Advising Joffra on the Effectiveness of GymAnywhere’s Liability Limitation Clause

Introduction

This essay examines the enforceability of a liability limitation clause included in a sales agreement between Joffra, a fitness business owner, and GymAnywhere, a supplier of fitness equipment. The clause in question seeks to limit GymAnywhere’s liability for breaches of sections 13-15 of the Sale of Goods Act 1979 to 50% of the purchase price, with an option for Joffra to pay a 20% premium to avoid this limitation. Joffra, having overlooked the term, did not pay the premium, and subsequently received defective mats and weights. Assuming a business-to-business contract and a breach of section 14 of the Sale of Goods Act 1979, this essay will advise Joffra on whether the clause effectively limits GymAnywhere’s liability. Using the IRAC (Issue, Rule, Application, Conclusion) framework, the analysis will address the incorporation of the term, its construction, and its validity under the Unfair Contract Terms Act 1977 (UCTA). The essay aims to provide a clear and reasoned assessment of Joffra’s legal position.

Issue: Incorporation of the Limitation Clause

The first issue is whether the liability limitation clause was effectively incorporated into the contract between Joffra and GymAnywhere. Incorporation can occur through signature, notice, or a consistent course of dealing. As per L’Estrange v F Graucob Ltd [1934], a signed document generally binds the signatory to its terms, regardless of whether they were read or understood.¹ Joffra completed and returned the formal order form, which suggests he signed or otherwise agreed to the document. If signed, the term would likely be incorporated, as the court in L’Estrange held that signature demonstrates consent to the terms.

However, incorporation also depends on whether the clause was introduced in time and presented in an appropriate document. In Olley v Marlborough Court Hotel [1949], a term introduced after contract formation was not binding.² Here, the term was included in the sales agreement form before Joffra’s acceptance, indicating it was introduced timely. Furthermore, the form, described as a “formal order form headed sales agreement,” appears to be a contractual document, unlike in Chapelton v Barry UDC [1940], where a term on a mere ticket was deemed non-contractual.³ Therefore, the clause likely satisfies the requirements for incorporation through signature and appropriate documentation.

Rule: Construction of the Clause

Assuming the clause is incorporated, the next step is to interpret its meaning through construction. Courts aim to give words their ordinary meaning, as affirmed in Investors Compensation Scheme Ltd v West Bromwich Building Society [1997].⁴ Additionally, under the contra proferentem rule, any ambiguity in a term is construed against the party relying on it, as seen in Wallis, Son & Wells v Pratt & Haynes [1911].⁵ The clause states that GymAnywhere “limits liability for goods supplied that breach sections 13-15 of the Sale of Goods Act 1979 to 50% of the purchase price,” with a premium option to avoid this limitation. The wording appears clear and unambiguous in capping liability at 50% unless the premium is paid. There is little room for alternative interpretation, and thus, on its face, the clause covers the breach of section 14 as admitted in the facts.

Application: Reasonableness under UCTA 1977

Even if incorporated and clearly constructed, the clause’s enforceability must be tested against the Unfair Contract Terms Act 1977 (UCTA), which governs exemption clauses in business-to-business contracts. Under section 6 of UCTA, a term excluding or limiting liability for breaches of implied terms under the Sale of Goods Act 1979 (such as section 14 on satisfactory quality) must satisfy the reasonableness test as defined in section 11.⁶ Section 11(1) states that a term must be “fair and reasonable” given the circumstances known or reasonably contemplated by the parties at the time of contract formation. Moreover, Schedule 2 of UCTA provides guidelines for assessing reasonableness, including the parties’ bargaining positions, the customer’s knowledge of the term, and whether the customer had alternatives.⁷

Applying this to Joffra’s case, several factors suggest the clause may not be reasonable. First, regarding bargaining positions (Schedule 2(a)), there is no evidence that Joffra, as a small business owner, had equal power to negotiate terms with GymAnywhere, a presumably larger supplier. If Joffra lacked viable alternatives to source equipment, this could weigh against reasonableness. Second, under Schedule 2(c), Joffra’s knowledge of the term is relevant. He admits to missing the clause, and while signature typically binds (as per L’Estrange), UCTA considers whether he ought reasonably to have known of it. If the clause was in small print or inconspicuous, this could support an argument against reasonableness.

Furthermore, section 11(4) of UCTA requires consideration of the resources available to GymAnywhere to meet liability and the feasibility of insurance. As a supplier, GymAnywhere likely has greater resources and access to insurance than Joffra, suggesting it would be fairer for them to bear the risk of defective goods. Crucially, the burden lies on GymAnywhere to prove the term’s reasonableness (section 11(5)). Given these factors, a court might find the clause unreasonable, rendering it unenforceable under UCTA.

Conclusion

In conclusion, while the liability limitation clause was likely incorporated into the contract through Joffra’s completion of the sales agreement form, its enforceability is doubtful under UCTA 1977. The clause’s construction is clear in limiting liability to 50% of the purchase price for breaches of the Sale of Goods Act 1979, including section 14. However, applying the reasonableness test under section 11 and Schedule 2 of UCTA, factors such as potential disparities in bargaining power, Joffra’s lack of awareness of the term, and GymAnywhere’s likely greater resources suggest the clause may not be deemed fair and reasonable. Consequently, Joffra could argue that the clause is ineffective, entitling him to claim full damages for the defective mats and weights. This analysis highlights the protective role of UCTA in business-to-business contracts and the importance of transparency in contractual terms. Joffra is advised to seek legal counsel to confirm the application of these principles to his specific circumstances.

References

• L’Estrange v F Graucob Ltd [1934] 2 KB 394.
• Olley v Marlborough Court Hotel [1949] 1 KB 532.
• Chapelton v Barry UDC [1940] 1 KB 532.
• Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28.
• Wallis, Son & Wells v Pratt & Haynes [1911] AC 394.
• Unfair Contract Terms Act 1977 (c. 50), London: HMSO.

¹ L’Estrange v F Graucob Ltd [1934] 2 KB 394.
² Olley v Marlborough Court Hotel [1949] 1 KB 532.
³ Chapelton v Barry UDC [1940] 1 KB 532.
⁴ Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28.
⁵ Wallis, Son & Wells v Pratt & Haynes [1911] AC 394.
⁶ Unfair Contract Terms Act 1977, s. 6 and s. 11.
⁷ Unfair Contract Terms Act 1977, Schedule 2.