Elder Dempster v Paterson Zochonis

Elder Dempster v Paterson Zochonis

Recognised the vicarious liability principle, whereby a principle party’s agents may expect the same protections as contractually provided to the principle.

Facts

An action in tortious negligence was brought against a ship owner for failing to properly store cargo. In response, the ship owner attempted to rely on an exclusion of liability clause written in the bills of lading, even though the contract regarding the cargo’s transport had been made between the shipper and charterer.

Issue

Whether an exclusion of liability clause in a contract could be relied upon by a party who was not privy to the contract.

Decision/Outcome

The House of Lords unanimously held that the ship owner could successfully rely upon the exclusion of liability clause as a defence to tortious negligence, on the grounds of vicarious immunity. Per this principle, an agent of a party may expect and claim the same liability immunity that their employer/the instructing agent held. Thus, despite that the ship owner was not privy to the bills of lading agreement, as an agent of the charterer, they could claim protection from the same exclusion of liability clause that the charterer’s benefit from. Notably, public policy was considered to be an influential factor here, given the impact it would have had on the shipping industry were liability imposed. Furthermore, despite the unanimous decision, this case is noted for the disparate reasoning of the presiding judges and its influence on conceptions of the theoretical and jurisprudential underpinnings of contract law.

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