Watford Electronics Ltd v Sanderson CFL Ltd [2001] EWCA Civ 317

Facts

  • Watford Electronics Ltd, a family-owned mail-order supplier of computer equipment, contracted with Sanderson CFL Ltd for an integrated software system.
  • After installation, the software did not perform as required.
  • The contract included an entire agreement clause stating no reliance on pre-contractual statements or representations.
  • Watford Electronics brought a claim for the system’s failure.
  • The trial judge ruled the contract’s limitation clause invalid due to unreasonableness.
  • Sanderson CFL Ltd appealed to the Court of Appeal.

Issues

  1. Whether the limitation clause effectively excluded or limited liability, especially concerning pre-contractual discussions and representations, in light of commercial context.
  2. Whether the limitation clause was reasonable under section 11(1) of the Unfair Contract Terms Act 1977, considering statutory provisions from the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982.

Decision

  • The Court of Appeal found the judge had erred in assessing the scope of the limitation clause.
  • The limitation clause did not exclude all pre-contractual elements or liability for misrepresentation.
  • The existence of a contractual duty for the defendant to mitigate losses was a separate obligation not excluded by the clause.
  • The claimant’s standard business terms and the commercial setting of the contract were relevant to the clause’s reasonableness.
  • The appeal was allowed; the limitation clause was deemed reasonable and enforceable in this context.

Legal Principles

  • Implied terms under the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982 require goods to match their description and be fit for purpose, creating strict liability.
  • Exclusion or limitation clauses must be incorporated into a contract, be precisely worded, and not misrepresented; ambiguities are interpreted against the party seeking to rely on them (contra proferentem rule).
  • Exclusion clauses in B2B contracts are valid only if reasonable under the Unfair Contract Terms Act 1977, with the burden on the party relying on the clause to prove reasonableness.
  • The courts consider bargaining power, opportunity to negotiate, available alternatives, the existence of separate obligations, and the overall contractual context in assessing reasonableness.
  • Entire agreement clauses do not preclude liability for misrepresentation unless expressly stated.

Conclusion

The Court of Appeal held the limitation clause in the Watford Electronics contract reasonable and enforceable, emphasizing that exclusion clauses in B2B contracts must be assessed in their full contractual and statutory context to ensure fairness and clarity in risk allocation.

The answers, solutions, explanations, and written content provided on this page represent PastPaperHero's interpretation of academic material and potential responses to given questions. These are not guaranteed to be the only correct or definitive answers or explanations. Alternative valid responses, interpretations, or approaches may exist. If you believe any content is incorrect, outdated, or could be improved, please get in touch with us and we will review and make necessary amendments if we deem it appropriate. As per our terms and conditions, PastPaperHero shall not be held liable or responsible for any consequences arising. This includes, but is not limited to, incorrect answers in assignments, exams, or any form of testing administered by educational institutions or examination boards, as well as any misunderstandings or misapplications of concepts explained in our written content. Users are responsible for verifying that the methods, procedures, and explanations presented align with those taught in their respective educational settings and with current academic standards. While we strive to provide high-quality, accurate, and up-to-date content, PastPaperHero does not guarantee the completeness or accuracy of our written explanations, nor any specific outcomes in academic understanding or testing, whether formal or informal.
No resources available.

Job & Test Prep on a Budget

Compare PastPaperHero's subscription offering to the wider market

PastPaperHero
Monthly Plan
$10
Assessment Day
One-time Fee
$20-39
Job Test Prep
One-time Fee
$90-350

Note the above prices are approximate and based on prices listed on the respective websites as of May 2025. Prices may vary based on location, currency exchange rates, and other factors.

Get unlimited access to thousands of practice questions, flashcards, and detailed explanations. Save over 90% compared to one-time courses while maintaining the flexibility to learn at your own pace.

All-in-one Learning Platform

Everything you need to master your assessments and job tests in one place

  • Comprehensive Content

    Access thousands of fully explained questions and cases across multiple subjects

  • Visual Learning

    Understand complex concepts with intuitive diagrams and flowcharts

  • Focused Practice

    Prepare for assessments with targeted practice materials and expert guidance

  • Personalized Learning

    Track your progress and focus on areas where you need improvement

  • Affordable Access

    Get quality educational resources at a fraction of traditional costs

Tell Us What You Think

Help us improve our resources by sharing your experience

Pleased to share that I have successfully passed the SQE1 exam on 1st attempt. With SQE2 exempted, I’m now one step closer to getting enrolled as a Solicitor of England and Wales! Would like to thank my seniors, colleagues, mentors and friends for all the support during this grueling journey. This is one of the most difficult bar exams in the world to undertake, especially alongside a full time job! So happy to help out any aspirant who may be reading this message! I had prepared from the University of Law SQE Manuals and the AI powered MCQ bank from PastPaperHero.

Saptarshi Chatterjee

Saptarshi Chatterjee

Senior Associate at Trilegal