High Court determines that an “unusual” and “exorbitant” exclusion clause in standard terms and conditions fails the UCTA reasonableness test

Phoenix Interior Design Ltd v Henley Homes Plc & Anor [2021] EWHC 1573 (QB)

The question

When is an exclusion clause in standard terms and conditions considered to be unreasonable? 

The key takeaway

Any unusual or onerous exclusions or limitations in terms and conditions need to be visible and well-signposted to the other party. If not, they can be deemed to be unreasonable and unenforceable.

The background

The Claimant, Phoenix Interior Design Ltd (Phoenix), brought a claim against the Defendant, Henley Homes Plc (a property development group) (Henley), with respect to unpaid invoices for interior design services. The parties’ relationship spanned some 10 years, and Phoenix had been retained to provide furniture and fittings for a new “high end” apartment hotel in Scotland. 

Phoenix presented Henley with its design concept, and hard copies of its terms and conditions were made available at the presentation. Subsequently, a revised proposal was sent to Henley via email with the terms and conditions provided “overleaf”. There were further revisions of the design over some time, which all referred to the same terms and conditions, but no new copies of the terms were provided with those revisions.

A dispute then arose between the parties concerning the quality and suitability of the products and design provided by Phoenix; whether the works were signed off by Henley and whether completion had occurred. Phoenix asserted that a “five-star specification” was not part of the contract and sought to rely on its terms and conditions, in particular its exclusion clause, which provided that it was not liable under its warranty if the total price of the goods had not been paid by the due date for payment. 

Henley disputed Phoenix’s assertions, arguing that Phoenix’s performance had been defective to the point that completion had not occurred, and the invoice balance was therefore not due.

The decision

The High Court held that Phoenix’s terms and conditions had been incorporated into the contract. Among other factors, Henley was provided a copy of the terms at the presentation and in subsequent email correspondence, and signed copies of the agreement referred to them (even though they were not provided overleaf). Henley had not attempted to incorporate its own terms and had simply accepted the agreement. 

In the agreement, Phoenix had warranted that the goods would correspond with their specification. However, the exclusion clause that Phoenix sought to rely on was unreasonable because:

• there was no good explanation for why an anti-set off clause would not have sufficed
• it was an unusual clause tucked away “in the undergrowth” of the standard terms and conditions without any highlighting of the consequences, which were also not obvious
• the clause was potentially exorbitant because the consequence of the slightest delay or deduction might bar all rights of redress against the claimant relating to the quality of the goods supplied
• it was very difficult for a customer without an independent certifier to say when there had or had not been completion, and
• payment was due on the date of completion as opposed to a number of days following it.

Why is this important?

The case is a clear reminder to draw attention to particularly unusual or exorbitant clauses within terms and conditions and make the consequences of non-compliance clear to the other party. Don’t simply assume that the other party is aware of them. The more visible and well-signposted the clause, the greater the likelihood that the supplier can successfully rely on them. 

Any practical tips?

Make sure that any unusual or onerous terms, including exclusions and limitations of liability, are visible and clearly marked/brought the attention of the other party in standard terms and conditions (and not hidden in the small print).

Make it easy for the other party to have access to the standard terms and conditions and ensure that they are properly incorporated into any agreement (ideally with some method of express acceptance).