The Law of Business - Assignment Example

The Law of Business A. What is the purpose of the exclusion clauses in a contract? (10 marks) about 150 words Exclusion clauses are contractual terms that permit a party to a contract to circumvent liability in case of breach of the contractual agreement. These clauses are also invoked to limit liability, if one of the contracting parties causes damage to the other party. (Kelly & Hayward, 2005. p.118). Legitimacy of exclusion clauses is governed by considerations such as , whether they were integrated into the contract; whether it encompasses the violation; and whether its effect is circumscribed by any construction rule of the common law. In addition, exclusion clauses are dependent on statutory specifications (Kelly, Holmes, & Hayward, Business law , 2005. pp 151 – 152 ). Exclusion clauses fall under the purview of legislation, like Unfair Contract Terms Act 1977 and the Unfair Terms of the Consumer Contract Regulations 1999. The Unfair Contracts Terms Act 1977 disallows exclusion of liability for negligence resulting in death or injury. In consumer sales, exclusion clauses cannot prevent liability for breach of implied terms of the Sale of Goods Act 1979, unless they are reasonable (Kelly, Holmes, & Hayward, Business law , 2005. pp 151 – 152 ). B) Richard operates a car sales business. Milo drove to Richard’s car park to buy a car from him. At the entrance to the car park was a sign, which read: “the management is not responsible for the personal safety or personal property of clients while on premises” After some discussion Richard sold an Opel Omega to Milo. Milo Bought the car for his own private use. Milo signed a written contract of sale on Richards standard form. A term in the contracted started: “The seller is not liable for breach of any term implied by statute or common law or otherwise implied.” On this way out of Richards car park Milo Suffered personal injury and damage to his car when one of Richards ‘s employees carelessly backed into him. The Opel was delivered a week later. Two months after the sale the cars satellite navigation system broke down and the petrol tank developed a leak Richard claims to be legally protected against any liability. Advise Milo (40 marks) about 700words. In this problem, the legal issues to be addressed are, whether Richards can rely on the exclusion clause for evading liability, and whether Milo has any remedy to recover damages for the loss caused to him due to Richard’s employee’s negligence. In order to make Richard liable for the losses suffered by Milo, the latter has to establish that Richard cannot rely on the exemption clause in the standard terms of the contract. Milo can be deemed a consumer as per Section 3(1) of the Consumer Contracts Regulations 1999; as he had bought the car for his personal use.In R&B Customs Brokers Co Ltd v United Dominion Trust Ltd, the Court of Appeal held that the purchase of the car was merely incidental to the company’s business activity. Hence, the defendant’s liability in respect of breach of implied terms could not be excluded (R&B Customs Brokers Co Ltd v. United Dominion Trust Ltd, 1988). A notice incorporating an unreasonable term cannot exclude liability for negligence resulting in loss or damage. The Unfair Contract Terms Act 1977, states that a contract term or notice that attempts to exclude or restrict liability for negligence, then agreement to or awareness of this term does not signify voluntary acceptance of risk. A notice stating that the management is not responsible for the personal safety of customers is untenable under the provisions of Unfair Contract Terms Act 1977. Hence Richard’s company cannot evade liability, on the basis of exclusion clauses, for the damage caused to Milo due to the negligence of its employee. In addition, the statement “The seller is not liable for breach of any term implied by statute or common law or otherwise implied.” is invalid; because, any contractual term violating the law is void. This is in accordance with the fact that in consumer sales, exclusion clauses cannot prevent liability for breach of implied terms of the Sale of Goods Act 1979, unless they are reasonable. Since the notice is in breach of the law of implied terms, it cannot be relied upon for excluding the liability of the seller. In Thornton v. Shoe Lane Parking, the defendant contended that he was not liable for the injuries received by Thornton whilst parking his car in the defendant’s car park. The court held that the contract was formed when the plaintiff entered the parking place, which was prior to the issue of the ticket; hence the defendant was held liable (Thornton v. Shoe Lane Parking , 1971). In our present problem, Milo had entered into a contract with Richard’s company, as soon as he had entered the premises. He had observed the notice only after entering the premises. Hence the exclusion clause will be inapplicable, as it had not been included in the construction of the contract. In Hollier v. Rambler Motors, the plaintiff was a regular customer of the defendant’s garage. The court held that as it could not be proved that the plaintiff had prior knowledge of the exclusion clause and that he had agreed to be bound by it, the exclusion term did not constitute a part of the last contract, entered into by him with the garage (Hollier v Rambler Motors (AMC) Ltd , 1972 ). In LEstrange v. Graucob Ltd, the supplier of a cigarette vending machine disclaimed responsibility for the quality of the machine, by means of an exclusion clause in the agreement. Sections 68 and 68A of the Trade Practices Act prohibit the inclusion of implied exclusion terms into contractual agreements, made in respect of goods or services (LEstrange v Graucob Ltd , 1934 ). In Curtis v. Chemical Cleaning, the court ruled that under section 52 of the Trade Practices Act, exemption clauses were deemed to be deceptive and consequently not binding in nature (Curtis v Chemical Cleaning and Dyeing Co , 1951 ). As per the case-law and provisions of law discussed above, Richard’s company cannot