BUSINESS TO BUSINESS CONTRACTS

“I regularly buy and sell vehicles from and to other businesses in England and Wales. I have been told that these are sold as seen and there are no liabilities or ability to claim if there is a fault is that correct?"

It is correct that there are a number of differences between a business to business and a business to consumer transaction. What conditions apply will depend on the agreement between the parties.

In a business to business sale there is no protection at all.

That is not true. Whilst the Consumer Rights Act 2015 (CRA) replaced the Sale of Goods Act 1979 (SOGA) for business to consumer transactions, the SOGA continued to protect business to business transactions. The SOGA contains almost identical protections with regards as described, satisfactory quality and fit for purpose etc... and as such these will also be conditions of a business to business contract.

Where the SOGA differs is that these conditions can be excluded in a business to business transaction, and often are. You therefore have to decide when buying or selling a vehicle whether you wish to exclude the SOGA and where you want to sell vehicles sold as seen etc…that you have an express term within the agreement that exclude them.

The seller can exclude anything they like

That is not true. Whilst the courts are a lot less likely to interfere with the terms of a contract in a business to business transaction, this does not mean that it is the wild west and that anything goes. The Unfair Contract Terms Act 1977 (UCTA) sets a number of contractual clauses that are unenforceable.

  • A business cannot exclude liability for death or personal injury due to their negligence
  • A business can limit their liability for any damage caused due to their negligence, but only if the term itself is reasonable and sufficiently brought to the other party’s attention
  • A business can limit their liability for any damage caused due to a misrepresentation on their part but only if the term itself is reasonable and sufficiently brought to the other party’s attention

What is reasonable will depend on what the court decides is reasonable ‘having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.’

When deciding what is reasonable the court will consider what or ought reasonably to have been known to the parties when the contract was made and will also consider: -

  • the strength of the bargaining positions of the parties relative to each other,
  • whether the customer received an inducement to agree to the term,
  • whether the customer knew or ought reasonably to have known of the existence and the extent of the term,
  • where the term excludes or restricts any relevant liability if some condition was not complied with, whether it was reasonable at the time of the contract to expect that compliance with that condition would be practicable;

It is important to note that it is for the party seeking to rely on the clause to prove that it is reasonable.

The seller is liable for anything within the first 6 months.

That is not true. This is correct under the CRA where a business contracts with a consumer, but in a business to business contract there is no such assumption. As such it will be for the purchaser to prove that the issue complained of was a fault and was more likely than not present at the time of sale.

If I wasn’t aware of a contractual term within the contract I can’t be bound by it.

That is not true. In a business to business transaction the court is far less likely than in a business to consumer transaction to interfere with the agreement. Where you have been provided with terms and conditions and have signed them the court will assume that you have read, understood and agreed to be bound by them and it will be very difficult to avoid them unless they are deemed unreasonable (see above).

The court is a little more likely to interpret a contract where there is no signature. However, refusing to sign a contract is not a bar to the terms being binding. If you receive terms and conditions and then continue to trade with a company the starting point for a court is that these terms will be binding.

Conclusion

Contractual disputes are complicated and will depend on the nature of the agreement and the extent of any contract. Where position ensures that all terms are in writing and never enter into an agreement without fully understanding the terms, carefully document all conversations and to evidence all telephone calls, emails and letters for future reference.

Source: Motor Industry Legal Services (MILS)