Be Careful What You Sign

There is a common belief that in any contract, if the goods or services provided do not do what they are intended to do it will open the door for a claim in damages. That is not always so, as a recent case shows.

It involved a specialist fire protection company that provided a company that produced frozen foods with a fire suppression system in order to control the fire risk from a multi-purpose fryer in their building. When that caught fire 11 years after its installation, the fire suppression system failed to put the fire out, which caused extensive damage to the company’s premises and its business and led to a claim for £6.6 million.

The fire protection company had a contract which incorporated as standard a term which clearly stated that it was excluded from all liability for loss, damage etc. resulting from the failure of the system or the negligence of the company that installed it. Cover for consequential loss was stated to be available at an extra cost.

The first paragraph of the agreement drew attention to this, stating that the contract provided for no damages to be due in any circumstances. The food producer argued that such a blanket disclaimer was a breach of the Unfair Contract Terms Act 1977 (UCTA), and that a claim in negligence could be brought. The Court of Appeal disagreed.

In the Court’s view, the terms of the contract could not be said to be particularly onerous and had been adequately brought to the food producer’s attention. The contract was quite low value (under £8,000) and the allocation of risk was reasonable. Given that there was no disparity of bargaining power between the two companies and that cover for the risk that eventually materialised was offered, the contract could not be said to have breached the UCTA either. For further information on this topic please contact David Bailey on 01273 810 064 or email david.bailey@healys.old-website.shout-loud.co.uk.