R & B Customs Brokers Co Ltd v United Dominions Trust Ltd

A company may deal as a consumer under the Unfair Contract Terms Act 1977 when purchasing goods of a type ordinarily supplied for private use. A transaction merely incidental to its business is made in the course of that business only where sufficient regularity makes such transactions an integral part of the business. A one-off adventure constituting a trade may also qualify.

Under section 14(3) of the Sale of Goods Act 1979, an ordinary purpose may be a sufficiently communicated particular purpose. A buyer’s discovery of a defect before contracting does not necessarily terminate reliance on the seller’s skill and judgment, especially where the buyer reasonably anticipates repair.

A shipping and freight-forwarding company acquired a second-hand four-wheel-drive vehicle under a conditional sale agreement with a finance company. The motor dealer supplied the vehicle and conducted the antecedent negotiations. The vehicle’s roof leaked and the vehicle was not reasonably fit for ordinary use on English roads.

His Honour Judge McDonnell, sitting in the Mayor’s and City of London Court, gave judgment for the purchasing company against the finance company and a corresponding indemnity judgment for the finance company against the dealer. The dealer appealed, supported by the finance company.

The principal issues were whether section 14(3) of the Sale of Goods Act 1979 implied a condition of reasonable fitness and whether the purchasing company dealt as a consumer under section 12 of the Unfair Contract Terms Act 1977, so that the contractual exclusion could not affect its statutory rights.

1. Appeal dismissed unanimously. Dillon and Neill LJJ held that the agreement contained an implied condition under section 14(3) of the Sale of Goods Act 1979 that the vehicle would be reasonably fit for ordinary use on English roads. That purpose was sufficiently made known through the dealer, who was treated as the seller because it conducted the antecedent negotiations.
2. The company continued to rely on the dealer’s skill and judgment. Discovery of the roof leak before execution of the agreement did not automatically end that reliance. The anticipated return of the vehicle for attention and the dealer’s promise shortly afterwards to detect and repair the leak confirmed the continuing state of reliance. Evidence of events shortly after contracting was admissible as evidence of the buyer’s state of mind when the contract was made.
3. The court left open whether knowledge of an apparently minor and remediable defect prevented reliance on the merchantable-quality condition under section 14(2). Neill LJ was not persuaded that the condition was excluded where the buyer reasonably believed the defect would be rectified easily and without cost.
4. Both Lord Justices held that the company dealt as a consumer within section 12 of the Unfair Contract Terms Act 1977. The phrase “in the course of a business” was not used in its broadest possible sense. Transactions that are integral to a business fall within it directly. Transactions merely incidental to the business require a degree of regularity sufficient to make them an integral part of that business. A one-off adventure in the nature of trade can itself constitute a business.
5. The purchase was, at most, incidental to the company’s shipping and freight-forwarding business. Evidence that it was only the second or third vehicle acquired on credit did not establish the necessary regularity. Use of the corporate name and provision of business details did not amount to a sufficient holding out that the purchase was made in the course of business.
6. Because the company dealt as a consumer, section 6(2) prevented exclusion of liability under section 14 and the contractual exclusion was inapplicable. Dillon LJ added that, had reasonableness arisen, he would have regarded the exclusion as reasonable. Neill LJ declined to express a view because the evidence concerning execution of the agreement was unclear.

• Court of Appeal: The dealer’s appeal, supported by the finance company, was dismissed unanimously. The application for leave to appeal to the House of Lords was refused.
• Mayor’s and City of London Court: On 31 March 1987, His Honour Judge McDonnell gave judgment for the purchasing company against the finance company and a corresponding indemnity judgment for the finance company against the dealer.