Problems based on Contract and Solution-13

TANMOY MUKHERJI INSTITUTE OF JURIDICAL SCIENCE

Dr. Tanmoy Mukherji

Advocate

Problems based on Contract and Solution-13

Tanmoy Mukherji

Advocate

QUESTION- The defendant entered into a contract to build and supply marine engines for the plaintiff. The contract had an exclusion clause which was designed to protect the defendant from liability for defective materials and workmanship. The engines supplied under the contract had so many defects that they could not be used. The plaintiff sued the defendant to claim damages. Decide.

Facts-

→ The defendant agreed to build and supply marine engines.

→ The contract contained an exclusion clause protecting the defendant from liability for:

-defective material

-defective workmanship

→ The engines supplied were so defective that they could not be used at all.

→ The plaintiff sued for damages.

Issues

i) Whether the exclusion clause is valid and enforceable?

ii) Whether the defendant can escape liability despite supplying completely defective goods?

Legal Principles-

Exclusion Clause-

An exclusion clause limits or excludes liability in a contract.

Under the Indian Contract Act, 1872 such clauses are generally valid if-

→they are clear and unambiguous

→they are not against public policy.

Rule of Interpretation-

Courts apply the following rules:

Strict Interpretation-

Clauses are interpreted strictly against the party relying on it. Known as contra proferentem rule.

Fundamental Breach doctrine-

If a breach-

→goes to the root of the contract.

→destroys the main object.

The exclusion clause cannot protect the defaulting party.

Sale of goods

Even though not directly mentioned, principles from the Sales of goods Act, 1930 apply.

Rules must be-

→of merchantable quality

→fit for purpose

Here, engines are completely unusable so, there is a breach of implied condition.

Reference Case:

Application of Law to the given problem

The main purpose of the contract

→Supply of usable marine engines.

→Engines are completely defective and unusable.

→ Therefore, there is total failure of consideration.

→ The breach is fundamental.

→The exclusion clause can't cover such a serious breach.

Conclusion-

 →The defect is so serious that it destroys the entire contract.

→ The exclusion clause becomes ineffective.

→The defendant is liable for damages.