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1978.
MANAGERIAL LAW.
Managerial Law,
Vol. 21,
Issue. 1,
p.
1.
Article contents
The Effect of Discharge by Breach on Exception Clauses
Published online by Cambridge University Press: 16 January 2009
Extract
It was perhaps never very likely that the proponents of fundamental breach would allow their doctrine to die just because of some obiter dicta on the subject from the House of Lords. In that respect, therefore, the recent decision of the Court of Appeal in Harbutt's “Plasticine” Ltd. v. Wayne Tank and Pump Co. Ltd. need cause no surprise. What had happened in that case, essentially, was that the defendants had agreed to manufacture some equipment and to instal it in the plaintiffs' factory under a contract, clause 15 of which limited the defendants' liability to the amount of the contract price (£2, 330). A small and easily corrected defect in the equipment caused a fire which destroyed the factory and resulted in a loss to the plaintiffs of some £150,000. The Court of Appeal held (Lord Denning M.R. dubitante) that on its true construction clause 15 covered the loss in the events which had occurred. The whole court nevertheless joined in holding that the destruction of the factory and consequent discharge by breach of the contract had the effect of making clause 15 inapplicable. Judgment was given for the full amount of the loss.
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