By Stewart Fyfe, of Burnetts Solicitors

Last updated 17:04, Monday, 18 August 2008

A misspelling of a bull's name cost a firm £68,000 in damages. Burnetts Dispute Resolution Department looks at what businesses can do to protect themselves.

Case study: In the recent case of Sclater v Lindsay’s AI, misspelling a bull’s name resulted in semen becoming unsaleable and Carlisle County Court ordering Lindsay’s to pay farmer and Burnetts client, Hamish Sclater, £67,945 damages. Lindsay’s couldn’t believe that such a small mistake could have such far-reaching consequences. The courts will ask ‘what would two reasonably competent business-people, possessing the knowledge these parties had when the contract was formed, have foreseen as the consequences of this breach?’

WE ALL know that if a party breaches a contract, it has to compensate the other for any losses. But consequences can be far-reaching, so how far will the courts go in awarding damages?

In the recent case of Sclater v Lindsay’s AI, misspelling a bull’s name resulted in semen becoming unsaleable and Carlisle County Court ordering Lindsay’s to pay farmer and Burnetts client, Hamish Sclater, £67,945 damages. Lindsay’s couldn’t believe that such a small mistake could have such far-reaching consequences.

The courts will ask “what would two reasonably competent business-people, possessing the knowledge these parties had when the contract was formed, have foreseen as the consequences of this breach?”

Lindsay’s AI deal with many animals, some very valuable. The bull was valuable, but not unforeseeably so.

Also, a pedigree farmer relies on successful breeding to enhance the value of his herd.

Accordingly, it was foreseeable that this mistake could result in substantial losses for Mr Sclater. It came as a shock to Lindsay’s, but, according to the court, they could and should have seen it coming.

So what can businesses do to protect themselves?

Think about your contracts and your customers. What might go wrong and what might be the consequences for them?

Check whether insurance is available against possible losses. Consider written contracts excluding liability for certain losses.

If there are any circumstances which have special significance for you, does the other party know? If not, tell them in writing at the outset.

Review your contract-forming procedures and make sure everyone who forms contracts for your organisation is properly trained.

• Stewart Fyfe is a solicitor in Burnetts’ Dispute Resolution Department. For further information about commercial disputes, contact Burnetts on 01228 552222 or visit www.burnetts.co.uk.