Smith v UMB Chrysler (Scotland) Ltd – Case Summary

Smith v UMB Chrysler (Scotland) Ltd

House of Lords (Scotland)

Citations: [1978] 1 WLR 165; [1978] 1 All ER 18; (1978) 122 SJ 61; [1980] CLY 359.

Facts

The claimant contracted with the defendant to carry out maintenance work at the claimant’s factory. The contract was said to be subject to the claimant’s ‘general conditions of contact, obtainable on request’. However, there were three different versions of these conditions. The most recent version contained a clause requiring the defendant to indemnify the claimant for the following:

(a) All losses and costs incurred by reason of the supplier’s breach of any statute, bye-law or regulation; (b) Any liability, loss, claim or proceedings whatsoever under statute or common law (i) in respect of personal injury to, or death of any person whomsoever, (ii) in respect of any injury or damage whatsoever to any property, real or personal, arising out of or in the course of or caused by the execution of this order.

The other versions did not contain this clause. The defendant never asked for or saw a copy of the conditions.

One of the defendant’s workers was injured on the claimant’s premises. This was due to the claimant’s negligence and breach of statutory duty. The claimant tried to enforce the indemnity clause in relation to their liability to that worker. The defendant argued that the indemnity clause was not part of the contract, or if it was, did not require indemnity in negligence cases.

Issue(s)
  1. Which, if any, of the versions of the general conditions did the parties’ contract incorporate?
  2. Did the indemnity clause apply in cases of negligence?
Decision

The House of Lords held that the parties’ contract incorporated the most recent version of the general conditions, including the indemnity clause. However, applying the three-stage test in Canada Steamship Co Ltd v The King [1952] AC 192, the indemnity clause should not be construed as applying in negligence cases. The words used might be wide enough to incorporate negligence. However, there were other possible causes of action the clause might apply to. Accordingly, it was to be construed as applying to those causes of action only.

This Case is Authority For…

The burden of proving the wording of a clause is wide enough to cover negligence is on the party seeking to rely on the clause.

This case demonstrates that where a clause could apply to non-negligence causes of action, it is unlikely to be construed as applying to negligence.

Other

Viscount Dilhorne explained that the court’s reluctance to construe non-explicit clauses as covering negligence is because it is inherently unlikely that parties want to exclude negligence liability or that anyone would agree to indemnify another for negligence.