AEG (UK) Ltd v Logic Resource Ltd
| Jurisdiction | England & Wales |
| Judge | Hirst,Waite,Hobhouse L JJ. |
| Judgment Date | 20 October 1995 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 October 1995 |
Court of Appeal.
Hirst, Waite and Hobhouse L JJ.
Donald Lambie (instructed by Julian Holy) for the defendant.
Paul Norris (instructed by Gregsons) for the plaintiffs.
The following cases were referred to in the judgment:
Circle Freight International Ltd v Medeast Gulf Exports LtdUNK [1988] 2 Ll Rep 427.
Interfoto Picture Library Ltd v Stiletto Visual Programmes LtdELR [1989] QB 433.
Keeton Sons & Co Ltd v Carl Prior Ltd [1986] BTLC 30.
Mitchell (George) (Chesterhall) Ltd v Finney Lock SeedsELR [1983] 2 AC 803.
Parker v South Eastern Railway CoELR (1877) 2 CPD 416.
Spurling v BradshawWLR [1956] 1 WLR 461.
Thornton v Shoe Lane Parking LtdELR [1971] 2 QB 163.
Contract — conditions, Of Sale — confirmation Of Order Referred To Printed Conditions Of Sale — conditions Provided On Demand — conditions Not Requested — condition That Buyer Pay Costs Of Returning Defective Goods — whether Condition To Be Construed In Isolation Or In Context — whether Condition Incorporated Into Contract — whether Condition Onerous Or Unusual — whether Condition Fairly And Reasonably Brought To Defendant's Attention — whether Condition Reasonable — unfair Contract Terms Act 1977, Sch 2, Para (c).
This was an appeal and a cross-appeal from a judgment of the Central London County Court which held that the defendant was bound by the plaintiffs' printed conditions of sale and that those terms were not unreasonable under the Unfair Contract Terms Act 1977.
The defendant, a one-man company, received an order for the supply of equipment of a certain specification from its customers in Iran. The defendant submitted a purchase order form to the plaintiffs, a large multi-national company, for the supply of the equipment. The plaintiffs sent back confirmation of the order written on their standard form. At the bottom of the form, in small letters, was written “Orders are subject to our conditions of sale — for extract see reverse”. On the reverse were printed extracts from their conditions of sale and at the bottom of that page was printed “A copy of the full conditions of sale is available on request”. The defendant never requested a full set of the terms and conditions and was never shown them. In particular, cl. 7 was never drawn to the attention of the defendant. Clause 7.5 stated that the purchaser was to return defective goods at his own expense. The plaintiffs had known that the goods were for export, although they had not known that they were destined for Iran.
After the defendant's customers had received the goods the defendants received a complaint about the equipment. The plaintiffs agreed that it was defective. It was returned to the plaintiffs, by air freight, for modification. The defendant then paid the plaintiffs' invoice minus the costs of transferring the goods from Iran.
The plaintiffs issued proceedings claiming the outstanding sum. It was common ground that the plaintiffs' terms and conditions were not standard to the industry. The judge held that the condition had been incorporated into the contract because it had been brought to the plaintiffs' attention and was not in breach of the Unfair Contract Terms Act because it was a reasonable term. The defendant appealed on both grounds and the plaintiffs cross-appealed.
Held, allowing the appeal and dismissing the cross-appeal:
1. Clause 7.5 was the only right available to the plaintiff for the remedying of defects as the effect of cl. 7 as a whole was to exclude all other warranties and conditions including those implied by the Sale of Goods Act 1979. Therefore to determine whether, cl. 7.5 was onerous and unusual the judge should not have considered cl. 7.5 in isolation, but in the context of cl. 7 as a whole.
2. (Per Hirst and Waite L JJ) In its context cl. 7.5 was onerous in that it imposed on the buyers the obligation to pay the costs of returning the goods, and it was unusual, there being no evidence that it was a standard or common term.
3. (Per Hirst and Waite L JJ) As the condition was onerous and unusual, to determine whether the condition had been incorporated into the contract, the correct test was whether notice of the condition had fairly and reasonably been brought to the attention of the defendant. The plaintiffs had not satisfied that test, and therefore the condition had not been incorporated into the contract. (Interfoto Picture Library Ltd v Stiletto Visual Programmes LtdELR[1989] QB 433 applied.)
