Exemption Clauses in General

Exclusion clauses, or in general exemption clauses could enter into the contract by these three possibilities – signature, reasonable notice and previous course dealings. The process of reasonable notice is divided into time and form of the notice and effect of the exclusion clause. Very important is also interpreting the exclusion clauses.

Signature is considered as formal tool anywhere, and wide public gives it high value. It would lost it if would not be taken seriously towards the terms in the contract and liability coming from it. When the contract is prepared and at the

same time signed then consequently all the terms in the contract are considered as approved by both parts, without regard on the fact of being read or correctly understood. That rule was applied in case L´Estrange v Graucob (1934). There was signed a hire-purchase agreement, which was unfortunately not read by the buyer. The vending machine – subject of the contract became faulty, but according the small typing in the contract, dealer gave up all liability from the product. Therefore, exclusion clause was used, and buyer, who signed the contract without reading it, did not get any compensation. However there is one exception to this rule – a misrepresentation, in relation to the case law Curtis v Chemical Cleaning and Dyeing Co (1951). The wedding dress of Mrs. Curtis was taken to the cleaning company and she signed agreement excluding liability of the cleaning company from any damage. She asked about the precise meaning of damage, and she was acknowledged that it means dress would have spangles and drops. When she came for clean dress she found a blemish on them, which was not included in exclusion clause to which employers were relying on. Court of Appeal held that there was misinterpretation in explaining the meaning of sequins and beads, so cleaning company could not count on exclusion clause despite the agreement was signed.

For the reasonable notice is considered when parts of contractual terms – on tickets or notes – are showed at the time when agreement is made and recipient is aware of their existence. The leading case for that possibility is considered Parker v South East Railway (1877). Mr. Parker left his bag in a paid station

cloakroom. He bought a ticket where was clearly stated to look at the back side for the conditions. Among those belong also that liability of the company for lost baggage is only up to £10. Unfortunately, bag of Mr. Parker was lost, and its value was £24, which he claimed from the company. Court of Appeal held that there exists reasonable notice to see the conditions on the back side. Consequently company was required to pay only £10. Indeed, there are only two ways when reasonable notice could be given. First one is before making the contract, and the second is at the time of making the contract. Case law relating particularly to the time is Olley v Marlborough Court Ltd (1949). Young couple booked in advance a hotel for a week. When they enter the rook there was notice that hotel is not responsible for lost or stolen property of their guests. Unfortunately, the fur coat was stolen, so couple asked for remedy. Hotel claim that they left notice of no responsibility. Finally, Court of Appeal decided that notice left in room, was not given notice in time, before, or at the time when contract – booking – was made. So notice in the room was completely new term, which could not be implied in the contract without agreement between both sides. Quite interesting is case Thornton v Shoe Lane Parking (1971). Mr. Thornton parked his car in the car park, where he got automatic ticket. After taking that ticket it was allow him to park at the park area. At the ticket was profusely stated that parking there is under the conditions stated at their building. Mr. Thornton after returning back to the car park became in injured in the car park and he claim remedies. However, not only the condition but several

notices stated that car park do not have any responsibility for damage or personal injury caused in the car park. Lord Denning came to another conclusion. He took whole process of creating a contract from the side of offer and acceptance. According to this contract was done after customer placed money into the machine. Consequently, when Mr. Thornton was able to see warning that it is necessary to check the conditions, contract was done and no conditions applied. It is also important in what form will be that reasonable notice given. There is a case Chapleton v Barry UDC (1940), where Mr. Chapleton hired rented two chairs on the beach. Mr. Chapleton bought tickets, and kept them for potential control. However, without reading terms at the back side, that rent company – local council – does not accept any responsibility from damage or injury. After he sat at the chair, it broke. So he sued council which was relying on the terms at the back of the tickets. Court of Appeal held that ticket plays a role of the receipt, to prove that chair was rented and paid. Indeed, logically nobody would expect the existence of the conditions. There is need to acknowledged the other party that there are contractual terms. Reasonable notice that these conditions exist is very important because it allow informing both parties and preventing misunderstandings. It is usual to have on the front of the document notice that contract contains exclusion or limitation clauses. When exemption clauses are not noticed in the front it could not be considered as reasonable notice. If any problems with reading terms or its hidden happen courts would probably not consider as reasonable notice either.

