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Warranty disclaimers for UK transactions should also disclaim “conditions” – oil seller fails to do so, leaves itself open to $3MM damage award

If you’re a vendor doing a sales transaction under UK law (England, Wales, Northern Ireland), be sure that your warranty disclaimer addresses not just implied warranties but also implied “conditions.”  An oil seller failed to do so and learned that its disclaimer didn’t preclude liability.  See KG Bominflot Bunkergesellschaft Für Mineralöle mbh & Co KG v. Petroplus Marketing AG, [2009] EWHC 1088 (Comm) [link]: 

The parties entered into a contract for the sale of gasoil, a type of heating oil.  The contract was governed by English law. 

The contract provided that delivery was complete, and title and risk passed to the buyer, when the gasoil was loaded onto a certain ship.

The gasoil met the contractual specifications when it was loaded. By the time the ship arrived at its destination, however, the gasoil no longer met the agreed specifications.  The claimed damages were in excess of US$3 million. Id. para. 8.

The seller took the position that all title and risk had passed, therefore the damages were the buyer’s problem. The buyer, though, argued that under the Sale of Goods Act 1979, “it was an implied condition of the sale contract that the goods would be reasonably fit for the purpose of remaining, during their time on the vessel and for a reasonable time thereafter, within the specifications set out in the sale contract." Id. para. 7 (quoting buyer’s argument).

The judge agreed with the buyer, holding that by failing to disclaim implied conditions as well as implied warranties, the seller had left itself open to the buyer’s claim:

49. If the failure to use the word “condition” renders clause 18 [the warranty disclaimer] of little or no effect, so be it. The sellers agreed to the wording of clause 18 in the face of Wallis v Pratt and must live with the consequences.

(Hat tip:  Ken Adams.)

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