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Topic 9- Exemption Clauses (Incorporation into the contract (No Signed…
Topic 9- Exemption Clauses
Introduction
As part of the general formation of a contract, a party may seek to include a specific term that limits or excludes them from liability
TWO MAIN TYPES
The Exclusion Clause
Seeks to absolve the person relying on it from all liability in the event of a breach of contract
In practice, exclusion clauses are terms in a contract by which one party tries to cut down scope of their duties
McDermot: it 'is a clause which seeks to exclude or limit liability for breach of contract or liability as may be found in tort or under statute'
The Limitation Clause
Limitation clauses are more specific- aim to restrict the
remedies
available to one of the parties in the event of breach
Commpnly appear in form of a cap on amount of damages that may be claimed, or alternatively may require a party to act within specific time limit before he or she may claim a remedy
If clause merely regulates entitlement to damages, it is said to have procedural effect
McDermot: Notes limitation clause should be viewed by courts with less suspicion han an exclusion clause
Evidence of different in courts approach:
Alisa Craig Fisihing Co v Malvern Fishing and Securicor
:
Facts: Ship sank at a dock due to the D's negligence
Clause in contract which limited D's liability to £1,000
The validity of teh clause was upheld by H of L who stated the contra proferentum rule did not apply as rigorously to such clauses
Contractual Liability
In absence of exemption clause one of teh contracting parties may find themselves exposed to contractual liability
Roche v Cork, Blackrock and Passage Rly
: P put a bag which contained £10 in D's cloakroom- received ticket in return for bag, which contained no terms or conditions
Issue: £10 missing
Held; In absence of exemption clause limiting liability, D liable to pay £10
CONTRAST:
Leonard v Great Northern Railway
Facts: P sent turkeys by rail
when tehy arrived there were 4 missing
Agreement contained an exclusion clause to effect that if any went missing, P would have 3 days to notify carrier
Issue: P complained after time limite
Held: liabiliy of Ds limied, exclusion clause succeeded
The Law Regarding Exemption Clauses
here are a number of issues that must be addressed in context of exemption clauses
Incorporation
Interpretation
Enforcability
In order to be enforceable, an exclusion clause must satisfy four tests:
iIf you rely on the excluison clause as the P or D, it mus have been
incorporaed
into the contract
Hs the clause been worded so as to cover breach that has occurred? Qu as to
construction
of the clause
Is the clause affected by any Consumer protection legislation
The exclusion clause mus deal with he events that have taken place
Incorporation into the contract
If term has not been incorporated into a contract, then it may not be relied upon as a contractual term
Essentially incorporation will be adjudged according to whether doc is signed or unsigned
In circumstances where no doc signed, the courts will inquire into whether or not party seeking to rely on clause made
reasonable attempt
to bring it to attention to the other party
Signed Documents
Most effect manner in which to incorporate terms
Essentially, where a contractual doc has been signed, person who has signed the doc will be bound by its terms regardless of whether or not he/she actually read those terms
L'Estrange v Graucob
: P signed agreement re purchase of cigarette vending machine
Issue: Exclusion clause in body of agreement excluding all liability re express or implied warranties.
Machine unfit for purpose
Held: Signature proved the agreement, and in the absence of fraud and other invalidating factors, P bound by terms included in doc irrespective of whether she read them or not
Duff v Great Northern Railway Co:
one of the terms of contract signed referred to conditions on the back of an invoice
P handed invocie at time of signing
Held: P bound by exemption clause
O'Connor v First National Building Society
: Standard form mortgage applicaion excluded Building Sociey from liabiliy should property be defective
Clause in LARGE PRINT about the place for signature
Held: Bound by clause
Carroll v An Post National Lottery
: I have found as a fact P knew rules printed on reverse side of payslip and that he did not read them
subject to certain qualifications= bound by them
Electronic Signature
Electronic Commerce Act- electronic and paper signatures sufficient
No Signed document
Where there is no signature at issue, incorp of exemption clause will take place only if
reasonable steps have been taken to bring clause to attention of affected party
If party read the clause, then clearly part will be deemed to have
actual notice
= sufficient to estab incorporation
CONSTRUCTIVE NOTICE: Ticket cases
Johnson v Great Southern and Western Railway:
P, who purchased a railway ticket, held to be bound by an exemption clause hat limited liability of co should any passengers be injured
Despite fact he had not read terms of clause
Court of opinion because he had
opportunity
to make himself aware of clause, this was constructive notice of relevant term
What constitutes reasonable steps?
