Canada Steamship Lines Ltd v The King is a Canadian contract law

Canadian contract law

Canadian contract law has its foundation in the English legal tradition of the 19th and early 20th century. It remains largely rooted in the old English common law and equity. Individual provinces have codified many of the principles in a Sale of Goods Act, which was also modeled on early English...

 case concerning the interpretation of unfair terms contra proferentum. The case was decided by the Judicial Committee of the Privy Council

Judicial Committee of the Privy Council

The Judicial Committee of the Privy Council is one of the highest courts in the United Kingdom. Established by the Judicial Committee Act 1833 to hear appeals formerly heard by the King in Council The Judicial Committee of the Privy Council (JCPC) is one of the highest courts in the United...

, at that time the court of last resort for Canada

Canada

Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

, as part of the British Empire and Commonwealth. Although decided under Canadian law, it has been influential in similar cases under English law.

Facts

Clause 8 in a contract said the Crown would keep a freight shed in repair, where Canada Steamship Lines Ltd’s goods were being stored. This was at St Gabriel Basin, on a wharf of the inner harbour of Montreal

Montreal

Montreal is a city in Canada. It is the largest city in the province of Quebec, the second-largest city in Canada and the seventh largest in North America...

. Unfortunately, while trying to keep the shed in repair with an oxy-acetylene torch, an employee started a fire

Fire

Fire is the rapid oxidation of a material in the chemical process of combustion, releasing heat, light, and various reaction products. Slower oxidative processes like rusting or digestion are not included by this definition....

 and burned down the shed. According to proper practice he was negligent and should have used a hand drill because sparks flew and lit some cotton bales. $533,584 of goods were destroyed, $40,714 belonging to Canada Steamship Lines. Clause 7 said ‘the lessee shall not have any claim… for… damage… to… goods… being… in the said shed.’ Clause 17 said “the lessee shall at all times indemnify ... the lessor from and against all claims ... by whomsoever made ... in any manner based upon, occasioned by or attributable to the execution of these presents, or any action taken or things done ... by virtue hereof, or the exercise in any manner of rights arising hereunder.” The Crown argued that Canada Steamship could not sue because clause 7 excluded liability.

Advice

Giving the advice of the Judicial Committee of the Privy Council, Lord Morton of Henryton said that clause 7 did not exclude negligence liability in clear enough terms and clause 17 was ambiguous and would be construed against the Crown. The Crown could realistically be said to have been strictly liable for damage to the goods (e.g. by breach of obligation to keep the shed in repair) and therefore negligence should not be covered. He set out these principles, that (1) if a clause expressly excludes liability for negligence (or an appropriate synonym ) then effect is given to that. If not, (2) one should ask whether the words are wide enough to exclude negligence and if there is doubt that is resolved against the one relying on the clause. If that is satisfied then (3) one should ask whether the clause could cover some alternative liability other than for negligence, and if it can it covers that. In this cause another form of liability for damage was strict liability, and so the exclusion clause did not work to cover negligence.

See also

• English contract law
  English contract law
  English contract law is a body of law regulating contracts in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries across the Commonwealth , and the United States...
  
  
• Unfair Contract Terms Act 1977
  Unfair Contract Terms Act 1977
  The Unfair Contract Terms Act 1977 is an Act of Parliament of the United Kingdom which regulates contracts by restricting the operation and legality of some contract terms. It extends to nearly all forms of contract and one of its most important functions is limiting the applicability of...
  
  
• Unfair Contract Terms Bill
  Unfair Contract Terms Bill
  The Unfair Contract Terms Bill is a proposed Act of Parliament of the United Kingdom, which would consolidate two existing pieces of consumer protection legislation, the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999 into one Act...
  
  
• Interpreting contracts in English law
  Interpreting contracts in English law
  Interpreting contracts in English law is an area of English contract law, which concerns how the courts decide what an agreement means. It is settled law that the process is based on the objective view of a reasonable person, given the context in which the contracting parties made their agreement...
  
  
• Hollier v Rambler Motors (AMC) Ltd
  Hollier v Rambler Motors (AMC) Ltd
  Hollier v Rambler Motors Ltd [1972] 2 QB 71 is an English contract law case, concerning the incorporation of terms into a contract and the contra proferentum rule of interpretation. It shows an example of a very hostile interpretation of exclusion clauses.-Facts:Walter Hollier took his Rambler car...
  
  [1972] 1 All ER 399