A lease of a freight shed exonerated the lessor from ‘any claim . . for . . damage . . to . . Goods . . being . . in the said shed’ and requiring the lessee to indemnify the lessor ‘from and against all claims’. The negligent use of an oxy-acetylene torch by an employee led to a fire which destroyed the shed and contents. The question was whether the lessee could claim against the lessor for the loss of its goods that had been in the shed.
Held: The courts should not ordinarily infer that a contracting party has given up rights which the law confers upon him to an extent greater than the contract terms indicate he has chosen to do; and if the contract terms can take legal and practical effect without denying him the rights he would ordinarily enjoy if the other party is negligent, they will be read as not denying him those rights unless they are so expressed as to make clear that they do. An exclusion clause to be effective must satisfy these three tests ‘(1) If the clause contains language which expressly exempts the person in whose favour it is made (hereafter called the `the proferens’) from the consequences of his own servants, effect must be given to that provision (2) If there is no express reference to negligence, the court must consider whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the servants of the proferens (3) If the words used are wide enough for the above purpose, the court must then consider whether `the head of damage may be based on some ground other than negligence’ . . . The `other ground’ must not be so fanciful or remote that the proferens cannot be supposed to have desired protection against it; but subject to this qualification, . . . the existence of a possible head of damage other then that of negligence is fatal to the proferens even if the words used are prima facie wide enough to cover negligence on the part of his servants.’
Judges:
Lord Morton of Henryton
Citations:
[1952] AC 192, [1952] UKPC 1, [1952] 1 TLR 261, [1952] 1 All ER 305, [1952] 1 Lloyd’s Rep 1
Links:
Jurisdiction:
Canada
Cited by:
Approved – Smith v UMB Chrysler (Scotland) Ltd HL 9-Nov-1977
The principles set out in Canada Steamship apply to ‘clauses which purport to exempt one party to a contract from liability’. The principles should be applied without ‘mechanistic construction’.
Lord Keith of Kinkel said: The tests were . .
Cited – National Westminster Bank v Utrecht-America Finance Company CA 10-May-2001
An agreement between the parties for assignment or novation of a credit agreement, contained a ‘take out’ agreement (‘TOA’). The defendant began proceedings in California to rescind the agreement, and the claimants obtained summary judgement under . .
Restricted – Hollier v Rambler Motors (AMC) Ltd CA 19-Nov-1971
The plaintiff left his car with the defendant garage for repair. Whilst there it was substantially damaged by fire. The defendant sought to rely upon their terms which would negative liability, saying that the terms had been incorporated by . .
Explained – Lamport and Holt Lines v Coubro and Scrutton (M and I) Ltd, (The Raphael) 1982
. .
Limited – Stent Foundations Ltd v M J Gleeson Group Plc TCC 9-Aug-2000
The defendant company sought to rely upon an exemption clause.
Held: Applying standard rules for contract interpretation, the exemption clause was to be construed against the one proposing it. At best the clause was ambiguous, and the . .
Cited – HIH Casualty and General Insurance Limited and others v Chase Manhattan Bank and others HL 20-Feb-2003
The insurance company had paid claims on policies used to underwrite the production of TV films. The re-insurers resisted the claims against them by the insurers on the grounds of non-disclosure by the insured, or in the alternative damages for . .
Cited – Gillespie Bros and Co Ltd v Roy Bowles Transport Ltd CA 1973
The court looked at how it should construe the Canada Steamship guidelines with regard to an exemption clause absolving one party of responsibility for negligence. There was a express reference to negligence by the words ‘save harmless and keep . . . .
Cited – Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd HL 26-Nov-1981
Even though a shipowner who had carried cargo on deck was not entitled to rely on the exceptions to liability in his contract, a limitation clause was different and should not be construed by reference to the specially exacting standards applicable . .
Applied – Toomey v Eagle Star Insurance Co Ltd (No 2) QBD 1995
Applying Canada Steamship Lines Ltd v The King, Colman J said: ‘Notwithstanding the commercial purpose of this transaction, the correct approach, as a matter of construction, is to conclude that in fact the effect of cl (a) is only to exclude the . .
Cited – Barclays Bank Plc v Kufner ComC 10-Oct-2008
barclays_kufnerComC2008
The bank sought summary judgment under a guarantee to secure a loan to purchase a luxury yacht which was to be hired out in business. The loan had been charged against the yacht, but when the yacht was re-registered, the bank failed to re-establish . .
Cited – Societe Generale, London Branch v Geys SC 19-Dec-2012
The claimant’s employment by the bank had been terminated. The parties disputed the sums due, and the date of the termination of the contract. The court was asked ‘Does a repudiation of a contract of employment by the employer which takes the form . .
Lists of cited by and citing cases may be incomplete.
Contract
Updated: 08 June 2022; Ref: scu.185978