July 11, 2017

The Court of Appeal has upheld a High Court decision granting the claimants summary judgment on their claim for sums outstanding under a syndicated loan facility agreement totalling over US$144.2 million plus interest. Longmore and Henderson LLJ endorsed the judge’s ruling that the parties were not, as the defendants contended, contracting on the claimants’ written standard terms of business. Therefore the no set-off provisions in the contract were not subject to the test of reasonableness under the Unfair Contract Terms Act 1977, but applied with full contractual force to exclude any right of set-off the defendants might have had on their counterclaims.

Distilling the reasoning of the High Court in previous cases, the Court of Appeal said that it was relevant to inquire whether there had been “more than insubstantial variations to the terms which may otherwise have been habitually used by the other party to the transaction”, in which case it would be unlikely that the contract could be shown to have been made “on the other’s written standard terms of business”. The court also confirmed that there is “no requirement that negotiations must relate to the exclusion terms of the contract, if the Act is not to apply” (African Export-Import Bank v Shebah Exploration & Production Company Ltd [2017] EWCA Civ 845 (28 June 2017 – to read the full judgment click here).