Exclusion Clauses in Contracts - Report Example

Exclusion Clauses in Contracts In this problem, the important legal issues to be addressed are; whether the swimming pool company can rely on the exclusion clause relying on the notices displayed at the entrance and behind the door of the cubicle, for avoiding liability. It is also to be determined, whether Janet has any legal remedy to recover damages for the losses caused to her due to the theft of her belongings and injury to her nose. An exemption clause to be valid should be incorporated into the construction of the contract, and should also encompass the breach that had actually transpired. Moreover, the contra preferentum rule states that any exclusion clause will be interpreted against the party that desires to rely on it. Consequently, it should be unambiguous. Finally, the doctrine of fundamental breach, states that liability cannot be excluded, if a fundamental breach had taken place.1 The purpose of including exclusion clauses in contracts is to circumvent liability. These clauses are governed by the Unfair Terms of the Consumer Contract Regulation 1999 and the Unfair Contract Terms Act 1977.2 Specifically, section 1(3) of the Unfair Contract Terms Act 1977 renders a business liable for violation or avoidance of statutory obligations, in the normal course of business.3 Janet can be precluded from claiming damages from the swimming pool company, only if the notice of the exclusion clause had been incorporated into the construction of the contract. An exclusion clause is deemed to have been incorporated, only if it is part of a document that has been signed by the parties to the contract.4 In the alternative, reasonable notice regarding the exemption clause has to be provided,5 either prior to or at the time of the formation of the contract6. Therefore, it is essential to determine if the notice at the back of the cubicle door and the turnstile was conspicuous. On the other hand, if the management of the swimming pool had drawn specific attention to the notice, then the exclusion clause would have been deemed to have been incorporated in the contract. In order to succeed in her claim, Janet has to establish that the management of the swimming pool cannot rely on the exemption clause in the standard terms of the contract, and that as a consequence they are liable for breach of contract. The Unfair Contract Terms Act applies to exclusion clauses in the course of a business; in cases of negligence, the injured party should have been a consumer. This Act applies to the test of reasonableness7 and protects a consumer. A consumer is defined as a person who does not enter the contract, in the course of a business; whereas the other party does so in the course of a business.8 It is to be proved whether Janet is a consumer under the provisions of the UTCCR. Section 3 of the Unfair Terms in Consumer Contracts Regulations 1999, which covers consumer contracts, states that a person deals as a consumer if he neither makes the contract in the course of a business nor holds himself out as doing so and the shop owner makes the contract in the course of business. In our problem Janet is a consumer since she has entered the contract for her personal benefit, and not in the course of a business. The exclusion clause must have been incorporated into the contract either before or at the time of concluding the contract9. In Chapelton, it was held that certain items like cloakroom tickets, and car park tickets were not to be treated as valid contractual documents.10 In Spurling v Bradshaw, Lord Denning stated that certain exclusion clauses had to be displayed clearly, in red ink on the pertinent document.11 In our problem, no such prominent notice was given to the Janet. Hence, the management cannot rely on this exclusion clause, in order to circumvent liability. In addition, as per section 2(1) of the UCTA, liability cannot be excluded if personal injury results from negligence. Consequently, the swimming pool company cannot exclude liability for the personal injury caused to Janet, via its exclusion clause. In relation to other loss and damage caused by negligence, section 2(2) states that an exclusion clause will be valid only if it is reasonable. In L’Estrange the court opined that overbearing commercial behaviour by the dominant party in a contract of sale was disallowed by the consumer protection legislation.12 In Olley the exemption clause notice was displayed at such a place that it could not be seen whilst booking the room. Hence, the court held that the exclusion clause in the notice would not constitute a part of the contract.13It was held in Canadian Pacific Railway Co v. Lockhart, that the employer