Court of Appeal explains how UCTA applies to exclusion clauses in a commercial contract

Section 3 of the Unfair Contract Terms Act (UCTA) 1977 provides that, where contracting parties deal on one party's written standard terms, a party can only exclude liability for its breach of contract if that term is reasonable.

In Photo Production v Securicor [1980], the House of Lords said that in commercial matters, the parties should usually be free to agree terms, unless they were of unequal bargaining power (and there is no insurance in the background).

The Court of Appeal held that the judge adopted the wrong approach in this case by relying on the fact that the parties were of equal bargaining strength. Instead, it was said that the correct approach was that adopted in Balmoral Group v Borealis [2005]: "Even where the parties are large commercial concerns and of equal bargaining strength as regards the price to be paid under the contract, that does not mean that they are of equal bargaining strength in respect of the terms".

In Last Bus Ltd (t/a Dublin Coach) v Dawsongroup Bus and Coach Ltd & Anor [2023] the party with the standard terms would not have contracted without the exclusion clause and there were no materially different terms available in the market. As a result, the parties were not of equal bargaining strength in relation to the exclusion clause. Since the exclusion left the other party with no remedy in the event of a total failure of consideration and that there was no evidence of the insurance position of the parties, the judge had used the wrong test to judge reasonableness. The trial judge must therefore consider again the question of reasonableness.