Air Transworld Ltd v Bombardier Inc

Clear and comprehensive contractual language may exclude conditions implied by the Sale of Goods Act 1979, even though the contract does not use the word “condition”. A clause which makes the seller’s contractual warranties and liabilities exclusive, and excludes all other obligations or liabilities implied by law, may achieve that result by necessary inference. The Unfair Contract Terms Act 1977 does not impose its reasonableness controls on an international supply contract. A corporate purchaser deals as a consumer only where the purchase is not made in the course of its business. The purchase, ownership and operation of an aircraft may constitute the company’s business even if the aircraft is intended principally for private use.

Air Transworld Ltd sought a declaration that it had validly rejected a Challenger 605 aircraft purchased from Bombardier Inc, together with repayment of the price or damages. The aircraft purchase agreement was assigned from Angoil SA to Air Transworld, and the defendant became party to the assignment.

The claimant alleged breaches of the statutory conditions concerning description, quality and fitness for purpose. Bombardier relied on contractual provisions making its warranties and liabilities exclusive, and argued that the Unfair Contract Terms Act 1977 did not apply or, alternatively, that the exclusions were reasonable. The principal issues concerned construction of the contractual exclusion, international supply contracts, consumer status and reasonableness.

1. The claim was dismissed. Article 4 of the aircraft purchase agreement made the seller’s warranties, obligations and liabilities, and the buyer’s rights and remedies, exclusive and in lieu of all other express or implied obligations or liabilities. Although the clause did not use the word “condition”, its reference to obligations and liabilities implied by law necessarily included the conditions implied by sections 13 and 14 of the Sale of Goods Act 1979. The contractual warranty therefore replaced those statutory conditions.

2. The authorities requiring precise language before statutory conditions are excluded did not require the use of that particular word in every case. The present wording was materially wider than clauses referring only to warranties or guarantees. It had one fair meaning and did not require a strained construction.

3. The APA and Assignment Agreement were international supply contracts within section 26 of the Unfair Contract Terms Act 1977. The aircraft was to be delivered in Canada and exported immediately. Further, the acts constituting offer and acceptance occurred in different states. Section 26(4)(b) referred to the totality of the acts constituting offer and acceptance, including their making and receipt, rather than a legally technical place of contract. Section 26(4)(c) did not independently apply because delivery was in, rather than to, Canada.

4. Section 27 excluded the relevant UCTA controls because English law governed solely by contractual choice and the contracts would otherwise have been governed by Canadian or Quebec law. The Assignment Agreement was the operative contract under which the claimant sued, and it independently possessed the international character required by section 26.

5. The claimant did not deal as a consumer. Applying the approach in R&B Customs Brokers Ltd v United Dominions Trust Ltd, the purchase was integral to the claimant’s business of owning and operating aircraft, notwithstanding the claimant’s alter-ego relationship with Mr Mosquito and the intended private use. In any event, the aircraft was of a type ordinarily supplied for private use.

6. Alternatively, the exclusions satisfied the statutory requirement of reasonableness. The parties had comparable bargaining strength, the claimant could consider alternative manufacturers, the relevant warranty had been drawn to its solicitor’s attention, and the risk allocation formed part of the commercial bargain. A sufficiently serious breach of the replacement warranty might amount to repudiatory breach and attract damages, but that possibility did not make the agreed exclusion unreasonable.