to repay it.
This could not sensibly be read together with a term that provided
for a right to require repayment on one month's notice where
there was no default.
The Court of Appeal held that the standard terms were
incompatible with the intent and purpose and specific terms of the
Offer which reflected the agreement reached between the parties.
They could not fairly or sensibly be read together with the Offer
and were not therefore incorporated into the contract.
Things to consider
Where a printed standard term is inconsistent with what may
reasonably be understood to be the main purpose or object of the
contract, then it is likely to be found to be a term which cannot
'fairly' or 'sensibly' be read together with it. In
the event of conflict, special conditions will normally prevail
over general printed conditions unless expressly provided to the
contrary. The terms the lender sought to include in this case were
inconsistent with the object of the particular type of
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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