In Regus (UK) Limited v Epcot Solutions Limited the High Court held that where in a B2B contract the office accommodation supplier (Regus) was in breach of contract to a corporate customer by failing to provide air conditioning it could not rely in its standard terms of contract which attempted to exclude all financial losses as such was not reasonable under the Unfair Contract Terms Act (UCTA) 1977.
The Act effectively prevents certain disclaimers having any effect in law even though they were part of the terms of the agreement as the law regards some type of limitation or exclusion clauses as unfair.
Broadly speaking the law will do more to protect consumers than business customers but what is interesting about this case is that it shows that with B2B contracts here too UCTA can bite to prevent unfairness.
If a party is a consumer or deals with a party on that party’s written standard terms the exclusion clause will be enforceable so far as “reasonable” and UCTA provides factors which can be taken into account in determining this.
Three of these include:
- The strength of bargaining position;
- The opportunity to negotiate with competitors which did not have a similar clause and
- Whether the customer knew or ought to have known of the existence of the clause.
Applying this to the facts here Regus was a multinational concern and Epcot a small company providing IT training.
The Court found Regus had failed to provide a functioning air conditioning unit and was in breach of contract as well as being negligent in carrying out repairs.
The Court felt the particular wording of the exclusion clause could not be relied on as it deprived Epcot of any financial remedy for what was an essential “hotel” service.
What this case shows in that “total exclusion” clauses courts may well strike out the whole clause for being unreasonable.
Accordingly businesses may be better to limit or “cap” their losses to a more reasonable sum.
