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Scruttons Ltd v Midland Silicones Ltd [1962] AC 446

Contract law – Shipping contracts – Damages

Facts

A drum filled with chemicals was shipped from the United States to the United Kingdom, as agreed by a bill of lading which included a clause which referenced the United States Carriage of Goods by Sea Act 1936. This clause limited the liability of the carrier to $500 for any damage that was caused to the goods. The carrier engaged stevedores to deal with the unloading of the cargo on arrival and unfortunately, while lowering the chemical drum onto a lorry, they negligently dropped the drum, causing almost $600 worth of damage. The respondents sued for the loss but the stevedores counter-claimed that their liability should be limited as per the clause stated in the contract.

Issue

The overriding issue for the court to consider, in this case, was whether the clause in the contract, which was inserted by the United States Carriage of Goods by Sea Act 1936, could be relied upon by the stevedores who had damaged the bottle. It was particularly important for the court to consider whether the stevedores were party to the contract between the buyer and seller. 

Held

The court held that the clause could not be relied upon by the plaintiffs as the United States Carriage of Goods by Sea Act 1936 did not apply to stevedores. Moreover, the stevedores were not a party to the contract, by either express or implied terms, between the parties. They were, therefore, a stranger to the contract and the court relied upon the fundamental principle that a stranger cannot rely upon a contract they are not a party to.


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