Ticket which had on the front typed to see the conditions at the back was bought. But at the back was stamp so terms were unreadable. Therefore court in Sugar v LMS Railway Co (1941) decided that there was no efficient note so consequently the terms were not implied in the contract. Especially by courts is today paid attention on how unusual or disadvantageous terms are implied in the contracts. The leading case law for that is Interfoto Picture Library v Stiletto Visual Programmes Ltd (1988). Advertising agency borrowed some photographs from the claimants who owned photo library. Photos were delivered to the advertising agency, with a note that they have to be returned in 14 days and also accompanied with a list of conditions. Among those conditions was one that says after 14 days without returning photos there is applicable fee £5 for each photo and day. After some time of probable forgetting on photos, company returned them and photo library asked for over £3700. Court of Appeal decided that term about fee was very onerous and therefore should be put attention on it at the list of conditions. There was also used statement of Lord Denning that some clauses should be print in red ink on the front of the document to draw attention. Despite the condition was not hidden, it was only normally printed, photo library assumed that advertising company read the condition, but they did not make sure about it. Court decided to award £3.50 for each week of not returning the photos due to quantum meruit.

Exclusion clauses implied by previous course dealing means that exclusion clauses become parts of the contract by previous agreements, if they exist. It is

very useful and time saving if two companies, which trade together longer time and have couple of contracts do not put still the same exclusion clauses, they are aware of them, so they deal according to them. That possibility is also legally acceptable. Case concerned about that is Spurling v Bradshaw (1956). After the years of trading defendant delivered few barrel of orange juice to the claimant to store them. In a few days was delivered to him also receipt and documents, which stated at the back exclusion of the claimant from any liability from loss or damage cause by negligence of claimant and his employees. After defendant wanted to collect the barrels he found out that they are empty. Therefore he did not want to pay fees for storage so claimant brought legal proceedings. Defendant argued with the negligence of the claimant, but he was protected by the exclusion clause. Defendant then claimed that clause was brought after the contract was completed, but then he has to admit that same documents were received by him in previous dealings, but he did not read them. The conclusion of the court was that term was implied by previous course dealings. On the other hand there is case Hollier v Rambler Motors (AMC) Ltd (1972). Mr Hollier left his car for repairing in the garage of defendant. Car was damaged by fire. Claimant, who unsuccessfully sued the company of defendant few times in previous years, did not at the last time sign the notice excluding defendant from responsibility cause by fire. Company defended that notice was not important because it was signed in previous dealings, so claimant was aware of that. However, Court of Appeal had different opinion. It was held that

in this case is previous dealing not efficient enough to give reason for addition as that clause.

To imply the exclusion limitation clause into the contract is not everything. There is also another side – the court, which will analyse the interpretation of the clause by using rule contra proferentem. What means that clause would be presented on the side that is not relying on it. If the clauses have unclear meaning then this rule is very useful. It was used in Houghton v Trafalgar Insurance Co (1954) where was involved accident of the car with the five seats on which were actually six people. The insurance exclusion clause stated no responsibility if the car is loaded, what insurance company applied here. Court of Appeal by applying rule contra proferentem gave word loaded general meaning, which is connected with goods, not human beings. Finally, the excluded liability was rejected, because in the car were more people, not more weight. Less strictly is this rule applied if clause only limit the liability and not totally exclude it. There is a case law which deal with it – Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd and Securior (Scotland) Ltd (1983). In Aberdeen harbour were ships which need security protection. Securior acted incompetently so two of the ships sank. In the contract was liability of the Securior limited to £1000, but Ailsa Craig wanted to interpret it in their way. The House of Lords finished the trial by concluding that limitation clauses are not as strict as exclusion clauses, because they are accepting possible risk. So by accepting limited amount of money from one side, to taking risk from other side,

both parts make something like a business between them. This is legitimate intention seen by courts as limitation clause.

To conclude, exclusion clauses are important parts of each contract, which are to be read, otherwise it could caused many troubles. They can be implied to contract by signature, reasonable notice or by previous course dealings. Implication by signature is done when at the actual time, the contract was done and all clauses were incorporated, and contract was signed. Reasonable notice means that there was given a clear notice where are, and which terms will be applied if something happen. Previous course dealings are based on previous contracts made between companies, so there is no need to repeat them all the time, because both sides are aware of them. Exclusion clauses are to exclude liability of one party, usually from negligence or incompetence, and to aware the other party that by accepting them they are coming into the potential risk. To limit that risk were created limitation clauses which accept liability up to the high of before agreed amount. However, none of these clauses guarantee the interpretation of the court. When the court in analysing the clause sees injustice, then judgement would be in favour of damaged party. Also that has its exceptions, when it is clear that damaged party did not read the terms. The freedom of contract allows parties to imply exclusion clause to whatever, that choice is up to parties. It could be said that exclusion clauses are business. And then they have to accept consequences.