Civil Engineering Reference
In-Depth Information
the contract must be a careful and honest attempt to accurately calculate the
loss or damage which will be suffered and it must be a pre-estimate in
the sense that it must be an estimate at the time the contract is made, not at
the time of the breach
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. It appears that the courts have made exceptions to
this rule: the sum may be less than that which would represent an accurate
forecast of probable loss perhaps because a party wishes to limit his liability:
'I agree that it is not a pre-estimate of actual damage. I think it must have
been obvious to both parties that the actual damage would be much more
than £20 a week, but it was intended to go towards the damage, and it
was all that the sellers were prepared to pay. I find it impossible to
believe that the sellers, who were quoting for delivery at 9 months
without any liability, undertook delivery at 18 weeks, and in so doing,
when they engaged to pay £20 a week, in fact made themselves liable to
pay full compensation for all loss.'
126
Clauses inserted as limitations of liability must now be examined in the light
of the Unfair Contract Terms Act 1977. Section 3, in part, states that:
'This section applies as between contracting parties where one of them
deals as a consumer or on the other's written standard terms of busi-
ness. . . . As against that party, the other cannot by reference to any
contract term. . . . when himself in breach of contract, exclude or restrict
any liability of his in respect of the breach. . . . except in so far as (in any of
the cases mentioned above in this subsection) the contract term satisfies
the requirement of reasonableness.'
Where it can be shown that the lower sum was inserted as a limitation of
liability and where one party deals on the other's standard written terms of
business, the termmust satisfy the requirements of reasonableness set out in
section 11 and Schedule 2. In most building industry cases, the limitation of
liability should be easily attributable to the application of sound business
principles. It should not be ruled out that, in some instances, the limitation
could be shown to be unreasonable and, therefore, unenforceable. In most
cases, the liquidated damages are inserted into the contract by the employer
and they are thought of as being for his benefit. Therefore, if they are less
than one might expect, the employer must have had his own good reasons
for it.
3.4 Sums greater than a genuine pre-estimate
It also seems that the courts are willing to countenance sums which are
greater than that which would constitute a genuine pre-estimate in certain
limited circumstances. The point was considered in
The Angelic Star
127
. The
125
Public Works Commissioners
v.
Hills
[1906] All ER 919, [1906] AC 368.
126
Cellulose Acetate Silk Co Ltd
v.
Widnes Foundry (1925) Ltd
[1933] AC 20 at 23 per Lord Atkin.
127
[1988] 1 Lloyds Rep 122.
