Goodlife Foods Ltd v Hall Fire Protection Ltd

Factual and Procedural Background

This appeal concerns an exclusion clause (clause 11) in the standard terms of a specialist fire suppression contractor, referred to as Defendant, and its incorporation into the contract with the Plaintiff, as well as the reasonableness of that clause under the Unfair Contract Terms Act 1977 ("UCTA"). The Plaintiff's factory premises suffered a fire on 25 May 2012, and the Plaintiff commenced proceedings against the Defendant for breach of contract and/or negligence related to a fire suppression system installed approximately ten years earlier. The breach of contract claim was statute-barred, but the negligence claim was not.

The Defendant relied on clause 11 in their standard terms to exclude liability for the Plaintiff's damages claim. The initial trial judge, His Honour Judge Davies, decided in favour of the Defendant on preliminary issues, holding that clause 11 was incorporated into the contract and was reasonable under UCTA. Permission to appeal was granted on the incorporation and reasonableness issues.

The contract involved the Defendant providing a fire suppression system for the Plaintiff's multi-purpose fryer at their factory. The contract sum was modest (£7,490), whereas the Plaintiff claimed losses of about £6.6 million due to the fire. The Defendant’s quotation expressly referred to their standard terms and conditions, including clause 11, which excluded liability for losses caused by negligence or malfunction of the system, subject to a limited warranty and an offer to provide insurance for excluded risks.

Legal Issues Presented

1. Was clause 11 particularly unusual and/or onerous, and if so, was it fairly and reasonably brought to the Plaintiff's attention?
2. If clause 11 was incorporated into the contract, was it reasonable and therefore effective under the Unfair Contract Terms Act 1977?

Arguments of the Parties

Appellant's Arguments

• Clause 11 was a blanket exclusion clause and unusually onerous compared to typical limitation clauses.
• The judge’s comparison of clause 11 with clauses limiting liability to the contract price created a false dichotomy and overlooked other types of claims where a limitation would be meaningful.
• The notice given of clause 11 was inadequate because it was not highlighted beyond the norm, and the introductory warning was misleading and might deter further reading.
• The limited warranty did not save the unreasonable nature of clause 11.
• Insurance considerations did not affect reasonableness since both parties were insured.
• The clause unfairly allocated risk by attempting to avoid the Defendant’s core obligation to provide a proper fire suppression system.

Respondent's Arguments

• Clause 11 was not a blanket exclusion clause due to the limited warranty, which was of real value.
• The clause was not onerous or unusual, and was comparable to commonly accepted clauses limiting liability to the contract price.
• The terms and conditions, including clause 11, were expressly referred to and supplied with the quotation and order acknowledgment, providing fair and reasonable notice.
• The initial warning in the terms was sufficiently clear to alert the Plaintiff to the exclusion clause.
• The Plaintiff had ample time to consider the clause and seek legal or insurance advice before contracting.
• Insurance was a critical factor in favour of reasonableness, as the Plaintiff was best placed to insure against the risks, and the clause offered an alternative to increase insurance coverage.
• The clause represented a fair allocation of risk and did not undermine the Defendant’s core contractual obligations.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by acknowledging the separation between the common law principles governing incorporation of terms and the statutory reasonableness test under UCTA. The court accepted the trial judge’s detailed factual findings and his division of clause 11 into three parts: the exclusion of liability, the limited warranty for defective components, and the offer to provide insurance for excluded risks.

Regarding incorporation, the court applied established principles that particularly onerous or unusual terms require special notice to be incorporated. After reviewing comparative evidence from the fire suppression industry and considering the modest contract value, the court agreed with the trial judge that clause 11 was not particularly onerous or unusual. The clause was printed clearly, expressly referred to in the quotation and order acknowledgment, and accompanied by an introductory warning that the terms excluded damages. The Plaintiff had ample time and opportunity to consider the terms, including seeking advice. Thus, clause 11 was fairly and reasonably brought to the Plaintiff’s attention and incorporated.

On reasonableness under UCTA, the court considered the statutory framework, including section 2 and section 11 of UCTA and Schedule 2 guidelines. The court noted the parties’ equality in bargaining power, the availability of alternative suppliers, and the Plaintiff’s knowledge of the clause. The court emphasized the critical role of insurance: the Plaintiff was best placed to insure against the risk of loss, and the clause expressly offered insurance as an alternative to exclusion of liability. The limited warranty was found to be of real value, and the clause did not exclude liability for personal injury or fraud.

The court rejected the Plaintiff’s submission that the clause was unreasonable because it undermined the Defendant’s core obligation, noting that the contract must be construed as a whole, including clause 11. The court also rejected criticisms that the clause created a false dichotomy or that insurance considerations were neutral. The court found no unconscionable behaviour or unfair advantage taken by the Defendant.

Applying a deferential standard of appellate review, the court found no error in the trial judge’s balancing exercise and evaluation of evidence. The court concluded that clause 11 was reasonable in all the circumstances and effective under UCTA.

Holding and Implications

The court DISMISSED the appeal.

The decision confirms that exclusion clauses in commercial contracts between parties of equal bargaining power will be upheld if they are not particularly onerous or unusual and are fairly and reasonably brought to the other party’s attention. Further, such clauses will be considered reasonable under UCTA where the allocation of risk is commercially sensible, the parties are aware of the clause, and insurance considerations support the reasonableness of the clause.

The ruling reaffirms the principle of party autonomy in commercial contracts and the importance of the insurance context in assessing reasonableness under UCTA. No new legal principles were established; the decision applies existing law to the facts, emphasizing judicial restraint in overturning commercial bargains freely made.