Bike Repair and Exclusion Clause Advice PDF

Andy brought his bike into his favorite bike shop for a service and repairs. He was entering a special race the following week and was certain that he was likely to win the considerable prize for first place. He presented the bike to the assistant and received a docket with an identifying number and...

Andy brought his bike into his favorite bike shop for a service and repairs. He was entering a special race the following week and was certain that he was likely to win the considerable prize for first place. He presented the bike to the assistant and received a docket with an identifying number and the words: “All goods accepted only subject to the terms and conditions displayed.” Andy chatted to the shop assistant about the upcoming race and its importance to him and the need for his bike to be in top condition. He noticed the words on the docket and asked about the terms and was told not to worry about them as they were only concerned with the recent price changes for new bikes. There was a large sign behind the counter and in front of Andy but it had a bike hanging in front of it and so was not visible at this time. The sign read: “All care but no responsibility taken for goods left for repair or service or for any loss or damage howsoever caused.” The day before the big race Andy went in to collect his bike and it could not be found. Someone had put the wrong tag on it and it was stored in the basement with the unclaimed bikes. Advise Andy. EXEMPTION/EXCLUSION CLAUSE  Intro A clause may be inserted into a contract which aims to exclude or limit one party's liability for breach of contract or negligence. G.H.L. Fridman defines it as “such a clause that excludes or modifies contractual obligation. It affects the nature and scope of a party’s performance.  Types (1) Limits liability to cases of willful neglect or default (i.e. Limits one party's liability in the event of the occurrence of certain acts or default of the party); “The company shall not be liable for any loss suffered by the owner due to burglary, theft, fire or any other cause whatsoever, unless such loss is solely caused by negligence of the company's own employee acting in the course of their employment.” 2) Excludes or restricts liability which would otherwise attach to a breach of contract such as liability to be sued for breach or be liable for damages; “Carrier undertakes to use its best efforts to carry the passenger and baggage with reasonable dispatch. Times shown in timetables or elsewhere are not guaranteed and form no part of this contact. Carrier may without notice substitutes alternate carriers or aircraft, and may alter or omit stopping at places shown on the ticket in case of necessity. Schedules ar subject to change without notice. Carrier assumes no responsibility for making connections.” 3) Limits the amount of damages (or otherwise called limitation clause) in the event of breach of the contract by one party. “... the carrier shall not be liable for loss or damage or detention arising or resulting from the act neglect or fault of the servants or agents of the carrier...not in any event for an amount exceeding the declared value of goods paying freight on ad valorem basis or the invoice value whichever shall be least or in the case of any other goods the invoice value in sterling pounds 100 per package or unit or sterling pounds 25 per cubic metre or half hundredweight, which shall be least...”  Valid Exclusion Clause? Judicial control 2 steps adopted by the court to determine a fair & reasonable exemption clause: i) Incorporation ii) Interpretation  i) Incorporation The person wishing to rely on the exclusion clause must show that it formed part of the contract. Lord Denning MR in Gillespie Bros v Roy Bowles Transport QB 400 “the court must be satisfied that the particular document relied on as containing notice of the excluding or limiting term is in truth an integral part of the contract.” An exclusion clause can be incorporated in the contract by signature, by notice, or by a course of dealing.  Incorporation Signed By Unsigned Previous Course Document Doc/Notice of Dealing  Signed Documents If the plaintiff signs a document having contractual effect containing an exclusion clause, it will automatically form part of the contract, and he is bound by its terms. This is so even if he has not read the document and regardless of whether he understands it or not. See: L'Estrange v Graucob 2 KB 394. - The plaintiff bought a cigarette machine for her cafe from the defendant and signed a sales agreement, in very small print, without reading it. The agreement provided that "any express or implied condition, statement or warranty... is hereby excluded". The machine failed to work properly. In an action for breach of warranty the defendants were held to be protected by the clause Scrutton LJ said: "When a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not."  Subramanian v Retnam – the party did not know English. Still bound by what he had signed (in the absence of fraud/misrepresentation) Sebor (Sarawak) Trading v Sy. Cheap Hin Toy Manufacture – Issue: whether the appellant can rely on the exclusion clause in the bill of lading(BoL) used for the transportation of the respondents’ goods. EC was stated on the reverse side of the BoL. Held: Such notice must be brought to the respondents notice at/bf time of entering into the contract. The director had signed on the reverse side of the BoL. Inference made that the director must have been aware of the EC. Further, BoL=standard form of contract. The respondent have been familiar in sending goods by sea. Thus, sufficient notice. *CF Associated Concrete Products v Tackoh Sdn Bhd – P could not rely on EC.  