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Chapter 40: Exclusion and Limitation clauses (prt 2) - Coggle Diagram
Chapter 40: Exclusion and Limitation clauses (prt 2)
Previous Course of dealings
if parties have dealt on the same terms in the past it is possible to imply knowledge of the clause from past dealings as long as there has been a consistent course of dealing. however, the courts are reluctant to find that to be the case
Mc Cutcheon v David Mac Brayne (1964)
McCutheon delivered his car to the defendants shipping company for carriage from the Hebrides to the Mainland.
the car was destroyed when the ship sank because of the company's negligence
the company's usually practice was to issue a risk note to the customers exempting them from liability for losses resulting from their negligence
McCutheon has signed such notes on previous occasions but had never read the terms
on this occasion, no suck risk note was supplied, and McCutheon sought to recover the value of his car
issues:
company maintained the exclusion clause referred to in the risk note was incorporated into the oral contract because of the parties' previous course of dealing.
they argued the conditions of carriage were prominently displayed on notices at their offices and as McCutheon had signed such risk notes before, he should be deemed to have knowledge of them
McCutheon contended he had never read the terms on the previous occasions he had transacted with the defendants
he contended the clause could not be relied upon because it had not been successfully imported in to the instance oral contract
HELD:
McCutheon was successful in his claim
clause had not been successfully incorporated into the contract
McCutheon could not be bound by a clause on the basis of a previous course of dealing when he did not have knowledge of the specific term
previous course of dealings are only capable of importing a term into a later contract where actual or constructive knowledge of the terms is established, and the parties assent to them
Hollier v Rambler (1972)
Hollier had his car repaired by the defendant garage three or four times over a period of five years.
On at least two of these occasions he had signed a form which stated the garage were exempted from liability for damage caused by fire on their premises.
Hollier had not read the form.
On this occasion there was an oral agreement for the repairs to be conducted, and Hollier had not signed a form.
His car was damaged by fire and Hollier claimed in negligence.
ISSUE:
Hollier claimed the garage had been negligent and in breach of the implied term that they would take reasonable care of his car.
He also contended the garage could not rely on the exclusion clause because it could not be imported from previous written contracts into the oral contract made between himself and the garage.
The garage sought to rely on the exemption clause on the basis that the term had been imported into the oral contract by virtue of the parties’ previous course of dealing.
They argued three or four occasions within five years was sufficient to amount to a course of dealing such that the terms of the previous contract would be imported into the oral one, and, therefore they were exempted from liability.
HELD:
Hollier was successful in his claim. Three or four occasions in five years was insufficient to amount to a course of dealing and the exclusion clause had not, therefore, been imported into the oral contract. Even if the clause had been so imported, the language used was not so plain as to clearly exclude the garage from liability for its own negligence.
effect of an exclusion clause on third parties to a contract
Think back to privity of contract, the doctrine usually prevents a third from relying on the terms of a contract. This means an exclusion clause in a contract may not offer protection to parties other than the parties to the contract.
Scruttons Ltd v Midland Silicones Ltd [1962] AC 446
A drum filled with chemicals was shipped from the United States to the United Kingdom, as agreed by a bill of lading which included a clause which referenced the
United States Carriage of Goods by Sea Act 1936.
This clause limited the liability of the carrier to $500 for any damage that was caused to the goods.
The carrier engaged stevedores to deal with the unloading of the cargo on arrival and unfortunately, while lowering the chemical drum onto a lorry, they negligently dropped the drum, causing almost $600 worth of damage.
The respondents sued for the loss but the stevedores counter-claimed that their liability should be limited as per the clause stated in the contract.
ISSUE:
The overriding issue for the court to consider, in this case, was whether the clause in the contract, which was inserted by the
United States Carriage of Goods by Sea Act 1936
, could be relied upon by the stevedores who had damaged the bottle.
It was particularly important for the court to consider whether the stevedores were party to the contract between the buyer and seller.
HELD:
The court held that the clause could not be relied upon by the plaintiffs as the
United States Carriage of Goods by Sea Act 1936
did not apply to stevedores. Moreover, the stevedores were not a party to the contract, by either express or implied terms, between the parties.
They were, therefore, a stranger to the contract and the court relied upon the fundamental principle that a stranger cannot rely upon a contract they are not a party to.
The Contracts (Rights of Third Parties) Act 1999
means that third parties can now rely on an exclusion clause, providing the other requirements of the Act are met, and the Act it self is not excluded.
Statutory Controls - exclusion
if an exclusion clause had not been successfully incorporated into a contract according to the normal rules, it will be inoperable anyway
The contra proferentem rule- where there is doubt about the meaning of a term in a contract, the words will be construed against the person who put them in the contract.
The contra proferentem doctrine is there to remove doubt, not create it, so if the exclusion clause is clear contra proferentem does not apply.
Transocean Drilling UK Ltd v Providence Resources plc (2016)
there was claim for loss of use by Providence of oil exploration rigs off the coast of Ireland
Normally, it is assumed that exclusion clauses should be construed
Contra Proferentem
.
however, the agreement in this case was a sophisticated arrangement which was drawn up for parties of equal bargaining power.
the exclusion clause benefited both parties, and was part of a scheme for allocating losses between the parties
court stated that the
contra proferentem
principle is an approach to be used where the term is both one-sided and ambiguous.
if meaning of the words is clear, the the rule is not to be used.