Last Bus Limited v Dawsongroup Bus and Coach Limited & Anor.

A contractual exclusion of implied terms concerning quality is construed according to its ordinary language. A reference to terms implied by law can include statutory implied terms where the wording and context support that construction. In a commercial hire-purchase transaction, it is not inherently reasonable for a finance house to exclude liability for quality merely because it did not participate in selecting or inspecting the goods. Reasonableness remains fact-sensitive under the Unfair Contract Terms Act 1977. However, substantial commercial parties of broadly equal bargaining power may be held to their freely agreed allocation of risk, particularly where the customer understood or ought to have understood the term, had alternative purchasing or financing options, and had consistently contracted on the same basis.

Last Bus operated a fleet of premium coaches. It acquired 30 Mercedes Tourismo coaches supplied by EvoBus using hire-purchase finance from Dawson. The agreements contained a clause excluding all express and implied terms concerning quality, fitness, specifications and description.

Last Bus alleged that some coaches were defective and claimed against EvoBus in contract and misrepresentation, and against Dawson for breach of the statutory implied term of satisfactory quality under the Supply of Goods (Implied Terms) Act 1973. Dawson applied for summary judgment, arguing that the clause excluded the implied term and satisfied the reasonableness requirement under the Unfair Contract Terms Act 1977. The issue was whether Last Bus had a real prospect of resisting either proposition.

1. Construction. Clause 5(b), which excluded all conditions, warranties and representations concerning quality that were express or implied by law, purported to exclude the statutory implied term. The phrase did not sensibly distinguish common law from statute law.
2. Reasonableness. It was wrong to treat exclusion by a hire-purchase finance house as inherently reasonable merely because it had not participated in negotiations or inspected the goods. The statutory requirement had to be assessed case by case by reference to the circumstances known, or which ought reasonably to have been known, when the contracts were made. Dawson bore the burden of proof.
3. The authorities concerning substantial commercial parties of equal bargaining strength supported caution before interfering with freely agreed risk allocation. Party autonomy remained important, but did not create an automatic rule in favour of finance houses.
4. Last Bus was commercially experienced, had substantial bargaining strength, could have bought for cash or used alternative financing, ought reasonably to have known the exclusion through an extensive prior course of dealing, and could secure whatever direct contractual protection EvoBus was willing to provide. The absence of an alternative hire-purchase financier willing to accept quality responsibility was relevant but insufficient to outweigh those factors.
5. Dawson was bound to establish at trial that Clause 5(b) was reasonable. The application succeeded and summary judgment was granted dismissing the claim against Dawson. The alternative argument based on the reasonableness of an equivalent exclusion by EvoBus in a direct sale was not finally determined.