George Mitchell Ltd v Finney Lock Seeds Ltd [1983] 2 AC 803

House of Lords

Basic Facts: D (Finney Lock Seeds Ltd) was a seed merchant specializing in various types of seeds. C (George Mitchell Ltd), a farming business, ordered a specific type of cabbage seeds known as “Finney’s Late Dutch Special” from D. However, D provided the wrong variety of seeds. As a result, C’s crop was worthless, and the financial loss amounted to £61,513. D argued that their liability should be limited to either replacing the seeds or refunding the £201 paid, based on a clause in their standard terms and conditions.

Issue for the Court: Is the limitation of liability clause, which restricts D’s liability to the replacement of seeds or a refund, reasonable under the Unfair Contract Terms Act 1977?

Held :The court found that the limitation of liability clause was unreasonable and thus unenforceable. The clause was validly incorporated but was subject to reasonableness.

• Under the Unfair Contract Terms Act 1977, the clause did not meet the reasonableness test because:

• Industry Practice: It was common for seed suppliers to negotiate settlements beyond the seed price for genuine claims.

• Insurance: Seed suppliers could easily obtain insurance for such risks without significantly raising seed prices.

• Bargaining Power: C had limited ability to negotiate the terms due to the standard form nature of the contract.