The Facts

Pharmaceutical company buys shipment of flu vaccines

A dispute involving the pharmaceutical industry revolved around the exemption clauses in a contract.

An Australian pharmaceutical company purchased a shipment of influenza vaccines from the United Kingdom in preparation for the 1999 flu season.

The vaccine was required to be stored at a certain temperature and meet other delivery requirements.

The collection, storage and transportation of the vaccine was to be handled by a separate company. This process was arranged by a retailer of medical supplies.

Agent signs contract without reading conditions

As an agent for the pharmaceutical company, the retailer entered into a contract with the company employed to store and deliver the vaccine.

When it came to settling the contract, the agent signed it without inspecting a declaration appearing just above the place where a signature was required: "Please read 'Conditions of Contract' (Overleaf) prior to signing."

The agent neglected to read the relevant conditions and exemption clauses of the contract, nor were they communicated in any dialogue between the parties. Importantly, one of these clauses provided that the carrier would not be responsible for any damage to the vaccine shipments.

Pharmaceutical company sues transport company for negligence

During delivery the vaccine was destroyed, as it was stored at the incorrect temperature.

The pharmaceutical company subsequently sued the transport company for damages for negligence.

However, the transport company claimed it was not liable for the destruction of the vaccines due to one of the exemption clauses in the contract.

It was up to the court to decide if the transport company was indeed liable for the destruction of the vaccines.

case a - The case for the transport company

case b - The case for the pharmaceutical company

  • As the pharmaceutical company authorised an agent to act on its behalf in terms of rates of freight and payment agreements, it is bound by the exemption clauses of the contract.
  • We clearly stated in the original contract that it is imperative to read the "Conditions of Contract" on the other side of the page.
  • It is not our fault the pharmaceutical company's agent did not bother to read them.
  • We did not rush the agent or trick him into signing the contract.
  • Although the agent failed to read these conditions, he nonetheless signed the contract - and a signature is an act of being bound to a contract.
  • We are technically not a party to the contract, as we had an agent sign it on our behalf.
  • Our agent did not read the terms and conditions overleaf and thus had no knowledge of the exemption clauses. Hence, the transport company cannot rely on these clauses and is indeed liable.
  • Even though our agent failed to read the exemption clauses, the transport company made no mention of them in conversation between the parties.
  • Our agent (the retailer of medical supplies) sent a fax to the transport company expressing the significance of the transportation. The fax specified: "These are highly perishable vaccines for flu inoculation in humans. It is therefore vital that you can assure us of being able to maintain and evidence your part of the cold chain from pick up to drop off."
  • Even though our agent signed the contract, the transport company did not do everything reasonably sufficient to ensure that all parties had read and understood the terms and conditions.

So, which case won?

Cast your judgment below to find out

Anneka Frayne
Business disputes and litigation
Stacks Law Firm

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