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Exemption Clauses - Coggle Diagram

- - - - Such a clause excludes or modifies contractual obligations. It affects the nature and scope of a party’s performance.
    - - 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.
    - - 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.
  - - - 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.
    - - contains no provision dealing with exemption clauses. The Malaysian courts have followed English common law when considering this aspect of the law.
        
        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.
- - - - 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.
  - - - 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.
- - - - 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
    - - Port Swettenham Authority v Tw Wu & Co (M) Sdn Bhd [1978]
        
        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
      - Chin Hooi Nan v Comprehensive Auto Restoration Service Sdn Bhd [1995]
        
        The owner's car was damaged while under going a car wax and polishing service. The owner sued R for Rs negligence.
        
        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"
      - Jeniffer Mcalpin Lynn & Ors v AK Ludin Bin Pengiran Sulaiman & Anor[1989]
        
        Facts: There was an accident when the P and her husband were traveling in a water taxi. As a result, the P’s husband died, and the P sustained serious injuries. The P then sued the owners of the water taxi for negligence. The owners of the water taxi attempted to rely on an exemption clause which printed on the back of the receipt for the fare which the P had paid. which stated that "all passengers are at their own risk"
        
        Held that EC was not applicable stated as follows:
        
        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.
  - - - Rutter v Palmer [1922]
        
        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.
      - Alderslade v Hendon Laundry Ltd [1945]
        
        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
- - - - Olley v Marlborough Court Ltd [1949]
        
        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.
      - Goh Gok Hoon v Eusuff Bros Sdn Bhd [1990]
        
        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.
  - - - Parker v South Eastern Rly Co (1877)
        
        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 Test
        
        if the person receiving the ticket:
        
        Did not see or know that there was any writing on the ticket – then he is not bound by the conditions
        
        Kua Lee Ngoh v Jagindar Singh Speedway Station [1987]
        
        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.
        
        Thornton v Shoe Lane Parking [1971]
        
        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.
        
        Knew there was writing on the ticket and knew or believed that the writing contained conditions – then he is bound by the conditions, and
        
        Malaysian Airlines Bhd v Malini Nathan [1986]
        
        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.
        
        Knew that there was writing on the ticket but did not know or believe that the writing contained conditions (as in the present case):
        
        if the delivery of the ticket in such a manner that he could see there was writing on the ticket was reasonable notice that the writing contained conditions – then he is bound by the conditions, or
        
        Thompson v LMS Rly Co [1930]
        
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        Hood v Anchor Line (Henderson Brothers) Limited
        
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        if the delivery of the ticket in such a manner that he could see there was writing on the ticket was not reasonable notice that the writing contained conditions – then he is not bound by the condition.
        
        Richardson, Spence & Co v Rowntree (1894)
        
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  - - - Sugar v LMS Railway Co [1941]
        
        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
      - Chapelton v Barry Urban District Council [1940]
        
        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.
      - Borhanuddin Bin Haji Jantara v American International Assurance Co Ltd [1986]
        
        In this case the deceased, Azian bt Borhanuddin, was a 19 year-old Malaysian Airlines stewardess. On December 4, 1977 she died tragically in an air crash at Tanjong Kupang, Johore. About two weeks before the crash on November 21, 1977, she had submitted a proposal from the Ds, AIA and signed by her ending with a declaration that ‘the assurance herein applied for shall not take effect unless and until a policy is issued and delivered to me on this application and the first premium thereon actually paid”. On December 2, 1977, she paid the sum of $118 and received a cashier’s receipt with the following words” said sum is received only for the account of payer, and the company is in no way committed thereby to the acceptance thereof for the purpose offered”. No policy was issued and the P, her father.
        
        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.
- - - - 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.
    - - 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
- - - - Chanter v Hopkins (1838)
        
        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”.
      - Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989)
        
        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.
      - Alexander v Railway Executive [1951]
        
        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.
  - - - Alexander v Railway Executive [1951]
        
        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.
  - - - Sussie Atlantique’s Case [1967]
        
        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.
    - - 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.
      - The House of Lords has clearly stated that there is no rule of law under the common law that whenever there is a fundamental breach or a breach of a fundamental term, the party in breach of the contract cannot rely on the EC. It is always a rule of construction as to whether the EC is drafted wide enough to cover the said breach.
        Therefore, whether a particular breach is covered by the EC would depend on the question of:
        
        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.
- - - - Curtis v Chemical Cleaning Co [1951]
        
        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.
  - - - Cases
        
        Gallie v Lee [1969]
        
        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.
        
        Petelin v Cullen [1975]
        
        Facts: P could neither read nor write English. He gave C an option to purchase his property in exchange for a payment of $50. the option had to be exercised within six months. At the end of that time, it had not been exercised and it lapsed. P then received a cheque for a further $50 and was asked to sign what C said was a receipt for the second payment. It was, in fact, an extension of the option and C purportedly exercised it during the extended period. P refused to transfer the property. C sued for SP. P pleaded non est factum.
        Held: Specific Performance (SP) was refused. The document P signed was radically different from what he thought it was. Therefore, a plea of non est factum was open to defeat C’s action.
        
        In this case, the HC laid down three conditions which it said had to be fulfilled before a plea of non est factum could be successful.
        
        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
    - - 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.