George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd
House of Lords
Citations: [1983] 2 AC 803; [1983] 3 WLR 163; [1983] 2 All ER 737; [1983] 2 Lloyd’s Rep 272; [1983] Com LR 209; [1983] CLY 3314.
Facts
The claimant orally ordered 301bs of Finney’s Late Dutch Special cabbage seed from the defendants, who were seed merchants. The parties’ contract included limitation and exclusions clauses. These stated that:
‘(1) In the event of any seeds or plants sold…not complying with the express terms of the contract of sale…or any seeds or plants proving defective in varietal purity we will, at our option, replace the defective seeds or plants, free of charge to the buyer or will refund all payments made…this shall be the limit of our obligation.’
(2) We hereby exclude all liability for any loss or damage arising from the use of any seeds or plants supplied by us and for any consequential loss or damage arising out of such use or any failure in the performance of or any defect in any seeds or plants supplied by us or for any other loss or damage whatsoever save for, at our option, liability for any such replacement or refund as aforesaid.
‘(3)…any express or implied condition, statement or warranty, statutory or otherwise, not stated in these conditions is hereby excluded.
The defendant negligently supplied seeds of the wrong type, which were commercially worthless. As a result, the claimant suffered £61,000 worth of loss.
When the claimant sued the defendant for breach of contract, the defendant sought to rely on the exclusion and limitation clauses. These would limit the damages payable to a few hundred pounds. The claimant responded that these terms were void under sections 55(3) and(4) of the Sale of Goods Act 1893 (subsequently replaced by s.55(3) and (4) of the Sale of Goods Act 1979, found in paragraph 11 of Schedule 1). Those provisions rendered such clauses void unless they were ‘fair and reasonable’.
Issue(s)
- Did the exclusion clauses cover negligent breaches?
- Were the exclusion clauses and limitation clauses fair and reasonable?
Decision
The House of Lords held that the clauses covered the loss in question. They were clearly intended to cover breaches of contract, whether or not those breaches were the result of negligence.
However, the House also held that the clauses were not fair or reasonable. As such, they were unenforceable. The factors which led the House to this conclusion included:
- The fact that exclusion clauses of this kind were near universal in the seed industry, so the claimant did not have the option of contracting with someone else to avoid them;
- The limitations and exclusions had never been the subject of negotiation between seed farmers and seed suppliers;
- There was widespread practice of settling claims of this kind in the industry, which indicated that many seed suppliers did not actually consider the clauses fair or reasonable to rely on;
- The seriousness and extent of the breach was considerable; and
- It was possible for the defendant to insure against liability without materially increasing the price of the seeds.
This Case is Authority For…
When determining whether a clause is fair and reasonable, the court must have regard to all the circumstances of the case. This includes events which happened after the contract was made, such as the nature and extent of the breach.
Sections 55(4)-(5) of the Sale of Goods Act 1979 does not permit the court to allow the defendant to rely on part of a limitation of exclusion clause if the clause as a whole is not fair or reasonable.
Other
Lord Bridge reaffirmed the fact that there is no doctrine of ‘fundamental breach’ in English law.
