LEGT 1710 BUSINESS LAW – ASSIGNMENT 2
Vincent is demanding compensation from Claude for the damages incurred from the paints provided. Claude, however, refuses this claim by arguing that he is protected by an exclusion clause – the words on the receipt and sign. Given that negligence was apparent and that the exclusion clause did not fall foul of any statutory regulations; whether Vincent will be successful in his claim, ultimately lies in the question was Vincent bound by the words on the receipt or sign?. To reach a conclusion regarding this issue, it is necessary to examine the following legal matters raised: 1 2
1. 2. 3. 2
Are these words considered to have contractual effect?
Were the damages that resulted from the breach covered by these words?
Would Vincent be bound had the clause been misrepresented by Claude‟s salesman?
Background: What is an exclusion clause
From a legal perspective, the words on the receipt and sign are referred to as an exclusion clause - a contractual term which attempts to limit or exclude liability of the person inserting it into the contract. Therefore, for Vincent to
successfully make a claim against Claude, he must show that the outcomes of either of the first two issues mentioned above is negative – i.e. he must show that either, “the words do not have a contractual effect”, or that the “breach is not covered by the exclusion clause”. 3 4
Do the words have a contractual effect? Incorporation
For the exclusion clause on the sign and receipt to effectively exclude Claude from any liability and hold Vincent bound, it must have been incorporated into the contract, i.e. does the clause form part of the contract? 5
The two general forms of incorporating an exclusion clause are either: Signed documents, or Unsigned documents 6
Exclusion clauses incorporated through signed document are probably the least controversial method in validating its effect. The clause contained in a signed contract is held to be bound by the claimant, irrespective of whether the contract was read or understood by the signatory - as was the case in L’Estrange v Graucob Ltd (1934). 7
where there is a case of fraud or misrepresentation of the contract, the exclusion clause is held to be ineffective and therefore the signatory will not be bound, as illustrated in the case Curtis v Chemical Cleaning & Dyeing Co (1951).
In this case, it seems unlikely that Claude had incorporated the exclusion clause into a signed document, but had instead relied on standard contracts to validate the clause. As stated in the facts, the clause was displayed on both a sign and the receipt. As such, our question is; are these forms valid in conveying the clause, and therefore to be regarded as effectively incorporated? 9
Unsigned documents are considered to be incorporated if; 1. 2.
The document is considered contractual in nature and; Reasonable notice of the clause was given prior to the contract being made
Documents such as receipts and tickets may be regarded as non-contractual in nature - the clause printed on the back of a dry cleaning docket in Causer v Browne (1952) was deemed to be invalid as the docket was merely seen as a form of identification upon collection of garment. 10
Similarly, in Chapelton v Barry Urban District Council (1940), it was settled
that the receipt issued was not a reasonable place where a person would find an exclusion clause, hence held to be void. 11
However, in Parker v South Eastern Railway Co (1877), the courts found that a reasonable person would expect 12
to find contractual terms on the back of a cloakroom ticket and therefore, the Railway was effectively protected. 13
vital question in all of these cases were “would a reasonable person expect to find such terms in a document of the given nature”.
Therefore, it should be acceptable to conclude that, the receipt given to Vincent at the...
Bibliography: A Articles/Books/Reports Carter, J W, „Carter’s Guide to Australia Contract Law‟ (LexisNexis Butterworths, 2
Clarke, Bruce and Steve Kapnoullas, „When is a Signed Document Contractual? – Taking the “Fun” out of the “Funfair”‟ (2001) 1 Queensland University of Technology Law Journal 39 Enright, Christopher, „Studying Law‟ (The Federation Press, 1995) Gillies, Peter and Niloufer Selvadurai, Law of Contract (The Federation Press, 2009) Latimer, Paul, „Australian Business Law‟ (CCH Australia Ltd, 30 ed, 2010) Kapnoullas, Steve and Bruce Clarke, „Incorporation of Unusual or Unreasonable Terms into Contracts: The Red Hand Rule and Signed Documents‟ (2006) 11.2 Deakin Law Review 96 Khoury, Daniel and Yvonne Yamouni, Understanding Contract Law, (LexisNexis Butterworths, 2010) Pedan, Elisabeth and J W Carter, „Incorporation of Terms by Signature: L‟Estrange Rules!‟ (2005) 21 Journal of Contract 98 Schimmelfeder, Joern and Nicholas Pascoe, „Issues in the Drafting and Use of Exclusion Clauses in Commercial Agreements‟ (2006) Australian Construction Law Newsletter 1 < http://www.austlii.edu.au/au/journals/AUConstrLawNlr/2006/51.pdf> Seddon, N C and M P Ellinghaus, „Cheshire and Fifoot’s Law of Contract‟ (LexisNexis Butterworths, 8 ed, 2002)
B Cases Adler v Dickson  1 QB 158 Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379 Bright v Sampson and Duncan Enterprises Pty Ltd (1985) 1 NSWLR 346 Canada Steamship Lines Ltd v R  AC 192 Causer v Brown  VLR 1 Chapelton v Barry Urban District Council  1 KB 532
Couchman v Hill  KB 554 Curtis v Chemical Cleaning and Dyeing Co  1 KB 805 Darlington Futures v Delco Australia (1986) 161 CLR 500 eBay International AG v Creative Festival Entertainment Pty Ltd  FCA 1768 Eggleston v Marley Engineers Pty Ltd (1979) 21 SASR 51 Ellul & Ellul v Oakes (1972) 3 SASR 377 Henry Kendall & Sons v William Lillico & Sons Ltd  2 AC 3 Hollier v Rambler Motors (AMC) Ltd  2 QB 71 L’Estrange v F Graucob Ltd  2 KB 394 Le Mans Grand Prix Circuits Pty Ltd v Iliadis  4 VR 66 Nissho Iwai Aust Ltd v Malaysian International Shipping Corp Berhad (1989) 167 CLR 219 Olley v Marlborough Court Hotel  1 KB 532 Oscar Chess Ltd v Williams  1 WLR 370 Parker v South East Railway Co (1877) 2 CPD 416 Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd  1 QB 410 Photo Production Ltd v Securicor Transport Ltd  2 WLR 283 Selected Seeds Pty Ltd v QBEMM Pty Limited  HCA 37 Smith v Chrysler (Scotland) Ltd  SC JL 1 Spurling Ltd. v Bradshaw  1 WLR 461 Suisse Atlantique Societe d‟Armemerit Maritime SA v NV Rotterdamsche Kolen Centrale  1 AC 361 Sydney City Council v West (1965) 114 CLR 481 Thornton v Shoe Lane Parking  2 QB 163 TNT (Melbourne) Pty Ltd v May and Baker (Australia) Pty Ltd (1966) 115 CLR 353 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 79 ALJR 129 White v John Warwick & Co Ltd  1 WLR 1285
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