Scottish Court of Session Decisions

At advising, on 17th January 1992, the Lord Ordinary sustained the fourth plea-in-law for the pursuers which sought to challenge the relevancy of the defenders' averments concerning an exclusion clause in the mortgage application form which the pursuers had completed with a building society and allowed a proof before answer on the parties' remaining pleas.

LORD MORTON OF SHUNA's OPINION—In 1985 the pursuers wishing to buy a house with the assistance of a mortgage from a building society went to the Alliance Building Society and completed an application form which included a declaration signed by the pursuers:

"We accept that the society will provide us with a copy of the report and mortgage valuation which the society will obtain in relation to this application. We understand that the society is not the agent of the valuer or firm of valuers and that I am making no agreement with the valuer or firm of valuers. I/We understand that neither the society nor the valuer or the firm of valuers will warrant, represent or give any assurance to me/us that the statements, conclusions and opinions expressed or implied in the report and mortgage valuation will be accurate or valid and the valuer's report will be supplied without any acceptance of responsibility on his part to me/us. If I/we require advice regarding the price or condition of the property the society will, on request, notify me/us of the name and address of its valuer if he is normally available to accept instructions to carry out private surveys. If you would like a structural survey to be undertaken by the valuer at the time he makes his inspection for the society (this may result in the reduced charge for the structural survey) please tick the box."

The pursuers did not instruct a private survey or a structural survey. The building society obtained a mortgage valuation survey from the defenders valuing the property at £38,000 and making a "nil" estimate of essential repairs to be carried out. The pursuers aver that there were many patent defects in the house which should have been apparent to surveyors of ordinary competence exercising reasonable care and sue the defenders for negligence. The defenders aver that they, because of the express undertaking in the declaration in the application form, owed no duty to the pursuers. The case came before me on procedure roll on the defenders' relevancy plea, and the pursuers' fourth plea-in-law.

Counsel for the defenders pointed out that the amendments to the Unfair Contract Terms Act 1977 contained in the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 did not apply to this case and that it was the unamended 1977 Act that applied. Counsel conceded that the defenders had made no averments that would bring in the "fair and reasonable" defence in respect of the exclusion of liability in the declaration. He submitted that the disclaimer in the declaration would at common law have been effective, that the disclaimers contained both in Hedley Byrne and Co. Ltd. v. Heller and Partners [1964] AC 465 and in Smith v. Bush [1990] 1 AC 831 had been treated as non-contractual notices and that the declaration in the present case was a non-contractual notice and therefore not one caught by the unamended Unfair Contract Terms Act 1977 which was restricted in its application to Scotland in terms of contracts. The present case was on all fours with Robbie v. Graham & Sibbald 1989 S.L.T. 870 and I should follow Lord Weir's decision and dismiss the present case.

For the pursuers counsel pointed out that in Robbiethe pursuer had conceded that the Unfair Contract Terms Act afforded them no protection and that he was making no such concession in the present case. Counsel submitted that the declaration in the application form did form part of a contract and that therefore the 1977 Act did apply as the disclaimer was a term of the contract between the building society and the pursuers. The application form has been produced and parties were agreed that I could consider its terms. Counsel submitted that the pursuers as applicants had with the application form paid or undertaken to pay a fee for the surveyor's inspection of the property and had made various statements about their employment and earnings. By handing the completed application form to the building society there was, it was submitted, a contract. The building society had undertaken at least to consider the application. Even if no loan had ever been offered and accepted counsel argued that it could not be suggested that the building society might not be liable for breach of contract if they had used a person who was known to be wholly incompetent as a surveyor or if they had totally failed to take any action at all on the application form. The application form was not an offer on the part of the pursuers but the delivery to the building I society of the application form formed a contract on the same basis as in Hunter v. General Accident Fire and Life Assurance Corporation Ltd. 1909 SC (HL) 30 where it was held that the sending of a form to the insurance company was the acceptance of an offer by the insurance company and the contract was complete on delivery to the insurance company.

