Charnock v Liverpool Corporation [1968]

Charnock v Liverpool Corporation [1968] 3 All ER 473 is a notable case in English contract law that addresses the issue of collateral contracts and the inference of contractual relationships between parties. The key principle established in this case is that the existence of a collateral contract between a third party and one of the contracting parties is not precluded by the fact that the third party will be indemnified by the other contracting party.

When Charnock's car was damaged, his insurer sent it to be repaired at the Liverpool Corporation's garage. The insurer entered into a contract with Liverpool Corporation to cover the cost of the repairs. Subsequently, Charnock sued Liverpool Corporation for breach of contract, alleging a delay in the repair process. Liverpool Corporation argued that there was no direct contract between them.

The Court of Appeal allowed Charnock's claim, emphasising the existence of a collateral contract between Charnock and Liverpool Corporation for the repair of the car within a reasonable time. Harman LJ stated that when an individual requests a garage to repair their car, and the garage accepts, a contract is formed to carry out the repairs with reasonable skill and within a reasonable time. He highlighted that the knowledge that the insurance company would indemnify the car owner is common in insurance cases, but it does not negate the existence of a separate contract between the car owner and the repairer.

Salmon LJ concurred, asserting that there was a clear contract inferred from the facts between the garage proprietor and the car owner. This implied contract stipulated that, in exchange for the car owner leaving the vehicle with the garage for repair, the garage would undertake the repairs promptly and with due care. Additionally, the payment for the repairs would be made by the insurance company.

In summary, this case underscores that the involvement of a third party's indemnification does not preclude the inference of a collateral contract between the third party and the other contracting party. The decision recognises that, despite the insurer's role, a direct contractual relationship can exist between the car owner and the repairer.
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