Watford Electronics Ltd v Sanderson CFL Ltd: CA 23 Feb 2001

The plaintiff had contracted to purchase software from the respondent. The system failed to perform, and the defendant sought to rely upon its exclusion and limitation of liability clauses.
Held: It is for the party claiming that a contract term satisfies the requirement of reasonableness to show that it does. To decide whether term was fair and reasonable having regard to the circumstances known to parties when the contract was made it is necessary to determine its scope and effect of that term as a matter of construction. The fact that the plaintiff had similar clauses in its own terms did not prevent them challenging the reasonableness of the defendant’s terms, but it did show that it was commercially aware of the nature and purpose of such provisions. The entire agreement clause coloured the intent to be ascribed to the limitation of liability clause, particularly when the parties had had the benefit professional help in negotiations. Because the judge had failed to allow for the effect of the entire agreement clause, his decision to strike down the limit of liability clause was flawed, and a declaration was made accordingly.
Chadwick LJ said that where experienced business men, representing substantial companies of equal bargaining power negotiate an agreement, they may be taken to have had regard to the matters known to them and to be the best judges of the commercial fairness and reasonableness of the agreement which they have reached including the fairness of each of the terms of the agreement.
Chadwick LJ said: ‘Where experienced businessmen representing substantial companies of equal bargaining power negotiate an agreement, they may be taken to have had regard to the matters known to them. They should, in my view be taken to be the best judge of the commercial fairness of the agreement which they have made; including the fairness of each of the terms in that agreement.’ In this case, a term excluding indirect loss, applicable in the circumstances described, was a fair and reasonable one to include in the contract.


Lord Justice Peter Gibson, Lord Justice Chadwick And Mr Justice Buckley


Gazette 03-May-2001, [2001] EWCA Civ 317, [2001] 1 All ER (Comm) 696, [2001] BLR 143, [2002] FSR 19, (2001) 3 TCLR 14, [2001] Masons CLR 57




Misrepresentation Act 1967, Unfair Contract Terms Act 1977 3


England and Wales


CitedGeorge Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd HL 1983
A seedsman sought to rely upon an exclusion clause preventing any claim by a purchaser by way of set off against its sales invoices. The House was asked whether a contractual term was ‘fair and reasonable’ within the meaning of section 55 of the . .
CitedHadley v Baxendale Exc 23-Feb-1854
Contract Damages; What follows the Breach Naturaly
The plaintiffs had sent a part of their milling machinery for repair. The defendants contracted to carry it, but delayed in breach of contract. The plaintiffs claimed damages for the earnings lost through the delay. The defendants appealed, saying . .
CitedVictoria Laundry (Windsor) Ltd v Newman Industries CA 1949
The plaintiffs claimed for loss of the profits from their laundry business because of late delivery of a boiler.
Held: The Court did not regard ‘loss of profits from the laundry business’ as a single type of loss. They distinguished losses . .
CitedCullinane v British ‘Rema’ Manufacturing Co Ltd CA 1954
The court considered the possibility of a claim in breach of contract for damages for both capital loss and loss of profit.
Lord Evershed MR said: ‘It seems to me, as a matter of principle, that the full claim of damages in the form in which . .
CitedE A Grimstead and Son Limited v McGarrigan CA 13-Oct-1998
. .
CitedLowe v Lombank Ltd CA 1960
A false statement made about a matter of past fact could not operate either as an estoppel by representation or (where the fact is expressed as an agreement) a contractual estoppel. The court set out three criteria for an evidential estoppel: it . .
CitedThomas Witter v TBP Industries Ltd ChD 15-Jul-1994
An award of damages for misrepresentation required that there had at some time been a right of rescission, not necessarily a continuing right to rescind.
An acknowledgement of non-reliance clause has become a common part of modern commercial . .

Cited by:

CitedKingsway Hall Hotel Ltd v Red Sky IT (Hounslow) Ltd TCC 6-May-2010
The claimant said that the software supplied to it was not fit for purpose. The defendant said that the company had relied on its own inspections of what was a standard package, and had not made known its desire to use it in a specific context. The . .
CitedMorgan and Another v Pooley and Another QBD 7-Oct-2010
The claimants had bought a property from the defendants and now sought damages in misrepresentation saying that the defendants had failed to disclose a planning application for an adjacent farm as regards a track bordering the property.
Held: . .
Lists of cited by and citing cases may be incomplete.


Updated: 20 May 2022; Ref: scu.90319