evade liability for the loss and damage caused to Milo. Whenever goods are sold, in the due course of business, they are required by section 14(2) of the Sale of Goods Act 1979 to be of satisfactory quality. Since the navigation system of Milo’s car was broken within two months of purchase, It can be deemed that the goods supplied are not of satisfactory quality. Hence Milo can rescind the contract or can claim the replacement of the system in the car. He can also claim damages for the breach of contract by Richard’s company. C. Would it make any difference if Milo had bought the car for his business? (20 marks) about 300 words To establish liability in cases of exclusion clauses , it is essential to establish whether a purchaser is a consumer. Section 3(1) of the Consumer Contracts Regulations 1999 states that ‘a consumer is any natural person who, in contracts covered by these Regulations, is acting for purposes which are outside his trade, business or profession. If Milo had purchased the car for use in his business he cannot be considered to be a consumer. Since, he is a trader in the car business, for the purposes of this particular contract, he will be deemed to be a non- consumer. In non – consumer sales, liability for breach of section 12(1) SGA is inevitable. Furthermore, the Unfair Terms in Consumer Contracts Regulations 1999 renders void a contractual term devoid of good faith (Kelly, Holmes, & Hayward, Business law , 2005. pp 151 – 152 ) Whenever goods are sold in the due course of business, they are required by section 14(2) of the Sale of Goods Act 1979 to be of satisfactory quality. Since the seller had infringed the implied terms deemed to be essential conditions by the statute under the provisions of section 14(2) of the Sale of Goods Act 1979, the seller is liable for a claim of full refund of the cost of the car sold to Milo. The latter can rescind the contract, claim compensation for the personal injuries caused to him and the damage caused to his car by the exploding navigation system. As such, even if Milo had bought the car as a non consumer, the seller is liable for breach of implied terms under the provisions of Sale of Goods Act 1979. In Stevenson v. Rogers, the sale of a car is part and parcel of a business that entails the purchase and sale of cars (Stevenson v Rogers , 1999). In our case, since Milo is engaged in the business of sale and purchase of cars he is a non- consumer. D. In what way are the unfair terms in consumer contract regulations 1999 different to the unfair contract terms act 1977? (30 marks)about 500 words The Unfair Contract Terms Act 1977 and the Unfair Terms of the Consumer Contract Regulations 1999 govern the employment of exclusion clauses in business contracts. They have proven to be considerably efficacious in preventing the abuse of exclusion clauses, whilst ensuring their proper application. Section 1(3) of the Unfair Contract Terms Act 1977 deems a business liable, whenever it proves to be unsuccessful in carrying out the obligations or duties, which are to be executed in the normal course of business. According to Section 12 of the Unfair Contract Terms Act 1977, a party is considered to be dealing as a consumer, if the contract was not made in the normal course of business. Specifically, section 1(3) of the Unfair Contract Terms Act 1977 makes a business liable for not fulfilling obligations or duties that are consequent to what has been done or is to be done in the normal course of business. Section 11, Unfair Contract Terms Act 1977 states that reasonableness in contractual terms is of the greatest importance; and it verifies whether an exclusion clause is reasonable, after studying the circumstances that should have been known to the contracting parties in the normal course of business. In this fashion, section 11(5), Unfair Contract Terms Act 1977, bestows wide discretion upon the courts, in determining the reasonableness or otherwise of exclusion clauses. The responsibility of proving that an exclusion clause is reasonable is that of the contracting party that desires to incorporate or depend on such exclusion clause in the contract. The Unfair Terms of the Consumer Contract Regulations 1999 deals not only with exclusion clauses, but also other contractual terms. Consequently, these regulations are much wider in scope. The chief purpose of the Unfair Contract Terms Act 1977 is to limit the extent to which contractual liability can be excluded, whenever a breach of contract transpires. This purpose is achieved either by exact prohibition or by reference to a condition of reasonableness. The courts regulate exclusion clauses, by scrutinising its construction, whereby its validity and applicability to all the facts of the contract are examined (Andrews v. Singer, 1934). They also apply the contra preferentum rule, whereby ambiguities in the exclusion clauses are scrutinised (Hollier v Rambler Motors (AMC) Ltd , 1972 ). Finally, liability becomes unavoidable if the contractual breach’s outcome is the failure of the contract, in its entirety (Kelly, Holmes, & Hayward, 2005. pp. 143 – 146). As such, exclusion clauses are very important in standard form contracts. A contractual exemption clause aims to exclude liability of one of the parties to the contract. Nevertheless, the Statute sets out that no contractual term can exclude or limit liability for death or injury caused negligently. List of References Andrews v. Singer, 1 K.B. 17 (Kings Bench 1934). Consumer Contracts Regulations 1999. Curtis v Chemical Cleaning and Dyeing Co , 1 KB 805 (Kings Bench 1951 ). Hollier v Rambler Motors (AMC) Ltd , 2 QB 71 (Queens Bench 1972 ). Kelly, D., Holmes, A. E., & Hayward, R. (2005). Business law. Routledge Cavendish. LEstrange v Graucob Ltd , 2 KB 394 (Kings Bench 1934 ). R&B Customs Brokers Co Ltd v. United Dominion Trust Ltd, 1 All ER 847 (1988). Sale of Goods Act 1979. Stevenson v Rogers , 1 All ER 613 (1999). Thornton v. Shoe Lane Parking , No. 1 All ER 686 (1971). Unfair Contract Terms Act 1977. Unfair Terms of the Consumer Contract Regulations 1999. Read More