Photo Production Ltd v Securicor Transport Ltd [1980] UKHL 2 AC 827
Citation:Photo Production Ltd v Securicor Transport Ltd [1980] UKHL 2 AC 827
Rule of thumb:Can the fundamental core of a duty be contracted out of if the only source is common law? No, this is part of the common which cannot be contracted out of. Fundamental duties under a contract cannot be contracted out of, or liability transferred to another party. A person is not able to contract out of their most basic and fundamental legal duties under a contract – only the peripheral legal duties can be contracted out of – any contract terms contracting out of a basic fundamental legal obligation are not enforceable.
Background facts:
The facts were that Photo Productions Ltd engaged Securicor to guard their premises at night. A night-watchman, Mr Musgrove, started a fire in a brazier at Photo Production's factory to keep himself warm. The fire spread accidentally[1] and the Photo Productions plant was totally destroyed by fire, causing £648,000-worth of damage.
Parties argued:
When Photo Productions sued for the damages Securicor argued that an exemption clause in the contract excused all liability. The clause provided: "under no circumstances shall Securicor be responsible for any injurious act or default by any employee… unless such act or default could have been foreseen and avoided by the exercise of due diligence on the part of [Securicor]." The matter went to Court with Photo Production arguing that this was not a valid exemption clause. Securicor argued that the clause could not have been written any more clearly and Securicor knew exactly what the arrangement was they were paying for, so they could have no complaints, making it a valid clause.
Judgment:
The Court upheld the arguments of Photo Production. The Court affirmed that in general a blanket exemption clause like this will not be valid. In order for an exemption clause to be valid people need to explain exactly what types of scenario they will not be liable in. This is the way that these clauses begin to be applicable legally and this clause fell miles short of doing this. The scenario at hand was not referred to in the exemption clause so therefore they had no prospect of being excluded from liability in it. Moreover, it was affirmed that it is almost never possible for someone to exempt themselves from a fundamental breach of their duties where they abdicate their duties as in this case - only peripheral parts of their duties at the margins which have been clearly stated can potentially be exempt from liability.
Ratio-decidendi:
'when one party has been guilty of a fundamental breach... then the guilty party cannot rely on an exception or limitation clause to escape.. liability', Lord Wilberforce, 114.
‘Lord Denning M.R. in this was following the earlier decision of the Court of Appeal, and in particular his own judgment inHarbutt's "Plasticine" Ltd v Wayne Tank & Pump Co Ltd [1970] 1 Q.B. 447. In that case Lord Denning M.R. distinguished two cases (a) the case where as the result of a breach of contract the innocent party has, and exercises, the right to bring the contract to an end, (b) the case where the breach automatically brings the contract to an end, without the innocent party having to make an election whether to terminate the contract or to continue it. In the first case the Master of the Rolls, purportedly applying this House's decision in Suisse Atlantique Societe d'Armament SA v NV Rotterdamsche Kolen Centrale[1967] 1 AC 361, but in effect two citations from two of their Lordships' speeches, extracted a rule of law that the "termination" of the contract brings it and with it the exclusion clause, to an end. The Suisse Atlantique case in his view ...affirms the long line of cases in this court that when one party has been guilty of a fundamental breach of the contract ... and the other side accepts it, so that the contract comes to an end ... then the guilty party cannot rely on an exception or limitation clause to escape from his liability for the breach. (Harbutt's case [1970] 1 Q.B. 447 , 467). He then applied the same principle to the second case. My Lords, whatever the intrinsic merit of this doctrine, as to which I shall have something to say later, it is clear to me that so far from following this House's decision in the Suisse Atlantique it is directly opposed to it and that the whole purpose and tenor of the Suisse Atlantique was to repudiate it. The lengthy, and perhaps I may say sometimes indigestible speeches of their Lordships, are correctly summarised in the headnote - holding No. 3 [1967] 1 A.C. 361 , 362 - "That the question whether an exceptions clause was applicable where there was a fundamental breach of contract was one of the true construction of the contract." That there was any rule of law by which exceptions clauses are eliminated, or deprived of effect, regardless of their terms, was clearly not the view of Viscount Dilhorne, Lord Hodson, or of myself’, 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.