Allen Fabrications Ltd v ASD Ltd (t/a ASD Metal Services and/or Klockner & Co Multi Metal Distribution)

Standard terms may be incorporated expressly through a credit application or impliedly through a sufficiently consistent course of dealing. An onerous exclusion clause requires fair and reasonable notice, but the necessary notice depends on the circumstances. Where a commercial customer knows that suppliers commonly use clauses of the relevant type, further specific notice may be unnecessary.

Under Unfair Contract Terms Act 1977, reasonableness is fact-sensitive. Relevant matters include the parties’ commercial strength, available alternative suppliers, knowledge of the term, the nature of the goods, the extent of the exclusion and the parties’ insurance arrangements. A limitation to the price of goods may be reasonable where the customer is insured and knowingly accepts the commercial risk.

Allen supplied a steel platform and had purchased grating and clips from ASD. After a section of grating failed, causing serious injury to an employee of the end user, Allen faced contribution and indemnity claims and sought corresponding relief from ASD for breach of contract and negligence.

The preliminary issues concerned incorporation of ASD’s standard terms, the construction of clauses 8.6 and 8.8, and their reasonableness under the Unfair Contract Terms Act 1977. The court also considered whether the terms were incorporated through a signed credit application or a course of dealing involving more than 250 transactions.

1. Incorporation. ASD’s terms were expressly incorporated because Allen had accepted them when opening its credit account in 2002. They were also incorporated by the parties’ extensive course of dealing. The repeated invoices and advice notes provided sufficient notice of the standard terms.
2. Onerous terms. Where an onerous or unusual clause is relied on, it must be fairly and reasonably brought to the other party’s attention. The assessment is fact-sensitive and includes the nature of the clause, the steps taken to give notice, the character of the parties and their dealings. The requirement is moderated where the recipient already knows that terms of that type are likely to be used. Allen was an experienced commercial buyer, had dealt with ASD on more than 250 occasions, and knew that suppliers commonly used liability exclusions. The ordinary notice requirement was therefore sufficient.
3. Construction. Clause 8.6 applied generally to losses other than replacement, refund, personal injury or death caused by negligence, and damage to property caused by negligence within clause 8.7. Clause 8.8 additionally covered other liabilities, including negligence and implied contractual terms not otherwise addressed. Allen’s indemnity-style claim was therefore limited to the price of the goods.
4. Reasonableness. Under Unfair Contract Terms Act 1977, the burden of proving reasonableness lay on ASD. The relevant circumstances included the parties’ commercial status, alternative suppliers, Allen’s actual and constructive knowledge, the ordinary nature of the goods, the scope of the clauses, and insurance. Allen was insured, used comparable terms when acting as a seller, and accepted the risk in return for price. The clauses were reasonable.
5. The court found for ASD on Issues 2 to 4. The terms were incorporated, clauses 8.6 and 8.8 had the stated limiting effect, and both clauses were reasonable.