Scottish Court of Session Decisions

LORD DUNPARK'S OPINION.—The pursuer claims damages from the defenders based upon a reduced yield in his 1978 potato crop. He attributes this reduction to the failure of a spray weedkiller to control weed growth in his crop. In 1978 the pursuer purchased from the defenders a quantity of the said weedkiller under the trade name "Sencorex." His claim for damages rests on alleged breach by the defenders of the Sale of Goods Act 1893, section 14 (3) condition that this weedkiller was fit for the particular purpose for which the defenders knew that the pursuer had purchased it. The main line of defence to the claim is that the contract of sale between the pursuer and defenders included by implication the defenders' General Conditions of Sale, which the defenders aver included a condition which expressly excluded their liability under section 14 (3). They also aver that this was not a standard form contract within the meaning of section 17 of the Unfair Contract Terms Act 1977 and, alternatively, if it was a standard form contract, their exclusion clause was fair and reasonable.

In the event of the defenders being found liable in damages to the pursuer, the defenders claim relief from the third parties. The defenders aver that they purchased the weedkiller from the third parties, whom they allege to have been in breach of section 14 (3) of the 1893 Act, as amended by section 192 of the Consumer Credit Act 1974.

Both the pursuer and the third parties attacked the relevancy of material parts of the defenders' pleadings. Counsel for the pursuer sought to have excluded from probation the defenders' averments (1) relating to the implied inclusion in the contract of the defenders' condition excluding their liability under section 14 (3), and (2) that the contract was not a standard form contract to which section 17 of the Unfair Contract Terms Act 1977 applied. Quoad ultra counsel for the pursuer conceded that a proof before answer should be allowed. I shall deal with these points before turning to the issues raised by the third parties.

(1) Defenders' averments relating to inclusion in their contract with the pursuer of their General Conditions of Sale.

The defenders do not aver that their General Conditions were expressly included in their contract with the pursuer. They do not aver that they were specifically brought to the notice of the pursuer in relation to this contract either when it was concluded or any later time. They found on a course of trading with the pursuer prior to this contract. They undertake to prove that their General Conditions were set out in all their invoices, and they will argue that it is a necessary inference from these facts that their General Conditions of Sale, which include the clause excluding their liability under section 14 (3), were impliedly included in their contract with the pursuer.

This defence is founded upon one bald averment in Answer 6, viz.—"Moreover and in any event, the said contract of sale was governed by the defenders' General Conditions of Sale of which the pursuer, who had traded with the defenders regularly over a long period, was well aware as they were set out in all the defenders' invoices." Pursuer's counsel submitted that this averment was irrelevant for want of specification, and I agree with him.

A party, who maintains that a contract must be held to have included printed conditions by implication solely from the fact that the other contracting party knew, when this contract was concluded, that the first contracting party invariably issued a document containing these conditions in relation to contracts in a form and of a nature similar to the contract in issue, must satisfy the court that "each party has led the other reasonably to believe that he intended that the rights and liabilities towards one another which would otherwise arise by implication of law from the nature of the contract…should be modified in the manner specified in the written document" (Grayston Plant Ltd. v. Plean Precast Ltd. 1976 SC 206, per Lord Justice-Clerk (Wheatley) at p. 220, quoting a dictum of Diplock L.J. in the Court of Appeal in Hardwick Game Farm v. Suffolk Agricultural Poultry Producers' Association [1966] 1 W.L.R. 287 at p. 340D. Counsel for the defenders submitted that he had averred a sufficient basis from which the inference of inclusion could be drawn. I do not agree. Such a basis must be clearly spelled out in the pleadings. The only basis averred in this case is a regular course of trading over a long period and the printing of the said General Conditions in all the defenders' invoices. Now I do not know, and, what is more important at this stage, neither does the pursuer, the nature or number of the transactions which the defenders intend to prove in support of their averment. For aught yet seen, those prior transactions may have been few and far between: they may or may not have been contracts of sale: if they were, the goods sold and the form of the contracts may have varied. Esto that the defenders' intended their General Conditions to be included in contracts for the sale of goods of their own manufacture, it does not necessarily follow that the pursuer was bound to assume that they intended the same conditions to apply to sales by the defenders of goods manufactured by third parties and sold under a trade name. The nature, subject-matter and terms of prior transactions are of vital importance. If this sale contract was similar in these respects to those contracts which preceded it, it may be easier to include the General Conditions by implication in this contract than it otherwise would be. The inference of inclusion must be easier to draw where all the transactions are of the same nature, e.g. haulage contracts (see Eastman Chemical International A.G. v. N.M.T. Trading Ltd. [1972] 2 Lloyd's Rep. 25); storage contracts (Britain & Overseas Trading (Bristles) Ltd. v. Brooks Wharf & Bull Wharf Ltd. [1967] 2 Lloyd's Rep. 51; plant hire (Grayston Plant Ltd. v. Plean Precast Ltd., cit. supra); or sale of the same or similar subject matter (Hardwick Game Farm v. Suffolk Agricultural Poultry Producers Association [1969] 2 AC 31. Variation in the form of the contract may be of crucial importance (see McCutcheon v. David MacBrayne Ltd. 1964 SC (HL) 28).

