H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd

For contractual damages to be recoverable, the type of loss must have been within the parties’ reasonable contemplation as a serious possibility, assuming that they had contemplated the breach which occurred. The precise mechanism and full extent of physical injury need not have been anticipated.

A seller’s absolute obligation to supply reasonably fit goods makes liability independent of whether the defect was discoverable. It does not remove the rules governing remoteness. Where an unfit product might seriously be expected to cause physical injury of the relevant type, an unusual disease or unexpectedly severe consequences do not render that injury too remote.

The plaintiffs bought from the defendants a hopper for storing pig feed. The defendants knew the hopper was required to keep feed suitable for an intensive, high-grade pig herd. Their employee installed it with its top ventilator closed. The feed became mouldy, causing illness, an outbreak of E. coli and the death of 254 pigs.

Swanwick J gave judgment for the plaintiffs and ordered an inquiry into damages. The defendants appealed, accepting a breach in installation but contending that serious illness was outside the parties’ reasonable contemplation. The central issue was whether the physical damage was too remote in contract.

1. Appeal dismissed unanimously. Orr LJ expressly adopted the reasoning of Scarman LJ. That reasoning therefore supplied the majority basis for the decision. Lord Denning MR agreed in the result but proposed a different distinction between economic loss and physical injury.

2. Per Scarman LJ, contractual remoteness asks what type of loss it is reasonable to suppose would have been within the parties’ contemplation as a serious possibility if, when contracting, they had contemplated the breach which actually occurred. The rules in Hadley v Baxendale are aspects of that general principle. The inquiry is objective and involves a hypothesis because the parties need not actually have anticipated the breach.

3. The contract was one contract for the sale, delivery and installation of a hopper with a ventilated top, reasonably fit for storing feed for the plaintiffs’ pigs. It contained express terms concerning suitability and ventilation and implied terms under sections 14(1) and 14(2) of the Sale of Goods Act 1893. The result would nevertheless have been the same if sale and installation were treated as separate contracts.

4. The relevant contemplated consequence was illness caused by a hopper unfit to preserve feed in a condition suitable for pigs. It was unnecessary that the parties should have contemplated mould, E. coli or the precise chain by which the disease developed. Once physical injury of the relevant type was a serious possibility, recovery was not limited because the disease and its severity could not have been anticipated.

5. Section 53(2) of the Sale of Goods Act 1893 embodied the ordinary-course rule governing damages for breach of warranty. An absolute warranty means that liability may arise despite a latent or unknowable defect. It does not make the seller liable for every causal consequence without regard to remoteness.

6. Lord Denning MR would have applied the tort standard of reasonable foreseeability to contractual physical damage while reserving the stricter contemplation standard for economic loss. Orr and Scarman LJJ declined to recognise that legal distinction. The order for an inquiry into damages therefore stood. The appeal was dismissed with costs, with conditional leave to appeal to the House of Lords.

1. Court of Appeal: The defendants’ appeal was dismissed unanimously, with costs. Conditional leave to appeal to the House of Lords was granted.

2. High Court, Queen’s Bench Division: Swanwick J gave judgment for the plaintiffs and ordered an inquiry to determine damages. The Court of Appeal upheld that result, although the majority clarified the reasoning on remoteness.