Bairstow Eves London Central Ltd v Smith & Anor

Regulation 6(2) of the Unfair Terms in Consumer Contracts Regulations 1999 must be interpreted restrictively. It excludes scrutiny of the adequacy of the agreed price, but may not shield price-escalation or default provisions from the fairness assessment. The court must first construe the contract objectively, using its language and relevant surrounding circumstances. Where the contract requires payment of a lower operative price and gives the supplier a fallback right to claim a higher sum on default, the higher sum is not necessarily the protected contractual price. Regulation 5(1) then remains applicable, although the term must separately be shown to be unfair.

Bairstow Eves appealed from a Romford County Court judgment holding that provisions requiring a 3 per cent estate-agency commission were unfair and non-binding under the Unfair Terms in Consumer Contracts Regulations 1999. The agreement also provided for a 1.5 per cent commission if paid within 10 working days of completion, with a right for Bairstow to claim 3 per cent if payment was late. The county court held that regulation 6(2) did not prevent assessment of the 3 per cent provisions and gave judgment for the vendors. The appeal concerned whether the 3 per cent provision was the protected price or a default provision subject to fairness review.

The appeal was dismissed. The vendors’ conditional appeal concerning an indemnity from Darlingtons therefore did not arise.

1. Regulation 6(2) of the Unfair Terms in Consumer Contracts Regulations 1999 protects the essential price bargain, but must receive a restrictive interpretation. The Regulations are not a form of price control and do not permit the court to rewrite the agreed price. Nevertheless, price-escalation and default provisions may fall outside regulation 6(2) and remain subject to regulation 5(1). Whether a term is unfair is a separate inquiry.

2. The critical issue was whether the agreement provided for a 3 per cent price with an option to pay 1.5 per cent, or instead required payment of 1.5 per cent and gave Bairstow a fallback right to claim 3 per cent upon default.

3. Construing the agreement objectively, the court was entitled to consider the contractual matrix. The market context, the parties’ negotiation of the 1.5 per cent figure, their assumption that it would be paid within 10 days, and the wording of the payment and interest clauses all supported the second construction.

4. The agreement therefore treated 1.5 per cent as the operative price and 3 per cent as a default provision. Regulation 6(2) did not prevent scrutiny of the latter. Since the county court’s finding that the provision was unfair was not challenged, the provisions requiring 3 per cent were non-binding on the vendors.

5. The court expressed no view on whether regulation 6(2) applied to the 3 per cent rate in a multiple-agency context, and directed that the order should not determine that issue.

• High Court (Queen’s Bench Division): appeal dismissed. The court upheld the judgment of HHJ Richardson in the Romford County Court dated 11 December 2003.