Microlise Limited v James Kemball Limited & Anor

Contract formation is determined objectively from the whole correspondence and the parties’ conduct. Where negotiations and documents leave the applicable terms uncertain, the court must identify what a reasonable person would conclude the parties agreed, including any framework agreement incorporated by reference. An unsigned agreement may nevertheless be binding where the surrounding communications, documents and performance establish an intention to contract. A framework agreement may govern later orders and entities within a corporate group, but only within its objectively established temporal and substantive scope. Under Unfair Contract Terms Act 1977, limitation and exclusion clauses in commercial contracts between parties of equal bargaining power may be reasonable where the parties knew, or should have known, of the relevant allocation of risk. Reasonableness is assessed when the contract is made.

Microlise supplied telematics equipment and related services to companies associated with Uniserve. The parties disputed which contractual terms governed the orders, which entities were contracting parties, and the effect of limitation and exclusion clauses in Microlise’s Supply of Products and Services Agreement (SPSA).

The judgment determined three preliminary issues ordered by Soole J: whether the SPSA or the quotation/order general terms applied; which entities were within the contractual relationship; and whether clauses excluding indirect or consequential loss and capping liability at £1 million were fair and reasonable.

1. Issue 1 — applicable terms. The court rejected a “battle of the forms” analysis because the competing documents were all supplied by Microlise. The correct approach was an objective assessment of the whole correspondence, documents and conduct. The December 2015 reference to Microlise’s “standard terms and conditions”, available on request, objectively referred to the SPSA, which was supplied alongside the quotation/order forms. The SPSA was therefore incorporated by reference and took precedence over the quotation/order general terms.
2. The absence of a signature, commencement date and completed corporate details did not make the SPSA fatally incomplete. It was a framework agreement intended to operate with later quotations and orders. Acceptance was evidenced by the signed order and Microlise’s subsequent performance. The SPSA came into force on 1 February 2016.
3. Issue 2 — contracting parties and scope. The SPSA governed Microlise’s relationship with the Uniserve Group from 1 February 2016. Orders given by Uniserve entities fell within it. JKL could not have been subject to it before its acquisition on 22 April 2016, but subsequent JKL orders were within its scope. Zenith orders were covered where made directly with Microlise. Pre-existing or later “white-label” orders made through MAN remained outside the SPSA. Direct Microlise supply of non-white-label equipment to Zenith was within the SPSA, absent an applicable MAN contract.
4. Issue 3 — clauses 29.1 and 29.2. Applying section 11 and Schedule 2 of Unfair Contract Terms Act 1977, the court held both clauses fair and reasonable. The parties had equal bargaining power, the clauses reflected common commercial practice, and the Defendants were sufficiently aware of this type of risk allocation. Clause 29.1 excluded contractual liability for indirect or consequential loss, meaning second-limb Hadley v Baxendale loss, but did not exclude claims based on pre-contractual misrepresentation. Clause 29.2 was a limitation clause capping contractual liability at £1 million. Reasonableness was assessed as at 1 February 2016.
5. The parties were invited to draw up an appropriate order.

The judgment determined three preliminary issues ordered by Soole J on 5 October 2022. The remaining issues were listed for a later trial.