In every case the question whether the proved material facts of previous transactions are sufficient to warrant the implication of inclusion of general conditions in the contract in issue is one of degree. Esto that the defenders prove that all the invoices sent to the pursuer on previous occasions related to the sale of goods and contained the same general conditions, how many such invoices will they endeavour to prove were sent to the pursuer under the averment "regularly over a long period"? Three or four occasions over a five year period might not be enough to yield the inference of inclusion in this contract (see Hollier v. Rambler Motors Ltd. [1972] 2 QB 71, per Salmon L.J.).

In my opinion the defenders' bald averment is irrelevant for two reasons. First, it does not disclose that the defenders undertake to prove a sufficient number of similar transactions for the inference of inclusion to be drawn. Second, it does not give to the pursuer fair notice of the number, dates and nature of the prior trading transactions which the defenders seek to prove. These are matters which the pursuer might wish to refute but would be unable to do so without having had the opportunity of checking his own records prior to the proof. I shall grant the motion of Mr Clarke for the defenders which was, in the event of my decision on this point being against him, to give him the opportunity to amend his pleadings by adding the specification which I consider to be necessary for relevancy. How he does that must be a matter for him; but the pursuer's criticism could easily be met by reference in the pleadings to a production containing a complete list of the number, dates and nature of the prior transactions which the defenders hope to prove.

(2) Standard form contract.

Notwithstanding the defenders' averment that their General Conditions of Sale were part of their contract with the pursuer, they nevertheless aver that the contract "was not a standard form contract within the meaning of the Unfair Contract Terms Act 1977" and that section 17 of that Act has no application to said contract. Section 17 precludes the operation of contractual terms which exclude or restrict liability for breach of contract "if it was not fair and reasonable to incorporate the term in the contract;" but the section only applies to two types of contract, namely, consumer contracts and standard form contracts. "Consumer contract" is defined in section 25 (1). The contract in issue is not a consumer contract but the pursuer contends that, esto the defenders' General Conditions of Sale were impliedly incorporated in this contract, it was a standard form contract to which section 17 of the Unfair Contract Terms Act applies.

The Act does not define "standard form contract," but its meaning is not difficult to comprehend. In some cases there may be difficulty in deciding whether the phrase properly applies to a particular contract. I have no difficulty in deciding that, upon the assumption that the defenders prove that their General Conditions of Sale were set out in all their invoices and that they were incorporated by implication in their contract with the pursuer, the contract was a standard form contract within the meaning of the said section 17.

Since Parliament saw fit to leave the phrase to speak for itself, far be it from me to attempt to formulate a comprehensive definition of it. However, the terms of section 17 in the context of this Act make it plain to me that the section is designed to prevent one party to a contract from having his contractual rights, against a party who is in breach of contract, excluded or restricted by a term or condition, which is one of a number of fixed terms or conditions invariably incorporated in contracts of the kind in question by the party in breach, and which have been incorporated in the particular contract in circumstances in which it would be unfair and unreasonable for the other party to have his rights so excluded or restricted. If the section is to achieve its purpose, the phrase "standard form contract" cannot be confined to written contracts in which both parties use standard forms. It is, in my opinion, wide enough to include any contract, whether wholly written or partly oral, which includes a set of fixed terms or conditions which the proponer applies, without material variation, to contracts of the kind in question. It would, therefore, include this contract if the defenders' General Conditions of Sale are proved to have been incorporated in it. In that event, it would be for the defenders to prove that it was fair and reasonable for their Condition 6 to be incorporated in this contract.

Mr Clarke for the defenders referred to section 24 (1) of the 1977 Act which limits the circumstances relevant to the "reasonableness" test to those which were, or ought reasonably to have been, known to or in contemplation of the parties at the time when the contract was made. So, he argued, ingeniously but fallaciously, this contract was concluded as an oral contract and it could not be transformed into a standard form contract by the addition of the defenders' written general conditions. The fallacy, in my opinion, is that these general conditions were added to the contract after its conclusion. Not so. The basis of the defenders' case that these conditions were incorporated in this particular contract is that the pursuer knew that the defenders always inserted these conditions in their contracts of sale and that the reasonable inference from this knowledge is that the pursuer impliedly accepted them as included in this particular contract at the time it was concluded. The defenders have no averments which even suggest that their contract was modified after its conclusion by the addition of their General Conditions. Accordingly, it follows from the assumption that the General Conditions were part of this contract, that it was a standard form contract.

I have dealt with the pleadings as they stand, but the terms of section 20 (2) (a) of the Unfair Contract Terms Act 1977 seem to me to render academic the applicability or otherwise of section 17 to this contract. The absence of any reference to section 20 in the pursuer's pleadings presumably explains why it was not referred to during the debate on the relevancy of the defences.

[His Lordship then dealt with the defenders' case against the third parties with which this report is not concerned.]