In Phoenix Interior Design Ltd v Henley Homes plc  EWHC 1573 (QB), the High Court recently determined that an exclusion clause in a supplier's standard terms and conditions fell foul of the reasonableness test under s.11 of the Unfair Contract Terms Act 1977 (UCTA).
Henley Homes plc (Henley Homes), a property development company, contracted with Phoenix Interior Design Ltd (Phoenix) to design and furnish a hotel in Scotland. Henley Holmes paid only half of the balance under the contract and alleged defective performance (amongst other things) for reason of their non-payment. Phoenix sought to rely on an exclusion clause within its standard conditions, which provided that, "the Seller shall be under no liability under the above warranty (or any other warranty, condition or guarantee) if the total price of the Goods has not been paid by the due date for payment". Whilst the case considered a number of issues, including incorporation of terms, this piece focuses on the reasonableness of the exclusion clause.
The judge found that the exclusion clause did not meet the test for reasonableness under UCTA and the clause was therefore ineffective. The judge's reasoning included:
- The clause was uncommon;
- It was "tucked away in the undergrowth" of the standard terms and conditions without any particular highlighting of the consequences of even the slightest delay in payment;
- The clause was potentially exorbitant in that the consequence of the slightest delay or deduction might bar all rights of redress against Phoenix relating to the quality of the goods supplied;
- It created real difficulty in its application as there was no due calendar date for the balance payment; and
- The limited rights under the clause to the replacement of goods or to a refund, following payment in full did not provide an excuse.
Whilst the decision does not create new law, and parties remain free to seek to limit their liability (or to exclude certain liabilities altogether), it is a useful reminder of the importance of drawing attention to particularly onerous/unusual exclusions in any standard terms and conditions and making the consequences of those terms obvious. Indeed, the more unusual a clause, the more attention should be drawn to it.
[T]he Claimant has failed to discharge the onus under section 11(5) of UCTA to show that Clause 8.2.3 satisfies the requirement of reasonableness.