If your stock is stored at someone else’s warehouse and is damaged or lost, what are your chances of recovery?
The answer lies in the small print. This may provide that the warehouse owner will perform its duties with reasonable skill and care, but exclude liability if the loss is caused by something the warehouse is unable to prevent by reasonable diligence.
The company itself is liable for wilful default of an employee, for example theft. It will most probably also be liable if it does not have suitable operating systems such as alarms, proper record keeping systems, CCTV monitoring, security guards or a combination of these.
Limitations of liability may take the form of a financial cap, or requirement for a claim to be notified within a short period (sometimes only a few days) or for court action to be commenced within a few months rather than the statutory six years.
In principle these limitations are acceptable and binding. The rationale is that losses from damage or wilful default are reasonably foreseeable or even common and therefore must be taken to have been contemplated by both parties when they entered into the arrangement.
The Unfair Contract Terms Act requires that, where one party’s standard terms are in operation, any limitations of liability or exclusions must be reasonable. The issue here will be fact specific; terms which permit a higher financial limit for claims on payment of an additional charge, whether the limitations are commonly used by warehouse businesses, and whether the customer can obtain insurance cover for their goods are all factors which have persuaded courts that limitations are reasonable.
Fundamentally, agreed contract terms between experienced businessmen should be upheld, and businesses should not expect anything different.
© S Calnan 2011
Sebastian Calnan specialises in supply chain and distribution law at Calnan Cox Solicitors in Northamptonshire and can be contacted at firstname.lastname@example.org or on 01604 882287