Legal Updates

Commercial Law – Unfair Contract Terms – Foreign Contractors - Offshore Companies

The case of Heifer International Inc v Christiansen and Others [2008] related to unfair contract terms and the determination of the meaning of the word 'purpose' in regulation 3 of the Unfair Terms in Consumer Contracts Regulations 1999 (“the Regulations”). According to regulation 3 of the Regulations, ‘consumer’ is defined as:

“…Any natural person who, in contracts covered by these Regulations, is acting for purposes which are outside his trade, business or profession”.

T and his wife were looking for a suitable family home in England. He asserted that his wife had been advised to use an offshore company to purchase the property and that she had subsequently established the claimant company in order to do so. The claimant company was beneficially owned by her and the couple’s children.

The claimant company’s memorandum of association set out general objects and powers which included property investment and the development of resources of real property, as well as property of every description. A property was then purchased.

T was of the opinion that Danish workmen were of superior quality to those in the United Kingdom. This led the defendants, who were workmen based in Denmark, to be engaged in the renovation of the property. The written contracts made with each defendant included an arbitration clause. The arbitration clauses meant that any disputes were to be referred to the Danish Arbitration Board.

Unfortunately, disputes arose which meant that the claimant company brought proceedings. The defendants applied to have the proceedings dismissed. They argued that the English courts had no jurisdiction considering the wording of the arbitration clauses.

The claimant relied on regulation 6(1) of the Regulations to argue that the arbitration clauses were unfair in that they required that disputes to be referred to the Danish Arbitration Board. The claimants believed this to be unfair as such proceedings would be conducted in Danish.

An issue to be determined was whether the claimant was deemed a 'consumer' within the meaning of regulation 3 of the Regulations.

The court held that the word 'purpose' in regulation 3 of the Regulations connoted intention. This meant that if a party acted in such a way that furthered its intention, namely to further its trade business or profession, its actions were to be excluded from the Regulations.

However, if an action was for a different purpose, but which had an incidental result that furthered its trade, business or profession, then the contract in question was not excluded from the Regulations.

In this case, the purpose of buying and renovating the house was to provide a place for T and his family to live. It was not to provide an investment opportunity for the claimant. The claimant was not to benefit from any increase in the value of the house, although there may have been an incidental increase in its value. This meant that the Regulations applied.

Although the arbitration clauses could have been potentially unfair taking into account regulation 6(1) of the Regulations, the court held that they were not unfair considering the circumstances. T had chosen to have his house renovated by Danish workmen and a Danish architect. Even though the arbitration clauses had not been individually negotiated, the claimant was able to influence the content of the terms, and the insertion of the terms was not contrary to good faith or inherently unfair.

Furthermore, the court found that there was no evidence supporting the fact that the claimant could not afford to pay for interpreters, nor that the Danish Arbitration Board would not give it a fair hearing. As a result, the court granted the relief sought by the defendants.

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© RT COOPERS, 2008. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.

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