Exclusion clauses in contracts

October 27, 2017 Law

The issue is whether the exclusion clause Coaches Ltd intends to trust on was incorporated into the contract, and if so whether it is effectual in excepting Coaches Ltd’s liability.

The first point is therefore whether the exclusion clause was expressly incorporated into the contract. The clause was printed on the dorsum of the bill sent to Chelsea Ltd after the telephone engagement. As the contract was unwritten and took topographic point over the telephone, this means that the clause was non expressly agreed to by the parties at the clip of doing the contract, and it is banal jurisprudence that a party can non later one-sidedly change the footings of the contract:Olley Vs Marlborough Court[ 1949 ] 1 KB 532.

However, the clause may hold been incorporated into the contract at the clip the contract was made impliedly. The relevant signifier of implied incorporation here is implication by class of covering. For this to be established, three demands must be met.

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The first is that there must be a class of covering which was both consistent and regular: McCutcheon V David MacBrayne Ltd [ 1964 ] 1 All ER 430.

InMcCutcheonthere had been traffics between the parties on four occasions prior to the 1 before the tribunal, and the House of Lords found that this was an insufficiently consistent and regular class of covering to connote a term into the contract.

On the other manus, inHardwick Game Farm V Suffolk Agricultural Poultry Producers Association[ 1969 ] 2 AC 31 there had been three or four traffics a month between the parties over a period of three old ages, numbering approximately one hundred traffics, and this was found to represent a class of covering sufficiently consistent and regular to justify the deduction of a term into the contract.

Finally, inHollier V Rambler Motors ( AMC ) Ltd[ 1972 ] 2 QB 71 there had been three or four old traffics between the claimant and the suspect garage over the class of five old ages. Of these, merely in two had the claimant been asked to subscribe an bill at the underside of which the clause in inquiry was printed. The Court of Appeal held, followingMcCutcheon, that the class of covering was deficient to warrant the deduction of the term into the contract.

We are told that Chelsea Ltd had hired a manager from Coaches Ltd “without any jobs for the last few years” , but we are non given sufficient information to set up, following the instances cited above, whether the class of covering was sufficiently consistent or regular.

The 2nd demand is that the papers in inquiry must hold moderately been expected by the parties to hold contractual consequence:Chapelton V Barry Urban District Council[ 1940 ] 1 KB 532. It could be argued that the bill in the present case was non a papers which the parties would moderately hold expected to hold contractual consequence, peculiarly if the monetary value was agreed over the phone, which would indicate towards the bill being a mere post-contractual reception. This would ensue in the clause non holding been expressly incorporated into the contract:Chapelton( above ) and peculiarlyThornton V Shoe Lane Parking Ltd[ 1971 ] 2 QB 163. On the other manus, the papers could hold contractual consequence if, for illustration, the telephone understanding was capable to the bill, which had to be signed and returned to Coaches Ltd.

Tied in with this is the 3rd demand that the clause in inquiry must hold been moderately brought to the attending of the other party:Thompson V London, Midland & A ; Scottish Rly Co[ 1930 ] 1 KB 41. What is sensible will depend on the content of the clause, asperLord Denning’s celebrated “red manus rule” remarks inJ Spurling V Bradshaw[ 1956 ] 1 WLR 461.

We are told that the clause was written on the dorsum of the bill sent to Chelsea Ltd. It is ill-defined whether there was any mention to the clause on the forepart of the bill, or whether Chelsea Ltd was required to subscribe the bill or in any manner take notice of it, or whether it was a mere reception: whether the clause was moderately brought to the attending of Chelsea Ltd would depend on these facts.

Consequently, it seems that there are evidences to reason that the exclusion clause was non successfully incorporated into the contract, and that Coaches Ltd should therefore non be allowed to trust on it.

However, saying for the interest of statement that the clause had been incorporated into the contract, the 2nd issue to be considered is its cogency and effectivity.

The clause in inquiry intents to except all liability for ( I ) personal hurt and ( two ) harm to clients or their properties howsoever caused, and the two limbs will be considered individually.

Section 2 ( 1 ) of the Unfair Contract Footings Act 1977 ( “the Act” ) precludes a party from trusting on a term or notice to except or curtail liability for decease or personal hurt caused by carelessness ( as defined in subdivision 1 ( 1 ) ) . Consequently, the first limb of the exclusion clause falls foul of this proviso in relation to the purported exclusion of liability for personal hurt caused by carelessness, and is hence null in this regard and can non be relied on by Coaches Ltd.

On the other manus, subdivision 2 ( 2 ) of the Act allows a party to trust on a clause excepting or curtailing liability for harm other than decease or personal hurt caused by carelessness, but merely in so far as the clause is sensible.

The reasonableness trial is set out in subdivision 11 ( 1 ) , and is that the term must be one which it was just and sensible to include, holding respect to the fortunes which were, or ought moderately to hold been, known to or in the contemplation of the parties when the contract was made. It is for Coaches Ltd to demo that the clause is sensible: subdivision 11 ( 5 ) .

Following the Court of Appeal determination inStewart Gill Ltd V Horatio Myer & A ; Co Ltd[ 1992 ] QB 600, the clause can non be severed by the tribunal, and must be taken as a whole when sing reasonableness. As discussed above, the first limb falls foul of the Act, and this points really strongly towards the whole clause being unreasonable and hence nothingness. Further, liability is supposedly excluded instead than limited, and the clause is really loosely drafted, farther factors which point towards unreasonableness.

Finally, it should be noted that even if the clause were valid, it must cover the specific harm in issue to protect the suspect from liability. The attack adopted by the tribunals in interpreting exclusion clauses iscontra proferentem, i.e. clauses will by and large be construed against the party trusting on it. However, recent instances such asMcGeown V Direct Travel Insurance[ 2003 ] EWCA Civ 1606 suggest that the rigorous attack adopted in determinations such asAndrews Bros ( Bournemouth ) Ltd V Singer and Co Ltd[ 1934 ] 1 KB 17 has now been relaxed, peculiarly in position of the modern attack to reading laid out inInvestors Compensation Scheme V West Bromwich Building Society[ 1998 ] 1 WLR 898.

In decision, it is dubious whether the clause was incorporated into the contract, and in any event the Act if really likely to forestall its operation.


Chitty on Contracts, 29Thursdayed. , Sweet & A ; Maxwell, 2004

Dobson,Charlesworth’s Business Law, 16Thursdayed. , Sweet & A ; Maxwell, 1997

Keenan and Riches,Business Law, 7Thursdayed. , Longman, 2004

McKendrick,Contract Law, 6Thursdayed. , Palgrave, 2005

O’Sullivan & A ; Hilliard,The Law of Contract, 2neodymiumed. , Oxford University Press, 2006


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