UCTA Sounds the Retreat - Further Developments on Limitation of Liability

By Kit Burden and Duncan Pithouse

A recent decision of the Court of Appeal has emphasised the Courts' increasing unwillingness to intervene in the deals struck between commercial entities, and is another case in a recent line supporting the reasonableness of agreed liability provisions.

SUMMARY

In Granville Oil and Chemicals Limited v Davies Turner and Co Limited [2003] EWCA Civ 570, the Court of Appeal held that a standard term requiring a party to bring a claim under the contract within a period of nine months from the date on which the event giving rise to the cause of action occured, or otherwise lose the right to bring such a claim, was a reasonable exclusion or limitation of liability pursuant to the Unfair Contract Terms Act 1977.

FACTS

The case concerned the transportation of paint from Kuwait to Rotherham pursuant to an agreement between the claimant importer and the defendant freight forwarder. The contract was made subject to the British International Freight Association Standard Trading Conditions (1989 edn) (the "BIFA Terms") which included, at clause 30, (a) a requirement on the importer to notify the freight forwarder of any claims within 14 days of the date on which it became aware or ought to have become aware of the cause of action giving rise to the claim, and (b) a requirement to bring formally any claim within nine months of the date on which the event giving rise to the cause of action occured. One of the terms imposed on the freight forwarder was an obligation to effect all risks insurance cover in respect of the consignment whilst it was in transit.

On delivery to the importer in January 2000, the consignment of paint was found to have been damaged in transit. The importer notified the freight forwarder of its claim in accordance with clause 30, but did not formally commence proceedings. The freight forwarder promptly claimed under the all risks insurance policy in respect of the damage. However, underwriters notified the freight forwarder in March 2000 that it was rejecting the claim (on the grounds that the damage was caused by an excepted peril) and subsequently re-affirmed its rejection in June 2000 (albeit on slightly different grounds than before). The freight forwarder failed to tell the importer that the insurance claim had been rejected until 2 August 2000. In November 2001, the importer started proceedings against the freight forwarder for breach of contract in respect of (a) the damage to the...