However, a signed document can be rendered wholly or partly ineffective if the other party has made a misrepresentation as to its effect. See: Curtis v Chemical Cleaning Co 1 KB 80 -The plaintiff took a wedding dress to be cleaned by the defendants. She signed a piece of paper headed 'Receipt' after being told by the assistant that it exempted the cleaners from liability for damage to beads and sequins. The receipt in fact contained a clause excluding liability "for any damage howsoever arising". When the dress was returned it was badly stained. It was held that the cleaners could not escape liability for damage to the material of the dress by relying on the exemption clause because its scope had been misrepresented by the defendant's assistant. The exemption clause was invalid.  EC is void where there is oral promise made by the D and it is repugnant to the printed one. Oral promise took precedence over the printed conditions. See Mendelssohn v Normand Ltd The existence of Collateral contract.  Unsigned Documents/By Notice The exclusion clause may be contained in an unsigned document such as a ticket or a printed notice. The clause must be made known to the user/buyer before or at the time the contract was made. In such a case, reasonable and sufficient notice of the existence of the exclusion clause should be given.  For a valid exclusion clause, requirement to be satisfied: (i) The clause must be contained in a contractual document, ie one which the reasonable person would assume to contain contractual terms, and not in a document which merely acknowledges payment such as a receipt. See: Parker v SE Railway Co (1877) 2 CPD 416 Chappleton v Barry UDC.  Parker v South Eastern Railway (1877) 2 CPD 416 The plaintiff deposited a bag in a cloak-room at the defendants' railway station. He received a paper ticket which read 'See back'. On the other side were printed several clauses including "The company will not be responsible for any package exceeding the value of £10." The plaintiff presented his ticket on the same day, but his bag could not be found. He claimed £24 10s. as the value of his bag, and the company pleaded the limitation clause in defence. In the Court of Appeal, Mellish LJ gave the following opinion: If the person receiving the ticket did not see or know that there was any writing on the ticket, he is not bound by the conditions; If he knew there was writing, and knew or believed that the writing contained conditions, then he is bound by the conditions; If he knew there was writing on the ticket, but did not know or believe that the writing contained conditions, he would be bound, if the delivering of the ticket to him is in such a manner that he could see there was writing upon it and the writing contained conditions.  Chappleton v Barry UDC 1 KB 531 - Deck chairs were stacked by a notice asking the public who wished to use the deck chairs to get tickets and retain them for inspection. The plaintiff paid for two tickets for chairs, but did not read them. On the back of the ticket were printed words purporting to exempt the council from liability. The plaintiff was injured when a deck chair collapsed. - The clause was held to be ineffective. The ticket was a mere receipt; and not a valid exemption clause (Not contractual doc) - Its object was that the hirer might produce it to prove that he had paid and to show him how long he might use the chair. - Additionally, the plaintiff received the ticket after the contract was made. Therefore it was invalid exemption clause. (2nd requirement)  (ii) The existence of the exclusion clause must be brought to the notice/knowledge of the other party before or at the time the contract is entered into. Olley v Marlborough Court 1 KB 532. The plaintiff booked in for a week's stay at the defendants' hotel. A stranger gained access to her room and stole her mink coat. There was a notice on the back of the bedroom door which stated that "the proprietors will not hold themselves responsible for articles lost or stolen unless handed to the manageress for safe custody." The Court of Appeal held that the notice was not incorporated in the contract between the proprietors and the guest. The contract was made in the hall of the hotel before the plaintiff entered her bedroom and before she had an opportunity to see the notice.  Thornton v Shoe Lane Parking Co Ltd -ticket issued at the automatic machine. Any exemption clause printed on it is not binding as the ticket was issued after the contract is made. (offer – when the machine was ready to accept payment, acceptance- when customer put his money into the slot) (iii) Reasonably sufficient notice of the clause must be given. It should be noted that reasonable, not actual notice is required. Qs: what amounts to reasonable & sufficient notice? Whether the maker has take reasonable step to bring the EC to the knowledge of the other party? the question is one of sufficiency of notice for the reasonable person, not the particular individual in question. (objective test) Parker v Southern Eastern Railway Co. (1877) the railway company must be entitled to make some assumptions respecting the person who deposits luggage with them; I think they are entitled to assume that he can read, and that he understands the English language.  