In my opinion, it is clear from the decision in Martin v. Bell-lngram 1986 S.C. 208 as well as from the decision in Smith v. Bush, that apart from the question of whether there was an effective exclusion clause the surveyor in the situation of the defenders in the present case owed a duty of care to the mortgagee. As Lord Templeman said in Smith v. Bush at p. 844:

"A valuer who values property as a security for a mortgage is liable either in contract or in tort to the mortgagee for any failure on the part of the valuer to exercise reasonable skill and care in the valuation. The valuer is liable in contract if he receives instructions from and is paid by the mortgagee. The valuer is liable in tort if he receives instruction from and is paid by the mortgagor but knows that the valuation is for the purpose of a mortgage and will be relied upon by the mortgagee."

In the same case Lord Jauncey of Tullichettle said at p. 871:

"I prefer to approach the matter by asking whether the facts disclose that the appellants inspecting and reporting must, but for the disclaimers, by reason of the proximate relationship between them, be deemed to have assumed responsibility towards Mrs Smith as well as to the building society who instructed them, There can only be an affirmative answer to this question."

The question then arises as to whether the Unfair Contract Terms Act 1977 in its unamended state affected the exclusion clause in the present case. There are of course separate parts of the Act dealing with Scots law and Smith v. Bush was concerned only with the English part of that legislation. It may be, as was suggested by counsel for the pursuers, that the references in the English legislation to both "a contract term" and to a "notice" are because of the English requirement of consideration in contract and because of the refusal of English law to recognise any jus quaesitum tertio, both of which differences between the Scots and English law of contract were pointed out by Lord Reid in Hedley Byrne, but the question for me is whether the provisions in the 1977 Act for Scotland affect this exclusion clause. Section 16 in its original state provided, reading it short:

"Where a term of a contract purports to exclude or restrict liability for breach of duty arising in the course of any business … that term … shall … have no effect if it was not fair and reasonable to incorporate the term in the contract."

Section 16 contains no provision restricting its application to a party to the contract, in contrast with sec. 17 which provides:

"Any term of a contract which is a consumer contract or a standard form contract shall have no effect for the purpose of enabling a party to the contract—(a) who is in breach of a contractual obligation, to exclude or restrict any liability of his to the consumer or customer in respect of the breach".

Quite apart from the situation in the present case, it is not difficult to imagine other situations where one party to a contract might find it convenient or advantageous to include a term in the contract excluding the potential liability of a third party to the other party in the contract. In Caparo Industries plc v. Dickman [1990] 2 AC 605 Lord Bridge of Harwich at p. 620, in discussing Smith v. Bush, said:

"In both cases the terms agreed between the plaintiff and the mortgagee purported to exclude any liability on the part of the mortgagee or the surveyor for the accuracy of the mortgage valuation. The House held that in both cases the surveyor making the inspection and valuation owed a duty of care to the plaintiff house purchaser and that the contractual clauses purporting to exclude liability were struck down by section 2 (2) and section 11 (3) of the Unfair Contract Terms Act 1977."

Lord Bridge appears to have considered that the exclusion clauses in Smith v. Bush were both in the application forms signed by the applicants and handed to the lender who then arranged for the survey. It is the same situation in the present case. The exclusion clause is a term of the contract between the pursuers and the Alliance Building Society and sec. 16 of the Act as it was prior to amendment therefore applies to it. The defenders concede that they have not made any averments that it was fair and reasonable that the exclusion clause should be incorporated in the contract. I shall accordingly sustain the fourth plea-in-law for the pursuers and allow a proof before answer on the parties' remaining pleas.

The defenders reclaimed to the Inner House, the reclaiming motion calling before the First Division, comprising the Lord President (Hope), Lord Mayfield and Lord Cullen, for a hearing on 15th January 1993. Eo die, their Lordships made avizandum.

At advising, on 5th February 1993:

LORD PRESIDENT (Hope)—The question raised by this reclaiming motion relates to the application of sec. 16 of the Unfair Contract Terms Act 1977 to a disclaimer of liability by a firm of valuers who were instructed to provide a report and mortgage valuation to a building society. The purpose of the disclaimer was to exclude the valuers' liability for negligence to the prospective purchasers, to whom the disclaimer was communicated by being set out in the society's mortgage application form.

