Darlington Futures Ltd v Delco Australia Pty Ltd

What happened?

A futures broker traded on its client's account without authority. The brokerage contract contained a clause excluding liability and another limiting it to a fixed sum. The client argued those clauses could not cover unauthorised trading of that kind.

What did the Court decide?

The clauses were read as they stood. On that reading the exclusion did not cover the unauthorised dealings, but the limitation clause did — the two were construed separately and produced different answers, because their words were different.

Why does this case matter?

Its authority comes from the Court restating settled Australian principle rather than changing it, and from what it declined to do next. English law had by then drawn a distinction between exclusion clauses and mere limitation clauses, applying a gentler approach to the second; the Court noted the suggestion and did not adopt it. So in Australia the two kinds of clause are not governed by different rules.

Contra proferentem survives, but expressly as something applied where appropriate in case of ambiguity — a tie-breaker for genuine ambiguity, not a licence to find ambiguity that is not there. That is a much narrower tool than students usually assume.

Notice that the two clauses in this very case came out differently even though the same approach was applied to both. An answer that disposes of "the exclusion clauses" together has skipped the work.

Exam and application relevance

Set out what the particular clause says, in the setting of the contract as a whole, before reaching for any doctrine — and only if genuine ambiguity survives that reading does contra proferentem do anything. Do not argue that a limitation clause gets an easier ride than an exclusion clause; that distinction was available to this Court and was not taken up. Treat each clause on its own words.

Check your understanding

Why did the limitation clause protect the broker when the exclusion clause did not, given that both were construed the same way?