Thompson v LMS Railway 1 KB 41. - The plaintiff who could not read gave her niece the money to buy an excursion ticket. On the face of the ticket was printed "Excursion, For Conditions see back"; and on the back, "Issued subject to the conditions and regulations in the company's time- tables and notices and excursion and other bills." The conditions provided that excursion ticket holders should have no right of action against the company in respect of any injury, however caused. The plaintiff stepped out of a train before it reached the platform and was injured.  The issue before the court was whether the defendants had taken reasonable steps to bring the conditions to the notice(knowledge) of the plaintiff - The company contended they had taken reasonable steps to bring the exclusion clause to the attention of their customers, as the contract terms were clearly referenced on the tickets. - Lord Hanworth MR said that anyone who took the ticket was conscious that there were some conditions, and it was obvious that the company did not provide for the price of an excursion ticket what it provided for the usual fare. - Having regard to the condition of education in this country, it was irrelevant that the plaintiff could not read. - The company had taken sufficient steps to bring the terms to customers’ attention in clear and legible print. - The clauses were incorporated in the contract between the plaintiff and D even though they had not been read by the P.  Sanggaralingam Arumugam v Wong Kook Wah 2 CLJ 255 – the clause was held to be invalid when it was not brought to the notice of the plaintiff. Cf Malaysia Airlines System v Malini Nathan 2 MLJ 100 – MAS was sued for breach of contract for failing to fly the first respondent, a 14 yo pupil back to KL. In denying the liability, MAS relied on Condition 9 under the Conditions of Contract printed on the airline ticket, which reads:  “Carrier undertakes to use its best efforts to carry the passenger and baggage with reasonable dispatch. Times shown in timetables or elsewhere are not guaranteed and form no part of this contract. Carrier may without notice substitute alternate carriers or aircraft, and may alter or omit stopping places shown on the ticket in case of necessity. Schedules are subject to changes without notice. Carrier assumes no responsibility for making connections.”  The court held that MAS was not in breach of contract for failing to accommodate the passenger on the said flight. They were entitled to rely on the clause printed on the ticket which stated that the times shown in the timetables or elsewhere are not guaranteed and form no part of the contract. - What is reasonable notice is a question of fact. - Attention should be drawn to the existence of exclusion clauses by clear words on the front of any document delivered to the plaintiff, eg "For conditions, see back“ - The degree of notice required may increase according to the gravity or unusualness of the clause in question. See Thornton v Shoe Lane Parking Ltd 2 QB 163 Interfoto Picture Library v Stiletto Visual Programmes  Thornton v Shoe Lane Parking Ltd 2 QB 163 The exemption clause was contained in the parking ticket which stated “ All Cars Parked At Owner's Risk.” Defendant: Exemption clause exempted the Defendants from liability for personal injury caused to the Plaintiff. Court: The warning was too wide. If the Defendant intended to to exclude personal injury they have to explicitly say so. In the absence of such explicit warning, the Defendants were held liable for the personal injury sustained by the Plaintiff. If the clause is such a nature that the party adversely affected would not normally expect it, then the other party will not be able to incorporate it by simply handing over or displaying a document containing a clause. He must go further and make it conspicuous or take other special steps to draw attention to it. So in Thornton, steps taken by the proprietor might have been sufficient to incorporate the more usual clause excluding liability for property damage, but adequate notice of this condition (excluding personal injury) had not been given.  Lord Denning in J Spurling Ltd v Bradshaw 1 WLR 461, “some clauses I have seen would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held sufficient.”  However, position would be different if the party relying on the clause knew or should have known of the other party’s disability. Extra steps need to be taken to bring notice to the person suffering disabilities. See Richardson, Spence v Rowntree 5 CPD 1.  Previous dealings Even where there has been insufficient notice, an exclusion clause may nevertheless be incorporated where there has been a previous consistent course of dealing between the parties on the same terms. Contrast: McCutcheon v David MacBrayne 1 WLR 125. -Exclusion clauses were contained in 27 paragraphs of small print contained inside and outside a ferry booking office and in a 'risk note' which passengers sometimes signed. The exclusion clauses were held not to be incorporated. There was no course of conduct because there was no consistency of dealing in the sense that the appellant was sometimes asked to sign a risk note (containing EC) and sometimes not asked to sign it.  As against a private consumer, a considerable number of past transactions may be required.(frequency) Hollier v Rambler Motors 2 AB 71. - The plaintiff had used the defendant garage three or four times over five years and on some occasions had signed a contract, which excluded the defendants from liability for damage by fire. On this occasion nothing was signed and the plaintiff's car was badly damaged in a fire. It was held that there was not a regular course of dealing, therefore the defendants were liable. - The court referred to Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association (1969) in which more than 100 notices had been given over a period of three years, which did amount to a course of dealing.  