Darlington Futures v Delco Aust

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Citation: Darlington Futures Ltd v Delco Aust Pty Ltd (1986) 161 CLR 500

This information can be found in the Casebook: Paterson, Robertson & Duke, Contract: Cases and Materials (Lawbook Co, 11th ed, 2009), pp. 380-2 [13.30]

Contents

Background facts

  • The Plaintiff [Delco] hired the Defendant [Darlington] to trade for it in the stock market.
  • The contract contained exclusion/limitation clauses:
    • Clause 6 excluded liability for ‘loss arising in any way out of any trading activity undertaken on behalf of the client whether pursuant to this agreement or not.’
    • Clause 7 limited the broker’s liability to $100 in respect of ‘any claim arising out of or in connection with the relationship established by this agreement.’
  • Without the authority of the Plaintiff, the Defendant traded in his names heavy losses were sustained.
  • The Plaintiff sued to recover the damages.

Argument

  • The Defendant sought to rely on his exclusion clauses to exclude/limit liability.

Legal issues

Judgment

  • The Defendant definitely breached the contract, the real question is whether clause 6 protects the Defendant even from consequences of a breach of contract.
  • When an exclusion clause (or limitation clause) is construed, it should still be done with the entirety of the contract in mind.
    • "These decisions clearly establish that the interpretation of an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity[1]."
    • contra proferentem - against the interest of the party trying to rely on it.
  • In this case, Clause 6 only excludes liability for trading done on behalf of the Plaintiff. Since this was done without authority, it is not considered on behalf of the Plaintiff and thus the Defendant is not excluded from liability.
  • Clause 7 however, is phrased in a way which extends to unauthorised transactions. Thus, it limits liability.
  • The Defendant wins, his liability is limited to $100 per transaction (nothing in comparison to how much he actually owes).

References

  1. (1986) 161 CLR 500, 510
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