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Home » Smith v Eric S Bush 

Smith v Eric S Bush 

The case of Smith v Eric S Bush [1990] UKHL 1 is a leading decision of the House of Lords that clarified two significant areas of English law — the existence of a duty of care in tort for negligent misstatements made to third parties, and the application of the Unfair Contract Terms Act 1977 to exclusion clauses in professional service contracts.

The case is particularly important in the context of residential property valuations and the responsibilities of professional surveyors towards prospective homebuyers who rely on their reports. The judgement in Smith v Eric S Bush stands as a cornerstone in the development of tort law and contract law, addressing how far liability can extend in negligence and what constitutes a reasonable exclusion of responsibility under statute.

Facts of Smith v Eric S Bush Case

In Smith v Eric S Bush, the defendant, Eric Bush, was a professional surveyor employed by Abbey National Building Society to inspect and value a residential property located at 242 Silver Road, Norwich. The property was being purchased by the claimant, Mrs Smith, who had paid a fee of £36.89 to Abbey National for the valuation to be carried out.

Although the surveyor was technically working for the building society, the report was clearly intended to inform the decision of the purchaser regarding the purchase and mortgage of the property.

The surveyor, Eric S Bush, issued a valuation report stating that the property did not require any essential repairs. This statement was incorrect. In reality, the house suffered from structural defects which were not identified in the report.

Relying on the surveyor’s assurance, Mrs Smith purchased the property for £18,000, which had been valued at £16,500. After the purchase was completed, part of the chimney collapsed through the roof and into the loft, causing significant damage. Mrs Smith then sought legal redress for her financial loss.

However, the report prepared by the surveyor contained a disclaimer stating that no responsibility was accepted towards the purchaser for the contents of the report. Similarly, the mortgage agreement between Abbey National and Mrs Smith contained an exemption clause excluding the surveyor’s liability for negligence. There was therefore no direct contract between Mrs Smith and Eric S Bush.

Mrs Smith brought an action against Eric S Bush, claiming damages for negligence. She contended that despite the disclaimer, the surveyor owed her a duty of care in tort because it was foreseeable that she would rely on the report when deciding whether to buy the property.

She further argued that the exemption clause was unreasonable and unenforceable under sections 2(2), 11, and 13(1) of the Unfair Contract Terms Act 1977 (UCTA 1977).

The appeal was heard together with another case, Harris v Wyre Forest District Council, which raised similar questions regarding a surveyor’s duty of care and the reasonableness of an exclusion clause.

Legal Issues

The House of Lords in Smith v Eric S Bush was asked to determine three central issues:

  1. Whether Eric S Bush, as a surveyor, owed a duty of care in tort to Mrs Smith, even though there was no contractual relationship between them.
  2. Whether the disclaimer of liability contained in the valuation report and mortgage agreement came within the scope of the Unfair Contract Terms Act 1977, particularly sections 2(2) and 13(1).
  3. Whether the exclusion clause relied upon by the surveyor was fair and reasonable within the meaning of section 11 of the Act.

Smith v Eric S Bush Judgement

The House of Lords held in favour of Mrs Smith, concluding that Eric S Bush owed her a duty of care in tort and that the disclaimer of liability was unreasonable under the Unfair Contract Terms Act 1977.

Duty of Care in Tort

The Lords confirmed that Eric S Bush owed a duty of care to Mrs Smith, even in the absence of a direct contractual relationship. It was reasonably foreseeable that Mrs Smith would rely on the valuation report in deciding whether to purchase the property.

The nature of the relationship between the parties was sufficiently proximate, and it was fair, just, and reasonable to impose a duty. This reasoning effectively extended the principle from Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, which recognised liability for negligent misstatements, to cases where a professional’s statement is made to a third party who relies upon it.

The court noted that in ordinary residential property purchases, it was common practice for purchasers to rely upon the valuation carried out for the lender, especially where the property was of modest value. It would therefore be unrealistic to suggest that the purchaser had not relied on the surveyor’s report.

