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 gal matters raised: 1 2 1. . 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 3 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. . He must show that either, “the words do not have a contractual effect”, or that the “breach is not covered by the exclusion clause”. 34 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: O O 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 Lagrange v Curaçao Ltd (1934). 7 However, 8 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 Chaperon 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. 1 However, in Parker v South Eastern Railway Co (1877), the courts found that a reasonable person would expect 12 o find contractual terms on the back of a cloakroom ticket and therefore, the Railway was effectively protected. 13 The 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 time of the sale is not contractual in nature but a form of evidence of purchase. 4 This conclusion can be further supported by studying the concept – at In the case of Pharmaceutical Society of Great Britain v what point was the contract regarded to have come into play? 15 Boots Cash Chemists (Southern) Ltd (1953), the sale and therefore the contract was taken to be made at the point where the shop accepted the offer from the customer. However in the cases of ticket machines, Lord Denying commented 16 that “the issue of this ticket was regarded as an offer… F the customer took it and retained it without objection, his act was regarded as an acceptance of the offer’ – Thornton v Shoe Lane Parking (1971). As such, the point of acceptance by Claude is taken to be the time when the contract was made. 17 A reasonable person would agree, the receipt handed over by Claude would have taken place after he payment was accepted and therefore the clause was introduced in a belated manner – as the judges in the previously mentioned case Thornton v Shoe Land Parking (1971) inferred notice of the exclusion clause should have been given before the ticket was issued. 8 Consequently, Claude”s only hope of being protected lies within the clause printed on the sign at the counter. To be effectively exempt of any of Vincent”s claims, Claude must prove that Vincent knew of this clause or that reasonable notice was given prior to the contract being made. 19 What constitutes “reasonable notice” is a question of the facts. 21 20 However, as stated before, the general principle is that a clause must have been incorporated before or at the time the contract came into effect – eBay International GAG v Creative Festival Entertainment Pity Ltd (2006).
Thus in the case of Alley v Marlborough Court Ltd (1949), the notice in 22 the hotel room came too late as it was not present at the front desk where the Where there are unusual or onerous clauses, greater notice is expected – Lord Denying in Spurning v Bradshaw (1956) stated that some exclusion clauses “need to be printed in red ink on the face of the document with a red hand pointing to it before the notice loud be held sufficient”. 23 In the given case between Vincent and Claude, the clause would not be considered onerous and therefore displaying the sign “on the counter of Claude”s sales area” should be considered sufficient notice.
As a result, Vincent will be bound by the clause and Claude will effectively be protected. However this claim of sufficient notice is arguable and again the answer lies in the facts of the situation. – Was the sign too small for sufficient notice of the clause? , Was it placed in a readily visible area on the counter? , was the writing on the sign legible?. 24 These facts are essential in confirming that there was sufficient notice, however, despite the unlikely possibilities that the sign did not adequately notify, it should not be ruled out. However, the concept of notice from previous dealings implies reasonable notice was given by Claude.
In the case of Bellman New Ferry Co Ltd v Robertson (1906), it was regarded that the customer, being a regular client of the company, had been given ample notice of the exclusion clause displayed on the sign. 26 25 Similarly in the case Spurning Ltd v Bradshaw (1 956), the courts held that whether the notice was ever read or understood is irrelevant, it is enough to show that they ought to have known about the clause is more than enough. So, are Vincent”s trips to Claude”s store – 2 times a week for 2 years – considered regular for the purpose of reasonable notice?
