A clause may be inserted into a contract which aims to exclude or limit one party’s liability for breach of contract or negligence. However, the party may only rely on such a clause if (a) it has been incorporated into the contract, and if, (b) as a matter of interpretation, it extends to the loss in question. Its validity will then be tested under (c) the Unfair Contract Terms Act 1977 and (d) the Unfair Terms in Consumer Contracts Regulations 1999.
When negotiating technology entrants, a customer may require that liability for negligence be excluded from the general contractual exclusions and limitations of liability.
In this situation it is common, especially when dealing with technology suppliers or service providers based overseas or who are part of a global operation, for a suggestion to be made that only “gross negligence” or “willful default” should fall outside the liability exclusions and caps. For case (b): The relevant legal issue of case b is the relative importance of contractual terms.
A contract for a sale of goods between businesses or between a business and a consumer may contain many terms hat have important legal implications. Two commonly used types of contract provisions are conditions and warranties. While both conditions and warranties have important implications for the rights of the parties to the agreement, there are important differences between the two. In a contract of sale, a condition is something that must occur for the contract to take effect. If a condition is violated, the contract loses its force and becomes void.
Warranty is a guarantee by the seller or manufacturer of a product that a particular factual claim about a product is valid. A warranty might read “this umbrella is guaranteed to not ear, rip or break for two years from the date of its purchase. ” This is known as an express warranty, because it is explicitly stated. Another type of warranty is known as an implied warranty. Implied warranties are created by state law and essentially guarantee that a product will reasonably satisfy its intended purpose.
When a warranty on a contract for sale of goods is breached, the party protected by the warranty, or the party purchasing the goods, is entitled to damages. Those damages may be specifically stated in an express warranty. B. Identify the relevant legal principles and their supporting precedents. For case (a): the relevant legal principle in case (a) is the principle of incorporation from imitation and exclusion of liability. In order for a term to be incorporated in the contract (from part of it), the party to be bound by it must have sufficient notice of it. Two factors are crucial to the issue of notice: timing and sufficiency.
The timing principle states that the term excluding liability must be notified to the other party prior to that party’s acceptance: notice may be given by a written sign of some kind displayed at the place of business, or in a contractual document. It would be clearly evident to customers before they commit themselves to the contract. Note that a party may be deemed to have implied notice from past contractual dealings where the court is satisfied that these have occurred on the same terms, sufficiently regularly, over a sufficient length of time. However, such an implication is unlikely to be made in a consumer contract.
The sufficiency principle states that generally a clause will not be binding unless the offer has taken reasonable steps to draw it to the customer’s attention: the more onerous the terms the greater is the degree of notice required. Exclusion lasses contained in the body of a document should be printed in clear type, which may need to be underlined or otherwise highlighted. The supporting precedents include Alley v Marlborough Courts Hotel (1 949, CA), Thornton v Shoe Lane Parking (1 971, CA), Chaperon v Barry CDC (1 940, CA), Interferon Picture Library Ltd v Stiletto Productions (1988, CA) and so on.
For case (b): The relevant legal principle in case (b) is second principle of nominate terms. ‘Conditions’, ‘nominate terms’, and are three categories used to classify terms in a contract. Their level of importance in the eyes of the law varies, tit ‘warranties’ being the least important, and ‘conditions being the most important. ‘Nominate terms’ are terms that lie in limbo. If the nominate term is an important one (ii. Like a condition), the innocent party may terminate the contract, and obtain other remedies. However, if it is read to be a minor term (ii. Arrantly), the innocent party may not terminate. Not all terms are clearly and immediately identifiable as conditions or warranties. Some, describe by the courts as ‘nominate’, are worded broadly to cover a variety of possible breaches, some more serious than others. The court then has to describe whether a particular breach is to be treated as one of condition or warranty. The relevant principle of case b is the second principle of nominate term which states that the use of the words ‘condition’ and ‘warranty’ to describe a term is of evidential value only- it is not conclusive in itself.
