Court Of Appeal Reverses Regus Decision And Finds Exclusion Clause Was Reasonable

In May 2007, the High Court decided, in the case of Regus (UK) Limited v Epcot Solutions Limited, that the exclusion of liability clause in the supplier's standard terms of business was unreasonable under the Unfair Contract Terms Act 1977 (UCTA).

The Court of Appeal recently reversed this decision, stating that the first instance judge was mistaken in concluding that the clause left the customer without any remedy. The clause still allowed the customer a remedy in damages for breach of contract - here the diminution in the value of the services provided. The Court also decided that the clause met the requirement of reasonableness under UCTA, allaying concerns about the first instance decision, which had called into question the effectiveness of many suppliers' standard exclusion clauses.

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Court Of Appeal Reverses Regus Decision And Finds Exclusion Clause Was Reasonable

In May 2007, the High Court decided, in the case of Regus (UK) Limited v Epcot Solutions Limited, that the exclusion of liability clause in the supplier's standard terms of business was unreasonable under the Unfair Contract Terms Act 1977 (UCTA).

The Court of Appeal recently reversed this decision, stating that the first instance judge was mistaken in concluding that the clause left the customer without any remedy. The clause still allowed the customer a remedy in damages for breach of contract - here the diminution in the value of the services provided. The Court also decided that the clause met the requirement of reasonableness under UCTA, allaying concerns about the first instance decision, which had called into question the effectiveness of many suppliers' standard exclusion clauses.

Background

The relevant section of the exclusion clause restricted any liability for "loss of business, loss of profits, loss of anticipated savings, loss of or damage to data, third party claims or any consequential loss."

According to UCTA, reasonableness will be assessed through several factors including:

The relative strength of the parties' bargaining positions,

Whether the customer had received an inducement to agree to the clause,

Whether the customer knew or should have known of the existence of the clause,

Whether the party suffering loss had been able to insure itself against such loss.

The court decisions

In the first instance decision relating to the agreement to supply serviced office space, the court held...