Last Bus Ltd v Dawsongroup plc [2023] EWCA Civ 1297

Facts

• A bus fire resulting from a faulty part led to a dispute between Last Bus Ltd and Dawsongroup plc regarding liability under a supply contract.
• The contract contained an exclusion clause aimed at limiting liability for certain losses.
• The fairness and enforceability of this exclusion clause were central to the litigation.
• The Court of Appeal examined the clause within the context of commercial arrangements and its compliance with the Unfair Contract Terms Act 1977 (UCTA).
• The court referenced earlier decisions, including George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] QB 284 and Watford Electronics Ltd v Sanderson CFL Ltd [2001] EWCA Civ 317.

Issues

1. Whether the exclusion or limitation clause in the supply contract satisfied the fairness and reasonableness test under UCTA section 11.
2. Whether the clause was valid and enforceable in light of the bargaining power of the parties and the specific circumstances at the time the contract was formed.
3. How previous authorities regarding risk allocation and balanced bargaining informed the assessment of the exclusion clause in this case.

Decision

• The Court of Appeal reaffirmed that exclusion and limitation clauses must comply with UCTA’s section 11 fairness and reasonableness requirement.
• The court gave weight to factors identified both in UCTA section 11 and Schedule 2, including the balance of bargaining power, availability of insurance, and awareness or understanding of the term.
• The court confirmed that the assessment is made with reference to the facts reasonably known or available to the parties at the time the contract was made.
• It was emphasized that precise and clear drafting of exclusion clauses is essential for enforceability.
• The decision upheld the approach of assessing fairness according to each contract’s context and specific facts.

Legal Principles

• Section 11 of UCTA requires that exclusion and limitation clauses are "fair and reasonable" based on circumstances existing when the contract is made.
• Schedule 2 of UCTA provides guidelines for the fairness test, including factors like bargaining power, reasons for accepting the term, available insurance, and the parties' understanding.
• Judicial assessment involves review of contract context, precise clause wording, and parties' risk allocation.
• Precedent cases such as George Mitchell and Watford Electronics guide the courts in weighing risk distribution and the relative strength of parties.
• Failure to meet UCTA’s fairness requirement may render exclusion clauses unenforceable.

Conclusion

The Court of Appeal in Last Bus Ltd v Dawsongroup plc reaffirmed and clarified the method for assessing the enforceability of exclusion clauses under UCTA, focusing on the fairness test, the balance of bargaining power, and the importance of clear contractual terms, thereby providing practical guidance for drafting and evaluating exclusion and limitation clauses in commercial contracts.