Extent and enforceability of ‘limited warranty’
CHRISTIE’S v AVRORA [2012]
This decision concerned an attempt by the well-known auction house to ensure that any remedies of the buyer of a painting were limited to claims for breach of contract under an express ‘Limited Warranty’.
Facts:
- In its conditions of sale, C provides buyers with the following express warranty: “For five years from the date of sale, Christie’s warrants that, where the description of the painting was stated without qualification in the catalogue to be the work of a named author, the property is authentic and not a forgery".
- The terms then go on to say:
- “Apart from this express warranty, [we do not] give any representation, warranty or guarantee or assume any liability of any kind in respect of any lot… Except as required by local law any warranty of any kind whatsoever is excluded by this paragraph."
- "All statements in the catalogue … are statements of opinion and are not to be relied on as statements of fact. Such statements do not constitute a representation, warranty or assumption of liability of any kind."
- [Except for the express warranty] "C is [not] responsible in any way for errors in the catalogue … all property is sold without any representation or warranty. Buyers are responsible for satisfying themselves concerning matters referred to in the catalogue. … We are [not] responsible for the correctness of any statement concerning any lot, nor for any other errors or omissions in descriptions."
- “The buyer's sole and exclusive remedy against C, in place of any other remedy which might be available, is the cancellation of the sale and the refund of the original purchase price paid for the lot …"
- These provisions, albeit in a somewhat repetitive and rather inelegant way, seek to prevent C becoming vulnerable to any claim other than the one under the Limited Warranty, notably on the basis of negligence or misrepresentation. A made a claim against C on the basis of breach of warranty, negligence and misrepresentation for the full amount of its loss which presumably included the full, increased value of the painting had it been genuine.
Decision:
- C was held to have expressed an opinion (supported by the express warranty) and to have impliedly represented that it had reasonable grounds for holding that opinion. However, C tried to exclude a duty of care arising and attempted to prevent A from placing reliance on any representations.
- The Judge found, on balance, that the terms were effective in preventing a duty of care arising ie that there was no ‘assumption of responsibility’ by C.
- Because the Judge found that these terms “departed from reality” (since by making statements in the catalogue the auctioneers had, in fact, expressly accepted responsibility for identifying the author of the work sold), they were held to amount to limitations of liability and were therefore subject to the UCTA reasonableness test. He held, however, that the exclusions were reasonable as a substantial remedy was considered to be available for breach of the contractual Limited Warranty – a refund of the price paid.
Points to Note:
- Provisions which negate an assumption by a contracting party of responsibility for both negligence and misrepresentation might not be subject to the UCTA reasonableness test and could be effective as drafted where they are consistent with reality. However, where there is this ‘departure’ from reality, they may very well be subject to the reasonableness test.
- The provisions limiting and excluding liability did not explicitly make reference to negligence. In this instance it was not fatal for C, but it is usually sensible to expressly state that limitations and exclusions apply to liability in negligence as well as to other potential forms of liability.
- No discussion took place as to the insurance cover which C had in place when considering the reasonableness of the limitation clauses (in contrast to the Ampleforth case).
- Upholding the exclusions as reasonable in context was perhaps not particularly surprising. A was entitled to be repaid its purchase price in full (seemingly including a significant buyer premium/commission) whilst of course C was only the recipient of the buyer premium element and not the majority of the purchase price. Although there was some argument that the clause was unreasonable because it did not provide for the payment of interest and took no account of possible exchange rate losses suffered by A, this was unsuccessful. The position might, however, have been quite different had C not allowed for a substantial remedy under the Limited Warranty.