By Stuart Love
Friday Legal
IT is often thought that any liability (other than for death and personal injury) can be contracted out of with enough forethought and careful drafting. The recent First Tower Trustees Ltd v CDS (Superstores International) Ltd [2018] EWCA Civ 1396 case sounds a note of caution.
CDS contracted to lease warehouses from First Tower, during the conveyancing process CDS’s lawyers made all the usual pre-contract enquiries, including asking if there were any environmental problems with the warehouses. The responses received from First Tower’s lawyers was that they were unaware of any environmental issues, however that CDS should make its own enquiries.
Satisfied with the responses received from First Tower, CDS progressed to enter into a lease for the warehouses.
However, it was soon discovered that there was substantial asbestos contamination to the warehouses, to the extent that they were dangerous to enter and could not be used without substantial remedial works being undertaken. It was also discovered that First Tower, or at least its agent, was aware of the asbestos prior to the response to pre-contract enquiries being provided.
The Claim
CDS issued proceedings claiming that they entered into the lease in reliance on the misrepresentation that there was no asbestos and claimed damages for the losses they incurred.
One of the arguments run by First Tower in its defence was that it should not have any liability because the lease contained a clause in which CDS acknowledged that it had not entered into it in reliance on any representations made by First Tower. Therefore, a contractual estoppel existed preventing CDS from now relying on the representations, contained in replies to pre-contract enquiries, which turned out to be false.
The judge decided that the clause was an attempt to exclude liability for misrepresentations and as provided for at s.3(1) of the Misrepresentation Act 1967 would not be enforceable unless it was ‘fair and reasonable’ in accordance with s.11 of the Unfair Contract Terms Act 1977.
The judge at first instance (whose judgement was upheld on appeal) held that in the circumstances, the clause was not fair and reasonable, as it would effectively render standard pre-contractual enquiries in property transactions completely worthless.
The Lesson
While it is always wise to seek to quantify and limit your exposure when entering into commercial contracts of any type, if you are seeking to limit your liability in relation to pre-contract representations you need to consider whether a court would consider your actions to be reasonable in all the circumstances.
If you need any assistance striking the balance in your contractual documents or want to know if your existing contracts are enforceable, contact Stuart Love at Friday Legal Solicitors on 01536 210047 or
