Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd [1983] 1 WLR 964, UKHL
Citation:Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd [1983] 1 WLR 964, UKHL
Rule of thumb:Are limitation of damages clauses legitimate? Yes. Clauses which exempt a person to damages above a certain amount are valid provided that the amount is reasonable.
Background facts:
The facts of this case were that the pursuers had left their boat in the dock and due to measures which the defendant failed to take to properly maintain and restrain parts of the dock, the pursuer’s boat was hit and was sunk. The pursuers had an expensive boat sought and therefore sought large damages from the defenders for this. The defenders argued that there was a clause in the contract which limited damages caused to any boat to a certain amount. The defenders refused to pay anything more above this stated amount and so they were taken to Court by the pursuers.
Parties argued:
The pursuers argued that this was a blanket exemption from all types of liability thereby making it a non-applicable exemption clause. The defenders argued that there was a rationale for why this damages limit was stated. The defenders explained that this amount allowed them to run a sustainable business model. The defenders further explained that they therefore did not see boats valued above a certain amount as part of their target market for customers. The defenders stated that the pursuers were aware of this limit, or indeed should have been aware of it, and they still just sought to chance it.
Judgment:
The Court upheld the arguments of the defender. They stated that blanket exemption for damages above a certain amount, when properly outlined to people, are an exception when blanket exemption will apply. The Court stated that these are considered to be 'limitation clauses' rather than exemption clauses as such.
Ratio-decidendi:
'Whether a clause limiting liability is effective or not is a question of construction of that clause as a whole. If it is to exclude liability for negligence, it must be clearly and unambiguously expressed, and in such a contract as this (ie a standard form contract), must be construed contra proferentem. I do not think that there is any doubt so far. But I venture to add one qualification, or at least clarification: one must not strive to create ambiguities by strained construction, as I think the appellants have striven to do. The relevant words must be given, if possible, their natural, plain meaning. Clauses of limitation are not regarded by the courts with the same hostility as clauses of exclusion: this is because they must be related to other contractual terms, in particular to the risks which the defending party may be exposed, the remuneration he receives, and possibly also of the other party to insure’, Lord Wilberforce.
'Clauses of limitation are not regarded by the courts with the same hostility as clauses of exclusion ... because... related to other contractual terms... the remuneration he receives, and possibly also the other party to insure', Lord Wilberforce
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.