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Is £40 enough?

Jul 14, 2018
Joe Warren, a partner and solicitor from Carbon Law Partners, looks at whether the £40 per item liability limit is appropriate in today’s market.

Many standard contract terms for removal services seek to limit liability for damage to £40 per item. Since 2015, however, an increasing number of customers have sought to challenge this in court. Unfortunately for removal companies, a change in the law has given customers new ammunition with which to do so.  

The legal approach to consumer contracts changed when the Consumer Rights Act 2015 came into force on 1 October 2015. The vast majority of current contracts for removal services are likely therefore to be covered by the new law. And in some key respects the approach to exclusion or limitation of liability clauses under the Consumer Rights Act 2015 is slightly different to its predecessor legislation.  

Implied duty of reasonable care and skill 

The Consumer Rights Act 2015 has in effect combined into one piece of legislation the Sale of Goods Act 1979, the Unfair Terms in Consumer Contracts Regulations 1999 and the Sale of Goods and Services Act 1982.   

Section 49 of the new Act implies a term into consumer contracts that the contractor will perform the service it provides with reasonable care and skill. A similar term was also implied under the previous legislation.  

What is new, however, is that contractors may not rely upon the following contractual terms in order to limit their liability to a consumer as a result of a breach of that implied duty of reasonable care and skill:  

  1. Any term that limits liability for injury or death; 

  1. Any term that limits the amount of compensation for other losses to an amount that is less than the contract price for that service; 

  1. A term that fails a fairness test as set out in the Consumer Rights Act. 

This article looks at the second of those terms - the limitation of liability by reference to a set amount - because this is the area most often challenged by consumers in respect of removals contracts.    

Limiting liability 

If property is damaged during removals by what could be classified as a breach of the contractor’s implied duty, then, where the new Act applies, a removal company can no longer rely upon a term limiting the amount of compensation to a set amount per item. If a court decides that such a contractual term is void, then there could be no limit to the damages that a consumer could claim.  

This will clearly become a concern for a company that regularly deals with customers who have items which are over £40 in value and when items become damaged due to a breach of the company’s duty of care and skill.   

Previous decisions 

There is no reported case law in this area as of yet, probably because most claims are at a level that are not worth appealing. When the Office of Fair Trading (“OFT”) was in place, though, there were a few decisions from them regarding the reasonableness of a term limiting liability. So some guidance as to how the courts will interpret limitation clauses can be gleaned from the OFT’s decisions, albeit that, strictly speaking, they concerned the law as it was before the Consumer Rights Act 2015.   

In one reported decision, the OFT revealed that they had looked into the standard terms and conditions of a removal company (Bishops Move) and, in that instance, asked them to revise terms that excluded liability in certain circumstances. That included a term that limited their liability to £200.  

In another investigation, the OFT considered the practices of the removal company (Pickfords) in relation to a term in their contract that damage from the process of removals should be notified by a customer within seven days of removal or delivery. The OFT found the term to be unfair and then suggested a revised term which allowed an option for the consumer to ask for an extension of that time period. However, whilst it did look at a term that limited the amount the consumer could claim to £40 per item, that term was in fact left untouched by the OFT on that occasion.   

In summary, under the previous legislation the OFT sent out some mixed messages about whether or not it thought limitation of liability clauses were fair to consumers.   

In the new world of the Consumer Rights Act 2015, there is likely to be far less leeway for removals companies to limit their liability in such a way and it might well be the case that such companies have to consider if there are other ways to tip the balance in their favour in relation to large or vexatious claims.   

What may assist 

The terms relating to limiting liability should not be viewed in isolation. There may be other grounds for liability to be excluded or limited, for example due to a failure to report the damage within a certain time period or a failure to use a particular method for reporting the damage to the contractor.   

Any claim by a customer will also need to prove the damage they allege they have suffered and how much it would cost to replace their damaged items. It would not be enough for a consumer merely to assert that some of its possessions were damaged.   

For advice on claims being made for damages which relate to the Cons

umer Rights Act 2015 or any other contractual argument contact Joe Warren of Carbon Law Partners via e-mail: joe.warren@carbonlawpartners.com or call 0117 332 8333.

Joe Warren

Joe is a Partner and Solicitor at Carbon Law Partners. He advises businesses in relation to commercial and contractual disputes which includes challenges to terms and conditions on the basis of fairness and under the Consumer Rights Act 2015.  

Clarification

Re: Is £40 enough?  The Mover, July 2018, Page 40.
The above article in our July issue looked at the £40/item liability limit often used in removals contracts.  It questioned whether this figure was enough and suggested that companies might be challenged if expensive items were damaged. The article referenced an OFT decision relating to Bishop's Move.  The company pointed out that this happened in 1999 and, therefore, was not relevant.  Joe Warren, the solicitor who wrote the story however confirmed that, from a legal perspective, the age of a decision sometimes has very little impact. There is a lack of case law on this issue and so the Court will often be given references to older decisions of the OFT to persuade them what is reasonable.

 




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