It is accepted that the valuers owed a duty of care to the prospective purchasers. This point is not capable of being disputed in the circumstances of the present case: see Martin v. Bell-Ingram 1986 S.C. 208, Duncan v. Gumleys 1987 S.L.T. 729. In Smith v. Bush [1990] 1 AC 831, it was held that a valuer instructed by a building society to carry out a valuation of a dwellinghouse for the purpose of enabling the society to decide whether or not to grant a mortgage over it owed a duty of care to the prospective purchaser to exercise reasonable skill and care in carrying out the valuation, if he was aware that the purchaser would probably purchase the house in reliance on the valuation without an independent survey. A building society requires to obtain a report from a valuer in order to fulfil its statutory duty under sec. 25 (1) of the Building Societies Act 1962, which provides:

"25.—(1) It shall be the duty of every director of a building society to satisfy himself that the arrangements made for assessing the adequacy of the security to be taken in respect of advances to be made by the society are such as may reasonably be expected to ensure that—… (b) there will be made available to every person who has to assess the adequacy of any security to be so taken an appropriate report as to the value of any freehold or leasehold estate comprised in the security and as to any matter likely to affect the value thereof."

The society is not obliged to send a copy of any such report and valuation to the prospective purchaser. But it is well known that it is the practice for this to be done, and that purchasers especially of property of modest value do frequently rely on the care and skill of the valuers when making their own decision as to whether or not to purchase the property.

This practice has resulted in attempts by valuers to exclude their liability to prospective purchasers by requiring the building society to communicate a disclaimer to them on their behalf. In Martin the disclaimer was held to be of no effect because it was not communicated to the prospective purchasers until after the pursuers had purchased the property in reliance on the report. That difficulty has been avoided in the present case by including the disclaimer in the application form. But it is agreed that, if sec. 16 of the 1977 Act applies to it, the disclaimer can have no effect. This is because the defenders are not in a position to show that it was fair and reasonable to incorporate it into their relationship with the purchasers. Section 16 (1) of the Act has now been amended by sec. 68 (3) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990, but this amendment took effect on 1st April 1991, which was after the relevant events in this case. In its unamended form sec. 16 (1) was in these terms: [his Lordship quoted same and continued thereafter:]

The question is whether the pursuers are able to show, on the undisputed facts of this case, that sec. 16 applies and thus that the defenders are unable to rely on the disclaimer.

The pursuers wished to purchase a dwellinghouse in Rumbling Bridge with the assistance of a loan from the Alliance Building Society. They completed a mortgage application form in which they were required to provide details of the property on which the loan was required and of their personal circumstances. They were required also to sign a declaration form, which contained a declaration that the particulars set out in the form were true and correct and that they were to form the basis of any contract between themselves and the society at that stage. Thus far there was, in my opinion, nothing in the application form to show that, by signing it and submitting it to the society, the pursuers were entering into a contract with the society at that stage. This is not a case such as Hunter v. General Accident Fire and Life Assurance Corporation Ltd. 1909 SC (HL) 30, where it was held that a coupon policy of insurance in a Letts' diary was an offer of insurance by the defenders which could be accepted, and a contract made, by complying with the conditions which were set out in it. The society could not be said to be making any offer of a loan to the pursuers by providing them with the application form which was open to acceptance by their signing the form and returning it to the society. Any contract of loan lay in the future, and it was dependent upon the view which the society took of the information on the application form and the condition of the property. It was only when they decided to communicate their decision to the pursuers to grant a loan over the property that a contract to this effect was made between them.

