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Widgets plc entered into a three-year contract with Crankit plc under which Crankit agreed to service Widgets’ production line machinery. Widgets signed a document headed ‘Service Agreement’ consisting of 150 terms, including the following: It shall be a condition of the contract that Crankit will attend in response to any call-out request by Widgets within 24 hours. Crankit will not be responsible to Widgets for any defect in quality of any spare parts supplied by Crankit when servicing customers’ machinery. Widgets agree to indemnify Crankit against any claims by Widgets or any other third party who may suffer damage to person or property arising from any failure properly to perform this service agreement.

Advise the parties how these terms will affect the outcome of a claim in the following circumstances:

When carrying out the first annual service Crankit fits a new fuel pump. This malfunctions 48 hours later, causing an explosion. Injuries result to Jeremy, who lives next door to the factory and the explosion also causes business interruption for three weeks.

Twenty months into the contract Crankit is called upon by Widgets, which reports that a major mechanical failure has brought its production line to a halt. Crankit replies that due to a lack of staff it will be unable to attend for three days. Next day Widgets tells Crankit that it is opting out of the contract as immediate servicing is obtainable from Best and Sons Ltd.

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