Citation(s) [1956] EWCA Civ 4 End date June 12, 1956 | Decision by Lord Denning | |
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Full case name Karsales (Harrow) Ltd. v. Frank Ernest Wallis Decided June 12, 1956 (1956-06-12) Ruling court Court of Appeal of England and Wales Judge sittings Alfred Denning, Baron Denning, Norman Birkett, 1st Baron Birkett, Hubert Parker, Baron Parker of Waddington Similar McCutcheon v David MacBray, Heilbut - Symons & Co v Buc, J Spurling Ltd v Bradshaw, Olley v Marlborough Court Ltd, George Mitchell (Chesterh | ||
Karsales (Harrow) Ltd v Wallis [1956] EWCA Civ 4 is an English contract law case which established the rules of fundamental breach. The court was unanimous in the decision handed down by Denning LJ in replacing the Rule of Strict Construction, which stated that the contract was constructed to do only what it says it will do.
Contents
Karsales has been controversial because it set precedent which says judges can override contracts and create a "better" contract in equity, even though both parties agreed to the original contract.
Facts
Mr. Wallis viewed a used Buick car that was being sold by Stinton for ₤600. Wallis found the car to be in excellent condition, and agreed that he would buy the car if Stinton would arrange financing through a hire-purchase company. Karsales (Harrow) Ltd. bought the car and sold it to Mutual Finance Ltd., which then finally lent the car to Wallis on hire-purchase terms. Wallis had not seen the vehicle since his first viewing.
About a week later, the car was left outside, late at night. The following morning, Wallis inspected the car and found it to be in a substantially different state than it was when he first saw the vehicle: the bumper was being held on by a rope, the new tires were taken off and old ones put on, the radio had been removed, the chrome strips around the body were removed, and the car would not run. Wallis refused to pay for the car since it was not in the same condition as when he agreed to make the purchase.
Trial
Karsales sued Wallis for the remaining payments on the vehicle. Karsales relied on an exclusion clause in their contract, which stated that
"No condition or warranty that the vehicle is roadworthy or as to its age, condition or fitness for any purpose is given by the owner or implied herein."The trial judge held that this clause did allow Karsales to recover the remaining costs from Wallis, and entered a judgement against him.
Court of Appeal
On appeal, Denning LJ reversed the trial judge's decision. He said the following.
Significance
Denning LJ established a new precedent by declaring this a fundamental breach: that is, a breach that goes to the root of the contract, where the breach is so severe that there cannot be a contract after this breach. This decision set the precedent that goes against the Strict Construction rule. In Strict Construction, the rule is that the contract is intended to do what it says it will do, and that judges can only apply what the contract says within its own terms. Since the contract has been agreed upon by both parties, the contract is seen as representing both parties' interests. However, Denning ruled against this rule since it would not be equitable (or fair) for both parties.