a clause excluding liability for breach of warranty will not exclude liability for breach of condition

Such a clause excludes or modifies contractual obligations. It affects the nature and scope of a party’s performance.

parties seeking to exempt themselves from liability will frequently use unclear and ambiguous language in order to conceal their purpose, the contra proferentem rule can be a useful tool.

EC will be construed CP which means that if there is any doubt as to the meaning and scope of the EC, the ambiguity should resolved against the interests of the party who is offering it and who seeks to rely on it.

clear words must be used if they are designed to excuse one party from a serious breach of the contract, any ambiguity as to the meaning of the words will be construed against the party relying on them

If there is any doubt or ambiguity in the meaning and scope of the exclusion clause used, the court will construe the ambiguous phrase against the party relying on the exclusion clause in favour of the other party.

An exemption clause is a contract term which purports to limit or exclude obligations which would otherwise attach to one of the parties to the contract.

These exemption clause may appear in printed tickets, notices or receipts which are brought to the customers’ attention at the time of the agreement which, in most cases, the consumer has no time or energy to read the printed words. Even if he reads them, he would probably not understand them. It is only when a dispute arises that the consumer realizes how mush of his rights have been excluded by these clauses?

The common law has long been familiar with the attempt of one party to a contract to insert terms excluding or limited liabilities which would otherwise be this. The situation frequently arises where a document purporting to express the terms of the contract is delivered to one of the parties and is not ready by him.

Facts: In this case, there was a dispute as to the interpretation of a provision in a policy insurance. The court pointed out that the general rules of interpretation apply to insurance policies in any written document.

Held: The second limb precisely envisaged the R’s situation where there was a technical lapse to renew his driving licence . Thus the R was insured under the policy and entitled to an indemnity by the insurers from any liability to a third party.

Facts: The P hired a cycle from the Ds under a contract which provided that ‘nothing in this agreement shall render the owner liable for any personal injury’. The saddle tilted forward while the P was riding the cycle and he was injured.

Held: The words used were sufficient to exclude the Ds’ strict liability in contract for hiring a defective cycle but not to exclude their tortuous liability for negligence.

Being the parent law, the Contracts Act 1950 attempts to codify only the basic principles of contract law. As such, it does not have specific provisions dealing with contents or the terms of a contract. Hence no mention is made of clauses which limit or even exclude one party’s liability, clauses which incorporate terms in other documents into the contract… it is perhaps for this reason that the Malaysia Judiciary has, upheld the validity of clauses that seem to be unfair to consumers.

The courts have tried to protect the position of the recipient of documents containing exemption clauses by:
requiring certain standards of notice in respect of the onerous terms, and
construing the document, whenever possible, in favour of the party receiving it.

In dealing with contracts of bailment, the courts have generally been concerned with the burden of proof under sections 104 and 105 of the CA that deals with the law in relation to bailment

The reasonable step that are required to bring the clause to the other party’s attention must be taken before or at the time the contract is entered into. That is, an exemption clause brought to that party’s attention after the contract has been entered into will not be effective to excludes liability.

As Syed Ahmad Alsagoff explains – for an exemption cluase to be effective, it must be brought to the notice of the contracting parties before or at the time the contract is made.

Facts: a consignment of 93 cases of pharmaceutical goods was shipped from Hong Kong to Port Swettenham under bills of lading nominating the Ps as consignees. The consignment passed into the custody of the Ds (the Port authority) and the port charges were paid. While the consignment was in the Ds custody, 64 of the cases disappeared. The Ps brought an action against the Ds alleging that the loss had been due to the Ds’ negligence and claiming damages.

Held: At the trial the Ds adduced evidence as to their system of taking care of goods entrusted to them but adduced no specific evidence as to their care of the 64 cases

The owner's car was damaged while under going a car wax and polishing service. The owner sued R for Rs negligence.

Facts:The P and her husband booked a hotel room and paid for a week’s lodging in advance. When they went up to the hotel room, they saw on the wall a notice that contained a clause “the proprietor will not hold themselves responsible for articles lost or stolen unless handed to the manageress for safe custody”. Due to the negligence of the hotel staff, a thief went into the room and stole some of their properties.

Held: The notice was not part of the contract, as the P would not have seen it until after the contract was made. Therefore, the D was liable.

