The Court of Appeal has already been busy in 2011 delivering a number of interesting judgments. Here we focus on Rohlig UK v Rock Unique  EWCA CIV 18, which demonstrates the importance of having properly drafted terms and conditions of business.
This litigation involved a freight forwarder claiming charges for transport and being faced with various cross claims. However, the key points could apply equally to a number of different businesses. Freight forwarders carry out a large number of relatively small transactions. Payment delays and spurious disputes present a real risk to their cashflow.
In this case, payment was withheld and the freight forwarder applied to court for summary judgment. It relied on two provisions in the standard trading conditions of the British International Freight Association (BIFA) as follows:
- all sums due had to be paid without deduction, counterclaim or set off; and
- any claim against it would fail if not notified in writing within nine months of the event which was the subject of the complaint.
Any clauses which seek to limit liability in contracts between businesses have to survive the test of reasonableness imposed by the Unfair Contract Terms Act 1977. It was pointed out that the time bar here would prevent a claim being brought say for overcharging, even where the claimant did not become aware that he had a right to claim until after the nine month limit had expired.
The Court of Appeal held that both clauses were reasonable. This was a fast moving business where the freight forwarder needed certainty. It was particularly significant that these were standard terms widely used within the industry.
We are still surprised by the number of cases we see where businesses, both large and small, do not use any terms of business or use terms which do not provide protection against trading risks! Simply excluding the right to withhold monies or set off claims would substantially improve the receiving parties' negotiating position.
A nine month time limit clause would not be reasonable in all industries. However, there are many businesses in which it would be reasonable to reduce the statutory six year limitation period.