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Topic 9- Exemption Clauses (Part 2) (Fundamental Breach (General Rule-…
Topic 9- Exemption Clauses (Part 2)
Construction Rule (Interpretation)
Contra- Profentem Rule
Rule of interpretation
Requires if an exclusion clause open to several meanings, court must interpret against the party relying on it
Any doubts or ambiguity- interpreted against person seeking to rely on clause (proferens)
EC (Unfair Terms in Consumer Contracts) Regultion 1995
Requires that 'where there is any doubt abou meaning of a term, interpretation most favorable to consumer will prevail'
In order to determine the effect of exemption clause, courts will look at the general circumstances of the transaction in deciding whether clause is enforcable or not
Matter of construction
Cautious approach adopted by courts reflected in contrac profertem rule
Andrews v Singer
Facts: Exclusion clause provided that 'all conditions, warranties and liabilities implied by common law, statute or otherwise'
Held: THe clause did not protect the Ds from claim for breach of express term of contract
the clause in qu was AMBIGUOUS and did not specifically reference 'express' terms
Wallis, Son and Wells v Pratt and Hynes:
Contract for the supply of goods was entered into wieht the seller staing he gave 'no warranty, express or implied'
Goods supplied failed to match description, breach of s13 Sale fo Goods Act
s13 implies that sale by description is an implied 'condition'
Held: Court interpreted word 'warranty' narrowly and held clause inapplicable
Negligence
In some cases, while exemption clause may be enough to exclude liability under Law of Contract (string liability), the proferens may still be found liable in Tort for negligence
White v Warwick
:
Facts: P hired bicycles w his Wife
Saddle titled on W's bicycle and she was thrown from it
Issue;: Clause in agreement- 'nothing in agreement shall render owners liable for any personal injuries to riders of bikes hired'
Issue: p sought damages on basis of strict liability and negligence
Held; While limiting clause held to exclude liability in contract
Such a clause could not oust rights of parties to sue in tort
Claim in tort independent of contract and could be estab without relying on contract at all
CONTRAST
Hughes v JJ power Ltd and Colliers Ltd:
Facs; p brought damaged engine to the D to have repaired
D took the work at owner's rsk
work carried out but further damage resulted
Issue: could D rely on disclaimed?
Held: Duty placed on D re P was same under both contract and tort i.e. duty to exercise ordinary skill of an ordinary competent person doing that type of work
No liability
There were not two heads of liability but one
Question as to whether the clause in qu covered negligent acts as well as liability under contract dealt with
Canada Steamship Line v R
: Lord Morton outline following test
If the cluse contained lnguage which expressly exempts the person in whose facour it is made (the proferens) from the consequences of the negligence of his own servants,effect must be given to that provision
If there is no express reference to negligence, court must consider whether the words used are
wide enough, in their ordinary meaning, to cover negligence
on part of the servants of the proferens
if a doubt arises- must be resolved against proferens
If words used wide enough for above purposes, court must then consider whether the
'head of damage' may be based on some ground other than that of negligence
If so it is fatal
Damages
Courts have applied the contra proferentem rule to meaning of 'consequential loss'
GB Gas Holdings Ltd v Accenture: Term interpreted as applying only to second limb of damage in
Hadley v Baxendale
Normal damage reasonably expected to occur
Special damage that both parties were aware would occur
would not be applicable to those damages which are considered to be natural cause of the breach of contract
Wilful Damage
The very clearest of words must be used by the proferens if he is to exclude or limit liability for either his own misconduct or that of his servants
Ronan v Midland Rly Co:
P agreed o emply D to ship cattle from Dub to Liverpool
Given receipt with wide-ranging exclusion clause to effect the cattle were to travel at owner's risk
Issue: cattle wilfully damaged and mutilated by D's employees
Held: Phrase 'at the owner's risk' did not exclude liability for deliberate acts of destruction
Main Purpose Rule
Rule requires an exclusion clause be restricted by looking to main purpose for which it was created
interpreted in such a way thtat does not defeat main purpose of contract
Sze Hai tong Bank v Rambler Cycle:
Main object in a contract re to carrying of goods included clause that goods were only to be delivered to someone entitled to delivery
Goods not delivered to such persons
Issue: Carrier sought to rely on exclusion clause to protect itself from breach
Held; allowing such a cluase to stand would defeat one of the main obligations of the contract
Deemed ineffective
Fundamental Breach
General Rule- Proferens may never be exempt from fundamental breach of contract- breach of a core obligation
Chanter v Hopkins
: a fundamental breach held to have occurred in contract in which it was thatpeas were to be supplied and beans delivered instead
Such a breach= so serious no exclusion clause could cover it
Karsales v Wallis
Lord Denning commented 'exempting clauses do not avail him when he is guilty of breach which goes o root of the contract
Facts: contract for supply of car, P inspected it and found to be in good condition
issue: when later delivered it had to be towed and found incapable of running
Performance was not what was agreed
H of Ls rejected Lord Denning's approach
Suisse Atlantique v NV Rodderdamsche:
- made clear possible to exempt for fundamental breach
through use of CLEAR AND UNEQUIVOCAL WORDS
To refuse to allow such exemption clauses 'would invovle a restrction on freedom of contract'
Irish Courts:
SC:
Clayton Love v B and I Transport:
Facts: D made agreement to transport deep-frozen scampi from Dub to Liverpool
understood goods would remain frozen during transport
Issue: Scampi stored at room temperature and ruined
P attempted to sue for breach of contract
D sought to rely n exemption clause
Held: SC: as a rule of law, the clause
could not be invoked to cover fundamental breach
Note-
Western Meats v National Ice and Cold Storage
: Barrington J appeared to have agreed with approach adopted by H of L
Bars to operating Exemption Clauses
Misrepresentation
s46: Sale of Goods and Supply of Services: clauses excluding liability to which a party may be subject as a result of misrep not enforcable
Collateral Undertakings
If oral undertaken is given by proferens, courts will regard oral undertaking as taking priority over printed terms
Evans v Merzario:
Ps arranged carriage of goods w Ds
Ds gave an oral assurance that the goods would be shipped under deck of ship
Held: Oral assurance overrode exclusion clause in written contract
Unconscionable Bargaining