was liable for the acts of his employee.14 Similarily, the swimming pool management cannot evade responsibility by stating that his employee was responsible for the losses. The swimming pool company cannot rely on the exclusion clause, since neither explicit notice was rendered nor incorporated into the construction of the contract. In addition, as Janet had been injured and had lost her belongings, the exclusion clause will not come to its rescue. Another notice was placed behind the turnstile, which could not be seen by her, as she used another approach to the swimming pool. For a standard term of a contract to be valid, it should be incorporated in to the terms of the contract. This exclusion clause is invalid, because it had not been included in to the contract, at the time of issuing her with the season ticket. The following case law reveals the importance of reasonable notice, in order to rely on exclusion terms in contracts. In Thornton the court ruled that the contract had been concluded at the time of the plaintiff entering the parking place.15 Similarly in our case, the management of the swimming pool had specified, via the exemption clause that they would not accept responsibility for valuables that had not been placed with them. This is untenable as per the provisions of the Unfair Contract Terms Act. In Curtis, it was held that the defendant company could not circumvent liability, on the basis of an exclusion clause; because the terms of the exclusion clause had been misrepresented to the customer, by the company’s employee.16 As per the case law, the exclusion term should have been incorporated in the contract, prior to its completion. As such, the contract between Janet and the management of the swimming pool had been concluded, as soon as she was provided with the season ticket by the management. This enabled her to access the swimming pool without having to pass through the turnstile, where the notice had been displayed. It is clear that reasonable notice had not been given to Janet. The exclusion term to be valid, should have been incorporated in to the contract; namely at the time of issuing the season ticket to her. In Parker it was held that there should be reasonable notice of an exclusion clause.17 In our problem, the exclusion clause was displayed on the reverse of the cubicle’s door, which does not constitute reasonable notice. If the exclusion clauses are unusual or burdensome, the notice given to the party should be displayed more prominently. In Hollier v. Rambler Motors, the court held that as it could not be established that the plaintiff had knowledge about the exclusion clause. Hence, the exemption clause could not be treated as a part of the contract between the plaintiff and the defendant.18 Since Janet is a consumer she can avail the protection of the Unfair Contracts Terms Act. In respect of her injury and loss of belongings, she can take recourse to the provisions of the Unfair Contracts Terms Act for making the management liable. She can also invoke the provisions of the Occupiers Liability Act, for negligence, by the management, in maintaining the premises. 19 She can claim damages from the management for the losses suffered by her in respect of her of her belongings as well as for personal injury. Thus, the swimming pool management is liable under the provisions of the Unfair Contract Terms Act 1977. Thus, Janet can successfully sue the swimming pool company and its employee. The exemption clause will be deemed to not have been incorporated in the contract, not to cover the breach, or not to be reasonable. Therefore, Janet can certainly claim damages for the loss of her belongings and damages for personal injuries. She can also claim damages for negligence from the company under the provisions of the Occupiers liability Act. References Curtis v Chemical Cleaning and Dyeing Co Ltd (1951) 1 HB 805, 1 All ER 631 David Kelly, Ann E. M. Holmes & Ruth Hayward, ‘Business law’, Routledge Cavendish, 2005 Hardwick Game Farm v Suffolk Agricultural etc Association (1969) 2 AC 31. Hollier v Rambler Motors (AMC) Ltd [1972] 2 QB 71. LEstrange v Graucob Ltd (1934) 2 KB 394 Lockhart v. Canadian Pacific Ry. Co., (1941) S.C.R. 278. M. P. Furmston, Geoffrey Chevalier Cheshire, & Cecil Herbert Stuart Fifoot, ‘Law of contract’, Oxford University Press, 2007 Occupiers Liability Act 1984. Olley v Marlborough Court Hotel (1949) 1 KB 532 Parker v South Eastern Railway (1877) 2 CPD 416. Sale of Goods Act 1979 Spurling Ltd v Bradshaw (1956) 1 WLR 461. Stevenson v Rogers (1999) 1 All ER 613 Thornton v Shoe Lane Parking (1971) 1 All ER 686 Unfair Contract Terms Act 1977 Unfair Terms in Consumer Contracts Regulations 1999 Read More