The High Court dismissed Southwark’s claim. The framework agreement and the order had to be read together, so the reference to the Orchard software being of satisfactory quality had to be read in conjunction with the warranty in the order. The software conformed to the standard set out in the order. The judge said that satisfactory quality should be interpreted in that light rather than given the meaning under the Sale of Goods Act. It was clear from the wording in the contract that no statutory terms (including fitness for purpose or satisfactory quality) would be implied. The judge added that, in any event, the Sale of Goods Act would not apply in this case because there was no sale of any goods, as the contract made clear that there was no transfer of property in the software as the software was licensed rather than sold and on termination of the agreement all copies had to be returned or destroyed.

The Government’s ability to do this will depend on the outcome of the European Commission’s ambitions to introduce a new Consumer Rights Directive. If enacted, that Directive would harmonise all consumer laws across the European Union. However, that proposal has been controversial and opposed by the UK Government because it would water down the rights that UK consumers currently have to reject goods that do not conform to the contract.

For more on the Government’s latest recommendations, click here: http://www.bis.gov.uk/assets/biscore/consumer-issues/docs/c/10-1255-consolidation-simplification-uk-consumer-law.

On appeal, the Court of Appeal has now ruled that B’s argument that there should be an implied term was wrong. The contract had provided that the product would be tested by an inspector at the time of loading and that decision was final and binding unless there was a manifest error. The Court of Appeal said that the implied term would render such an inspection meaningless. It could not possibly have been impliedly agreed by the parties. The parties had clearly had a desire for contractual certainty.

However, that was a pyrrhic victory for P as it lost on the other point. The implied term of Section 14 of the Act was not excluded by Clause 18 because of the poor wording of that Clause. Under English law, there was a difference between ‘conditions’ and ‘warranties’. Section 14 of the Act was a ‘condition’, but Clause18 did not exclude ‘conditions’.

This can be the danger of using a contract not written with English law in mind. This problem often arises when people use a US-originated contract and substitute the words ‘English law’ instead of the other US governing law. Unless exclusion clauses are drafted properly to reflect English law requirements, they may not work. That’s what one of the parties found out to its cost here.

The ASA acknowledged that ASDA applied the 100 day guarantee to the goods whether they were faulty or not and therefore this did go beyond the consumer’s rights at law for non-faulty goods, but this had not been made clear from the advert. Accordingly, ASDA had breached the Broadcasting Code of Practice and was ordered not to repeat the ad in that form.

In this case, G supplied products to Ford. E was a supplier of components to G. E’s products were defective, causing G to incur big losses. G wanted to claim those losses from E. The question was whether E’s terms (which severely limited its liability), G’s terms (which required E to have unlimited liability) or some other terms applied? Each side referred to their own terms and conditions applying in their relevant order documents. However, it was clear that the parties did not agree to the other side’s terms. They were both hoping to negotiate a mutually agreeable limit on liability, but this was not done.

On these facts, the High Court ruled that neither party’s terms and conditions applied. It was clear that they were not accepting the others’ terms. There was clearly a contract, so which terms did apply to the contract? The court said that the terms implied at law – ie in the Sale of Goods Act – applied because of the clear deadlock.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: ‘This case highlights the dangers of entering a contract without agreeing the terms. Parties often hope for the best if there is a sticking point, but if and when something does go wrong and one party suffers big losses that they want to claim from another, that is generally not the best time to agree what to do. Consequently, the parties can end up in dispute, costing them management time and money.

‘In this particular case, with the court finding that neither terms apply and the underlying legal position did, that would involve no limit on liability. That means that G effectively won. Is that what E would have wanted from the stalemate?’

The High Court said that the warranty did not apply because no operating documents had been provided by the time of the contract. There was therefore a disconnect between what Red Sky provided in its contracts and its actual processes. Instead of the contractual warranty, implied warranties applied based on the Sale of Goods Act and Supply of Goods and Services Act (notwithstanding that the contract terms had purported to exclude those terms) as no other reasonable warranty applied. The software was not of satisfactory quality or fit for its purpose. In addition, the exclusions and proposed cap on liability did not apply because, in deciding upon reasonableness, the judge took account of the fact that the parties were not of equal bargaining power, the standard terms had sought to exclude the statutory implied terms without providing reasonable replacements, and Kingsway did not know of the existence of the exclusions and limitations on liability. The judge sided with the customer to a large part based on its inability to satisfy itself with the system unless there were clear demonstrations or operating documents.