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.
Updated 20 March 2026
This case summary remains legally accurate as a statement of the decision in Scruttons Ltd v Midland Silicones Ltd [1962] AC 446. The House of Lords’ ruling — that a third party (here, stevedores) cannot rely on a limitation clause in a contract to which they are not a party — correctly reflects the privity of contract doctrine as it stood at the time.
Readers should be aware of two important legal developments that affect the broader context of this case. First, the Contracts (Rights of Third Parties) Act 1999 now allows third parties to enforce or rely upon contractual terms in certain circumstances, most relevantly where the contract expressly provides for this or where the term purports to confer a benefit on the third party (subject to the contracting parties not having indicated otherwise). Had this Act applied, the outcome in Scruttons might have differed, depending on the wording of the contract. Second, following Scruttons itself, the Privy Council in The Eurymedon [1975] AC 154 developed the ‘Himalaya clause’ mechanism, by which stevedores and similar third parties can be brought within the scope of a limitation clause through a collateral contract analysis — effectively providing a practical route around the strict privity rule confirmed in Scruttons. These developments are significant for understanding how the law has evolved since 1962, and students should read this case alongside those authorities.
