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Smith v Eric S Bush [1990] 1 AC 831

Reasonableness of exemption clauses for surveyor reports

Facts

The Defendant, Eric Bush was a surveyor who was employed by Abbey National to assess the value of a property which was to be purchased by the Claimant, Mrs Smith. Mrs Smith had paid Abbey National for Mr Bush’s work to be carried out. Mr Bush’s report stated that the property was not in need of any essential repairs. This was not correct, as it turned out that the property had suffered structural damage. The Claimant bought the property in reliance on this report but eventually part of the chimney collapsed and broke through the roof into the property’s loft. The Claimant and the Defendant did not have a contract between themselves (there was only a relationship between Abbey National and each of the Claimant and the Defendant). What is more, the contract between Abbey National and the Claimant included an exemption clause which specifically exempted the Defendant from liability for his report. The Claimant argued both in contract and tort; first that the exemption clause was unreasonable for the purposes of sections 2(2) and 13(1) of the Unfair Contract Terms Act 1977 and second that there was that the Defendant owed the Claimant a duty of care in tort.

Issues

The issues in this case were three: first, whether there was a duty to exercise reasonable care and skill incumbent on the valuer in tort; second, whether the exemption clause in the contract falls under the Unfair Contract Terms Act 1977 and third, whether relying on that exemption clause is fair and reasonable for the purposes of the Act.

Held

The court held that the exemption clause was unreasonable for the purposes of the Unfair Contract Terms Act 1977. It was of particular note that this was a low value property to be used as dwelling and that it was common practice for purchasers to rely on valuations in making such decisions. Where the property is to be an investment or to be used as a business or whether it was of higher value, an exemption clause of this nature could be reasonable.


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