In the Court of Appeal
Grabbit and Runn Ltd v Webfix Ltd
Grabbit and Runn are estate agents. They wanted to increase their business and raise their market profile, so they decided to invest in a new website for use in promoting the houses and other properties they sold. They paid Webfix, a website design company, to re-design their existing website according to a detailed specification, for a total cost of £10,000. Part of the package included software that would enable Grabbit and Run to upload photos to the website and edit them online.
Two months after the work was completed and Webfix had been paid, Grabbit and Runn put promotional literature for the properties they were attempting to sell on the new website. All went well until one day when all the images (photos of the houses etc for sale) stored on the website suddenly became corrupted. The website hosts told them the photos were irretrievable and the properties would all have to be re-photographed. Grabbit and Runn had to retake approximately 100 photographs that were lost, and in the meantime had no pictures of the properties they were selling on the website. Because of this, they failed to make two property sales, as a result of which they lost a total of £15,000 commission (the sales were arranged by other agents with purchasers who had been making enquiries with Grabbit and Runn until the website went down).
It was established that the corruption of the digital image files was caused by a fault in the software that was designed and supplied by Webfix. Webfix accept liability for the cost of replacing the faulty software, but deny liability for the loss of commission, relying on Clause 2 of the contract that was signed by Grabbit and Runn:
"The Customer agrees that Webfix’s liability in the event of any goods (including software) or service being defective shall be limited to replacement cost and that under no circumstances will Webfix be liable for any consequential loss whatsoever."
Grabbit and Runn sue Webfix for breach of contract in order to recover the lost commission. In the County Court, it was held:
1) Webfix were clearly in breach of s4(2) Supply of Goods and Services Act 1982 in that the software provided with their design service was not of satisfactory quality. The £15,000 lost commission was a result of this breach and was not too remote, falling within the remit of foreseeable damage according to the principle in Hadley v Baxendale, thus Webfix are liable for the £15,000 unless clause 2 of the contract is deemed to exempt them from liability on this occasion.
2) Clause 2 was incorporated into Grabbit and Runn’s contract with Webfix by virtue of being signed, but could not be relied on to limit liability for the breach of s4(2) SGSA because a) under UCTA 1977 s7(2) it is not possible to limit liability for breach of s4 SGSA where someone deals as consumer, and b) Grabbit and Runn on this occasion dealt as consumer within the definition of s12 UCTA because of the decision of the Court of Appeal in R&B Customs Brokers v United Dominions Trust.
Webfix appeals against this decision on the following grounds:
1) That the damage being claimed for was in fact too remote, as it falls outside of the ordinary Hadley v Baxendale principles and is more properly construed as being damage of the type envisaged in Victoria Laundries v Newman, thus Grabbit and Runn has no claim and the application of Clause 2 is immaterial.
2) If the court finds in the alternative that the damage was foreseeable;
i) on the true construction of s12 UCTA, Grabbit and Runn should not be treated as dealing as consumer, and
ii) if Grabbit and Runn did not deal as consumer, then a) under s7(3) UCTA the clause is subject to the requirement of reasonableness, and b) the clause is reasonable.
© Dr Kirsty Horsey 2008
