International Supply Contracts And Exclusion/Limitation Of Liability For Misrepresentation

A dispute arising from the leasing of two aircraft for use in

India by a UK-based company has provided the Court of Appeal with

an opportunity to clarify that section 3 of the Misrepresentation

Act 1967 does not apply to international supply contracts for the

purposes of the Unfair Contract Terms Act 1977 ("UCTA").

As such, an exclusion or limitation of liability in an

international supply contract relating to misrepresentation need

not be reasonable to be enforceable.

Relevant legislative provisions:

UCTA restricts the extent to which a party can limit or exclude

its liability for breach of contract, negligence or otherwise by

virtue of contractual terms, while section 3 of the

Misrepresentation Act 1967 (as substituted by section 8 of UCTA)

states that a contractual term which purports to exclude or limit

liability for misrepresentation is only effective to the extent it

satisfies the reasonableness test set out in section 11 of UCTA

Section 26 of UCTA provides that the restrictions imposed by

UCTA (including the reasonableness test) do not apply to

"international supply contracts". In particular, section

26(1) states that: "The limits imposed by this Act on the

extent to which a person may exclude or restrict liability by

reference to a contract term do not apply to liability arising

under an [international supply contract]".

Decision:

In Trident Turbopop (Dublin) Limited v First Flight

Couriers Limited [2009] EWCA Civ 290, First Flight Couriers

("First Flight"), an Indian courier

company, sought to defend proceedings brought by Trident Turbopop

(Dublin) Limited ("Trident") (for breach

of certain aircraft leases and wrongful interference with the

leased aircraft), on the basis that First Flight had been induced

to enter into the leases by pre-contractual misrepresentations made

to it by Trident. Trident argued that First Flight was precluded

from relying on any alleged misrepresentation as a result of the

particular exclusion clauses in the leases.

Trident was successful at first instance, but on a different

basis from that argued. Although the exclusion clauses in the

leases came within the scope of section 3 of the Misrepresentation

Act, the judge held that the leases were "international supply

contracts" within the meaning of section 26 of UCTA and the

exclusion clauses were not therefore subject to the reasonableness

test.

First Flight appealed the decision, arguing that the limits on

restricting liability for misrepresentation are...