ABSTRACT

Lord Diplock: My Lords, this is a case about an exemption clause contained in a contract for the sale of goods (not being a consumer sale) to which the Supply of Goods (Implied Terms) Act 1973 applied. In reliance on the exemption clause the sellers sought to limit their liability to the buyers to a sum which represented only 0.33% of the damage that the buyers had sustained as a result of an undisputed breach of contract by the sellers. The sellers failed before the trial judge, Parker, who, by placing on the language of the exemption clause a strained and artificial meaning, found himself able to hold that the breach of contract in respect of which the buyers sued fell outside the clause. In the Court of Appeal both Oliver LJ and Kerr LJ, by similar processes of strained interpretation, held that the breach was not covered by the exemption clause; but they also held that if the breach had been covered it would in all the circumstances of the case not have been fair or reasonable to allow reliance on the clause, and that accordingly the clause would have been unenforceable under the 1973 Act. Lord Denning MR was alone in holding that the language of the exemption clause was plain and unambiguous, that it would be apparent to anyone who read it that it covered the breach in respect of which the buyers’ action was brought, and that the passing of the Supply of Goods (Implied Terms) Act 1973 and its successor, the Unfair Contract Terms Act 1977, had removed from judges the temptation to resort to the device of ascribing to the words appearing in exemption clauses a tortured meaning so as to avoid giving effect to an exclusion or limitation of liability when the judge thought that in the circumstances to do so would be unfair. Lord Denning MR agreed with the other members of the court that the appeal should be dismissed, but solely on the statutory ground under the 1973 Act that it would not be fair and reasonable to allow reliance on the clause.