Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1978]
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Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1978] QB 791 addressed the issue of remoteness of damage in the context of a contract for the purchase and installation of bulk food storage hoppers. The majority held that losses for breach of contract are recoverable if the type or kind of loss is a likely result of the breach of contract. However, Lord Denning MR, dissenting on the reasoning, proposed a distinction between losses for physical damage (subject to the same restrictive test as in tort) and economic losses, suggesting a wider remoteness rule for economic losses.
Parsons, a pig farming company, purchased bulk food storage hoppers from Uttley Ingham & Co, which were installed on their farm. Due to an oversight by the installer, the ventilator top of one of the hoppers was not unsealed as it should have been. This resulted in the stored pignuts becoming mouldy. The company continued to feed the mouldy pignuts to the pigs, leading to an outbreak of E. coli. As a result, a significant number of pigs died, causing financial losses for Parsons.
The Court of Appeal unanimously held that the loss suffered by Parsons was not too remote. However, the reasoning behind the decision varied among the judges. Scarman LJ and Orr LJ held that the type of loss, rather than the actual loss, is relevant when applying the contract remoteness test. They emphasised that the test generally should not differ in contract or tort merely based on the cause of action. They considered it absurd for the test to be different for loss of profit and physical damage, asserting that the focus should be on what the parties would have reasonably contemplated at the time of the contract.
Lord Denning MR, while concurring with the result, dissented on the reasoning. He proposed a distinction in contract law between loss of profit (economic loss) and physical damage. He suggested that for economic losses, the loss should have been foreseen as a "serious possibility," while for physical damage, compensation should be awarded even if there is only a "slight possibility." Lord Denning relied on the emerging distinction between economic loss and physical damage in contract law, akin to that observed in tort.
The court ultimately allowed Parsons to recover damages for the death of the pigs and associated expenses. The decision highlighted the ongoing debate over the appropriate test for remoteness of damage in contract law, particularly concerning economic losses and physical damage.
Parsons, a pig farming company, purchased bulk food storage hoppers from Uttley Ingham & Co, which were installed on their farm. Due to an oversight by the installer, the ventilator top of one of the hoppers was not unsealed as it should have been. This resulted in the stored pignuts becoming mouldy. The company continued to feed the mouldy pignuts to the pigs, leading to an outbreak of E. coli. As a result, a significant number of pigs died, causing financial losses for Parsons.
The Court of Appeal unanimously held that the loss suffered by Parsons was not too remote. However, the reasoning behind the decision varied among the judges. Scarman LJ and Orr LJ held that the type of loss, rather than the actual loss, is relevant when applying the contract remoteness test. They emphasised that the test generally should not differ in contract or tort merely based on the cause of action. They considered it absurd for the test to be different for loss of profit and physical damage, asserting that the focus should be on what the parties would have reasonably contemplated at the time of the contract.
Lord Denning MR, while concurring with the result, dissented on the reasoning. He proposed a distinction in contract law between loss of profit (economic loss) and physical damage. He suggested that for economic losses, the loss should have been foreseen as a "serious possibility," while for physical damage, compensation should be awarded even if there is only a "slight possibility." Lord Denning relied on the emerging distinction between economic loss and physical damage in contract law, akin to that observed in tort.
The court ultimately allowed Parsons to recover damages for the death of the pigs and associated expenses. The decision highlighted the ongoing debate over the appropriate test for remoteness of damage in contract law, particularly concerning economic losses and physical damage.
