Legal Principles and Key Points
- In the case of George Mitchell Chesterhall Ltd v Finney Lock Seeds Ltd 1983 2 AC 803 it was found that non enforcement of an exemption or limitation clause in practice may lead a court to hold that it is unreasonable.
Facts of the Case
- In December 1973, the claimants orally ordered 301bs. Of Finney’s Late Dutch Special cabbage seed from D’s seed merchant from whom they had purchased seed for many years.
- The claimants knew that the sale was subject to the relevant conditions of sale.
- The defendants delivered seeds to the claimants in February 1974 with an invoice in their customary form describing the goods delivered in accordance with the oral order.
- The conditions of sale on the back of the invoice provided inter alia (1) that if the seeds sold or agreed to be sold did not comply with the express terms of the contract or proved defective in varietal purity the liability of the defendant vendors was limited to their replacement or to refund of the price paid.
- (2) For the total exclusion for all liability for any loss or damage arising from the use of any seeds supplied save their replacement or price refund, (3) for the exclusion of any express or implied condition or warranty, statutory or otherwise and they stated (4) that the price of seeds supplied was based upon the stated limitations upon liability.
- Owing to errors by the defendant’s suppliers and employees, the seed supplied was not late cabbage seed and was unmerchantable.
- After the seed was planted in an area of over 60 acres by the claimants, it germinated and grew but was commercially useless and had to be ploughed in.
- The price of the seed was £201.60.
- The loss to the claimants was over £61,000.
- On a claim for damages, the defendants relied on the conditions of sale which in reply the claimants claimed were void and unenforceable by section 55(3) and (4) of the Sale of Goods Act 1983.
- Parker J. held that it was making commercial nonsense of the contract to suggest that either party intended it to operate where what had been delivered was wholly different in kind from what had been ordered and agreed to be supplied and he gave judgment for the claimants for £61,513 plus interest.
- The defendants appealed.
Issues in George Mitchell Chesterhall Ltd v Finney Lock Seeds Ltd 1983 2 AC 803
- The issues consisted of whether the exclusion clause could extend to the seeds used by the claimant and whether extending the effect of the exclusion clause in this way would be reasonable under the Unfair Contract Terms Act 1977.
Held by House of Lords
- Appeal dismissed.
- On their true construction the conditions limited the liability of the defendants to a refund of the price paid or replacement of the seeds and that the ambit of the conditions could not be confined to breaches of contract arising without negligence on the part of the defendants.
- Including the fact of the clear recognition in the seed trade that reliance of the conditions would not be fair or reasonable and that the defendants could insure against crop failure without materially increasing the price of seeds, it would not be fair or reasonable within the meaning of the Sale of Goods Act 1979.