Exclusion Clause

Topics: Contract, Contractual term, Sale of Goods Act 1979 Pages: 7 (2391 words) Published: March 19, 2013
Joe (“J”) is demanding compensation from Fred (“F”) for the damage caused by Fred’s paints. F is attempting to exempt himself from the liability by the exclusion clause written on the receipt and the sign. The effectiveness of the exclusion clauses depends on several factors. Firstly, whether the exclusion clause belongs to a term of contract will be determined. Secondly, reasonable steps leading to the notice of exclusion clause to J will be decided. Thirdly, the words of exclusion clause will be carefully analyzed. Finally, the result as to the exclusion clause will be carefully suggested as well as other possible results if a different situation happened.

The contractual effectiveness of exemption clauses
Signed or Unsigned document
In order to identify the contractual effectiveness of the exclusion clause, the court needs to verify where the exclusion clause is contained. Where the exclusion clause is contained in a signed contractual document, the person is bound by the clause no matter the person really read the terms or not[1], showing in the case L’Estrange v Graucob (F) Ltd. It is reasonable to expect that a person being aware of all the contractual terms in which the signed document contains. The only exception is that the signatory can prove fraud or misrepresentation in regard to the clause.[2] If the exclusion clause is contained in an unsigned document, such as receipt and voucher, the court will first determine whether the document is contractual in nature and then determine whether reasonable notice of exclusion clause was given to the party being subject to the clause.

In this case, the exclusion clause is written on the receipt and a small sign on the counter of F’s sales area. Compared with formal signed contract, terms on the receipt are quite vague. The question depends on whether a reasonable would regard the term be part of the contract.[3] Obviously, in this case, the receipt was enclosed by J as proof of purchase since he had never read the notice on the receipt, which explains that the clauses were not treated as contract terms by both of the parties. Hence the receipt is of no contractual effectiveness. Same with the case, Causer v Browne, the receipt of dry cleaner is seen as a voucher to identify object with no contractual nature.[4] The notice on the small sign on the counter of F’s sales area did not belong to contract term since it was a unilateral notice. No practical action was taken to let J be aware of the content on the sign. Therefore, the clause on the sign was not contract term as well. In the following, the court will decide the issue of reasonable notice.

Reasonable notice
One more thing to consider is that whether sufficient notice has been given to J. If the party relying on the exemption clause has done what is reasonable to bring it to the attention of the other party, then it does not matter if the other party did not actually have notice it.[5] Showing as in the case, Thompson v London, Midland and Scottish Railway Co, Printed words of ‘Excursion. For conditions, see back’ is regarded as reasonable steps to bring the exclusion clause to plaintiff’s attention. Besides, reasonable notice must be given before or at the time of contracting, otherwise the clause is not incorporated into the contract.[6] (Olley v Marlborough Court)

J says he has never read either the notice on the receipt or the sign, which impliedly suggest that Fred and his staff did not mention the exclusion clause to Joe. It is F’s obligation to remind J of the exclusion clause, without which the exclusion clause could not be incorporated in an unsigned contract. Under this circumstance, F is not protected by the exclusion clause. However, F may argue that J has enough opportunities to get access to the exclusion clause since J has bought paint once a month form F over the last three years. It is quite a long time for J to have a chance to read the exclusion clause either on the...
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