Application of the Unfair Contract Terms Act 1977

The House of Lords held that the disclaimer of liability fell within the scope of UCTA 1977. Section 13(1) extends the Act’s protection to all exclusion or limitation clauses which would otherwise defeat a claim in negligence. Lord Templeman observed that the Act regulates all notices which would, at common law, operate as a defence to negligence.

Lord Griffiths stated that section 13 introduced a “but for” test — meaning the court must first consider whether a duty of care would exist but for the disclaimer, and then assess whether it is reasonable to allow that disclaimer to stand. Lord Jauncey agreed, describing the wording of section 13 as “entirely appropriate” to include disclaimers preventing a duty of care from arising.

Thus, even though Eric S Bush and the purchaser had no contractual relationship, the Unfair Contract Terms Act 1977 applied to the disclaimer because it effectively attempted to exclude liability for negligence.

Reasonableness of the Exclusion Clause

Under section 11 of UCTA 1977, a term is enforceable only if it is fair and reasonable in all the circumstances known to the parties when the contract was made. Applying this standard, the Lords held that the disclaimer in Smith v Eric S Bush was unreasonable.

Several factors were decisive in reaching this conclusion:

  • The property was a modest home bought by a private purchaser, not an investment or commercial transaction.
  • It was common practice for homebuyers to rely on a building society’s valuation when deciding to proceed with a purchase.
  • The purchaser had paid a fee for the valuation and could reasonably expect it to be accurate.
  • Buying a home is often the most significant financial commitment in a person’s life, and it would be unfair to place the risk entirely on the purchaser while allowing a professional surveyor to disclaim liability.

The Lords accepted, however, that there might be other situations — for instance, large-scale commercial property transactions — where an exclusion clause of this kind could be considered reasonable, especially where both parties are professionally advised and have equal bargaining power.

Decision and Outcome

The House of Lords unanimously dismissed the appeal and found in favour of Mrs Smith. It was held that:

  1. Eric S Bush owed Mrs Smith a duty of care in tort in respect of the valuation report.
  2. The disclaimer and exemption clause were unreasonable within the meaning of sections 2(2) and 13(1) of the Unfair Contract Terms Act 1977.
  3. Mrs Smith was therefore entitled to recover damages for the loss caused by the negligent misstatement.

Significance and Legal Principles

The decision in Smith v Eric S Bush [1990] UKHL 1 has had a lasting influence on the interpretation of both tort and contract law in the United Kingdom. It reaffirmed and extended the principle of liability for negligent misstatements established in Hedley Byrne and defined how statutory controls under the Unfair Contract Terms Act 1977 operate in professional service contexts.

The case established several important principles:

  1. Duty of Care to Third Parties – Professionals such as surveyors can owe a duty of care to third parties who rely on their statements, even in the absence of a contract.
  2. Scope of UCTA 1977 – The Act covers all clauses, notices, or disclaimers that attempt to exclude liability for negligence, whether contractual or otherwise.
  3. Reasonableness Test under Section 11 – The fairness of an exclusion clause depends on the nature of the transaction, the relative bargaining power of the parties, and the foreseeability of reliance.
  4. Consumer Protection in Modest Transactions – Where a private purchaser of an ordinary home relies on professional advice, exclusion clauses are likely to be regarded as unreasonable.
  5. Distinction in Commercial Contexts – By contrast, in professional or commercial property dealings, where parties are equally informed and advised, exclusion clauses may still be upheld.

Conclusion

Smith v Eric S Bush [1990] UKHL 1 represents a pivotal moment in the evolution of English tort and contract law. The case confirmed that a professional surveyor, such as Eric S Bush, can owe a duty of care in tort to a purchaser who reasonably relies on their report, even without direct contractual ties. It also firmly established that disclaimers and exclusion clauses attempting to limit such liability are subject to scrutiny under the Unfair Contract Terms Act 1977.

The decision ensures that individuals purchasing modest homes are afforded protection from negligent professional advice and that liability cannot be easily excluded through standard form disclaimers. At the same time, Smith v Eric S Bush maintains flexibility for different outcomes in more complex or commercial transactions.

By striking this balance, the House of Lords reinforced principles of fairness, accountability, and consumer protection — confirming that the law must adapt to reflect the realities of everyday transactions while upholding professional responsibility.