The EC which was printed on the back of the receipt which had been given to the owner as follows: " the company is not liable for any loss or damage whatsoever of or to the vehicle, its accessories or contents. Vehicle and goods are at owner's risk"

Facts: The A let premises out to the first respondent on 1st October 1959. There was no written agreement between the parties and the only documentary evidence produced by the A are a letter of acceptance from the first R and a copy of the receipts issued to the first R. The receipts have an endorsement prohibiting the firs R from subletting the premises. The A claimed vacant possession of the premises on the ground that the R had sublet it.

Held: the restriction on subletting was conveyed to the first R only after the tenancy agreement had been concluded and therefore the first R had no notice of it at the time when he wrote the letter of acceptance there.

The party seeking to rely on the exclusion clause must be able to prove that the clause was reasonably noticeable.

Fact: P deposited a bag in the D’s cloakroom. He paid 2 pence and was given a ticket on the face of which was printed “See Back”. On the back of the ticket was a printed notice saying that the company would not be responsible for any item whose value was more than $ 10.P’s bag, which was worth more than $10, was lost and be brought an action for damages against the company. P had not read the notice on the back of the ticket.

Held: P had notice of the condition on the back of the ticket, the condition was part of a counter-offer by the D company which was accepted by P. The printed notice was therefore part of the contract and the company could rely on it in its defence.

the law was that if the exemption clause clearly exempts the person relying on it from the negligence of himself or his agent, then the law would give effect to the provision.

It appears that the courts will less strict in construing a clause limiting liability in negligence than a clause excluding liability altogether.

Facts: (P) obtained a cheap excursion ticket with the customary wording referring the buyer to conditions in the company’s timetables. One such condition excluded liability for injury. The P was injured due to the negligence of the railway company.

Held: the company’s contention that a rail ticket, particularly a cheaper one, must reasonably be expected to contain terms and since the ticket plainly on its face was written the words ‘For conditions see back’, referred to the conditions under which it was issued.

In contrast, in this case:
Facts: The R bought a ticket to go on the App’s steamer from Philadelphia to Liverpool. The ticket contained a number of printed terms including one limiting liability of the Ds to $100. the ticket was handed to her folded up and the conditions were obliterated in part by a stamp in red ink. She sustained personal injuries during the voyage and sued the Apps.

Held: Although she knew that there was writing on the ticket, she did not know the writing contained conditions and that the notice had not been reasonably sufficient.

Facts:The D was a steamship company which tried to rely on the conditions stated in the passenger’s ticket. The P sued the D for negligence of the D’s employees.
The ticket was picked up on behalf of the P by Mr Paul May who was the P’s clerk. Mr May and the P did not read the ticket. The ticket was enclosed in an envelope. On the top of the face on the envelope, there was a hand pointing to the statement printed in capital letters, “please read conditions of the enclosed contract”.

Held that what is material is whether a reasonable person would be aware of such a clause. The P is not allowed to turn a ‘blind eye’ where a reasonable person would take the trouble to make enquiries. The P cannot be protected by his own careless ignorance.

Facts: The owner of a car sent the car for servicing to the D. when the owner returned to collect the car, he was told that the car had been stolen. The owner then sued the D for breach of contract. The D who relied on two notices of exemption clause which had been placed in the D’s premises.
Held: as there was no evidence to indicate that the owner had notice of this exemption clause, judgment was given to the P.

The HC held that the airline was not in breach of contract for failing to fly the Rs from London to Kuala Lumpur on the A’s airline. The Rs were booked and had a confirmed ticket to fly on the A’s airline on a scheduled date. As the flight was fully booked, the A was unable to accommodate the Rs on the said flight.

The P ought to have known condition no 9 and they were presumed to have known it as it was printed on the ticket.

The court did not refer to any case as authority for the principles stated. However, perhaps an airline ticket is a document which a passenger should read and as such, conditions printed on an airline ticket is reasonably sufficient notice of the exclusion clauses.

Facts: P wished to park in the Ds’ automatic car park. There was a notice which stated: “all cars parked at owners’ risk”. As P drove in, a ticket pushed out from the machine. P did not read the ticket. The ticket referred to conditions displayed elsewhere in the car park. P was injured in an accident. On being sued, the Ds claimed that they were protected by the exempting conditions.

Held that the Ds could not rely on the assumption clause because they did not take sufficient steps to draw the attention of the customer to the conditions.

The exemption clause must be put forward in a document which gives reasonable notice that liability conditions are proposed by it.

exemption clause will be incorporated into the contract only if reasonable notice of its existence is given to the party affected by it.

