Contract Assignment

“Pacta sunt servanda”, (agreements are to be kept; treaties are to be observed) is a Roman maxim designed to encourage good practice in contracts. This need to reinforce the principals of what a good contract should be would suggest that just like today, as well as making good contracts, the originators of today’s common law could be just as adept at making bad ones too. However, just like the Romans we also have developed systems, legislations and remedies that protect innocent parties from the perils of falling victim to unfair contracts terms.

In regard to Victoria’s problem with Splosh Ltd there are a number of issues that this essay will seek to clarify. The main facts in the case which are of relevance from the point of view of making a claim in contract law can be summarised to the following.

a. Victoria contracted Splosh Ltd a specialist firm of Pool builders to carry out some work on her property.

b. Victoria was given a document by Splosh Ltd headed ‘Standard Terms and Conditions’, attached to the document was a piece of paper which stated Splosh Ltd. (henceforth also referred to as ‘the company’) The company claimed it excluded them from liability for injuries caused by their equipment. Furthermore the document also stated it limited the company for any liability in respect of damage to the client’s property to a maximum sum of £500.

c. Victoria suffered injuries to herself as a result of what she maintained was insufficient safeguards taken by the company to prevent accidents. Furthermore the client also claims substantial damage was caused to her property as a result of the companies excavations.

We can see from the above that there are three main aspects to this case which are very important in establishing whether the client would have a successful outcome in a litigation claim against Splosh Ltd. We shall look at these in turn in more detail.

When Victoria as a consumer engaged the services of Splosh Ltd she did so on the understanding that they were a specialist company in their chosen field and as a result she could rely on their advice and professionalism to carry out a contract at her home in a safe and competent manner. Added to this as a specialist company they would be expected to have the necessary liability insurance in place to cover any eventuality, as a consumer one would not necessarily have that protection. Therefore, from the company’s point of view there is a natural advantage and an imbalance in the customer, contractor relationship. If the company were proven not to have carried out their obligations in a professional way then the courts would be inclined to support any claim brought against them by an appellant. The important fact here is that Victoria was a ‘consumer’ and not a company with similar resources to that of Splosh Ltd.

Compare this to the case of Ailsa Craig Fishing Co Ltd -v- Malvern Fishing Co Ltd [1983] 1 WLR 964; [1981] UKHL 12; [1983] 1 All ER 101; 1982 SLT 377. We can see that The House of Lords took a different approach by validating clearly expressed limitation clauses in a contract between the two parties. In this case a major factor was the parity between the companies involved, both could be said to be equally resourced and with the ability to properly scrutinize any contract between them.

There are three ways in which a term can be properly incorporated into a contract between parties. The first is by signature, it does not matter that the signee has not read the document, they are assumed to have understood it before signing. The second method is by ‘notice’ this can be done verbally although sufficient time must be given and the condition understood by the recipient. The third way in which terms and conditions can be incorporated is through previous dealings which have to be regular enough to show a pattern of acceptance. In Victoria’s case there has never been a history of Victoria and the company contracting before so the term ‘Standard Terms and Conditions’ would not be applicable. Secondly Victoria was handed a piece of paper with what amounts to a liability clause for any loss or injury as well as a limitation to the sum of £500 for damage to her property. Under the heading “Negligent Liability’ the Unfair Contract Terms Act 1977 (UCTA) clearly states that it is not permissible for a clause to be incorporated into a contract that is specifically designed to exclude death or personal injury.

Section 2-

(i) A Person cannot by reference to any contract term or to a notice given to persons generally or to particular persons exclude or restrict his liability for death or personal injury resulting from negligence.

(ii) In the case of other loss or damage, a person cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness.

(iii) Where a contract term or notice purports to exclude or restrict liability for negligence, a person’s agreement to or awareness of it is not itself to be taken as indicating his voluntary acceptance of any risk.

There are also other provisions in UCTA that would negate terms and conditions like the ones attempting to be incorporated into Victoria’s contract. Before a term can be incorporated it also has to pass the ‘reasonable test’. UCTA defines ‘reasonable’ as in Section 11.

is that the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.

Where the courts see a party trying to absolve themselves from a breach of duty they would simply remove the clauses and apply the law as if they were never there.

Section 11.

(ii) ln determining for the purposes of section 6 or 7 above whether a contract term satisfies the requirement of reasonableness, regard shall be had in particular to the matters specified in Schedule 2 to this Act; but this subsection does not prevent the court or arbitrator from holding, in accordance with any rule of law, that a term which purports to exclude or restrict any relevant liability is not a term of the contract.

It is relevant here to mention that as well as having to pass the reasonable test required of UCTA, as a consumer Victoria would also be further protected by the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1994/3159). This particular regulation applies only to consumers but where UTCCR is limited in scope UCTA will then take over. This was emphasised by the Court of Appeal [1996 All ER 481] which upheld an earlier decision in St Albans City and District Council v International Computers Ltd. Here the courts simply removed the liability clauses from the contract and formulated a decision on the facts as if they were never there.

In summery Victoria was handed a piece of paper containing terms that with proper notice she would not have agreed to, she did not sign it, the terms and conditions were not incorporated into the contract. The liability clauses inserted by Splosh Ltd could therefore not be relied upon in court. Victoria suffered personal injuries and financial loss as a result of the company’s alleged negligence. Victoria would be well advised to proceed with litigation to recover her losses in respect of personal injuries, damage to property and consequential damages.

Bibliography

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Hartwell, N., “The Application of the Reasonableness Test under the UCTA 1977: A

schism between certainty and fairness” [2005] Volume 3, Issue 2, Hertfordshire Law Journal 55-60

White, A,. Caveat Vendor? A review of the Court of Appeal decision in St Albans City and District Council v International Computers Limited, Journal of Information, Law & Technology [1997] Issue 3

Websites visited.

The Times online, Burn the midnight oil, but don’t let your career go up in flames, 2005. Maguire, P., http://business.timesonline.co.uk/tol/business/law/article519754.ece (accessed 22.01.10)

The Law Commission, Consultation Paper No 166, unfair terms in contracts, A Joint Consultation Paper, 2002, London TSO, Carnwath, L, J ,. Beale, H,. Bridge, S,.

Partington, M,. and Wilkie, A,. http://www.lawcom.gov.uk/docs/cp166.pdf (accessed 20.01.10)

Office of Public Sector Information, The Unfair Terms in Consumer Contracts Regulations 1994 http://www.opsi.gov.uk/si/si1994/Uksi_19943159_en_1.htm (accessed 23.01.10)

Office of Public Sector Information, Unfair Contract Terms Act 1977, 1977. http://www.opsi.gov.uk/RevisedStatutes/Acts/ukpga/1977/cukpga_19770050_en_1 (accessed 23.01.10)