4. (Per Hobhouse L J dissenting on the issue of incorporation) It was necessary before excluding the incorporation of a clause in limine to consider the type of clause it was. If it was of a type commonly found in printed conditions, it was only in the most exceptional circumstances that a party could say that it was not adequately brought to his notice by standard words of incorporation. Clause 7 did not fall into that category, and accordingly was properly incorporated into the contract. (Interfoto Picture Library Ltd v Stiletto Visual Programmes LtdELR[1989] QB 433distinguished.)
5. The burden of proof under the Unfair Contract Terms Act 1977 was on the plaintiffs to show that the condition imposed in cl. 7.5 was reasonable. Since they had failed to show that the defendant knew or ought reasonably to have known of the term within Sch. 2, para (c), the condition was not reasonable. It followed that the plaintiffs could not rely on it.
Per curiam (Hobhouse LJ): The extracts printed on the back of the confirmation document were highly selective and misleading and some might not have been incorporated. There were simple procedures to ensure that the problem of incorporation did not arise. The most usual was to ensure that full copies of the conditions were sent as a matter of routine.
Hirst LJ: This is an appeal with the leave of Judge White by the defendant buyers, Logic Resource Ltd, against part of the judgment of District Judge Gerlis sitting as an assistant recorder in the Central London County Court in favour of the plaintiff sellers, AEG (UK) Ltd, in relation to a contract made in January 1989 for the sale of 49 cathode ray tubes for a total of approximately £14,800 for the use in radar equipment. The goods were in fact exported by the defendants to their customers in Iran. The case raises two points of principle concerning the plaintiffs' printed conditions of sale. Firstly, whether the defendant was bound by those printed conditions of sale, i.e. whether the defendants received sufficient notice of them to result in their incorporation, or at least the incorporation of the relevant parts, into the contract of sale. Secondly, if they were so bound, whether the condition on which the plaintiffs particularly rely was reasonable under the Unfair Contract Terms Act 1977 (“UCTA”). The district judge found in the plaintiff/respondents' favour on both these points and the defendant/appellants challenge both those conclusions by their appeal. I shall refer to these two main issues in future respectively as “incorporation” and “UCTA”.
The plaintiffs are, of course, a very large and extremely well-known multi-national company. The defendants are a one-man business, as the judge found. The goods supplied were, as is now common ground, found to be defective when the defendants' customers in Iran discovered that they would not fit into their radar equipment because the pins on the cathode ray tubes were too long. Consequently, it was necessary for them to be returned to the plaintiffs for them to modify them.
They were, therefore, on the defendants' instructions to their customers in Iran, air freighted back to the UK at a cost of £4,233.33. When the defendants received the plaintiffs' invoice for payment they deducted inter alia the cost of air freighting them back to the UK (I say inter alia because there were other matters on which the defendants relied and succeeded which are not the subject matter of appeal). The plaintiffs disputed the deduction in reliance on one of the printed conditions in their standard conditions of sale, condition number 7.5, which provides, so far as relevant:
“The purchaser shall return the defective parts at his own expense to the supplier immediately upon request of the latter.” (emphasis added)
I refer to the full context of that stipulation shortly. It is here that the present bone of contention between the parties lies under the two main issues to which I have referred. There is also a further point raised by the respondents' notice in which they contend that the cost of returning the goods by air from Iran is in any event irrecoverable as it was not within the contemplation of the parties when the contract was made.
It is now convenient to summarise the facts in a little more detail. The order from the defendants' customers in Iran was received by the defendants towards the end of 1988. This was for the supply of 49 cathode ray tubes of a certain defined specification for use in radar equipment. The defendants, in turn, approached the plaintiffs who had taken over the manufacture of these items from their previous manufacturers, a company called MOV. On 13 January 1989, the defendants submitted a purchase order to the plaintiffs for the items. The order stated inter alia the delivery requirements. On 19 January 1989, the plaintiffs sent a confirmation of the order, which is one of the key documents in the case. Having set out the details of the equipment, it is said at the bottom in small capital letters: “orders are subject to our conditions of sale — for extract see reverse.” On the back there are quoted five conditions from the much longer lot to which I shall refer shortly. They are headed “extracts from our conditions of sale”. The five extracts are then set out and, at the bottom, is the important statement: “a copy of the full conditions of sale is available on request.” The printed conditions themselves cover two full foolscap pages and I shall...
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