It’s time to delve deep into the detail of a recent project which ended with former friends arguing in court. The debates were over TLC: whose terms applied, whether the consultant had limited her liability and if the goods complied with the contract.
Was It Five Star Enough?
The owners of a new luxury hotel refused to pay their interior design consultant’s bill, alleging defective goods (which she sourced and supplied); but what was the deal and were they right?
The first question for the court is always: was there a contract and if so, on what terms? The court held her terms were part of the contract because she had provided her client with a copy of her terms, both in person and by email; and her proposal summary, which referred to her terms, the client had signed twice. The fact that the client hadn’t read them was irrelevant.
Lesson 1: always read the terms!
In the consultant’s terms lay a clause which stated that the consultant would have no liability for quality ‘if the total price has not been paid by the due date for payment’. When the client claimed the goods were defective, but her fees were not paid, the consultant relied on this clause to say ‘read it and weep’.
Like all limits, this clause must be reasonable under the Unfair Contract Terms Act 1977 (which applies to all B2B standard terms of business). The court noted that this “apparently unusual clause is tucked away in the undergrowth of the Standard Terms and Conditions without any particular highlighting of the consequences of even the slightest delay in payment.” Because of the contract layout, the confusing wording, difficulty in applying the term as well as the potentially exorbitant consequences, the court struck it out as unreasonable.
Lesson 2: make your limits reasonable if you want to rely on them
Next the court had to decide if the consultant had complied with the contract’s quality standards, whatever they were! Although the client claimed it had asked for five-star furniture for a five-star hotel, the contract was ‘contradictory, inconsistent and imprecise’. There were no standards to measure compliance against. Rather cheekily, it had also continued to use the defective blinds, curtains, tables and headboards for years!
Lesson 3: you need clear standards to measure quality compliance against
The consultant interior designer won payment of her outstanding fees – nearly £¼m with just a small deduction for defective goods. What should you do to avoid ending up expensively arguing for 4 years? You need to sign terms; expressly agree any limits or exclusions; and create clear standards for compliance.