IDS had not been paid for sheets they had supplied to Hillmead, so they issued a claim. The claim was admitted but was met by a counterclaim of over £367,000 for different goods supplied to Hillmead by IDS. In the counterclaim Hillmead alleged that IDS's laminate sheets were not of "satisfactory quality",6 as Statute required.
IDS's primary defence to this was that the statutorily implied term that their goods were of "satisfactory quality" had been excluded by their express standard terms and conditions which had been incorporated into the contract between the parties. In particular, IDS's standard terms and conditions included the following clauses:-
"8.9: Save as set out in the foregoing sub-clauses no other terms, whether conditions warranties or innominate terms, express or implied, statutory or otherwise shall form part of this contract (except where the customer deals as a consumer within section 12 of the Unfair Contract Terms Act 1977 ...)."
"8.10: "The company shall not be liable for any loss of profit, loss of business, loss of goodwill, loss of savings, increased costs, claims by third parties, punitive damages, indirect loss or consequential loss whatsoever and howsoever caused ... suffered by the customer or any third party in relation to this contract ..."
"8.11: "Except for death or personal injury directly attributable to the negligence of the company or in the case of fraudulent misrepresentation in no circumstances whatsoever shall the company's liability (in contract, tort or otherwise) to the customer arising under, out of or in connection with this contract or the goods supplied hereunder exceed the invoice price of the particular goods concerned."
If this argument was correct, and IDS's terms and conditions applied to the contract, then IDS had a good defence to the claim for £367,000.
Did these exclusion and limitation clauses apply?
Hillmead said that these terms did not apply because they were in breach of the Unfair Contract Terms Act.
In addressing the question of unfair contract terms the court considered (amongst other matters):-
(i) What were the terms of the contract between IDS and Hillmead? In particular:
• were IDS' standard terms and conditions incorporated into the contract; and/or
• did the contract have the usual implied terms as to satisfactory quality and/or fitness for purpose as Hillmead alleges?
(ii) If IDS' standard terms and conditions were incorporated into the contract, did they (whether all or individually) satisfy the statutory test of reasonableness?
Were IDS in a position to impose their terms and conditions because they were in a significantly stronger position than Hillmead? If there was that inequality of bargaining power then that, coupled with other aspects of the conditions, may mean that IDS' standard terms and conditions did not satisfy the statutory test of reasonableness and so would not be incorporated into the contract.
In the UK there are only two suppliers of the laminate sheets, and IDS supplies 75% of the UK sales. They therefore have a dominant position in the market.