St Albans District Council v International Computers Ltd

St Albans City and DC v International Computers Ltd [1996] 4 All ER 481 is an English contract law case, concerning unfair terms under the Unfair Contract Terms Act 1977.

Facts

A contract to provide software (COMCIS) for the implementation of the poll tax (‘Community Charge’) of International Computers Ltd limited its liability to £100,000. The software was meant to create a register of tax payers. Because of errors in the software, the loss to the council was £1,313,846. The council claimed breach of contract, and that the liability limitation was unreasonable under the Unfair Contract Terms Act 1977. International Computers Ltd claimed that the liability limitation should remain.

Judgment

Scott Baker J awarded the full sum because the council was operating on IC Ltd’s written standard terms of business and so UCTA 1977 section 3 applied. Sections 6 or 7 also applied and under section 11 the clause was unreasonable. Under section 11(4) Scott Baker J highlighted that IC Ltd had ample resources and had £50m worldwide product liability insurance. Looking at Schedule 2, he said that the council was in a weaker bargaining position because they had financial restraints and were not in the commercial field. They had no opportunities of other contracts without the term. The council knew of the term and made representations about it. He noted (as in The Flamar Pride that Schedule 2 should be taken into account just as with ss 6-7). He summed up by saying that the loss of this size is better to fall on the company and not the local population through increased taxes or reduced services.

The Court of Appeal upheld Scott Baker J’s reasoning, but concluded the damages were in fact £484,000 less.

See also

• English contract law
• Unfair Contract Terms Act 1977
• Unfair Contract Terms Bill
• Interpreting contracts in English law
• The Salvage Association v CAP Financial Services Ltd [1995] FSR 655, failure to show evidence of why a particular limit is put in may lead to it being unreasonable
• British Fermentation Products Ltd v Compair [1999] 2 All ER (Comm) 389, Judge Bowsher QC had some trouble with the ‘written standard terms of business’ line in UCTA 1977 s 3, holding that the industry’s model forms of contract did not mean using standard terms, because they were not BFP’s own standard terms.

Notes

References