Stewart Gill Ltd v Horatio Myer & Co Ltd [1992] 1 QB 600
Set off clauses, exclusion clauses and reasonableness under the Unfair Contract Terms Act 1977
Facts
The Claimant and Defendant had a contract under which the Defendant purchased an overhead conveyor system from the Claimant. The system was defective however and the Defendant did not pay the full sum of the contract (with 10% outstanding). The Claimant started the claim and the Defendant attempted to defend by setting it off against what was owed to them. The conditions of sale had a clause however, which prohibited the purchaser (in this case the defendant) from refusing to pay or from attempting to set off any amount owed for whatever reason.
Issues
The issue in this case was whether the Unfair Contract Terms Act 1977 could apply to a contract between two companies and if it did, the second issue was if the clause in question was reasonable for the purposes of the Act.
Decision/Outcome
The court held that the Unfair Contract Terms Act 1977 applied to this case and that the anti-set off clause effectively amounted to an exclusion clause. The reasonableness test was to be applied to the clause as a whole and not just the aspect relied on and as a result, this clause was deemed to be unreasonable for the purposes of the act, since it effectively can act to exclude liability for breach of contract. It was observed that anti-set off clauses should be deemed to be unreasonable where they prevent the attempted set off of credits which the other party had admitted to owing the party seeking to set off.
Updated 20 March 2026
This case summary remains accurate as of 2025. Stewart Gill Ltd v Horatio Myer & Co Ltd [1992] 1 QB 600 is still good law and continues to be cited as authority for the proposition that anti-set-off clauses fall within the scope of the Unfair Contract Terms Act 1977 (UCTA 1977) and that the reasonableness test must be applied to the clause as a whole rather than only to the particular part relied upon in litigation. The Unfair Contract Terms Act 1977 remains in force and continues to govern exclusion and restriction clauses in business-to-business contracts of the kind described. Readers should note that the Consumer Rights Act 2015 consolidated and replaced the consumer-facing provisions formerly found in UCTA 1977 and the Unfair Terms in Consumer Contracts Regulations 1999, but UCTA 1977 continues to apply to business-to-business contracts. The Law Commission has at various points considered reform of UCTA 1977 in the business context, but no legislation abolishing or materially amending its application to such contracts has been enacted. The principles described in this summary therefore remain a reliable statement of the current legal position.