There was however a further declaration on the same page of the application form, which was in these terms:

"I/We accept that the Society will provide me/us with a copy of the report and mortgage valuation which the Society will obtain in relation to this application. I/We understand that the Society is not the agent of the valuer or firm of valuers and that I am making no agreement with the valuer or firm of valuers. I/We understand that neither the Society nor the valuer or the firm of valuers will warrant, represent or give any assurance to me/us that the statements, conclusions and opinions expressed or implied in the report and mortgage valuation will be accurate or valid and the valuer's report will be supplied without any acceptance of responsibility on his part to me/us. If I/we require advice regarding the price or condition of the property the Society will, on request, notify me/us of the name and address of its valuer if he is normally available to accept instructions to carry out private surveys."

The pursuers did not instruct a private survey or a structural survey of the house. They relied instead on the report and mortgage valuation, a copy of which was sent to them by the society after they had received the application form. They then concluded a contract for the purchase of the house, which they now aver was affected by a number of defects which were present at the time of the report and which would have been apparent to surveyors of ordinary experience exercising reasonable skill and care when they were carrying out the survey.

The pursuers' action is one of damages, on the ground that they have sustained loss and damage due to the defenders' fault and negligence. The defenders have invoked the disclaimer, on the ground that its effect is to exclude their liability for this claim. The pursuers' argument is that the defenders' averments on this matter are irrelevant, on the ground that it was not fair and reasonable to incorporate terms excluding or restricting such liabilities into a contract between the pursuers and the building society. The Lord Ordinary was satisfied that sec. 16 of the 1977 Act applied, on the ground that the disclaimer was a terra of the contract between the pursuers and the building society. Since the defenders conceded that it was not fair and reasonable that this clause should be incorporated in the contract, he sustained the pursuers' fourth plea-in-law to this effect and allowed a proof before answer on the remaining pleas.

Counsel for the defenders submitted that the Lord Ordinary had erred in law in holding that the disclaimer was part of a contract between the pursuers and the building society, and in any event that he was in error in holding that this was a contract to which sec. 16 of the 1977 Act applied. He pointed out that, in contrast to the position in England to which Pt. I of the 1977 Act applies, it was necessary to show for the purposes of sec. 16 of that Act that the disclaimer was "a term of a contract". It had not been necessary to satisfy this requirement in Smith v. Bush, on which some reliance appeared to have been placed by the Lord Ordinary, since that case was concerned only with sees. 2 (2), 11 (3) and 13 (1) in the English part of the Act. Section 2 (2) provides that a person cannot by reference to any contract term or to a notice exclude or restrict his liability for negligence except insofar as the term or notice satisfies the requirement of reasonableness. It was accepted in that case that there was a notice to which that subsection applied, and the discussion about the effect of the 1977 Act was concerned only with the question whether it was fair and reasonable for the valuer to rely on the disclaimer to exclude his liability to the purchaser. As to the question whether there was a contract in this case, it was difficult to see how that could be spelled out of what was contained in the application form. There was nothing more here than an application, which in itself could create no legal relationship. In any event, sec. 16 of the 1977 Act required to be read subject to sec. 15, which specifies certain types of contract to which sees. 16 to 18 of the Act do and do not apply. Neither subsec. (3) nor subsec. (4) of that section was relevant to this case while subsec. (2) provides that secs. 16 to 18 apply to any contract to the extent only that the contract is of the types specified there, none of which was relevant to this case either. This was not a point which had been drawn to the attention of the Lord Ordinary, but it was appropriate for us to consider it because, if sec. 16 did not apply to any contract which was created by the pursuers' signature to and delivery of the application form, they could not escape from the consequences of the disclaimer. But the principal point which he made by way of criticism of the Lord Ordinary was that he had not analysed the terms of the declarations on the application form. Had he done so he would have seen that it had no legal consequences to either party and thus could not create any obligation on either side, so there was no contract.

