The Legal Basis for Exclusion Clauses in Common Law Contracts
Whether Hippo could be advised to have a lawful position in relation to CSL and CSL’s employee, Joe in the case or not?
A contract under the common law principles have been regarded as an agreement which was entered among two or more individuals. But in order to constitute or make a contract valid and binding upon parties there must be three major constituents which must be present such as:
- An agreement which includes an offer and acceptance;
- Intent of the parties to create lawful relations;
- Consideration i.e. price paid for the promise (In Brief, 2017).
Although it is not compulsory that the agreements have to be in written form in order to be lawfully enforceable as they, may be made verbally with implied terms (In Brief, 2017).
Though the implied term of a contract was equally significant as it protects one of the individuals. This type of condition was normally implied by a law. For instance, if an individual purchases beans then he or she would not have a conversation with the seller about the worth of the beans. He or she would not have settled on an express condition. Though, it would seem only reasonable that the individual should have certain privileges against the seller if he or she have opened the packet and found the contents were defective. So a condition was implied into the agreement by statute that the goods were of acceptable quality. If they were not then the supermarket would be in contravention of contract.
In Att-Gen for Belize v. Belize Telecom Ltd [2009] 2 All ER 1127 it was concluded that the tribunal had no authority to improve the contract or to establish conditions to make the agreement more sensible. Provided that the benefit and intend of the individuals may conflict, it was improbable that condition would be implied on a daily basis to grant effect to their supposed intends. As one individual may have proposed to incorporate a specific clause, the other individual may have proposed precisely the opposite.
Though in Hong Kong Fir Shipping Co. Ltd v. Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 it was held that an individual would stare at the effect of the violation to make a decision in regard to the remedies available to the innocent party (Bits of Law, 2013).
Also, even if a clause meets the common law regulations then the (UCTA) may avert a person from depending on the clause.
Though, the exclusion clauses may observe to be powerful but a numerous number of these type of clauses may become void at the hearing of the tribunal. But if the respondent wants to be secured by such clause then he must prove that there was:
- Incorporation: It means that the clause was a part of the contract. Because, if the buyer hasn’t signed the deed or the written document then the exclusion clause would only form part of the agreement if an individual took sensible steps in order to bring it to the notice of the seller before the agreement was made.
- Construction: Even if the clause was incorporated into an agreement then also such clauses would only be successful of the words of the clause relays exactly to the contravention of the contract and to the answer which the buyer needs.
- The Unfair Contract Terms Act: So, if the buyer was from another trade, then the contract must be covered by the conditions of the Unfair Contract Terms Act, 1977 (UCTA). This Act may permits an individual to exclude some kinds of liability if that would be reasonably applicable in the situations.
In the matter of McCutcheon v. MacBrayne Ltd [1964] 1 WLR 125, (HL),it was upheld that though the individuals who were party to the contract had dealt with each other a number of times, but on certain occasions the deed containing the exemption clause was seen to be signed and sometimes it had not signed by the other party. So, it was concluded by the court that the exemption clause had not been regarded to be included as the transactions had not been dependable.
The Importance of Implied Terms in Common Law Contracts
The main aim of the UCTA was to limit the extent to which the liability in an agreement could be excluded for the contravention of the agreement and negligence, largely by reference to rationality need but in certain matter by a particular ban. As under section 2(1) of the UCTA it has been clearly stated that no individual could exclude or limit his legal responsibility in negligence for death or private harm (My Lawyer, 2017).
As in Monarch Airlines Ltd v. London Luton Airport Ltd [1997] CLC 698 it was stated by the tribunal that those terms which were clear enough to cover the act of negligence could be affirmed in the matters when at the time of construing the section, a tribunal should not ask whether there was an option head of lawful liability which the section might cover and, if there was, instantly interpreted as the clause which would be unsuitable to negligence. But, the tribunal instead stated by referring to the details and truth of the circumstances at the time of the agreement and asks what potential legal responsibility the individuals had in mind.
