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Published: Fri, 02 Feb 2018

Scenario presents an exclusion clause

Initially, the scenario presents an exclusion clause which can be defined as “a clause in a contract or a term in a notice which appears to exclude or restrict a liability or a legal duty which would otherwise arise” [1] . Exclusion clauses which aim to eliminate the liability for any breaches of the contract or negligence and for limiting the amount of damages that a person can claim are the most common types. The exclusion clause in the scenario is a true one in that it does not put any limitations on the amount of damages that can be claimed (Limitation Clause) or on the time frame in which the claim must be posted (time limitation clause).

When it comes to enforcing exclusion clauses, the primary importance lies in the location of the exclusion clause and the Claimants knowledge of the clause.

Firstly, it is of key importance that the clause is incorporated into the contract, in one of three ways; the main is incorporation by signature. The main authority on this matter is the case of L’Estrange v Graucob [1934] [2] which states that if the exclusion clause is part of the contract which the Claimant signed, then it is binding and so long as the offeror has taken reasonable steps to bring it to the offeree’s attention, it will be valid, regardless of whether or not it’s in the contract.

Secondly, the exclusion clause could be incorporated by a sign that is referred to in a receipt given to the Claimants. A significant case on this subject is ‘Parker v South Eastern Railways’ [1877] [3] , in which the terms of use for a cloakroom were printed on the reverse of a receipt, meaning that when the Claimants tried to claim £24 10s for their lost belongings they were refused. In the judgement Mellish LJ stated that if the Claimant did not know of or see the terms then they are not bound by them. However, he also gave two further situations where the Claimants would be bound by the terms, they are, that if the Claimant knew there was writing (or that it contained terms) and that if the Claimant knew there was writing on the ticket yet didn’t think they contained terms, they would still be bound.

To find out if Robert and Lucy are bound by the exclusion clause, it must first be discovered if they were aware of the writing on the back of the receipt, which isn’t explained in the scenario.

Furthermore, as the classes were bought in advance, we cannot be sure if they were purchased from the club’s venue or from elsewhere and so ‘Olley v Marlborough Court [1949]’ [4] can be referred to. In this case a hotel attempted to bind a customer by terms that they could not have reasonably seen from the reception and thus the Court of Appeal held that the exclusion clause didn’t bind the customer. Therefore it’s fair to assume that if Robert and Lucy did purchase the classes from somewhere other than the Salsa club, which did not display the contracts terms, the exclusion clause wouldn’t apply.

The third method of incorporation, which is incorporation by previous course of dealings, states that if the Claimant has dealt with the defendant previously then it can be assumed that they knew of the terms and that the terms are binding even if they weren’t incorporated in the present contract. Yet there are limitations on this; the first being set out in the case of Hollier v Rambler Motors [1972] [5] which held that the number of previous dealings must be substantial, and not merely infrequent as in this case [6] . Contrast this with Henry Kendall Ltd v William Lillico Ltd [1969] [7] in which the Claimant and defendant had over one hundred previous dealings, which was ruled sufficient. However, this is of little importance as Robert and Lucy have not dealt with Paul before, they have only danced at the same venue before.

Consistency is also important, as explained in the case of McCutcheon v David Macbrayne Ltd [1964] [8] , yet this isn’t important in the scenario as Robert and Lucy were not dealing with Paul at this time.

To clarify, up to now the law regarding exclusion clauses tells us that Robert and Lucy are most probably not bound by the exclusion clause on the inside of the Salsa club, provided they were unaware of the writing on the back of their receipt and that they didn’t see the terms before or when they signed up for the classes.

It must also be considered whether the exclusion clause actually covers what has happened to Robert and Lucy; as the clause cannot be relied upon when it doesn’t. It is clear to see that the exclusion clause is intended to cover for the loss of personal property and therefore it covers Lucy’s coat and so depending on the outcomes of the issues raised above, the exclusion clause may present itself as a defence for Paul on this matter.

However, problems arise when it comes to deciding if the damage to Robert’s Rolex is covered by this clause which raises the question as to whether or not the meaning of ‘loss’ can be extended to damage. According to the dictionary definition of loss, it does [9] and therefore the damage to Robert’s Rolex may also be covered.

With regards to the possible negligence on Paul’s behalf, the Unfair Contract Terms Act 1977 [10] states in s.2 that a person cannot attempt to avoid liability for death or personal injury resulting from negligence [11] and that they cannot try to avoid liability for negligence, unless the terms of the contract pass the ‘reasonableness test’. [12] Therefore, according to the UCTA it seems very unlikely that Paul is going to be able to rely on the exclusion clause as a defence, when it comes to the damage to Robert’s arm and Rolex. Adding to Pauls misfortune, the case of Canada Steamship Lines v Regem [1952] [13] has stated that in order to exclude the Defendants liability for negligence, a specific word or a synonym must be expressively used. It’s clear to see in this scenario, that Paul doesn’t clearly state that he is excluding himself from negligence and therefore it’s highly likely that he will be held liable for the damage to Robert’s arm and Rolex.

According to the UCTA, the ‘reasonableness test’ [14] can be passed if it can be shown that the Claimants knew of the terms before entering the contract [15] , which in this case cannot be cleared up completely, and secondly, it must be shown that it should be “fair and reasonable” to allow reliance upon the clause [16] . It seems that determining whether or not the clause is “fair and reasonable” would be an objective test based on what happened, as opposed to what the contracting parties believed happened, and therefore this would be a matter for the Judge to resolve based on their interpretation of the events.

In conclusion, at this point Paul has been unable to avoid liability for the damage to Robert’s arm and Rolex, yet the clause has covered him for the problems arising from the loss of Lucy’s coat.

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