ESU-Essex Court Chambers National Mooting Competition

Third Round Problem (Moot of 2001/2002)

Yupi Ltd v Drax plc
In The House of Lords

Drax plc, a development company and a member of the Association of Property Developers, owned a large seagoing motor yacht, the Satanita, which was sometimes used for corporate entertaining and sometimes for private use by senior executives. In 1999 Drax plc, having purchased an even larger craft, the Valkyrie, sold the Satanita for £3,500, to Yupi Ltd, who purchased her as a retirement gift for its founder. A term of the contract of sale warranted that the Satanita complied with the Control of Marine Pollution Regulations 1998.

The Satanita was delivered to Yupi Ltd on 1 September 1999. The next day the Satanita was taken to sea. Within hours she was boarded by the Marine Pollution Inspectorate and inspected. The inspection showed that she did not comply with the Regulations and a prohibition of use order was served under the Regulations. Yupi Ltd incurred considerable expense in having the Satanita brought into compliance with the Regulations.

Drax plc refused to pay any compensation to Yupi Ltd. Consequently, Yupi Ltd brought an action for damages for breach of an express term that the Satanita complied with the Regulations.

By way of defence, Drax plc argued that it was protected by an exemption clause set out in a set of standard terms and conditions published by the Association of Property Developers, which had expressly been incorporated in its contract with Yupi Ltd, just as those terms and conditions had been incorporated in the other contracts of sale of goods on those rare occasions (four in all) over the last three years when Drax plc had disposed of surplus goods. Drax plc argued that that clause was effective against Yupi Ltd, notwithstanding s3 of the Unfair Contract Terms Act 1977, because Yupi Ltd had not dealt as consumer or on Drax plc's standard written terms of business.

High J held that the clause had been incorporated in the contract of sale and that on its true construction it applied to the liability in question. She also held that the clause was an unreasonable one. However, she held that Drax plc were protected by the clause since s3 of the 1977 Act did not apply because:

  1. Yupi Ltd had not dealt with Drax plc as a consumer because the sale of the yacht by Drax plc did not satisfy the requirements laid down by the Court of Appeal in R & B Customs Brokers Co Ltd V United Dominions Trust Ltd [1988] 1 All ER 847 CA; and
  2. Yupi Ltd had not dealt with Drax plc on its standard written terms of business (British Fermentation Products Ltd v Compare Reavell Ltd [1999] 2 All ER (Comm) 389 applied).
Yupi Ltd appealed unsuccessfully to the Court of Appeal. The Court agreed with the judgement of High J, including elements (i) and (ii).

Yupi Ltd now appeals to the House of Lords on the grounds that the Court of Appeal was wrong to hold that:

-   element (i) of High J's judgment; and/or
-   element (ii) of High J's judgment,

were (or, as the case may be, was) correct.

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