Adopting industry standard terms for UCTA

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African Export-Import Bank v Shebah Exploration [2017] BLR 469 Court of Appeal

Facts

African Export-Import Bank (AFREXIM) is an Egyptian Bank which lent $150m to Shebah in the form of a “syndicated facility agreement” using standard conditions produced by the Loan Market Association.

The question arose whether the LMA standard terms could be regarded as AFREXIM’s own standard terms for the purposes of applying the provisions of the Unfair Contract Terms Act?

(The Unfair Contract Terms Act 1977 provides that, where in the course of business one party relies upon its written standard terms to exclude or change its liabilities, it must prove that reliance is reasonable).

Court of Appeal Held

  1. To bring in the UCTA, the Complainant firstly has to show that the industry standard terms and conditions in question have been habitually used by the other party. Shebah failed to prove this.
  2. Had they done so, the burden would then have fallen upon AFREXIM to prove that the exclusions contained in the LMA Conditions were reasonable.

Comment

1. The burden of proof on the person seeking to rely upon the UCTA is to show habitual use of the standard terms by the other party. This is not necessarily easy to make out. It would not be enough just to show that they had been used now and again. “Habitual use” would have to be proved. In Yuanda v Gear, the TCC said: “The conditions have to be standard in that they are terms which the company in question uses for all or nearly all of its contracts of a particular type.”

2. If there has been negotiation with the parties, leading to some of the standard terms being amended or deleted, then they would no longer be standard terms.

For more specialist legal advice call Keith Bishop, Head of Construction & Engineering, on
0191 211 7983 or email [email protected].