I should add that counsel for the defenders accepted that it was not necessary for sec. 16 to apply to the disclaimer, to show that there was a contract between the valuer and the prospective purchaser. There can be no doubt that the disclaimer was included in the application form for the benefit of the valuer. Accordingly the defenders are entitled, on the principle of the jus quaesitum tertio, to invoke it in a question with the pursuers, and the pursuers for their part are entitled to seek the protection of sec. 16 although their contract, if there was one, was with the society. In Robbie v. Graham & Sibbald 1989 S.L.T. 870, it was conceded that a disclaimer on the application form for a loan from a building society was not a notice having contractual effect, and accordingly that the pursuers, who had no contract with the valuers, were not entitled to the protection of the 1977 Act. But that is not the position in the present case, since the pursuers' argument, which has not been disputed by counsel for the defenders, is that sec. 16, prior to its amendment by sec. 68 (3) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990, was not restricted in its application to cases where the exclusion clause was in favour of one of the parties to the contract. This is in contrast to the provisions of sec. 17 of the 1977 Act, which applies only to the case where a party to a contract which is a consumer contract or a standard form contract seeks to exclude or restrict his own liability to the consumer or customer for breach of an obligation in that contract.

I have difficulty with what I understood to be counsel for the pursuers' primary argument that by signing and delivering the application form the pursuers had a contractual right to have the society process and consider their application. According to this argument, the society, by issuing the application form, made an offer to consider any application which was made in terms of it, and this offer was accepted when the pursuers signed and returned the application form. This was said to create a contract between them for the purposes of sec. 16 of the Act. It seems to me, however, that at best there was here an expression of willingness by the society to consider the application, with a view to the provision of a loan to the pursuers over the property. But this was not intended to have any legal effect, and the society were under no obligation to consider the application when the form was returned to them. It is unnecessary to examine this point further, however, because I am satisfied that there was a contract in regard to the provision of, and payment for, a copy of the report and valuation of the property.

In my opinion the effect of that part of the declaration which relates to the report and valuation to be obtained by the society was to create a contract between the pursuers and the society, and this was a contract of the kind to which sec. 16 of the 1977 Act applies by virtue of sec. 15 (2) (c) of that Act. The opening of this part of the declaration states that the applicants "accept that the Society will provide me/us with a copy of the report and mortgage valuation which the Society will obtain in relation to this application". At the end of the declaration there is a statement that the applicants enclose the inspection fee, according to the appropriate entry in the scale of charges for inspection of the property including V.A.T. which, it is stated, the society has to pay to the valuer. It seems to me that there is here an offer by the building society to provide a copy of the report and mortgage valuation to the applicants, which the pursuers in this case accepted by signing the declaration and returning the application form to the society. I recognise that, since the society were under no obligation to consider the application, they were under no obligation to obtain a report and mortgage valuation from a valuer. But that does not, in my opinion, mean that there was no contract. The contract was contingent upon their obtaining this report, which they were required to do by sec. 25 (1) of the 1962 Act in the event of their deciding to consider granting a loan over the property. The society's obligation came into existence as soon as this implied suspensive condition was purified. The effect was, as counsel for the pursuers put it in the course of his argument, to oblige the pursuers to pay for the report, and it also had the effect of obliging the society to send a copy of the report to the pursuers. Counsel for the defenders said that the test of specific implement could not be applied to what was set out in the application form. But in my opinion it is clear that, if the pursuers were to receive the report and mortgage valuation from the society and then to refuse to pay for it—as might happen, because the purchase price which determines the amount of the inspection charge may not be known at the date of the application—their liability for the fee could be enforced by an action for payment based on the terms of the declaration in the application form.

The only remaining question is whether this was a contract of the kind to which sec. 16 of the 1977 Act applies. This point turns on whether the contract can be said to be one which, in terms of sec. 15 (2) (c), "relates to services of whatever kind, including (without prejudice to the foregoing generality) carriage, deposit and pledge, care and custody, mandate, agency, loan and services relating to the use of the land".

