Exemption Clause

Topics: Contract, Contract law, Breach of contract Pages: 7 (1906 words) Published: May 8, 2012
Exemption Clause

Each time a person travels on a bus, train or an airplane, buys a washing machine, computers, etc., or deposits good in a railway locker or even going to a concert, he will receive a standard form contract. There are two kinds of standard form contracts which is business transactions and consumer transactions

Business transaction is one that regulates dealings between people in business for example building contracts and etc. While consumer transaction is one which is the result of concentration of particular kind of business in relatively few hands, for example, hire purchase agreement and insurance contracts.

The party delivering the standard form contract may insert certain clauses in the contract unfairly exempting him from certain liabilities at common law. These clauses may appear in printed tickets, notices or receipts which are brought to consumers’ attention at the time of the agreement. The Malaysian Courts have followed English common law regarding this as the Contracts Act 1950 contains no provision dealing with exemption clause.

Definition of Exemption Clause

An exemption clause is a term of a contract which exclude a person or the defendant liability for his or her breach of contract.

The effect of exemption clause is that the plaintiff have no right to claim for damages or compensation for the loss suffered. An example of exclusion clause is in the case of Premier Hotel v Tang Ling Seng which stated

“The hotel will not assume responsibility for valuables or money lost from the room”


In the case of Chin Hooi Nan v Comprehensive Auto Restoration Service which stated

“The company is not liable for any loss or damage whatsoever of or to the vehicle, its accessories or contents. Vehicles and goods are at owner’s risk.”

An Example Of Exclusion Clause in Concert Ticket

Whether an exemption clause form part of the contract ?

In the case of Ailsa Craig Fishing v Malvern Fishing (1983) , an exemption clause is a term of contract. A contract existed between Securicor and Aberdeen Fishing Vessel Owners Association whereby Securicor were to provide security cover in the harbor where the claimant’s vessel were moored. As a result of negligence and breach of contract, the claimant’s vessel sunk. The contract contained a clause which provided in the event of negligence or breach, Securicor would not be liable for any amount exceeding 1000 Euro in any one claim and that it would not be liable for more than 10000 Euro in any twelve month period. It is binding on the parties if it fulfills all the conditions for its validity. If the clause is valid, the defendant is not liable for breach.

How the clause is incorporated

1. Signed document

By the use of standard uniform contracts like

I. Insurance policies

II. High purchase agreements

III. Hire of safe deposit box in Banks

2. Unsigned document

I. Tickets

II. Receipt

III. Notices on wall

We had chosen a concert ticket (unsigned document) as our topic of discussion. This concert ticket contains terms and conditions at the back of the ticket. It contains 10 conditions which among them is the exclusion clause. If the exemption clause is valid, then the user could not claim for damages or any compensation for their loss. In order to know whether the exemption clause is valid, and whether or not the user is bind with the rules, a certain rule needs to be fulfilled.

Consert Ticket


The First Rule

1. The notice of the exemption clause must be contemporaneous with the contract.

For an exemption clause to be effective, the party receiving it must be given noticed or have the knowledge of the exemption clause. In the case of Olley v Marlborough [1949]....
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