The Retrofitted Warehouse Racking
A logistics company signed a three-year contract with a warehouse operator for storage of 4,000 pallets. The written agreement contained an entire-agreement clause, a clause excluding liability for 'loss of profit or business interruption however arising', and a clause limiting total liability to the fees paid in the preceding 12 months. During negotiations the operator's sales manager had said orally that the operator 'always keeps two backup forklifts on site'. In fact there were none. A forklift breakdown caused a four-day stoppage; the client lost a key retail contract worth £220,000 and incurred £40,000 in wasted staff costs. Annual fees were £96,000. The client sues for misrepresentation and breach.
1. Can the client rely on the oral statement about backup forklifts despite the entire-agreement clause?
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The entire-agreement clause is strong evidence that the parties intended the written document to be the whole bargain, and it will usually prevent the statement being treated as a contractual term or a collateral warranty. But an entire-agreement clause does not automatically exclude liability for a pre-contractual misrepresentation, particularly a fraudulent one. The statement here was a specific factual assertion by a person with apparent authority; if it was made knowing it was false, or recklessly, it is a fraudulent misrepresentation and the exclusion cannot bite. If it was merely careless, the clause may be construed as covering it only if clear words are used. The client's best route is to plead misrepresentation, argue the statement induced the contract, and seek rescission or damages, while accepting that the entire-agreement clause weakens any claim that the statement became a term.
2. How will the exclusion and limitation clauses affect the £220,000 lost-contract claim and the £40,000 wasted costs?
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The clauses must be interpreted in context. 'Loss of profit or business interruption however arising' plainly covers the £220,000 lost retail contract as business interruption, even though it is characterised as loss of a chance. The £40,000 wasted staff costs is less clearly within that wording; it may be wasted expenditure rather than lost profit, so it could fall outside the specific exclusion. However, the cap of 12 months' fees (£96,000) applies to total liability, so even recoverable wasted costs are subject to that ceiling. The client should also argue that the cap does not apply to the misrepresentation claim, since a clause limiting liability for fraud is ineffective. If the misrepresentation claim succeeds, the exclusion and cap may be disapplied for that head of loss, allowing recovery beyond £96,000 subject to remoteness and mitigation.