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Declarations as to satisfactory quality

We were surprised to come across a situation recently in which an asset financier (who we were not advising) sought to rely upon a declaration contained within its standard terms and conditions to the effect that the assets on finance had been delivered, were of satisfactory quality and were fit for their purpose.

This was instead of using a Certificate of Acceptance, a delivery note or even a confirmation of delivery by telephone.

There are circumstances in commercial contacts such as aircraft leasing where the courts will readily give effect to properly drafted Certificates of Acceptance, but not in the consumer context. The leading case is Lowe v Lombank Ltd [1960] 1 All ER 611 which involved the Hire Purchase of a vehicle to a consumer, and even though a separate delivery note had been signed by the hirer the court had little difficulty in rejecting the financier’s claim that this barred the hirer from complaining about the vehicle because it well knew that she had no proper opportunity to inspect it.

It therefore seems unlikely that in a case where there is nothing such as a Certificate of Acceptance, a delivery note or even a confirmatory telephone call the court would be prepared to accept that a hirer is bound by a declaration contained within the terms of the Agreement itself that goods have been delivered and are satisfactory.

The position is explained clearly in Goode’s Encyclopaedia of Consumer Credit at para 46.89:

“If the creditor wishes to assert that the debtor’s signature to a document estops the debtor from disputing the truth of the statements contained in the document the creditor must show that he acted on the statements in the belief that they were true and thereby altered his position. Thus, if a finance company as claimant wishes to rely on the signature to a delivery receipt as estopping the debtor from disputing that he received the goods in proper condition, the finance company must call evidence to show that it believed the debtor’s representation to be true and that acting on that belief it paid over the cash price of the goods (less the deposit) to the dealer. This is particularly necessary where the debtor is alleging a breach of the term of fitness or satisfactory quality since in the absence of such evidence by the finance company the court will be minded to infer that if the company acted on the representation at all it did so in the belief not that the representation was true but that it sufficed to enable the company to escape the consequences of that section. That said, a note of warning. There is almost no known case in the last quarter century where the debtor’s signature on a document handed to him with delivery and asserting that the goods have been received in good condition has actually been taken by a court as establishing a valid estoppel against the debtor. Further a term making such a signature binding on the customer when given prior to his having an opportunity to examine the goods risks being held an unfair term under the Consumer Rights Act 2015 and may even be within para 16 of the so-called ‘Grey List’ of terms presumed unfair contained in Schedule 2 to that Act”.

Indeed we have learned from years of experience in litigating these matters that there is no point in adopting an academic analysis of these agreements without taking into account what is likely to happen when they reach court, and in our view most judges would be unimpressed to see an asset financier short-circuiting the process of obtaining any meaningful confirmation of delivery by seeking to rely on a declaration within the Agreement itself.