STANDARD FORM CONTRACTS, UNFAIR TERMS AND PENALTY CLAUSES

Munkenbeck & Marshall v Harold [2005] EWHC 356 (TCC); [2005] All ER (D) 227 (Apr)

Rachel Kapila, University of Oxford

In Munkenbeck & Marshall v Harold [2005] EWHC 356 (TCC); [2005] All ER (D) 227 (Apr), Judge Richard Havery QC held that terms in the RIBA Standard Form of Agreement for the Appointment of an Architect (SFA/99) providing for the indemnity of the architect in respect of legal and other costs in any proceedings and specifying the rate of interest payable on unpaid sums were unfair within the meaning of regulation 5 of the Unfair Terms in Consumer Contracts Regulations 1999, and thus were unenforceable. However, an argument that the term specifying the rate of interest amounted to a penalty clause was rejected; Judge Havery held that, having regard to the late payment of commercial debts generally, it could not be said that the provision did not represent a genuine pre-estimate of the damage likely to be suffered by the architect in the event of non-payment of sums due to it.