Exclusion of Sale of Goods Act 1979 implied terms

Précis – An exclusion clause does not need to expressly refer to the exclusion of “conditions” in order to exclude liability for breach of the Sale of Goods Act conditions. However, it remains best practice to use comprehensive language when drafting exclusions clauses which refers to conditions as well as warranties and other terms.

What? The case of Air Transworld Limited v Bombardier Inc [2012] raised the question of whether, in order to exclude liability for the implied conditions of the Sale of Goods Act 1979, the word “conditions” would need to be used in the exclusion clause.

So What? The judge found that the exclusion clause, despite not referring to “conditions”, was sufficient to exclude liability for breach of the Sale of Goods Act conditions. However, this case was very much decided on its facts and as such, we recommend that when drafting exclusions clauses, comprehensive language should be used which refers to conditions as well as warranties and other terms.

Facts

In Air Transworld Limited v Bombardier Inc [2012], the claimant purchased a private jet from the defendant. The sale contract contained the following provision:

“THE WARRANTY, OBLIGATIONS AND LIABILITY OF SELLER AND THE RIGHTS AND REMEDIES OF BUYER SET FORTH IN THIS AGREEMENT ARE EXCLUSIVE AND ARE IN LIEU OF AND BUYER HEREBY WAIVES AND RELEASES ALL OTHER WARRANTIES, OBLIGATIONS, REPRESENTATIONS OR LIABILITIES, EXPRESS OR IMPLIED, ARISING BY LAW, IN CONTRACT, CIVIL LIABILITY OR IN TORT, OR OTHERWISE, INCLUDING BUT NOT LIMITED TO A) ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE, AND B) ANY OTHER OBLIGATION OR LIABILITY ON THE PART OF SELLER TO ANYONE OF ANY NATURE WHATSOEVER BY REASON OF THE DESIGN, MANUFACTURE, SALE, REPAIR, LEASE OR USE OF THE AIRCRAFT OR RELATED PRODUCTS AND SERVICES DELIVERED OR RENDERED HEREUNDER OR OTHERWISE.”

The claimant purported to reject the jet and rescind the sale contract on the basis that the jet did not correspond with description, was not of satisfactory quality and was unfit for purpose and therefore did not comply with the conditions set out in Sections 13 and 14 Sale of Goods Act 1979. The claimant submitted that the provision above was not effective to exclude liability under these Sale of Goods Act conditions and relied on a line of authorities (culminating in Mercini Lady [2011]) to argue that in order to exclude such liability the word “conditions” would need to be used in the exclusion clause.

Judgment

The judge found in favour of the defendant and held that the clause was sufficient (subject to UCTA) to exclude liability for breach of the Sale of Goods Act conditions. He found that the words used in the clause encompassed contractual conditions implied by law and to adopt a different construction would amount to a distortion of the words used. The clause was not ambiguous and there was only one meaning which could fairly be given to it. The express reference to warranties of merchantability and fitness for purpose were only illustrative of the all embracing provision found in the first part of the clause.

On the facts of the case UCTA was not relevant. However, the judge found that, if UCTA had been applicable, he would have held that the reasonableness test was satisfied and accordingly that the exclusion of liability for breach of the Sections 13 and 14 Sale of Goods Act conditions was enforceable.

Whilst this decision is interesting, it must be stressed that it was decided very much on its facts and should not be treated as authority for the proposition that you do not need to refer expressly to “conditions” when seeking to exclude liability for breach of implied terms. It remains the case that when drafting such a clause you should always use comprehensive language which refers to conditions as well as warranties and other terms.

To access the judgment, click here.  See, in particular, paragraphs 11 – 31.