Scruttons Ltd v Midland Silicones Ltd

A third party, such as a stevedore, cannot rely on a limitation clause in a contract to which it is not a party.

Citation
[1962] AC 446
Court
House of Lords
Year
1962
Subject
Contract Law
Topic
Privity of contract

Facts

A drum of chemicals was shipped from New York to London under a bill of lading that limited the carrier's liability to $500. Scruttons, stevedores employed by the carrier to unload the ship in London, negligently dropped the drum while lowering it onto a lorry, causing damage worth about £593. The cargo owners sued Scruttons in tort, and Scruttons sought to rely on the limitation in the bill of lading.

Legal principle

The House of Lords held that Scruttons could not rely on the limitation clause, because they were not parties to the contract of carriage. Lord Reid suggested that a third party could take the benefit of such a clause if four conditions were met: the bill of lading makes clear that the stevedore is intended to be protected; it makes clear that the carrier is contracting as agent for the stevedore as well as on its own behalf; the carrier has authority from the stevedore to do so; and any difficulty about consideration moving from the stevedore is overcome. Those conditions were not satisfied here, but they were later applied in The Eurymedon.

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