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Let the supplier beware
You may have taken every precaution to make sure a contract
is watertight but a consumer can claim a term isn’t fair if it
puts them at a significant disadvantage
“In dealing with hard-headed contractors,
the consumer is likely not to understand the legal effect of
crafty smallprint. In adjudication they can shout ‘unfair’”
As if building contract were not tricky
enough, life becomes even trickier when the customer happens to
be a consumer. Special rules apply in situations that involve
the consumer – or, put another way, special rules do not apply.
Let me explain.
In the left-hand corner is the builder – yes,
the bloke who buys bricks, employs the lads, scrambles around in
the rain, makes a thin profit if he’s lucky, and is wholly
dependant on the next cheque. In the right-hand corner is the
consumer, who in this case have just lost their 250-year-old
house in a fire, and the insurers.
In this story Mr Domsalla is the builder, Mr
and Mrs Dyason are the consumers and Lloyds TSB/Zurich are the
insurer.
One night in January 2003, the Dyason’s home
went up in flames. Disaster. The insurance policy clicked into
place. The loss adjuster organised the tender documents,
specification and contract documents. He chose the builder. The
first technical point, which I doubt the builder or homeowner
spotted, was that when they signed the JCT Minor Works document,
the homeowner actually signed as an agent for the TSB/Zurich and
as himself. So the three folks were in contract. And when the
dispute broke out – the work was late and was said to have
defects – the consumer got niggled, the builder got niggled, and
the builder began an adjudication.
The adjudicator decided that, since an
withholding notice had not been issued in time, he would not
even look at the claim for defects. Ah, but what about the fact
that statutory adjudication and all the fancy payment rules
about “withholding notices” don’t apply to residential
occupiers? Since the JCT Minor Works had been signed, this was a
“contractual adjudication” using the rules printed in the JCT,
which meant, the adjudicator held, that withholding notices
applied.
The riposte to that was the Unfair Terms in
Consumer Contracts Regulations, 1999 – of which, of course, no
true life builder has ever heard. Nor is it mentioned in JCT
Minor Works. In short, the consumer is protected from unfair
terms even if they have signed up to them. So builders have to
know not only their stock bricks from their granite sets but
also their consumer contract law. Fat chance.
The unfair terms regulations strike down any
smallprint in contract paperwork that causes a “significant
imbalance in the rights and obligations of the parties” to the
detriment of the poor old hard-done-by consumer. The notion is
that the consumer, when dealing with hard-headed commercial
suppliers and contractors, is likely not to understand the legal
effect of crafty smallprint. When it comes to adjudication the
consumer can shout “unfair”.
In this case the owner of the house wanted to
withhold money because he believed there were defects. Snag is,
he hadn’t realised the need for the withholding notice. The
adjudicator had to decide whether the need to issue a notice
five days before the cheque was due was an unfair term and did
not apply to consumers. He decided that the withholding notice
was fair play and ordered the customer to pay up because no
notice had been sent.
The High Court took a different view. It
decided that, for consumers, the withholding notice was an
unfair term. The judge decided that the consumer had been
deprived of a right to have his defects complaint heard and, if
necessary, withhold money. So, technically, the adjudicator had
unfairly shut out the withholding and defects claim.
Interestingly, the judge would not strike
down “consumer adjudication” as an unfair term. He judged that
it did not cause a “significant imbalance in the parties’ rights
to the detriment of the consumer”.
Beware, then: the withholding notice is
characterised as an unfair term when dealing with Mr and Mrs Consumer. So, all you builders don’t forget to mix a little bit
of law in with your sand and cement.
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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