Terms of business – when can you and can’t you use them?
Under the Unfair Contract Terms Act 1977 (UCTA), when a party to a business to business contract deals on its “written standard terms of business”, any term which seeks to limit or exclude that party’s liability for breach of contract, non-performance or performance substantially different from that reasonably expected must pass the test of reasonableness in order to be enforceable.
There is no statutory definition of “written standard terms of business”, however the recent Court of Appeal decision in African Export-Import Bank v Shebah Exploration & Production has shed some light on the meaning of the phrase, particularly in the context of model form agreements. The court held that it must be shown that:
- The other party habitually uses those terms of business. Occasional use will not suffice.
- Some negotiations and amendments are permitted provided there have not been “more than insubstantial variations to the terms”.
- The negotiations do not need to relate to the exclusion terms of the contract. The terms need to be reviewed as a whole.
The case clarifies that model form agreements, such as standard JCT contracts, are capable of being regarded as “written standard terms of business” provided they satisfy the above requirements.