A judge in the Court of Session ruled that the condition, which sought to restrict liability, should be deleted from the contract.

Lord Woolman heard that the pursuers Dundee City Council, Angus Council and Perth & Kinross Council combined under the name “Tayside Contracts” to carry out various tasks, including road maintenance.

In March 2010, Tayside Contracts asked the defender, D. Geddes Contractors Limited, to provide a quotation for the supply of stone chippings.

In April, Tayside Contracts accepted the defender’s offer to supply chippings from a quarry in Arbroath and the parties entered into further contracts – all of which incorporated the defender’s standard terms and conditions.

In the financial year 2010-11, Tayside Contracts purchased a total of 8,764.59 tonnes of chippings from the defender at cost of £176,631.26 and used the chippings in the course of its road maintenance programme in the summer of 2010.

However, within a matter of months problems had developed and by mid-winter there were widespread failures of the road surfaces.

The pursuers’ investigations disclosed that the problems were attributable to the composition of the defender’s chippings and they raised an action seeking damages of £812,718 for breach of contract, claiming that the defender failed to supply materials that were of satisfactory quality or reasonably fit for their purpose, contrary to section 14 (2) and 14 (3) of the Sale of Goods Act 1979, but the defender denied liability.

The factual dispute will be resolved by way of proof, but there was a preliminary legal issue for determination.

The defender maintained that condition 6 of its standard terms – which contained a time-bar restriction, a limitation clause and an exclusion clause – restricted its liability.

The clause provided that: “The company will not entertain a complaint of any kind (except in special circumstances justifying delay) unless it is made in writing within 24 hours after the time of supply of the materials or goods of which a complaint is made or any materials or goods supplied by the company should be defective or in any way not in accordance with contract liability shall be limited to the cost price of the material supplied. The company is not under any circumstances to be liable for any loss or damage whether direct or indirect caused or arising by reason of the late supply or any fault failure or defect in any materials or goods supplied by them or by reason of the same not being the quality or specification ordered or by reason of any matter whatsoever.”

On behalf of the pursuers, it was argued that a clause restricting liability must be clear and unambiguous, but condition 6 failed that test because the limitation and exclusion elements were “mutually inconsistent”. It was therefore “void for uncertainty”.

On behalf of the defender, it was submitted that the court should prefer a construction that gave effect to condition 6, rather than one which rendered it void. As the parties plainly intended to restrict liability, the court should adopt a “blue pencil” approach and give effect to that intention by putting a line through the second sentence.

Sustaining the pursuer’s plea in law, the judge held that the clause was “poorly drafted”.

Delivering his opinion, Lord Woolman said: “The difficulties begin with the time-bar restriction. It imposes an extremely tight timescale on a purchaser, who must make a written complaint within 24 hours of delivery. That appears wholly unrealistic in relation to stone chippings, where any problem is as likely to be latent as patent.

“The scope of the qualification is uncertain. It can be contended that ‘special circumstances justifying delay’ will apply in virtually every case. It can also be maintained, however, that as the parties’ transaction involved the supply of stone chippings, a latent defect does not amount to special circumstances.

“The uncertainty deepens when the limitation and exemption provisions are considered. In the event of a breach by the defender, the purchaser is understandably left confused as to its rights. Is it prevented from recovering damages at all, or can it recover the cost price of the defective chippings? As it stands, there is no plain answer. An insurer which acted for either the pursuers or the defender would find it impossible to assess the risk.”

He also declined to adopt the “blue pencil” approach, which is commonly applied in relation to restrictive covenants.

“To adopt a blue pencil approach would turn a claim where there was no liability to one where there was restricted liability. That does not make commercial common sense. It alters the parties’ intention,” Lord Woolman added.