Even if there is no course of dealing, an exclusion clause may still become part of the contract through trade usage or custom. See: British Crane Hire v Ipswich Plant Hire QB 303. -Both parties were companies engaged in hiring out earth-moving equipment. The plaintiffs supplied a crane to the defendants on the basis of a telephone contract made quickly, without mentioning conditions of hire. The plaintiffs later sent a copy of their conditions but before the defendants could sign them, the crane sank in marshy ground. The conditions, which were similar to those used by all firms in the business, said that the hirer should indemnify the owner for all expenses in connection with use. -The court held that the terms would be incorporated into the contract, not by a course of dealing, but because there was a common understanding between the parties, who were in the same line of business, that any contract would be on these standard terms. The defendants were liable for the expense involved in recovering the crane.  Messrs Young and Co v Wee Hood Teck Development Corp Popular Industries Ltd v Eastern Garment Manufacturing Sdn Bhd Scenario A 5 seater car was involved in an accident while carrying six people. The driver’s insurance policy exempted insurer from liability for damage caused ‘whilst the car is carrying any load in excess of that for which it was construes.”  ii) INTERPRETATION Once it is established that an exclusion clause is incorporated, the whole contract will be construed (ie, interpreted) to see whether the clause is fair and reasonable, covers the breach that has occurred. Rules of Construction/Canons of Construction – a system of basic rules and maxims applied by a court to aid in its interpretation of a written document, such as a statute or contract 1. Plain and ordinary meaning of the words - A court will interpret an exclusion clause in business to business contracts like any other clause, according to its plain, ordinary and natural meaning, as long as it is properly incorporated into the terms of the contract. - Lovell & Christmas Ltd v Wall (1911) 104 LT 85 : It is the duty of the court … to construe the document according to the ordinary grammatical meaning of the words used therein”. This literal approach is best explained in that when interpreting a contract, the court will look exactly to the normal meaning of the words, regardless of the intention of the parties. 2. CONTRA PROFERENTEM RULE If there is any ambiguity or uncertainty or as to the meaning of an exclusion clause, or the weaker party is in need of protection the court will construe it contra proferentem, i.e. the court will construe it strictly against the party who inserted it in the contract. Generally, contra proferentem operates against the party that drafted the wording and now seeks to rely on it. Lord Wilberforce in Ailsa Craig Fishing Co v Malvern Fishing Co: “Whether a condition limited liability is effective or not is a qs of construction of that condition in the context of the contract as a whole. If it is to exclude liability for negligence, it must be most clearly and unambigously expressed, and in such a contract as this, must be construed contra proferentum.”  Baldry v Marshall 1 KB 260 The plaintiff asked the defendants, who were motor dealers, to supply a car that would be suitable for touring purposes. The defendants recommended a Bugatti, which the plaintiff bought. The written contract excluded the defendant's liability for any "guarantee or warranty, statutory or otherwise". The car turned out to be unsuitable for the plaintiff's purposes, so he rejected it and sued to recover what he had paid. CA held: the requirement that the car be suitable for touring was a condition. Since the clause did not exclude liability for breach of a condition, the plaintiff was not bound by it. See also: Houghton v Trafalgar Insurance 1 QB 247 Held: Insurer – liable as the clause did not extend to cases where the car was carrying too many passengers.  Other eg: - a seller gives “ no warranty, express or implied” : does not protect him from liablility for breach of a condition. - A clause protecting him from liability for breach of implied conditions and warranties : does not cover breach of an express term - “no warranty, condition or description or representation is given” : does not exclude liability for breach of a collateral undertaking previously given, - A clause excluding the right to rescind a contract: does not affect the right to damages. - Etc.  CIMB Bank Bhd v Maybank Trustees Sdn Bhd 2 CLJ 1 Federal Ct - ‘the upholding or otherwise of the exemption clause agreed to by the parties depended upon the proper construction of that clause’. If the exclusion clause is unclear and ambiguous, the contra proferentem rule would apply. This means that the court would have to adopt an interpretation of the clause in a way which is least advantageous to the party who relies on the clause. However, if the clause is clear and unambiguous, the court would have no choice but to give effect to the meaning of the clause. This would be the case even if the construction or interpretation of the clause would lead to a possibly unfair outcome. In short, the wordings used in the contract and in particular the exclusion clause must be given its full effect. 