I do not accept counsel for the pursuers' argument that this was a contract which relates to loan. This is because I am not persuaded that the effect of submitting the application form to the society was to create a contract to the effect that their application for a loan was to be considered. In any event, it is clear that at that stage no contract of loan had yet been entered into. But loan is only one of several examples which are given in this paragraph of contracts relating to services, and all these examples are without prejudice to the generality. In my opinion a contract by the society to provide the applicants with a copy of the report and mortgage valuation was a contract relating to the services to be provided by the valuer in the preparation of that report. There is a simple and obvious relationship between the provision of these services and the valuer's wish to have the benefit of the disclaimer in order to exclude or restrict his liability for negligence in the provision of them. The effect of sec. 15 (2) is that, to this extent, sec. 16 applies to the contract which was created when the pursuers signed and returned the application form to the society. That is sufficient to enable them to obtain the benefit of sec. 16 (1) to defeat the application of the disclaimer since, for the reasons given by Lord Griffiths in Smith v. Bush at pp. 858–860, it cannot be disputed that it would not be fair and reasonable for the defenders as professional valuers to exclude their liability to the purchasers of this dwellinghouse.

For these reasons I consider that the defenders are not entitled to the benefit of the disclaimer and that we should adhere to the interlocutor of the Lord Ordinary. I would refuse this reclaiming motion.

LORD MAYFIELD —The pursuers sought to buy a house with the assistance of a mortgage from the Alliance Building Society. They completed a standard application form which included a declaration signed by the pursuers. The building society obtained a mortgage valuation survey from the defenders and reclaimers valuing the property at £38,000 and making a "nil" estimate of essential repairs to be carried out. In an action raised at the instance of the pursuers and respondents against the defenders and reclaimers based on negligence they averred that there were many patent defects in the house which should have been apparent to surveyors of ordinary competence exercising reasonable care. The question in the case is whether the liability of the defenders and reclaimers is excluded by the terms of the clause in the application form having regard to the provisions of the Unfair Contract Terms Act 1977. At procedure roll the Lord Ordinary allowed a proof before answer.

Counsel for the defenders and reclaimers submitted essentially that the Lord Ordinary erred in law in concluding that the declaration in the application form was part of a contract between the pursuers and the Alliance Building Society to which the provisions of sec. 16 of the Unfair Contract Terms Act 1977 applied and in not concluding that the declaration in the form was non-contractual in character and accordingly not caught by the provisions of the 1977 Act so far as applicable to Scotland.

Section 16 (1) (in the unamended form applicable at the time) states: [his Lordship quoted same and continued thereafter:]

It is accordingly necessary for the pursuers to establish that sec. 16 applies on the facts of this case and that the disclaimer purporting to exclude liability does not apply. It is agreed that if sec. 16 applies the disclaimer has no effect because the defenders are not able to show that it was fair and reasonable to incorporate the term in the contract. Section 16 applies if a contractual relationship exists between the parties and the disclaimer was a term of the contract between the pursuers and the building society. It was accepted by the defenders that it was not necessary to show that there was a contract between the valuer and the pursuers. It is also necessary to establish that the contract was of the category to which sec. 16 of the 1977 Act applies. That in turn depends on whether the contract falls within the provisions of sec. 15 (2) (c) of the Act.

Counsel for the pursuers made two main submissions. As I understood the first submission it was to the effect that when the completed application form was sent to the building society the pursuers had accepted an offer made by the building society to consider the application, and the building society were then under a contractual obligation to consider it. He referred to Hunter v. General Accident Fire and Life Assurance Corporation Ltd. 1909 SC (HL) 30 where it was held that the sending of a form to the insurance company was the acceptance of an offer by the insurance company and the contract was complete on the delivery to the insurance company. In the present case however the building society did not give any undertaking to consider the application. They were under no obligation to do so. I do not accept that a contract was formed at that stage.

However, I consider that counsel for the pursuers was well founded in his second submission that a contract had been created as to the provision of and payment for the report. In the declaration it is stated that the applicants "accept that the Society will provide me/us with a copy of the report and mortgage valuation which the Society will obtain in relation to this application". It is also stated in the declaration that the appellants enclose an inspection fee based on a scale of charges which the society has to pay to the valuer. In my view the essential ingredients of a contractual relationship are present, namely an offer by the building society to provide a copy of the report and mortgage valuation to the applicants and an acceptance by, in this case, the pursuers who signed the declaration and returned the application form to the society. The contract became effective when the society obtained the report from the valuer because the society were then obliged to send it to the pursuers and at that stage the pursuers were obliged to pay the fee.

