defendants, a firm of stevedores, negligently damaged a drum of chemicals and sought the immunity offered by a limitation clause contained in the bill of lading which governed the relationship between the plaintiffs and the carrier. The relevant clause provided that the ‘carrier’ included any person bound by the bill of lading, whether acting as carrier or bailee. The House of Lords held that, since the stevedores were not parties to the contract of carriage, they could not rely on the limitation clause, especially since the limitation clause did not mention the stevedores by name. One consequence of this decision was to restrict the effectiveness of exemption clauses, which, at the time, was a prime concern of the courts. However, desirable though it was seen to be to operate in this way, particularly in consumer contracts, the same result could have undesirable consequences in business dealings, as was demonstrated in Scruttons itself, by allowing a successful action against a third party in circumstances in which he could legitimately believe that the risk of loss had been allocated in a different direction. Since the decision in Scruttons, the Unfair Contract Terms Act 1977 has made it less important for the courts to manipulate common law rules in order to minimise the effect of exemption clauses, in which case, the courts should now be able to take a more realistic view of agreed allocations of risk, especially in consumer contracts. Because of the undesirable effects of the decision in Scruttons, methods have been employed to circumvent it. For example, it may be possible to treat one of the parties to the contract as the agent of the third party, but this requires a contractual provision worded in such a way as to include the third party within the range of people protected by the limitation. Moreover, the provision will also have to stipulate that a carrier, for example, contracts on his own behalf and as agent for the stevedore, and that the carrier has authority from the stevedore to contract in this way. In New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd, machinery

doi:10.4324/9781843141518-306

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defendants, a firm of stevedores, negligently damaged a drum of chemicals and sought the immunity offered by a limitation clause contained in the bill of lading which governed the relationship between the plaintiffs and the carrier. The relevant clause provided that the ‘carrier’ included any person bound by the bill of lading, whether acting as carrier or bailee. The House of Lords held that, since the stevedores were not parties to the contract of carriage, they could not rely on the limitation clause, especially since the limitation clause did not mention the stevedores by name. One consequence of this decision was to restrict the effectiveness of exemption clauses, which, at the time, was a prime concern of the courts. However, desirable though it was seen to be to operate in this way, particularly in consumer contracts, the same result could have undesirable consequences in business dealings, as was demonstrated in Scruttons itself, by allowing a successful action against a third party in circumstances in which he could legitimately believe that the risk of loss had been allocated in a different direction. Since the decision in Scruttons, the Unfair Contract Terms Act 1977 has made it less important for the courts to manipulate common law rules in order to minimise the effect of exemption clauses, in which case, the courts should now be able to take a more realistic view of agreed allocations of risk, especially in consumer contracts. Because of the undesirable effects of the decision in Scruttons, methods have been employed to circumvent it. For example, it may be possible to treat one of the parties to the contract as the agent of the third party, but this requires a contractual provision worded in such a way as to include the third party within the range of people protected by the limitation. Moreover, the provision will also have to stipulate that a carrier, for example, contracts on his own behalf and as agent for the stevedore, and that the carrier has authority from the stevedore to contract in this way. In New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd, machinery

DOI link for defendants, a firm of stevedores, negligently damaged a drum of chemicals and sought the immunity offered by a limitation clause contained in the bill of lading which governed the relationship between the plaintiffs and the carrier. The relevant clause provided that the ‘carrier’ included any person bound by the bill of lading, whether acting as carrier or bailee. The House of Lords held that, since the stevedores were not parties to the contract of carriage, they could not rely on the limitation clause, especially since the limitation clause did not mention the stevedores by name. One consequence of this decision was to restrict the effectiveness of exemption clauses, which, at the time, was a prime concern of the courts. However, desirable though it was seen to be to operate in this way, particularly in consumer contracts, the same result could have undesirable consequences in business dealings, as was demonstrated in Scruttons itself, by allowing a successful action against a third party in circumstances in which he could legitimately believe that the risk of loss had been allocated in a different direction. Since the decision in Scruttons, the Unfair Contract Terms Act 1977 has made it less important for the courts to manipulate common law rules in order to minimise the effect of exemption clauses, in which case, the courts should now be able to take a more realistic view of agreed allocations of risk, especially in consumer contracts. Because of the undesirable effects of the decision in Scruttons, methods have been employed to circumvent it. For example, it may be possible to treat one of the parties to the contract as the agent of the third party, but this requires a contractual provision worded in such a way as to include the third party within the range of people protected by the limitation. Moreover, the provision will also have to stipulate that a carrier, for example, contracts on his own behalf and as agent for the stevedore, and that the carrier has authority from the stevedore to contract in this way. In New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd, machinery

defendants, a firm of stevedores, negligently damaged a drum of chemicals and sought the immunity offered by a limitation clause contained in the bill of lading which governed the relationship between the plaintiffs and the carrier. The relevant clause provided that the ‘carrier’ included any person bound by the bill of lading, whether acting as carrier or bailee. The House of Lords held that, since the stevedores were not parties to the contract of carriage, they could not rely on the limitation clause, especially since the limitation clause did not mention the stevedores by name. One consequence of this decision was to restrict the effectiveness of exemption clauses, which, at the time, was a prime concern of the courts. However, desirable though it was seen to be to operate in this way, particularly in consumer contracts, the same result could have undesirable consequences in business dealings, as was demonstrated in Scruttons itself, by allowing a successful action against a third party in circumstances in which he could legitimately believe that the risk of loss had been allocated in a different direction. Since the decision in Scruttons, the Unfair Contract Terms Act 1977 has made it less important for the courts to manipulate common law rules in order to minimise the effect of exemption clauses, in which case, the courts should now be able to take a more realistic view of agreed allocations of risk, especially in consumer contracts. Because of the undesirable effects of the decision in Scruttons, methods have been employed to circumvent it. For example, it may be possible to treat one of the parties to the contract as the agent of the third party, but this requires a contractual provision worded in such a way as to include the third party within the range of people protected by the limitation. Moreover, the provision will also have to stipulate that a carrier, for example, contracts on his own behalf and as agent for the stevedore, and that the carrier has authority from the stevedore to contract in this way. In New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd, machinery

ABSTRACT

One consequence of this decision was to restrict the effectiveness of exemption clauses, which, at the time, was a prime concern of the courts. However, desirable though it was seen to be to operate in this way, particularly in consumer contracts, the same result could have undesirable consequences in business dealings, as was demonstrated in Scruttons itself, by allowing a successful action against a third party in circumstances in which he could legitimately believe that the risk of loss had been allocated in a different direction. Since the decision in Scruttons, the Unfair Contract Terms Act 1977 has made it less important for the courts to manipulate common law rules in order to minimise the effect of exemption clauses,47 in which case, the courts should now be able to take a more realistic view of agreed allocations of risk, especially in consumer contracts.