Spurling (J) Ltd v Bradshaw

An exclusion clause is effective only while the party relying on it performs the essential obligations of the contract. It cannot protect a warehouseman who commits a radical breach, such as storing goods other than as agreed, destroying them, selling them, or delivering them to an unauthorised person. Ordinary negligent damage during contractual storage does not, without more, amount to such a breach.

A particularly onerous clause requires correspondingly clear notice. Terms may nevertheless be incorporated by clear reference on contractual documents and by a consistent course of dealing. Where the pleaded complaint is negligent storage only, an express clause excluding liability for negligence may therefore defeat the claim.

The respondent warehousemen claimed unpaid rent and wharfage charges. The appellant admitted the charges but counterclaimed for damage to eight casks of orange juice stored by the respondents. He alleged that the casks had been negligently stored and were damaged when delivered to his nominee.

The judge below stopped the case before the warehousemen had called evidence. Although the judge found negligence, he held that an exclusion clause printed on the reverse of a landing account defeated the counterclaim. The appellant appealed, contending that the clause had not been incorporated and did not extend to the alleged loss.

The central issues were whether the clause formed part of the bailment contract and whether it protected the warehousemen against liability for negligent storage.

1. Appeal dismissed. All three Lord Justices held that the exclusion clause formed part of the contract and, on the case pleaded, protected the warehousemen from liability.

2. Lord Justice Denning held that an exclusion clause does not avail a party who has departed from the contract or committed a breach going to its root. A warehouseman’s essential obligations are to store the goods at the contractual place and to redeliver them on demand. Selling, consuming, destroying, mis-storing, or wrongly delivering the goods would be a fundamental breach beyond the clause. Mere negligence, however, does not by itself have that character. Lord Justice Morris expressed the same point through the requirement that the loss must occur within the “four corners” of the contract. Lord Justice Parker accepted the same qualification.

3. The allegation here was only that the goods had been negligently stored and delivered in a damaged condition. There was no pleaded or evidential basis for a finding that the warehousemen had stored the goods otherwise than as contracted or committed another fundamental breach. The clause therefore covered the assumed negligence.

4. The court also held that the terms had been incorporated. Lord Justice Denning stated that the more unreasonable a term, the clearer the notice required. Here, the landing account clearly referred to conditions on its reverse, the invoice stated that the goods were held at the owner’s risk, and the appellant had received similar landing accounts in previous dealings. His failure to read the terms did not prevent their incorporation.

5. The appeal was dismissed with costs.

• Court of Appeal: dismissed the appeal with costs and upheld dismissal of the counterclaim.
• Mayor's and City of London Court: the judge held that the exclusion clause defeated the counterclaim, notwithstanding an assumed finding of negligence.