A reasonable person would regard his dealings with Claude as consistent and regular hence advocating that reasonable notice was given by Claude and as such has effectively incorporated it into the contract – whether Vincent ever read the sign is irrelevant. 27 4 Interpretation Now, given that the exclusion clause was validly incorporated, Vincent can only rely on proving that these words were insufficient in excluding liability of Claude”s breach. Interpretation of the clause. 28 To do this, Vincent needs to consider the construction and In interpreting a clause, numerous approaches have been established by precedent cases. Today”s society; D [l Contra Procurement Rule The four corners” rule Interpretation according to the express agreement The following are approaches relatively more relevant to the case between Vincent and Claude but also considered as prominent in In the case of Darlington Futures Ltd v Dolce Australia Ltd (1 986), the High Court unsorted ‘the clause according to its natural and ordinary meaning read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract”. 0 28 However should the terms be ambiguous 29 and unclear, it will be read against the party relying on the clause, “giving it the narrowest possible meaning White v John Warwick & Co Ltd (1953), contra prominent was applied. Thus in Accordingly, Claude”s exclusion clause should be read according to its “natural and ordinary meaning’ with the exception of any ambiguity. 1 The clause: “Claude is not liable for any loss or damage caused by the paint, regardless of how much loss or damage may be caused” does not appear to be ambiguous in nature. However, it explicitly limits the exemption to him and any damages arising from the paint.
In the case where negligence is apparent, the courts have held that unless the clause is unambiguous and clearly states that it is exempt from any damages caused by negligence, the clauses will be construed contra prominent. 32 exclusion clause in Bright v Sampson and Duncan Enterprises Pity Ltd (1985) did to specifically mention exemption from liability resulting out of negligence and therefore, the clause was invalid in protecting the company from liability that arose. 33 However, in the case of Claude”s exclusion clause, it appears effective in protecting Claude and as a result Vincent will be legally bound by these words.
These words protect Claude only – and in addition only damages arising out of the paint he sold. Therefore, the $20,000 damages incurred by Vincent is cannot be recovered from Claude as Vincent is bound by the terms on the sign. But are the $40,000 damages to his works of art also limited by the clause on the sign? In considering whether Vincent is entitled to compensation for the $40,000 damages to his works of art, we need to determine whether the breach by Pablo was within the scope of the contract – The four corner rule. 4 In the case, The Council of the City of Sydney v West (1965), the judge held that the actions of the car park attendant in releasing the car to the thief were considered outside the terms of the contract and therefore the breach was not covered by the exclusion clause – fundamental breach. 35 Hence, Pablo”s deliberate breach was not merely negligent behavior but also considered a fundamental breach 36 was the ћwrong substance” supplied to Vincent actually paint? Given the unlikelihood that paint can “explode”, Pablo”s breach is outside the terms of the contract hence the clause will not work in favor of Pablo.
Furthermore, as stated before, the clause will only serve to protect Claude alone – Adler v Dickson (1955). 38 37 As such, Pablo”s exclusion from the clause is reinforced and therefore Claude will ultimately be liable for his employee’s actions as “an exclusion clause can only be as broad as the scope of the contract itself’. 39 However, had Claude included an additional clause carefully outlining that he s not responsible for his employees” negligent behavior in manufacturing the paint, Claude may have been protected from the liability of $40,000.
Pablo”s actions, despite being outside the terms of the contract, would be described as unforeseeable by a reasonable person and as such the clause would be interpreted according to its express terms Photo production v Securing Transport Ltd (1980). 5 Would Vincent be bound if the clause had been misrepresented by Clause’s Had Claude”s salesman advised Vincent at the time of sale that the sign at the counter meant that it “excluded Claude from liability only if the paint fumes effected people with an allergy to those fumes” – reaching a conclusion of whether Vincent was bound by the clause would have been much simpler. 1 In the case where a clause is misrepresented, it is held to be ineffective. In the case of Curtis v Chemical Cleaning & 42 Dying Co (1951 ) the company could not rely on their exclusion clause as the terms were misrepresented to Curtis to mean that only if the beads and sequins were damaged, they would otherwise not be liable. Similarly in the case of El 43 Mans Grand PRI Circuits Pity Ltd v Ladies (1998), the contract signed was misrepresented to be a marketing document. Despite the concept of being bound by what you sign regardless if it has been read or not, it certainly does not apply to terms that have been misrepresented – as was the case in El Mans. Therefore, if this misrepresentation had been the case, the exclusion would be negated, expected to foot the bill for the entire $60,000 damages suffered by Vincent. 45 and as such Claude would be 6 Conclusion It can be concluded that Vincent will most likely be bound by the words on the sign as it can be reasoned that the clause was successfully incorporated and wide enough to cover Clause’s breach.