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Karsales (Harrow) v Wallis [1956] 1 WLR 936

Doctrine of Fundamental Breach

Facts

The Defendant (Mr Wallis) agreed to buy a used car if the vendor was able to find a company with which the Defendant could enter into a hire-purchase agreement. The vendor found such a company (the Claimant).  Once the agreement was entered into, the Defendant inspected the vehicle he had agreed to purchase through the hire purchase agreement and found that it had been substantially altered from the version he had previously seen and agreed to buy. Namely, the radio was missing, as were the chrome strips around the body, the new tires had been replaced by old ones, the bumper was not held together with rope and perhaps most importantly, the car could not start. The Defendant therefore refused to pay for the car. The hire purchase agreement contained an exclusion clause which stated that ‘No condition or warranty that the vehicle is roadworthy or as to its age, condition or fitness for any purpose is given by the owner or implied herein.’

Issues

The issue in this case was whether the exclusion clause was valid even in cases where there was a fundamental breach of the contract.

Held

It was held that Karsales was under an obligation to provide a car which is in substantially the same condition as when Mr Wallis inspected it. This is particularly the case for hire purchase agreements where the purchaser had previously inspected the vehicle. More broadly, where there is a fundamental breach of a contract, a party cannot rely on an exemption clause. Not in the least, the Sale of Goods Act 1979 would still imply a term into the contract that the goods will be fit for purpose which cannot be excluded through such a clause.


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