It is also clear in my view that the contract fell within the terms of a contract relating to "services of whatever kind" referred to in sec. 15 (2) (c) of the Act.

For the above reasons I agree with your Lordship in the chair that the reclaiming motion should be refused.

LORD CULLEN —In this reclaiming motion the question at issue is whether the liability of the defenders for their alleged negligence in carrying out the inspection of a house is excluded by the terms of a clause in a standard application form which was completed by the pursuers and submitted by them to the Alliance Building Society in connection with the proposed purchase of that house. A report by the defenders on that house was released to the pursuers by the building society after the submission of that application; and the pursuers aver that they relied on it in deciding whether or not to purchase the house and in deciding how much to pay for it.

Whether this clause is effective in excluding the liability of the defenders depends on whether it was "a term of a contract" which "purports to exclude or restrict liability for breach of duty arising in the course of any business" within the meaning of those words as they appear in the unamended form of sec. 16(1) of the Unfair Contract Terms Act 1977; and, if it was the term of such a contract, whether that contract was one to which sec. 16(1) applies by virtue of falling within the scope of sec. 15 (2) of the Act. It was not in dispute that the terms of sec. 16(1) were apt to cover the exclusion or restriction of the liability of a person who was not one of the contracting parties; and that in Scotland it was possible for a contract between two parties to be so worded as to confer the benefit of exclusion or restriction of liability on such a third party. If the clause fell within the terms of sec. 16 (1) there was no further issue as to whether it was fair and reasonable to incorporate it in the contract.

In approaching the question whether the clause was "a term of a contract" counsel for the pursuers recognised that at the time when the report of the defenders was released to his clients the building society had not agreed to make a loan to them. He therefore sought to demonstrate that the clause formed part of a preliminary contract at that early stage of the communings between the building society and his clients.

The primary approach which he adopted was to argue that in submitting the completed application form to the building society the pursuers accepted an offer which had been made by the building society, namely to consider the application. This was on condition that if the building society chose to procure a valuer's report as part of its consideration of the application the pursuers would be bound to pay a fee for it. He emphasised that the completion of the application form involved trouble and possible expense to applicants. He sought to draw an analogy between the present case and that of Hunter v. General Accident Fire and Life Assurance Corporation Ltd. 1909 SC (HL) 30 in which it was held that a coupon insurance policy in a diary, in which the insurance company announced that they would pay a certain sum in the event of a fatal railway accident provided that the would-be insured complied with certain conditions, fell to be regarded as an offer which could be accepted and a contract so made by anyone who complied with the conditions. I am unable to accept this analogy or that a contract was made in the present case in the way suggested. The building society did not give any antecedent undertaking to consider the pursuers' application—whatever that might have entailed—and they were under no antecedent duty to do so. No doubt the respondents had reason to expect that the society would consider their application but that is a different matter. However, in the light of the terms of the declaration contained in the application, and in particular the statement that the applicants "accept that the Society will provide me/us with a copy of the report and mortgage valuation which the Society will obtain in relation to this application", I am persuaded that the building society should be taken as having offered to provide a copy of the report and mortgage valuation if they obtained it. When the pursuers submitted the application to the building society they accepted that offer, having undertaken to pay the appropriate inspection fee in return for a copy of the report and mortgage valuation, if the building society obtained it. The pleadings are silent as to whether the pursuers did in fact make payment of an inspection fee. It is enough that they undertook to pay the fee. In these circumstances I am satisfied that prior to the stage of deciding whether or not to make a loan to the respondents there was a contract between the building society and the pursuers which included the disclaimer of responsibility on the part of the valuer.

The remaining question is whether that contract fell within the scope of sec. 15 (2) of the 1977 Act. I accept the submission that the contract fell within the terms of a contract relating "to services of whatever kind" as these words appear in subpara. (c) of that subsection.

For these reasons I am in agreement with your Lordship in the chair that this reclaiming motion should be refused.