The court concluded that IDS were in a stronger bargaining position than Hillmead.
The court considered IDS' terms and conditions, in particular applying (amongst others) the following tests:
(i) whether it is reasonable to exclude implied terms as to satisfactory quality and/or fitness for purpose, as provided for in clause 8.9;
(ii) whether it is reasonable to confine any remedy to replacement of the goods, alternatively to limit financial liability to the invoice price of the goods, as provided for in clauses 6.2 and 8.11;
(iii) whether it is reasonable to exclude any liability for consequential loss etc, as provided for in clause 8.10.
The court considered a key issue in deciding whether clause 8.11 was reasonable was that the direct loss which a defect in the laminate panel would cause to Hillmead would be much greater than the cost of the laminate panel itself, and both parties knew this at the time of the contract. Clause 8.11 did not therefore satisfy the statutory test of reasonableness. The court concluded that the key issues in considering whether clause 8.10 satisfied the statutory test of reasonableness were the following:
(i) the parties were not of equal bargaining power;
(ii) the term was not negotiated;
(iii) the term seeks to exclude all liability for consequential loss, rather than seeks to limit such liability;
(iv) if the provision with less serious consequences to the buyer (namely the combined effect of clauses 6.2 and 8.11) does not satisfy the statutory test of reasonableness, that is a strong indication that the clause with more serious consequences to the buyer (namely the effect of clause 8.10) also does not satisfy the statutory test of reasonableness; and
(v) it was in the contemplation of the parties that any direct loss to the buyer would be greater than merely the cost of replacing the goods.
Was the reasonableness test satisfied?
For all these reasons the court concluded that clause 8.10 also did not satisfy the statutory test of reasonableness.
The parties were not of equal bargaining power, IDS could not by their standard terms and conditions exclude implied terms as to satisfactory quality and fitness for purpose, IDS could not exclude liability (except personal injury or death) to the invoice price for the goods and IDS could not exclude liability for consequential loss.
As none of IDS' particular terms and conditions satisfied the test of reasonableness as required by S.6 (3) of UCTA, Section 14 of the Sale of Goods Act 1979 which imposes an implied term as to satisfactory quality was not ousted by the IDS exclusion clauses.
The judge then went on to find that IDS were not in breach of contract because the bonded panels were of satisfactory quality in the circumstances.
However, the case can be contrasted with an earlier decision from 2007.
Shepherd Homes Ltd v Encia Remediation Ltd and Green Piling (2007)7