The High court found that a clause contained in the standard terms and conditions of an IT supplier was unenforceable and damages were awarded to their client for over £110k.
Often, suppliers look to exclude or limit liability within their standard terms and conditions as best they can, including terms relating to the quality of the goods and whether they are even fit for purpose – although these exclusions are only enforceable if they are reasonable as defined under the Unfair Contract Terms Act 1977.
In the 2010 case of Kingsway Hall Hotel Ltd v Red Sky IT (Hounslow) Ltd, the High Court held that such an exclusion in a contract for the purchase of software did not pass the Act’s reasonableness test and was therefore unenforceable.
Kingsway Hall Hotel purchased a reservations software from Red Sky under their standard terms and conditions which included a clause excluding any implied terms regarding performance, quality and fitness for purpose. (Implied terms meaning those that are not necessarily set out in writing, they may have been agreed orally, are fairly obvious or are written by statute)
The software did not work properly, and Kingsway Hall Hotel rejected the software after 6 months and brought a claim on the basis that the software was not of satisfactory quality and not fit for purpose.
Red Sky had a clause of the contract that purported to exclude Red Sky’s obligation to supply goods of satisfactory quality and performance which were fit for purpose. Red Sky’s standard terms also referred to Operating Documents that would be given to Kingsway. Red Sky failed to give operating documents to Kingsway during the sales process and this meant the exclusion of liability clause was ineffective.
The Kingsway case clearly demonstrates that suppliers wishing to rely on such exclusions should:
- Ensure that their standard terms are not drafted based on a process that does not reflect their actual practice.
- Bring any liability exclusions to the express attention of the purchaser.
The decision gives an important warning to suppliers to act in accordance with their standard terms and conditions when carrying out their sales procedure. When you copy and paste from another company or use an ‘off the shelf’ template version this often is not the case.
“A failure to follow your standard terms and conditions in practice may result in your terms being deemed ineffective.”
This is why we ensure that we always get to know your business before drafting documents and tailor them until they perfectly match your business processes. We ensure that your terms are bespoke to you, and work with you, rather than you having to adapt to work with them.
Imagine having some terms that were not fully applicable to you and having to change the way that you work, if you require a deposit to start works and this is not mentioned, it is unreasonable to demand such. This is the case with many businesses out there, they are trying to rely on clauses that aren’t there, or say the opposite to what they need them to when things go wrong which gets you into all sorts of sticky situations!
Contracts that are not applicable to you will catch you out and not protect you in times of dispute, and will also make your business look unprofessional and a little stupid. Seabourne Freight, the shipping company did the same, and ended up being the laughing stock of the country – we even wrote a blog about them!
Contact us for a no obligation chat and lets talk about getting your terms written to suit your business.