Legal Principles and Key Points
- In the case of Photo Productions Ltd v Securicor Transport Ltd 1990 AC 827 it was held that the doctrine of fundamental breach is not to be used as a rule of law.
Facts of the Case
- C contracted with D for the provision of a night patrol service for their factory of four visits a night.
- The main perils which the parties had in mind were fire and theft.
- The contract was on D’s printed form incorporating standard conditions which provided;
- “1. Under no circumstances shall the company be responsible for any injurious act or default by any employee of the company unless such act or default could have been foreseen and avoided by the exercise of due diligence on the part of the company as his employer; nor, in any event, shall the company be held responsible for : (a) Any loss suffered by the customer through… fire or any other cause, except insofar as such loss is solely attributable to the negligence of the company’s employees acting within the course of their employment.”
- Condition 2 limited D’s potential liability under the terms of the contract “or at common law”
- One of D’s employees at night entered the factory on duty patrol and lit a fire which burned down the factory.
- The employee, who had satisfactory references and had been employed by D for some three months, later said that he had only meant to start a small fire but that it had go out of control.
- C claimed damages, particularised at over £648,000, based on breach of contract and/or negligence.
- MacKenna J held that condition 1 of the contract excluded them from responsibility for his act in setting fire to the factory and that the doctrine of fundamental breach did not prevent judgment being given for D.
- The Court of Appeal reversed his decision with Lord Denning stating that the doctrine of fundamental breach was a rule of law
Issues in Photo Productions Ltd v Securicor Transport Ltd 1990 AC 827
- Could the doctrine of fundamental breach be regarded as a rule of law.
Held by House of Lords
- Appeal allowed
- The appeal was allowed in that the doctrine of fundamental breach by virtue of which the termination of a contract brought it, and with it, any exclusion clause to an end was not good law.
- “Any persons capable of making a contract are free to enter into any contract they may choose and providing the contract is not illegal or D voidable, it is binding upon them. It is not denied that the present contract was binding upon each of the parties to it. In the end, every thing depends upon the true construction of the clause in dispute about which I have already expressed my opinion. My Lords, I would accordingly allow the appeal.” P.853 D