Frans Maas (UK) Ltd v Samsung Electronics (UK) Ltd

Commercial parties may incorporate standard terms through clear notice and a course of dealing, even where their contractual arrangements are informal. A limitation clause covering liability “howsoever arising” may, depending on its wording and commercial context, limit liability for an employee’s deliberate wrongdoing for which the employer is vicariously liable. The clause must be construed in its contractual setting and distinguished from a clause purporting to protect a party against its own fraud. Under the Unfair Contract Terms Act 1977, a freight-forwarding limitation calculated by weight may be reasonable between parties of equal bargaining strength, particularly where a higher limit could have been purchased and insurance was available.

The claimant warehouse operator stored and handled the defendant’s mobile telephones. After approximately 25,738 telephones were stolen from the claimant’s warehouse, the defendant counterclaimed for losses exceeding £2 million. The claimant accepted liability for unpaid service invoices, and summary judgment was entered on that claim. The trial concerned the counterclaim.

The principal issues were whether BIFA or UKWA standard terms governed the bailment, whether an alleged oral agreement for additional security existed and operated as a collateral contract, whether the theft involved employee assistance, whether the claimant was liable in wilful default or negligence, whether liability was limited, whether the limitation satisfied UCTA, and the amount of loss.

1. Contractual terms. The parties had a contractual bailment. The claimant had given sufficient notice of the BIFA terms, which governed the relationship and the goods at the time of the theft. The Tolos agreement governed the relationship between agents and did not displace the BIFA terms. If that conclusion were wrong, the UKWA terms would apply.
2. Alleged oral agreement. The alleged open-ended agreement requiring the claimant to provide security at its own expense was not proved. The evidence was uncertain, commercially implausible and unsupported by contemporaneous records or later conduct. The collateral-contract issue was therefore academic. The judge observed that whether an oral assurance ousted standard terms would depend on the facts, construction and nature of the assurance.
3. Liability. The theft was an inside job involving voluntary assistance from an employee. The employee’s role in securing the warehouse and goods created a sufficient connection between the wrongdoing and employment. The claimant was therefore vicariously liable for wilful default. The claimant was also negligent in its control of keys, alarm access and security records. Those failures materially contributed to the theft.
4. Limitation. Clause 27(A) of the BIFA terms limited liability “howsoever arising”, including liability for employee wilful default and negligence. It was a limitation clause, and the commercial context showed that employee dishonesty was an apparent risk which the parties could allocate by contract. The clause did not extend to the claimant’s own fraud.
5. UCTA and quantum. Clause 27(A) satisfied the reasonableness requirement under the Unfair Contract Terms Act 1977. The parties had equal bargaining strength, weight-based limits were customary, a higher limit could have been agreed for an additional charge, and insurance was available. The survey-fee claim formed part of the claim for loss or damage to the goods and was subject to the same limitation. The precise limitation figure was left for calculation with counsel.