Assessing liability-direct and consequential losses

In Wessanen Foods Ltd v Jofson Ltd the High Court examined the construction of terms, limitation clauses and damages following a fire of the defendant’s fork-lift truck which caused damage of £820,555 to the claimant’s factory. The fire was caused by battery cables snagging and catching fire when incorrectly stowed by the claimant’s driver.  

 

S9 (2) SGSA 1982 applied to the contract so that the trucks provided had to be of satisfactory quality. The basis of liability was not shown here as on the facts as the truck need not be “idiot proof” for the claimant’s driver as the matter of correct stowage was relatively straightforward though the defendant could be liable if the stowage is not immediately obvious to the “reasonable driver”.  

The court also looked at the limitation clause that operated in the contract. The use of the word “direct” was accepted on its normal meaning and thus distinguished such loss from indirect and consequential in accordance with the two heads of Headley v Baxendale.  

Because of the particular wording of the limitation clause only negligence and not breach of contract or statutory duty was covered and further only the second type of loss under Headley v Baxendale was covered in scope. As such the clause was not as widely drafted as it might have been as it allowed the first head-damages directly and naturally arising.   

The attempt by the claimants however to exclude the limitation clause as it stood failed since applying the guidelines of UCTA 1977 Schedule 2,the claimant’s negotiator was an experienced and was happy with the terms on the whole. As the claimants were of equal bargaining power and were familiar with the particular business term. The term was thus valid not void and accordingly the term could be used by the defendant to exclude its loss.

Getting the wording of liability right is critical as it can save a lot of money directly-here £820,000. Even with insurance in place you would benefit by avoiding an increase in premiums-something to remember when your renewal quote comes around next time.

 

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.