Photo Production Ltd v. Securicor Transport Ltd. (1980)

Photo Production Ltd v. Securicor Transport Ltd.

 [1980] UKHL 2

(Exemption clauses)

FACTS:

Plaintiffs entered into contract with defendant whereby latter was required to provide patrolling services for plaintiff’s factory as provided in contract. But, any liability arising out of default of the employees of the defendants was limited by the standardized contract which provided—under no circumstances, Co. will be liable for default by any employee unless such act could have been avoided by exercise of due diligence on part of Co. as employer. Further, it limited the damages arising out of any liability arising against Co.

Plaintiffs brought a claim for damages (in much excess than those provided under standardized contract) against defendants for fundamental breach of the contract wherein security guard, as employed by defendants to render patrolling services to plaintiffs, deliberately put a fire to the plaintiffs’ factory.

ISSUES:

1) Whether exemption clause can excuse a fundamental breach of the contract?

2) Whether any exemption clause, in present case, can limit/absolve the liability of defendant?

HELD:

The doctrine of fundamental breach states that if a party to contract fails to perform that obligation which goes to the root of the contract, there exists a rule of law which restricts the party to rely on the effect of an exclusion clause in the contract purporting to protect him from that breach unless such exclusion clause has been explicitly or implicitly intended in Contract to be subsisting even when there occurs a fundamental breach.

1. House of Lords held that the doctrine of fundamental breach is a rule of construction based on presumed intention of the parties. Whether and to what extent an exclusion clause was to apply doesn’t depend on kind of breach committed rather on the construction of the contract. Parties should be free to expressly define, exclude or modify their primary and secondary obligations under the contract—to the extent of exemption clauses serving as the basis of apportion of the risks as they think fit—unless they offend equitable rules against penalties or are unjust and unfair. Since in present case, parties unequivocally, and in clear express terms, laid the scope of exclusion clause implying it to be operative even when there was any fundamental breach of contract, hence, exclusion clause must stand good in present case.

2. On the facts, Court found that the exclusion clause limited primary obligation of Securicor, of being responsible for the safety and security of the premises, to the extent of exercising due diligence as employer of the security-men. This obligation was duly performed by the Co. for it took due care while appointing alleged security guard. Hence, no liability of Securicor exists.

Author: Vishrut Kansal (National University of Juridical Sciences, Kolkata)