The other four principles include that the express intention of the parties is paramount: if the contract specifies that a particular breach will entitle a party to opt out the contract, this is conclusive; if a party has a statutory right t terminate the contract if a term s breached, the term is a condition( for example, Sale of Goods Act implied conditions); consistently established commercial practice will determine the status of a term; if the damage resulting from the breach is so extensive that it substantially deprives the innocent party of the benefits bargained for , that party may repudiate their obligations.
The damage test is, in practice used as a last resort. The supporting precedents includes Schuler GAG v Hickman Machine Tool Sales (1974, HAL) c. Apply the legal principles onto the problems, supported by precedents. For case a, when carrying out the first annual service, Crankier its a new pump. This malfunctions 48 hours later, causing an explosion. Injuries result to Jeremy, who lives next door to the factory and the explosion also causes business interruption for three weeks.
According to term 142 of the contract between Widgets and Crankier, Widgets agree to indemnify Crankier against any claims by Widgets or any other third party who may suffer damage to person or property arising from any failure properly to perform this service agreement. The timing principle states that the term excluding liability must be notified to the other party prior to that party’s acceptance: notice may be given by a written sign f some kind displayed at the place of business, or in a contractual document.
It should be clearly evident to customers before they commit themselves to the contract. Since Widgets and Crankier has signed the contract before the business, it is very obvious that Widgets has read and agreed to the terms of the contract. The sufficiency principle states that generally a clause will not be binding unless the offer has taken reasonable steps to draw it to the customer’s attention. So the contract does not fit the principle of incorporation and all the terms of the contract are effective in law.
However, according to the substance of the Act of Negligence liability, under s 2 (1), liability cannot be excluded if death or personal injury is caused by negligence. So Crankier is not liable for the business interruption of Widgets but is liable for the personal injury of Jeremy. This can be supported by precedent of Thornton v Shoe Lane Parking: a notice inside a car park stated that the proprietors would not be liable for injuries to customer. This was also printed on the ticket dispensed from the automatic barrier at the car park entrance.
The COUrt decided that the exemption clause did not form art of the contract: by driving alongside the machine at the car park entrance from which the ticket was dispensed, the claimant had already communicated acceptance of the defendant’s offer to supply parking space. For case b, Crankier not being able to attend and fix the major machinery problem due to lack of staff cannot be clearly identified as condition term or warranty term, as it can be classified into nominate term.
According to term 10 of the contract between Widgets and Crankier has stated that It shall be a condition of the contract that Crankier will attend in response to any callout request by Widget within 24 hours. Applied by second principle of nominate term, the use of the words ‘condition’ and ‘warranty’ to describe a term is of evidential value only- it is not conclusive in itself. The precedent is the case of Schuler GAG v Hickman Machine Tools Sales, in this case, Hickman was given sole selling rights for Culler’s products for four and a half years.
A term of the contract stated that it was a condition of the contract that Hickman would send its representative weekly to solicit orders from the six largest UK manufacturers. This term was nor a condition in the sense that a single breach, however trivial, would entitle the innocent party to ruminate the contract. The reasonableness or otherwise of treating a term as a condition was crucial to deciding whether the parties intended breach of the term to give rise to repudiation rights.
In the case b, Crankier could not attend and fix the problem was because of lack of staff, and they have explained this situation to Widgets and promised that they would attend three days later, so it was obvious Crankier didn’t intend to breach the terms of the contract. However, Widgets claimed that the major mechanical failure has brought its production line to a halt, which caused considerably large financial loss of Widgets.
According to the last principle of nominate term, if the damage resulting from the breach is so extensive that it substantially deprives the innocent party of the benefits bargained for, that party may repudiate their obligation. D. Suggest likely outcomes and make recommendations to parties.
Cite this Contractual term
Contractual term. (2018, May 13). Retrieved from https://graduateway.com/contractual-term/