Article - Company

Limiting liability for employee theft

The recent case of Frans Maas (U.K.) Limited v Samsung Electronics (UK) Limited [2004] EWHC 1502 (Comm), where a warehouse company was not held liable for the loss of goods which had been stolen by its employees, has illustrated the need for businesses to consider including clauses in their standard terms and conditions of business to limit liability for employee fraud.

Frans Maas, a bailee warehouse company, argued that they were not liable for the loss of mobile telephones belonging to Samsung which were stored on their premises.  Frans Maas had contracted with the other business and included a clause in their standard terms and conditions which "excluded liability howsoever arising".

The Judge decided that Samsung, whose goods had been stolen whilst held in storage, should be bound by the standard terms and took the view that dishonesty by employees was a foreseeable risk in the storage business.  It was further held that the clause excluding liability was reasonable under the Unfair Contract Terms Act 1977 as the parties had equal bargaining power and terms of this sort were commonplace within the storage industry.

Businesses which either deal with storage companies or other companies where theft by employees is fairly commonplace should therefore consider inserting a clause into their standard terms and conditions of business which specifically deals with the exclusion of liability for theft by employees.

Article First Published: 12 April 2005

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