Allen Fabrications Limited v ASD Limited
The High Court recently considered a case on the incorporation of standard terms into a contract between two parties. The case involved a claim for negligence and breach of contract due to ASD’s failure to deliver the required number of fixings to properly secure a metal grating or to warn Allen Fabrications that further fixings were needs. ASD’s standard terms limited liability to the price of the goods supplied, and the High Court was asked to consider whether those standard terms had been incorporated into the supply agreement.
The High Court ruled that the standard terms had been expressly incorporated into the contract as Allen Fabrications must have signed a document accepting them. Whilst ASD could not produce a signed document, the facts of the case pointed towards there being a signed document.
However, the High Court considered (but without being binding as law and merely of persuasive because the case had already been decided based on the facts) whether, if there had not been a signature, the limitation of liability clause was unusual or onerous enough to require ASD to bring them to Allen Fabrications’ attention. Previous case law had shown that a party had to work harder to bring onerous clauses to the other party’s attention and some clauses had to be really explicitly highlighted given how onerous they were. In this instance, the High Court said that the limitation clause was not sufficiently onerous based on the facts of the case. The Court said that an exclusion or limitation clause was not always onerous, and much would always depend on the facts and context.
Simon Weinberg, a solicitor in the Commercial/IP/IT team at Matthew Arnold & Baldwin, commented, “This case goes to show that the courts will not automatically consider a limitation of liability clause to be onerous, even those in standard terms and conditions. Where both parties are commercial organisations who have dealt with each other a number of times, as was the case here, awareness of the contents of the other’s standard terms and conditions is expected. However, ASD might have avoided this case altogether if it had kept the signed document that it referred to in the case but could not produce; this is a reminder that signed contracts should be kept after contractual obligations have been completed, even if the contract was terminated, usually for at least 6 years following the contract coming to an end.”