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A piece of legislation that protects ‘consumers’ against unfair treatment from ‘commercial’ types – meaning you – undermines whole basis of a building contract

“English law does not normally ask a party negotiating a contract to protect the other party from the consequences of his own folly”

If you do business on your day off you’re doing business as a “consumer”. If you buy an architect’s professional services for a kitchen extension, buy a builder’s services to put it up, buy a central heating system to keep it warm you are a consumer. If you sign up to a JCT building contract with your day-off hat on, don’t assume that the contract will apply if there is a dispute. It’s that word “consumer” that changes things. When you have thrown aside your trowel, dungarees and laser level, you have been magically converted into a “consumer”. And when things go wrong the smallprint in the contract sometimes gets pooh-poohed.

Martin Boston decided to engage a builder, Bryen & Langley, to knock two flats into one, in posh New Cavendish Street, London W1. It was a half-a-million-pound job. A JCT98 was used. Mr Boston is not a developer, nor in the business of engaging builders to do work, nor a professional flat converter. Mr Boston and his missus just wanted the flat to live in; fair enough. There was a dispute when the account went miles over the anticipated contract sum. The builder wasn’t paid. The builder turned to his JCT98 and used the three pages of rules for adjudication. The adjudicator agreed the money was owed. Mr Boston then said three things: he didn’t agree; the JCT wasn’t actually effective; and he was a “consumer” and as such, the adjudication bumf in the JCT, if it applied at all, collided with the “Unfair Terms in Consumer Regulation 1999”. So, adjudication didn’t apply to him even if he had signed a JCT contract plainly containing adjudication provisions.

They went to court. The judge accepted that no contract containing the JCT98 document came into effect. So the adjudicator’s decision was void for that reason alone. Nevertheless the judge went on to consider the important point about the effect of the consumer regulations and so called unfairness. The judge decided that there was no consumer unfairness in this case. Mr Boston could not seek to oust adjudication by hurling the consumer regulations at the contract.

That’s all very interesting but let’s widen the discussion to the rationale for introducing such consumer regulations; or rather, let’s ask how different the hard-nosed commercial man is when it comes to dealing as a consumer. What’s the big difference? First, a consumer is someone contracting outside his trade, business or profession. That’s what I mean by doing business on your day off. So when the boss of Buildings ‘R’ Us buys building work for himself, lo, he is a consumer. By contrast, the seller or supplier is a person or company contracting to provide its trade, business or professional services. The consumer regulations shout “unfair” at contractual terms not individually negotiated if those terms are “contrary to the requirements of good faith” and “cause significant imbalance in the parties rights and obligations” to the “detriment of the consumer”. The House of Lords in a case on the same topic (Director General of Fair Trading vs First National Bank plc) said: “Contract terms should be expressed fully, clearly and legibly and contain no concealed pitfalls or traps. Appropriate prominence should be given to terms that might operate disadvantageously to the customer. Fair dealing requires that a supplier should not take advantage of the consumer’s necessity, indigence, lack of experience, or weak bargaining position.”

So that’s how you are to be treated on your day off. But, when you go to the office and put your commercial hat on, does that mean you are free to scheme pitfalls, lay traps, operate disadvantageously, deliberately take advantage of those with lesser experience?

English law does not normally ask a party negotiating a contract to protect the other party from the consequences of its own folly. There is, in commercial terms at least, still freedom to contract. If you proffer a harsh set of terms and the other bloke says “okay”, the law provides that the adjudicator, arbitrator or judge will give effect to those harsh contract terms. Fortunately there is a whole grandstand of people willing to contract under the flag of fair dealing. As for the schemers and trapsters … do as you would be done by, eh?

Readers are invited to forward recent judgments for reporting in this column (with full acknowledgement) to: Tony Bingham, 3 Paper Buildings, Temple, London EC4Y 7EU. DX: 37164 Biggleswade.

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