Much judicial debate
English C of A in leading case of
Parker v South Eastern Railway
:
Facts: P deposited a bag in a cloakroom and paid £2
received ticket on which was written 'see back'
On back of ticket were clauses, which limited the co's responsibility for packages up to £10
Issue: P's bag missing, claimed £24, D argued liability limited to £10 on basis of clause
QU: WHETHER OR NOT THE PERSON SEEKING TO RELY ON CLAUSE DID EVERYTHIGN REASONABLY POSS TO PUBLICISE RELEVANT EXCLUSION CLAUSE
General Rule: more onerous exclusion clause, greater obligation to point it out
Number of qus raised in this regard
If P knew of the exclusion clause, he is bound
If the P had no notice of exclusion clause, not bound
If notice was given and P did not notice the exclusion clause, depends on whether notice was
reasonable
If P knew there was not merely writing on ticket but
also conditions
he will be bound event if he is unaware of precise terms
Held; Signature would be fatal
Co had done enought ot bring clause to P's attention and was bound by clause
Richardson Spence and Co v Rowntree
H of L reaffirmed appraoch adopted in Parker
Facts: P was passenger on ship travelling from Liverpool to Philadelphia
Issue; given folded ticket, no writing visible when folded
ticket contained Ts and Cs- visible when unfolded, but P never read
P injured- one term= exclusion clause limiting liability of co
3 questions put to jury:
Did the P know there was writing on ticket? Yes
Did P know writing contained conditions concnerning the journey? No
Did the Ds do all that was reasonable to bring clause to attention of P? No
Held: The P was not bound by clause in qu
aware ticket contained writing, not aware contained further conditions and reasonable steps not take
IRISH APPROACH
Courts applied same principles
Early v Great Southern Railway
Facts: any passenger who went on a journey that cost less than standard fare referred to co's special conditions
These were contained in co's 'timetables, books, bills and notices' none of which was available for inspection
One condition stated tickets holders costing less than standard fare did not have right of action against co for injuries sustained
Issue- P injured
HELD: Despite fact no copies of Ts and Cs available at place where he boarded train, trial judge held D had taken reasonable steps to bring conditions to attention of P
Shea v Great Southern Railway:
P brought his bicycle onto a crowded bus
Bus driver gave him a icket, which stated the bus co was excluded from liability for thefth
Notice posted near entrace to bus stating same
P's bike thrown off roof of bus
Bound by notice
Reasonable Steps
There are four main principles re incorporation that may be deducted from case law
Must take place before agreement complete
Document containing clause must be of a contractual nature
More onerous the exemption clause, greater the responsibility on person seeking to rely on it to bring it to the attenion of the other party
Exemption clauses may also be incorporated as a result of past dealing
Western Meats v National Ice and Cold Storage: D provided cold storage facilites to P, attempted to rely on exemption clause
HELD: A business, man, offering specialist service, but accepting no responsibility for it, must bring home clearly to the party dealing with him that he accepts no such responsibility
expert- all the more important bring it to my attention
James Elliot Constricution v Irish Asphalt Ltd
In contract concerning supply of infill, court had to decide
WHERE TERMS IN DELIVERY DOCKETS CONTRACTUAL TERMS
Held: overarching contract for supply of goods for a project, including type of goods required, price of goods and creit terms
After that a series of separate contracts made for sale and supply of infill during the project
HELD: SC sated contractual docs can take variety of forms and a delivery docket
could
be a contractual document
The court held that while the dockets were contractual docs, on the facts the terms were not contractual terms
The dockets were signed- held that a key issue is whether the doc signed actually contained the Ts and Cs
On Facts- delivery did not contain terms D was reluing on, but stated that material was being sold subject to Ts and Cs
Limitation clause, not printed on delivery dockets
Only included in D's credit notes, which were only read by employees in accounts department and not anyone at managerial level
For notice to be reasonable it must be to someone within the co at an appropriate level
Timing of Exemption Clause
In order to be enforceable, notice of exclusion clause must be given at time of contract and not after
Olley v Marlborough Court Ltd
: D let a room to a H and W for a week
Paid for in advance
On wall of hotel room, notice stating hotel would accept no liability for losses, unless valuablelost had been placed in manager's safe
Issue: W's furs and jewellery were stole
Whether or not exemption clause effective?
held: Hotel liable as incorporation of exclusion clause in hotel room came after completion of contract at front desk
Thornton v Show Lane Parking
: Sign outside multi-storey car park stated 'Parking at owner's risk'
P took ticket from automatic ticket machine- stated 'ticket issued subject to conditions displayed on premises
P's car damaged
Held; Old Railway cases didn't apply to automatic machines
these machines may be regarded as booking clerks in disguise, so that the contract is made at the machine when the P inserts money into the machine
Whether the relevant clause brought to P's attention before he entered the car park
P isssued with ticket referring him to Ts and Cs, which were situated inside car park
offer made at notice at the entrance
Acceptance made by inserting money
P not bound by terms on the ticket as it came out after conclusion of the contract, when P entered car park
Incorporation by Course of Dealing
Spurling v Bradshaw
: Owners of barrels of orange juice left them with P under contract of bailment
Goods subsequently destroyed and D refused to pay for warehousing
Issue: P sued for non-payment, D counterclaimed for damages to his goods
Held: D admitted to having previous dealings iwth P and receiving similar documentation in form of receipts, which he never bothered to read
P entitled to assume there was assent to terms offered
The contract was enforcable on basis of their course of business
Important
: Dealings are regular and consistent
Parties must be of equal bargaining power
Transaction must be within specific trade
Pre-exisitng, regular and consistent contractual relationship
proferens always included an excluison clause
other parties never read
= proferens may be able to claim exclusion clause enforcable