McCain Foods Gb Ltd v Eco-Tec (Europe) Ltd

A supplier of integrated equipment is responsible for ensuring that the equipment complies with the contractual specification and is fit for its intended use, including operation with existing components expressly identified in that specification. Any exclusion of responsibility for that integration risk must be clearly agreed. An entire agreement clause does not exclude reliance on misrepresentations without clear words directed to that effect. Costs of replacement and reasonable mitigation, together with lost utility savings and revenue naturally resulting from equipment failure, are direct losses rather than consequential losses.

McCain purchased a biogas hydrogen-sulphide removal system from Eco-Tec under an Equipment Purchase Agreement and specification. The system could not be commissioned at McCain’s plant. McCain treated Eco-Tec as being in repudiatory breach and claimed damages. Eco-Tec denied liability, relying principally on interaction between its system and McCain’s existing blower, and on allegedly excessive gas concentrations and flow rates.

The court considered contractual compliance, fitness for purpose, misrepresentation, the entire agreement clause, the classification and measure of losses, mitigation, and Eco-Tec’s counterclaim.

1. The system supplied under the Equipment Purchase Agreement was incapable of being commissioned at McCain’s plant and therefore breached the contract. The specification placed the scrubber between the covered anaerobic lagoon and McCain’s existing blowers. Those blowers formed part of the specified operating conditions and intended integrated use.

2. The contractual obligations required the equipment to conform to the specification, to be fit and sufficient for McCain’s intended use, and, where integrated with components described in the contract, to perform with those components in accordance with the stated performance standards. Eco-Tec had not negotiated an exclusion of the risk created by interaction with McCain’s blower. That risk therefore remained with Eco-Tec.

3. The alternative defences based on pressure transience, flow-rate changes, excessive hydrogen-sulphide concentration and unidentified gases failed. Mr Gamble’s expert evidence was preferred to Mr Jones’s evidence, and Dr Buck’s conclusions based on possibilities did not assist. McCain validly ended the contract by its letter of 13 February 2009.

4. The pre-contract communications amounted to assurances that the system was robust, could cope with changing gas flow rates, and would not encounter practical difficulty at the interface with McCain’s blower. They were relied upon. The entire agreement clause did not exclude misrepresentation claims. Clear words were required to remove a right to rely on misrepresentations, and the clause contained no such words.

5. The contractual exclusion of indirect, special, incidental and consequential damages did not exclude the losses claimed. Applying