Exclusions of liability: when coaches explode

Posted Friday 9th December 2022

In a recent judgment, the High Court refused to find that a broad exclusion of liability clause was unlawful. A contract was entered into for the hire purchase of a number of coaches, several of which subsequently burst into flames resulting in Last Bus Limited, the hire-purchaser, bringing a claim against the lender and the distributor.

The hire purchase contract incorporated a sweeping exclusion of the lender’s liability in respect of the goods as follows:

“The Company shall have no liability for selection, inspection or any warranty about the quality, fitness, specifications or description of the Vehicle and the Customer agrees that all such representations, conditions and warranties whether express or implied by law are excluded.”

Under section 6 of the Unfair Contract Terms Act 1977, an exclusion of liability for a contract of this type is only lawful to the extent that it fulfils the ‘reasonableness test’. In weighing up the facts of the case and applying the reasonableness test to find whether the exclusion of liability was lawful, the court noted:

1. The bargaining power between the parties was balanced.
2. The claimant had agreed to the terms 45 times over the course of 20 years.
3. There were other options in the market and Last Bus could have shopped elsewhere (and, if it did, it was likely that other providers would have included a similar clause).

Mr Justice Baker, sitting in the Commercial Court division, therefore found that the exclusion of liability was lawful and did apply.

The case is an important reminder that sometimes, even with longstanding commercial relationships, the worse can come to the worst and, if it does, the contractual terms and conditions really do matter and it is vital to get them right in the first instance. The signatory of the agreement for the claimant, despite the length of dealing between the two companies, had never once read the terms. The judgment also includes a useful summary of recent case law relating to UCTA.

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Last Bus Ltd (trading as Dublin Coach) v Dawsongroup Bus and Coach Ltd (formerly Dawson Rentals Bus and Coach Ltd) and another [2022] EWHC 2971 (Comm) http://www.bailii.org/ew/cases/EWHC/Comm/2022/2971.html

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This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.

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