The party seeking to rely on an exemption clause must show that the loss or damage to the other party is within the scope of the clause. But the other party must first plead and prove that the loss or damage which has been sustained was caused by some breach of contract or duty on the part of the D.

Facts: articles sent by the P for laundering were lost, and the laundry company sought to rely on a clause exempting them from liability for ‘lost or damaged’ articles.

Held: The Court held that such a clause did exempt them from responsibility for negligence

Facts: The P owned a Le Gui motor car which he asked the D, a motor dealer, to sell for him. Their agreement contained a clause that:
“customers’ car are driven by your (the D’s) staff at customers’ sole risk”.When in the care of one of the D’s drivers, who was showing the car to a potential buyer, the car was damaged due to the driver’s negligence.

Held: Held that the D was protected by the EC and need not pay for the damage. The clause effectively placed the risk of negligence on the P and so his claimed failed.

Facts: In the ticket handed to a passenger carried the words ‘ For conditions see back’ on the front, but these were hidden by the stamp put on the ticket by booking clerk.

Held: There had not been sufficient notice to incorporate the condition into the contract

Facts: The Ds admitted the loss of one carton of merchandise delivered into the Ds’ godown belonging to the Ps. The Ds, however, argued that their liability was limited to RM1000 as provided in the Penang Port Commission By-Laws 1957. by-law 79 provides that “the Commission shall not be responsible to a greater extent than RM1000 for loss or damage to any package of goods which exceeds in value RM1000”. The Commission made this and other by-laws in purported exercise of the powers conferred on it by section 66 of the Penang Port Commission Ordinance.

Held: There is no authority in the Penang Port Commission Ordinance permitting the Commission to restrict its liability for goods received into its custody and particularly it has no power under section 66 to do so. Therefore, judge held that by-law 79 made under section 66 of the Ordinance was, if purporting to limit its liability, ultra vires the Ordinance. The Ps succeeded in their claim

Facts: The council hired out deckchairs and by the stack of chairs was a notice containing the terms of hire. C hired two chairs, paid his money and received two tickets which he put in his pocket. When C sat in one of the chairs, it broke and caused him injury. The chair was not fit for use. C sued the council for negligence and was met with the defence that the words printed on the back of his ticket included: “the council will be not be liable for any accident or damage arising from the hire of the chair”.

Held that the exemption clause printed on the ticket was not a term of the contract as the ticket issued was a mere voucher or receipt. It did not purport to set out the terms on which the P had hired the chairs but only to show for how long he had hired them and that he paid the fee.

Facts: By an agreement with the owners of a number of vessels, Securicor were bound to provide security cover in Aberdeen harbour. As a result of Securicor’s negligence in carrying out their obligations under the contract, a fishing boat owned by the Ps sank and was lost in the harbour. Securicor sought to rely on a clause of their contract which limited their liability for any loss or damage to $1000 per claim and a maximum of $10,000 for the claims arising from any one incident.

Held: Securicor could rely on their limitation clause.

A breach entitles the innocent party to treat the contract at an end or to affirm the contract.

Claimed against AIA for the sum of $100,000 insured contending that the receipt being non contractual document was not binding. AIA denied liability on the ground that there was no concluded contract.
Held: Thus, at the time of the premature death of Azian, no premium has been paid and thus there was no concluded contract between Azian and the AIA.

When an exemption clause is included in a signed document, the person signing is generally bound by it.

Lord Abinger said that:
“if a man offers to buy peas of another and he sends him beans, he does not perform his contract… the contract is to sell peas, and if he sends him anything else in their stead, it is a non-performance”.

Fact: A sold to B, a shopkeeper, a slot machine under conditions which excluded B’s normal rights under the Sale of Goods Act. B signed the document without reading the relevant condition. The machine did not work properly.

Held that A was protected by the exemption clause which was binding on B who had signed the contract.

Facts: Capalaba Park agreed to lease premises in a shopping centre it was developing to Laurinda. Under the contract, it undertook to ensure that the executed lease was registered but, despite repeated requests from Laurinda, it failed to do so. Finally, Laurinda wrote requiring it “to complete registration within fourteen days”. The registration was not completed and Laurinda terminated the lease.
Held: Capalaba Park’s failure to register the lease was such a fundamental breach of its obligations as to constitute a repudiation of the contract. Laurinda had therefore been entitled to treat the lease as at an end.

This principle was thought to constitute a substantive rule of law, that is, no matter how extensive an exemption clause might be, it could not exclude liability in respect of the breach of a fundamental term or a fundamental breach, irrespective of the intention of the parties.

