Recoveries from removal companies Part 3 – all change for limitation clauses
The Consumer Rights Act 2015 (CRA), which came into force on 1 October 2015, applies to every consumer contract formed after that date. Where that contract is for removals, the changes introduced by the CRA to the limitation of liability are very significant.
Clauses limiting liability from breach of an implied duty for reasonable care and skill
Section 49 of the CRA implies into consumer contracts a duty by the trader to perform a service with reasonable care and skill. According to the CRA, traders may not rely upon the following contractual terms in order to limit their liability to a consumer caused by their breach of that implied duty:
- A term limiting the trader’s liability for injury or death;
- A term capping the amount of compensation for other losses to an amount that is less than the purchase price for that service;
- A term that fails the fairness test set out in the CRA.
We will not look at the first limb of this test, as the claims we deal with relate to property damage rather than to personal injury.
A ‘cap’ on liability
Where the contract purports to restrict the value of the claim, these new provisions are particularly relevant. As stated in earlier articles, the removals industry practice is to limit liability to around £40 per damaged item. If property is damaged during removals by what could be classified as a breach of the trader’s implied duty, then the trader can no longer rely upon that term where the CRA applies. If the term is void, then there is no limit on the damages that the consumer can claim.
On 2 October, a consumer enters into a contract with a removal company to transport their household items for a fee of £150. Because of a lack of care and skill by the company’s employees, they damage beyond repair an expensive lamp worth £200. The consumer seeks the full value of the lamp but the company relies on the contract, which states that their liability is limited to £40 per item. However, this clause is not binding on the consumer because the contract value was £150 and, as the contract was formed after 1 October, the CRA applies. The consumer can claim the full £200 cost of replacing the lamp.
If the company had limited their liability to the contract value, then it is likely that they would only be liable to the consumer for damage to the lamp up to the limit specified in the contract of £150. However, any court can still then look at whether even that term is fair, using the fairness test.
The fairness test
Section 62 of the CRA covers what is considered ‘fair’. An unfair term is not binding on a consumer. In summary, a term is unfair if it:
- Is contrary to the requirement of good faith; and
- Causes a significant imbalance in the parties’ rights and obligations under the contract;
- Is to the detriment of the consumer;
- Taking into account:
- the nature of the subject matter of the contract;
- all the circumstances existing when the term was agreed; and
- all of the other terms of the contract or of any other contract on which it depends.
Section 62 is fairly widely drafted and is likely to involve a lot of discretion on the part of the court (should it come to it) in deciding what is ‘fair’. The cases we have already commented on in relation to ‘reasonableness’ in the previous articles are likely still to be considered by a court now deciding whether a term is ‘fair’ under the new act.
Terms that seek to limit liability where strict deadlines have not been met are more likely to be subject to the fairness test than terms which impose a cap on damages. This is also relevant to removals cases, where some removals companies require damage to be reported to them within days.
As stated in Part 1 & Part 2 on this subject, the position in relation to recovery against removals companies is never straightforward, even if the company’s terms purport to restrict a consumer’s remedy.
The future does now look brighter for consumers who have suffered at the hands of a trader if the contract was entered into after 1 October 2015.
The CRA makes it increasingly difficult for traders to exclude their liability over a certain amount. Terms that relate to advising the trader of a claim within a specified time frame would be the subject of the new ‘fairness’ test in the CRA. In the case of removals claims, if the removals contract was formed after 1 October 2015, the frustrating limit of ‘£40 per item’ will be a thing of the past in the vast majority of cases.
For more information on any of the issues raised in this article, please contact Joe Warren by emailing firstname.lastname@example.org or phoning 0117 904 5758.
Posted on Oct 28th, 2015 by Lyons Davidson