Similarly, under section 2(2) includes liability for negligence (Goldstone, 2009).
The principle of incorporation of exclusion clause was observed in the case of L’Estrange v. Graucob Ltd [1934] 2 KB 394 wherein it was stated that the exemption clause was in unfortunately fine print but readable and the applicant who had signed the deed without reading it would be bound by the clause, as it was incorporated in the agreement (Out Law, 2013).
In Parker v. South Eastern Railway (1877) 2 CPD 416, CA the tribunals stated that it was not essential for the innocent individual to know about the clause which was granted to the individual who observed to depend on that reasonable steps were taken to draw the clause to the attention of other individual.
In Thornton V Shoe Lane Parking Ltd [1971] 2 Qb 163 it was concluded that the clause would not be regarded as to incorporate in a contract as the respondent had not been granted adequate notice. Also, the clause was regarded as onerous as it made an attempt to exclude the liability for harm to a vehicle for personal harm which arouse out of negligence (In Brief, 2017) (Lexology, 2013).
It was clearly stated that if reasonable steps would not be taken then the defendant have to pay for the loss incurred. It was in Interfoto Picture Library Ltd v. Stiletto Visual Programmes Ltd [1989] QB 433 CA wherein it was stated that sensible steps had not be taken by the defendant as nothing was done in order to draw the attention of the other individual in regard to exclusion clause. And it was just one of the condition which was printed at the bottom. (E-Lawresources, 2017).
In another case of AEG (UK) Ltd v. Logic Resources Ltd [1996] CLC 265 it was stated that the clause must be brought to the attention of the other party if regard it to be enforced. (Steeles Law, 2010).
Incorporation of Exclusion Clauses into Common Law Contracts
As recently it has been observed that these clauses included consequential or indirect loss. The word Consequential loss was a classic matter of term under law (Crusie, 2013). So, in order to include a strange clause, the attention of the other individual must be drawn to it in the clearest manner. As in Spurling Ltd v. Bradshaw [1956] 1 WLR 461, CA, it was affirmed that in order to provide adequate notice of a strange clause, it would be essential for the clause to be ‘on paper in red ink with a red hand pointing to it (Allen & Overy, 2016).
Also in Chapelton v. Barry Urban District Council [1940] 1 KB 532 it was concluded that the ticket for the buying a chair was not contractual in nature as a sensible individual would regard it as a simple receipt. The ticket depicted that the applicant had paid for the chair and how long he could keep the receipt. So, it was not regarded as a deed which outlines the conditions on which the applicant had hired the chair (Lexology, 2009).
It was then in Curtis v Chemical Cleaning Co [1951] 1 KB 805 it was held that the cleaners could not escape liability for damage to the material of the dress by depending on the exclusion clause as it s scope has been misrepresented (Parris and Briskman, 2015).
In the present situation, it was specifically stated that the Defendant Company i.e. Computer Solutions Ltd was a transnational corporation which was selling packages subject to its standard conditions of sale, which comprised of certain clauses. The clauses included a liability clause and then an exclusion clause by excluding negligent act.
Though, as the terms were printed in receipts as the bottom of the quotations so the buyer would be liable as he has to read the same. But in this case as the contract was made orally at phone and there was not contract which was made in writing so it must have been the duty of the seller to give a notice to the seller as specified above.
But it was Joe who was the employee of the organization as per whose negligent act the installation was wrongfully made so Hippo could claim damages from both the corporation and the employee.
As first of all there was not notice given to the buyer before or at the time of contract and the loss in the form of damages could be taken from the corporation on the basis of the case of Pegler and Curtis.
So, Hippo could claim damages for the late delivery as loss of profits for loosing sales during Christmas period as there was no notice which was provided by the seller to the buyer and it was a oral contract which was made. There was no signed or written contract on the basis of which the seller could leave away from the liability to ay damages.