Facts: The P sued the railway station for the loss of luggage which was taken by the friend. The D relies on EC stated on the ticket and upon a large notice displayed in the waiting room and parcels office.
Held: the D committed a fundamental breach of contract and as such, could not rely on the EC as protection from liability.

Facts: C took a wedding dress to the cleaning company for cleaning and was asked to sign a document which contained a clause that the garment is ‘ accepted on the condition that the company is not liable for any damage.’ C asked why she had to sign it and was told that the company would not accept liability for damage done to the beads and sequins on the dress. C signed the document. The dress was stained badly while being cleaned and C brought this action for damages. The company raised the exemption clause in their defence.

Held that the clause gave no protection to the company because of misrepresentation as to its extent.

that the document signed was radically different in character or effect from what the signer thought he or she was signing,

that the signer was not careless in signing without checking the contents.

Facts: Mrs Gallie owned a house on long leasehold. She had made a will leaving it to her nephew, Wally Parkin, and had handed over the deeds to him. Parkin and a friend, Lee visited Mrs Gallie and asked her to sign a document that she believed was an assignment of the leasehold by gift from himself to Parkin. In fact, it was assignment from Mrs Gallie mortgaged the house to a building society to pay his personal debts. When he defaulted under the mortgage, the building society sought possession of the house, Mrs Gallie sued for a declaration that the assignment was void, arguing non est factum.

Held: Her argument failed. The plea of non est factum could not assist because there was no radical or fundamental difference between what she had actually signed and what she believed she had signed. Both were transfers and the sole difference was the beneficiary of the assignment.

The P has to show that the document was signed in the belief that it was radically different from what it was in fact, and

The failure to read and understand the document must not have been due to carelessness on the P’s part.

The P has to belong to a class of persons who have to rely on others for advice as to what they are signing because of an inability to read resulting from either blindness or illiteracy

in a contract of carriage it was opened to the carrier to limit his liability for negligence. However, before he can do so, it was necessary to fulfill two conditions:

a) he must give reasonable notice to the passenger of this exemption;
b) his liability must be excluded in clear terms

in the present case, there was no evidence of the presence of any notice outside or in the boat , nor anything on the front of the receipt given by the carrier to make the passenger realize that there was an exemption clause on the back of the receipt. Nor would any passenger regard a receipt be a contractual document if his attention was not drawn to the exemption clause.

Facts: The P and a friend deposited his trunks in a waiting room in a railway stations for storage. The P received a ticket in respect of the trunks. The friend informed the parcels clerk that the ticket for the parcels was probably lost and was allowed to remove articles from the trunks without the ticket by paying the excess deposit money and signing an indemnity, which the friend did.
The P sued the railway station for the loss of luggage which was taken by the friend. The D relies on EC stated on the ticket and upon a large notice displayed in the waiting room and parcels office.

Held: the D committed a fundamental breach of contract and as such, could not rely on the EC as protection from liability.

Facts: Finally, in 1980 the House of Lords accepted that there was no general rule that EC could not protect a party in fundamental breach.

This approach was confirmed in Photo Production Ltd v Securicor Transport Ltd [1980] AC 827

Photo Production employed Securicor to protect their factory by means of a visiting patrol. A clause in their contract provided that “under no circumstances shall the (D) company be responsible for any injurious act or default by any employee of the company”. One night, one of the Securicor guards lit a small fire inside the factory. The fire got completely out of control and destroyed the P’s premises, at a cost of $615,000.

Held: there was no principle of law that a fundamental breach automatically nullifies the effect of an EC. The court has to construe and apply each EC in the light of the breach or breaches complained of. Here, the clauses were clear and unambiguous. They were intended to limit Securicor’s liability in certain instances, including some that might be regarded as constituting fundamental breach.
Therefore, while the breaches committed by one of the Securicor guards might have been fundamental breaches, that did not matter they were specifically covered by the EC. Securicor was not liable.

whether the EC is sufficiently clear and unambiguous to receive effect in limiting the liability of the party in breach

whether a condition limiting liability is effective or not is a question of construction of that condition in the context of the contract as a whole. if it is to exclude liability for negligence, it must be most clearly and unambiguously expressed, and, in such a contract as this, must be construed contra proferentum.

the House of Lords decided that the doctrine of fundamental breach is a rule of construction and not a rule of law. The contracting parties are free to agree on the extent of the exemption clause.

exemption clauses and exclusion clauses are used synonymously, and they take a variety of forms.