Contract Law Notes - Tort, manufacturers and subcontractors
These contract law notes cover tort, manufacturers and subcontractors. Use our notes for exam revision or simply as a reference guide for your essays or otherwise.
- Personal injury/property damage caused by manufacturer’s/sub-contractor’s negligence
Donoghue v Stevenson  AC 562 (BBF 24)
Consumer Protection Act 1987
Hedley Byrne v Heller  AC 465 (BBF 28)
Caparo Industries Ltd v Dickman  1 All ER 568 (noted, BBF 30)
D alleged to have audited annual accounts negligently. HL: Foreseeability of loss not enough, must be proximity, fair and reasonable. No duty to investors who bought shares in reliance on the accounts.
… in this category of the tort of negligence, [it is] an essential ingredient of the ‘proximity’ between the plaintiff and the defendant, that the defendant knew that his statement would be communicated to the plaintiff, either as an individual or as a member of an identifiable class, specifically in connection with a particular transaction or transactions of a particular kind (eg in a prospectus inviting investment) and that the plaintiff would be very likely to rely on it for the purpose of deciding whether or not to enter on that transaction or on a transaction of that kind.
Dutton v Bognor Regis  1 QB 373 (noted BBF 31)
D had statutory power to inspect the foundations of houses under construction but its surveyors negligently failed to stop a house being built on inadequate foundations. CA allowed a subsequent owner of the house to recover the cost of repair for it from D. Lord Denning MR and Sachs LJ were prepared to treat the loss as physical damage and said that the builder would equally have been liable. Stamp LJ agreed that the Council was liable but did not agree that the builder would have been liable.
. . . [A] distinction has been drawn between constructing a dangerous article and constructing one which is defective or of inferior quality. I may be liable to one who purchases in the market a bottle of ginger beer which I have carelessly manufactured and which is dangerous and causes injury to person or property; but it is not the law that I am liable to him for the loss he suffers because what is found inside the bottle and for which he has paid money is not ginger beer but water. I do not warrant, except to an immediate purchaser, and then by the contract and not in tort, that the thing I manufacture is reasonably fit for its purpose.
. . . the distinction between the case of the manufacturer of a dangerous thing which causes damage and that of a thing which turns out to be defective and valueless lies I think not in the nature of the injury but in the character of the duty. I have a duty not carelessly to put out a dangerous thing which may cause damage to one who may purchase it, but the duty does not extend to putting out carelessly a defective or useless or valueless thing.
Anns v Merton LBC  AC 728 (noted, BBF 31)
As the purpose of the statutory powers was to ensure that houses were built in compliance with the bye-laws, the council would be liable for the cost of any repairs necessary to remove any danger to health and safety of the occupants through non-compliance if negligence on the part of the council or its employees were shown.
Junior Books Ltd v Veitchi Co Ltd  1 AC 520 (BBF 1163)
P nominated D as sub-contractor to lay floor of factory. The floor proved unsatisfactory and had to be replaced. There was no contract between P and D and P brought an action in tort alleging negligence. Conceded that D liable for cost of averting any danger, but the floor was not dangerous.
- The appellants were nominated sub-contractors. (2) The appellants were specialists in flooring. (3) The appellants knew what products were required by the respondents and their main contractors and specialised in the production of those products. (4) The appellants alone were responsible for the composition and construction of the flooring. (5) The respondents relied upon the appellants’ skill and experience. (6) The appellants as nominated sub-contractors must have known that the respondents relied upon their skill and experience. (7) The relationship between the parties was as close as it could be short of actual privity of contract. (8) The appellants must be taken to have known that if they did the work negligently (as it must be assumed that they did) the resulting defects would at some time require remedying by the respondents expending money upon the remedial measures as a consequence of which the respondents would suffer financial or economic loss.
The concept of proximity must always involve, at least in most cases, some degree of reliance—I have already mentioned the words ‘skill’ and ‘judgment’ in the speech of Lord Morris of Borth-y-Gest in Hedley Byrne  AC 465 at 503. These words seem to me to be an echo, be it conscious or unconscious, of the language of section 14(1) of the Sale of Goods Act 1893. My Lords, though the analogy is not exact, I do not find it unhelpful for I think the concept of proximity of which I have spoken and the reasoning of Lord Devlin in the Hedley Byrne case involve factual considerations not unlike those involved in a claim under section 14(1); and as between an ultimate purchaser and a manufacturer would not easily be found to exist in the ordinary everyday transaction of purchasing chattels when it is obvious that in truth the real reliance was upon the immediate vendor and not upon the manufacturer . . .
Muirhead v Industrial Tank Specialists  QB 507
Claim for loss of profit caused when motors driving pumps at lobster farm failed. Supplier selected by main contractor, so (Goff LJ) no “voluntary assumption of responsibility”.
Simaan General Contracting v Pilkington Glass  1 All ER 791
Glass supplied for project in Middle East had reddish tinge instead of green; action against nominated supplier brought by contractor
Greater Nottingham Co-op v Cementation  2 All ER 971
Claim by employer against nominated sub-contractor for delay caused by alleged negligence in carrying out work. Nominated sub-contractor had entered direct collateral warranty with employer but this did not address the question of delay.
D&F Estates v Church Commissioners  AC 177
Plaster fell from walls. HL: could recover only cost of removing danger, not the cost of re-plastering. D might be liable under “complex structure theory” where negligence in constructing one part of building caused damage to another.
Murphy v Brentwood DC  1 AC 398 (BBF 33)
Foundations of house inadequate; plan had been approved. P alleged imminent risk to health and safety. HL: Neither Council nor builder owed a duty of care to occupier; merely a case of a defective product, no duty of care in tort, compare where defect has caused injury or property damage. Even if dangerous, loss is purely economic as P can simply stop using the house.
Complex structure theory re-iterated
Junior Books not overruled: can only be understood on basis of special relationship so that duty of care embraces pure economic loss.
Department of Environment v Thomas Bates  2 All ER 943
Building would not carry intended load, therefore less valuable to lessees. Builder not liable in tort.
(i) A chain of contracts
(ii) a direct warranty; or
(iii) Contracts (Rights of Third Parties) Act 1999