is made to exclude or limit other liability, the court has to decide if this is
reasonable. Reasonableness is interpreted to mean fair given the
circumstances known to the parties at the time, and, from the case of
Stewart Gill v Horatio Myer Ltd (1992), takes into account the resources
available to meet the liability and the possibility of insurance. Other factors
which the court may take into account include:
- the bargaining power of the parties, and whether an alternative source
was available - any inducement to agree to the term, for example, a favourable price
- trade custom and previous dealings
- the difficulty of the task
- whether the goods are adapted to the order of the customer.
Three cases follow which show situations where exemption was held to be
unreasonable.
124 Contract law
Green v Cade (1978)
A consignment of seed potatoes was supplied to a farmer, with a clause
in the contract stating that any rejection or complaint must be reported
within three days of delivery. The crop failed because the seed potatoes
were found to contain a virus. It was held that this requirement was
unreasonable regarding a defect which could not be discovered on
inspection at the time of delivery.George Mitchell v Finney Lock Seeds (1983)
In a contract for the supply of cabbage seed, a clause limited the
supplier’s liability to the purchase price of about £200. When the
cabbage crop failed, this clause was held unreasonable, given that the
damage sustained was over £60,000. The courts took the following
points into consideration:- The supplier’s admission that ex gratia payments were sometimes
made in such circumstances (this was seen as an admission that the
clause was unreasonable). - The magnitude of the loss.
- The carelessness of the supplier.
- The availability of insurance to the supplier against such claims.
Smith v Bush and Harris v Wyre Forest (1990)
There are really two separate cases here, but the facts were similar. At
Court of Appeal level the decisions differed, but on joint appeal to the
House of Lords the outcome was the same in both instances. In each case
a surveyor attempted to exclude liability for negligence in valuing a
property. In the case of Smith v Bush some chimneys had been removed