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Feldaroll Foundry Plc v Hermes Leasing (London) Ltd

Sale of goods - Contracts - Hire purchase - Dealing as consumer - Companies - Fitness for purpose - Satisfactory quality - Unfair contract terms - Right of purchaser to reject goods on grounds of fitness - Unfair Contract Terms Act 1977, s 6 (2) - Unfair Contract Terms Act 1977, s 10

28 May 2004

The first defendant (H) appealed a decision that it was liable to the claimant (F) in relation to the sale of a defective car sold on a hire purchase agreement. F had agreed to the purchase of a Lamborghini motor car by way of hire purchase. H was a finance company which had agreed to provide the necessary finance agreement. The car was to be used by F's managing director (B), who was an enthusiast of high performance cars, and accordingly the use of the Lamborghini was seen as a reward. The car was defective and it was accordingly returned to the dealer within a few days. However F sought to roll-over the terms of the finance agreement to the supply of a replacement performance car. Accordingly F paid initial instalments under the terms of the finance agreement. A replacement car was never provided and the dealer subsequently became insolvent. By the instant proceedings F sought the repayment of the sums paid by way of instalments under the finance agreement, and H sought the remainder of the sums said to have been due. An issue before the trial judge was whether terms of the finance agreement which had excluded implied conditions of reasonable fitness and satisfactory quality had been enforceable, or whether Unfair Contract Terms Act 1977 s 6(2) rendered the exclusion term as nugatory on the grounds that F had acted as a consumer rather than in the course of its business (Unfair Contract Terms Act 1977, s 10). The judge, relying on R & B Customs Brokers Co Ltd v United Dominions Trust Ltd [1988] 1 WLR 321, held that F had acted as a consumer and that accordingly F had been entitled to reject the car on the grounds of fitness.

Whether the judge had erred in concluding that F had purchased the car as a consumer.

HELD (appeal dismissed)
It was clear from the decision of Stevenson v Rogers [1999] QB 1028 that the court in the instant appeal was bound by the decision of R & B. It was a decision that was binding on the Court of Appeal and during its time the relevant provisions of UCTA 1977 had remained unchanged. If the case of R & B was to be challenged, the Court of Appeal was not the forum. Furthermore, R & B was not distinguishable from the facts of the instant case. Accordingly, since the judge had correctly found that F had properly rejected the car, F had been entitled to reject the car on the grounds of fitness. The appeal would accordingly be dismissed.

Categorised in:

Company, Consumer, and Contract Financial services & Tax Procedures Landlord & Tenant