I don't understand how a 15% discount on the car's price "favour[s] DM". It DISfavours DM because it reduces DM's profit! Anyways, I don't understand how it points "to the reasonableness of the clause" on p. 10? It's wholly unrelated to the car's price because it seeks to exempt DM's liability.

Fact pattern

P, a director of a corporation, bought a second-hand car from DM (the defendant motor dealership), which could be used principally for entertaining the company’s customers but which would also be suitable for private use by P and the other directors. P managed to negotiate a 15% ‘trade discount’ on the price of the car. The lengthy contract for the sale of the car, which P signed, contained the following clause on p. 10:

DM Ltd will refund the price of any defective goods provided that such defects are communicated to the company in writing no later than 3 days after the contract of sale is concluded but the Company shall not otherwise be liable for any loss or damage caused by defects in the goods.

Before leaving DM, P noticed that the car’s windscreen-wiper blades needed replacing. P therefore purchased two new blades from the parts department of DM, fitting them himself. The sales invoice contained the same exclusion clause as that in the contract for the sale of the car and was also signed by P. After using the car for two weeks, P had a minor accident while driving the car in wet weather and the car was damaged. P discovered that the rubber wiper blades had perished and had consequently failed to clear the windscreen of rain. In the third week of using the car, its gearbox seized up and was ruined. DM had failed to refill the gearbox with oil during the pre-delivery service of the car.

Answer from Q&A Contract Law 2 ed 2019, 78.

      However, the Unfair Contract Terms Act 1977 (UCTA 1977) seeks to control the use of exemption clauses between businesses. By s. 1(3) the 1977 Act applies (subject to s.6(4)) where there is ‘business liability’; that is, ‘liability for breach of obligations . . . arising from things done or to be done by a person in the course of a business’. As DM is a motor dealership the sale of the car and liability is in the course of a business. Although the clause on page 10 arguably does not directly exclude or limit liability, the 1977 Act nonetheless applies as by s. 13 an exemption clause includes an attempt to ‘make the liability or its enforcement subject to restrictive or onerous conditions’. DM, by making liability subject to communication in writing to them of any defects in the goods within three days, seeks to impose a restrictive condition. Section 6(1A) of the UCTA 1977 restricts the extent to which ss. 13–15 of the SGA 1979 may be excluded. Section 6(1A) provides that liability for breach of obligations arising from ss. 13–15 of the SGA 1979 can be excluded but only ‘in so far as the term satisfies the requirement of reasonableness’. The exclusions will be subject to the test of reasonableness. By s. 11(1) of the UCTA 1977 it is provided that in relation to a contract term reasonableness is assessed at the time the contract is made, having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties at that time. By s. 11(2) of the UCTA 1977 guidelines concerning reasonableness are found in Sch. 2 to the UCTA 1977. It will be for DM to establish that the exemptions are reasonable as s. 11(5) of the UCTA 1977 places the burden of proof on the party who claims the clause is reasonable. So, will the exemptions relied upon by DM be able to pass the ‘reasonableness’ test? Having regard to the Sch. 2 guidelines concerning reasonableness, the parties have roughly equal bargaining power and P has been given a 15 per cent discount, both of which favour DM, pointing to the reasonableness of the clause.


The discount favours DMs assertion that this was a freely negotiated contract, and therefore all parts of the contract should stand. If the purchaser had just bought a car without negotiating, terms of the contract could be declared invalid.

So the fact that DM gave an unfavourable discount (cost DM 15%) favours DMs assertion that this was a freely negotiated contract.

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