Photo Production Ltd v Securicor Transport Ltd [1980]

Court: House of Lords

Facts: Photo Production Ltd contracted Securicor to provide security services. A security guard employed by Securicor accidentally started a fire that destroyed Photo Production's plant. Securicor relied on an exemption clause in the contract, which limited their liability for damage caused by their employees. Photo Production contended that the breach was fundamental and thus the exemption clause should not apply.

Issue: Does the doctrine of fundamental breach render an exclusion clause invalid if the breach is considered fundamental to the contract?

Held: The House of Lords overturned the Court of Appeal's decision, holding that the exclusion clause was valid. Lord Diplock and Lord Wilberforce emphasized that the validity of the exemption clause depended on its construction and should be enforced as agreed in the contract. The doctrine of fundamental breach was rejected, affirming that exemption clauses must be interpreted based on their terms.

Key Judicial Statement: Lord Wilberforce stated, "Exemption clauses are to be interpreted according to their plain terms, and the doctrine of fundamental breach does not alter this rule of construction."

💡Leveluplaw: The case clarifies that exclusion clauses in contracts must be interpreted according to their language, even if the breach is significant. The doctrine of fundamental breach is not applicable, and the enforceability of such clauses depends on contractual interpretation rather than judicial notions of fairness.