INTRODUCTION: The plaintiff and the defendant entered into a contract where the latter was required to patrol services for the plaintiff”s photo production factory. Be that as it may, any risk emerging out of default of the representatives of the respondents was restricted by the institutionalized contract which gave—by no means, Co. will be at risk for default by any worker except if such act could have been kept away from exercise of due determination on the part of Co. as manager.

FACTS: Photograph Production Ltd and Securicor had a contract for the arrangement of security by the latter. One Securicor's staff, Mr Musgrove, chose to warm himself while on duty on Photo Production's premises, and he did as such by lighting a fire. The flame spread and torched Photo Production's manufacturing plant, causing them loss adding up to £615,000. Photograph Production sued Securicor, who anyway guarded by indicating a rejection condition in the agreement which expressed “1. Under no circumstances shall the Company be responsible for any injurious act or default by any employee of the company unless such act or default could have been foreseen and avoided by the exercise of due diligence on the part of the company as his employer; nor, in any event, shall the Company be held responsible for: ( a) Any loss suffered by the customer through … fire or any other cause, except insofar as such loss is solely attributable to the negligence of the company's employees acting within the course of their employment.” Condition 2 limited the defendants' potential liability under the terms of the contract “or at common law.” On those grounds, Securicor affirmed that they were not subject to the harm caused. Photograph Production adamantly affirmed that Mr Musgrove's activities as a specialist of Securicor comprised a crucial break of the agreement, and in this way nullified it and extinguished the exclusion clause. In the Court of Appeal, it was held that correspondingly to Karsales (Harrow) Ltd. v Wallis, the convention of principal rupture applied for this situation 1 and that Securicor was along these lines at risk. The Securicor engaged the House of Lords.

 ISSUES:

• if an exemption clause may excuse a fundamental breach of the contract?
• Regardless of whether any exclusion condition, in the present case, can restrain/limit the liability of the defendant?

JUDGMENT:

1. The House of Lords held that the doctrine of fundamental breach is a rule of construction based on the presumed intention of the parties. Whether and to what extent an exclusion clause was to apply doesn’t depend on the kind of breach committed rather on the construction of the contract. Parties should be free to expressly define, exclude or modify their primary and secondary obligations under the contract—to the extent of exemption clauses serving as the basis of a portion of the risks as they think fit—unless they offend equitable rules against penalties or 1 Karsales (Harrow) Ltd. v Wallis, [1956] 1 WLR 936, [1956] 2 All ER 866 are unjust and unfair. Since in the present case, parties unequivocally, and in clear express terms, laid the scope of exclusion clause implying it to be operative even when there was any fundamental breach of contract, hence, the exclusion clause must stand good in the present case.
2. On the facts, the Court found that the exclusion clause limited the primary obligation of Securicor, of being responsible for the safety and security of the premises, to the extent of exercising due diligence as employer of the security-men. This obligation was duly performed by the Co. for it took due care while appointing alleged security guard. Hence, no liability of Securicor exists.