Thursday, 4 April 2013

Fundamental Breach

  • A further rule that the common law sought to introduce to restrict the impact of exclusion clauses was the doctrine of fundamental breach.
  • The rule stated that some breaches of contract are so serious that no exclusion clause can cover them.
  • Example Harbutt’s Plasticine 1970,  the defendants designed and installed a pipe work into the plaintiff’s factory which were totally unsuitable and caused a fire which destroyed the factory. The defendent’s hoped to rely on a limited liability clause, which limited their liability to contract price. 
  • The court of appeal dismissed the appeal from defendants
  • Lord Denning - in considering the consequences of of a fundamental breach, it is necessary to draw a distinction between a fundamental breach which leaves the contract open to be performed and a fundamental breach which itself brings the contract to an end.
  • The first type, it means that you can sue for damages for past or present breaches because you have affirmed the contract, you cannot end it. only if you claim then in the second group does the contract end.
  • The second type, party has been guilty of a fundamental breach of contract, that is, a breach goes to the very root of contract , the other side accepts it , so contract comes to an end  then the guilty party cannot rely on their exclusion or limited liability clause as the contract has come to an end,
  • This was later rejected in Photo Production Ltd v Securicor Transport Ltd 
  • Plaintiff had contracted with defendant to send a security guard to check their factories at night. Unfortunately, one that they hired went to the factory and started a fire. It was clear from facts they had not been negligent in recruiting him. They had a liability clause. The issue was whether the clause was nullified by a fundamental breach . The CA held it was and that the exclusion clause applied despite that a fundamental breach had occurred.
  • doctrine no longer necessary as we have UCTA and Harbutt was overruled 

No comments:

Post a Comment