Bespoke Clauses Prevail Over Standard Terms And Conditions

Where standard printed terms and conditions of a contract are inconsistent with its special terms and conditions, and cannot fairly or sensibly be read together, the special conditions will prevail so as not to defeat the main object and intention of the contract.

The Court of Appeal has provided a reminder of this basic proposition in Alexander (as representative of the "Property 118 Action Group") v West Bromwich Mortgage Company Ltd. Alexander took out a 25 year "buy-to-let" interest only tracker mortgage with the lender. Interest was fixed for the first two years and thereafter was to be at a variable rate of 1.99% above Bank of England base rate. The lender sought to increase the variable rate to 3.99%.

Alexander argued that the lender's standard printed conditions on which it was relying were not consistent with the terms of the offer of loan (the Offer) and were therefore not incorporated into the contract.

The two clauses in particular in issue in the standard mortgage conditions were those which gave the lender the right to

increase the variable rate of interest for any reason, including to reflect market conditions generally and request repayment of the loan in full on the giving of one month's notice. The interest rate clause

Alexander argued that it is well known that a tracker mortgage interest rate is variable only in line with a specified base rate and not for any other reasons.

He also relied on the 'inconsistency clause' in the standard conditions which stated that if there were any inconsistencies between the standard terms and those in the Offer, then the terms contained in the Offer would prevail.

At first instance, the Commercial Court held that the lender's general terms and conditions were not inconsistent with the special terms in the Offer but, taken together, they could be read as modifying or qualifying one another. The lender was entitled to increase the rate of interest for any reason. Alexander appealed.

The Court of Appeal, allowing the appeal, held that it was the Offer document that set out the features and specially agreed bespoke terms and conditions of the particular mortgage being agreed and described and defined it. The reference to the interest rate in the Offer was part of, and integral to, the product description. The Offer clearly indicated that the rate of interest would only be varied in accordance with (and so as to reflect) changes to the Bank of England base rate. There was no suggestion in the...