Conclusion
Therefore, at the end it was concluded that Hippo would be advised that the corporation have a lawful position in relation to CSL and CSL’s employee, Joe in the case as a result of which the damages must be paid to them. As the negligence clause could not be excluded in a contract as it was specifically stated by the UCTA. Secondly, the contract which was made in the present case was made on phone i.e. a oral contract which was not signed by the buyer so the terms were not known to him and it was the fault on the apart of seller that he did not gave sufficient notice to the buyer about the terms which it has incorporated. When the terms were not known by the buyer then when the same would be applicable in this case.
So, it has been advised that damages could be payable by CLS to Hippo for the above mentioned reasons.
References
Allen & Overy. (2016) Interpretation of exclusion clauses. [Online] Allen & Overy. Available from: https://www.allenovery.com/publications/en-gb/Pages/Interpretation-of-exclusion-clauses.aspx [Accessed on 5/3/17]
Bits of Law. (2013) Exemption Clauses: Incorporation. [Online] Bits of Law. Available from: https://www.bitsoflaw.org/contract/formation/study-note/degree/exemption-clauses-incorporation [Accessed on 5/3/17]
Crusie, R. (2013) Exclusion clauses: Top drafting tips and recent developments. [Online] ShooSmiths. Available from: https://www.shoosmiths.co.uk/client-resources/legal-updates/Exclusion-clauses-Top-drafting-tips-recent-developments-4903.aspx [Accessed on 5/3/17]
E-Lawresources. (2017) Unfair Terms – Regulation by statute – Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contract Regulations 1999. [Online] E-Lawresources. Available from: https://e-lawresources.co.uk/Unfair-Terms—Regulation-by-statute.php [Accessed on 5/3/17]
Goldstone, A. (2009) UK: Effective Exclusion Clauses: Ensuring They Work – Excluding And Limiting Liability. [Online] Mondaq. Available from: https://www.mondaq.com/x/83000/Contract+Law/Effective+Exclusion+Clauses+Ensuring+They+Work+Excluding+And+Limiting+Liability [Accessed on 5/3/17]
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Lexology. (2009) Limitation of liability: consequential or indirect loss. [Online] Lexology. Available from: https://www.lexology.com/library/detail.aspx?g=e5c5dd4d-e8df-42d0-ada8-3dfe3a14b508 [Accessed on 5/3/17]
Lexology. (2013) Limitations on liability exceptions for gross negligence and willful misconduct and the implications for outsourcing agreements. [Online] Lexology. Available from: https://www.lexology.com/library/detail.aspx?g=d7b52537-018d-487a-b258-780ac96689bb [Accessed on 5/3/17]
Lexology. (2015) Interpreting exclusion and limitation of liability clauses. [Online] Lexology. Available from: https://www.lexology.com/library/detail.aspx?g=aa071af8-d850-476a-8c71-735e9dc9468e [Accessed on 5/3/17]
My Lawyer. (2017) Exclusion clauses. [Online] My Lawyer. Available from: https://www.mylawyer.co.uk/exclusion-clauses-a-A76062D32724/ [Accessed on 5/3/17]
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Parris, E. and Briskman, S. (2015) Contracts refresher: excluding liability for loss of profits. [Online]Field Fisher. Available from: https://www.fieldfisher.com/publications/2015/01/contracts-refresher-excluding-liability-for-loss-of-profits#sthash.6dCPTbo6.dpbs [Accessed on 5/3/17]
Penningstons Manches. (2014) WHAT A LIABILITY? EXCLUSION CLAUSES AND LIABILITY FOR LOSS OF PROFITS. [Online] Penningstons Manches. Available from: https://www.penningtons.co.uk/news-publications/latest-news/what-a-liability-exclusion-clauses-and-liability-for-loss-of-profits/ [Accessed on 5/3/17]
Steeles Law. (2010) Validity of exclusion clauses where a sub-clause is deemed unreasonable. [Online] Steeles Law. Available from: https://www.steeleslaw.co.uk/news/validity-of-exclusion-clauses-where-a-sub-clause-is-deemed-unreasonable [Accessed on 5/3/17]
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