3. EC & NEGLIGENCE Very clear words are needed in a contract to exclude liability for negligence. - White v John Warwick 1 WLR 1285. The plaintiff hired a trademan's cycle from the defendants. The written agreement stated that "Nothing in this agreement shall render the owners liable for any personal injury". While the plaintiff was riding the cycle, the saddle tilted forward and he was injured. The defendants might have been liable in tort (for negligence) as well as in contract. The Court of Appeal held that the ambiguous wording out of the exclusion clause would effectively protect the defendants from their strict contractual liability, but it would not exempt them from liability in negligence.  The party must state in terms the kind and nature of liability he wants to exclude. In Hollier v Rambler Motors (AMC) 2 QB 71, a car was destroyed in a garage by a fire caused by the negligence of the employees of the business. The exclusion clause did specifically mention damage by fire, but failed to mention that the damage would be one of negligence. The clause was ineffective.  Msian Position: a strict attitude towards negligence and exclusion clause In Chin Hooi Nan v Comprehensive Auto Restoration Service 2 MLJ 100, Siti Norma Yaakob J stated: “It is settled law that an exemption clause however wide and general does not exonerate the respondents from the burden of proving that the damages caused to the car were not due to their negligence and misconduct. They must show that they had exercised due diligence and care in the handling of the car.”  In Chin Hooi Nan v Comprehensive Auto Restoration Service Sdn Bhd - the appellant had left his car at the respondents' premises in order to have it waxed and polished for RM295.Due to the respondents' negligence, the car was damaged when being driven by the employee of the respondents. The respondents tried to avoid liability, based on an exemption clause, written on the back of the receipt given to the plaintiff, which stated:The company is not liable for any loss or damage whatsoever of or to the vehicle, its accessories or contents. Vehicle and goods are at owner's risk. CoA: The D was unable to rely on the EC. Unable to prove the damage was not due to their negligence. Still liable.  Sekawan Guards Sdn Bhd v Thong Guan Sdn Bhd the appellant security company was held liable for the theft occurred at the premises of the respondent due to the negligence of the employee of the security company. “the company shall not be liable for any loss suffered by the owner due to burglary, theft, fire or any other cause whatsoever, unless such loss is solely caused by the negligence of the co’s own employee acting in the course of their employment”. EC was invalid. CF : Malaysia Airlines System v Malini Nathan 2 MLJ 100 – MAS was sued for breach of contract for failing to fly the first respondent, a 14 yo pupil back to KL. In denying the liability, MAS relied on Condition 9 under the Conditions of Contract printed on the airline ticket, which reads: Carrier undertakes to use its best efforts to carry the passenger and baggage with reasonable dispatch. Times shown in timetable or elsewhere are not guaranteed and form no part of this contract. ….Schedules are subject to change without notice…” Supreme Ct held: MAS was entitled to rely on the clause, and thus was not in breach. (even though EC did not cover such breach, i.e. flight was available but due to other reasons, Malini was refused a seat.  English Ct - Less strict approach if the EC only limits liability see Ailsa Craig Fishing Co v Malvern Fishing Co – D’s can rely on EC to limit his liability due to his negligence CF Msian Position - Jackson's Malaya Bhd v Penang Port Commission 2 MLJ  Port Swettenham Authority v T.W. Wu and Company 2 MLJ 137. the courts have considered exemption clauses as invalid on the ground that the subsidiary legislation which provided for the exclusion of the liability was ultra vires the parent Act. This has been the case with by-laws enacted on the authority of the Port AuthoritiesAct, to exclude liability in case of loss of goods by the port authorities.In cases of excluding or limiting liability for negligence, the courts have held that no liability can be excluded. 4. S 29 CA 1950 Cimb Bank Bhd v Anthony Lawrence Bourke & Anor 2 CLJ 1, Federal Court - The Bourkes, bought a piece of property on Jalan Sultan Ismail in Kuala Lumpur from developer, Crest Worldwide Resources Sdn Bhd in 2008. To finance the purchase, they took a loan from the bank the same year. It was a term loan agreement where the couple would service the monthly instalments and the bank would essentially pay to the developer progress payments whenever they were due. However, CIMB failed to make payment on one of the invoices and as a result, the developer terminated the sale and purchase agreement with the couple. The couple lost their property because of CIMB’s non-payment of the sum due to the developer. In 2015, the Bourkes sued the bank for negligence and breach of contract.  CIMB’s defence was heavily premised on the bank’s standard exclusion liability clause which protects the bank from any claim being made by the borrower. It also relied on another clause in the loan agreement which stated the bank need not have to disburse the loan if full drawdown was not made within a certain period of time. Held: The exclusion of a liability clause in the agreement cannot be sustained and cannot absolve the bank from liability in contract or tort. Contravened s 29 CA 1950 – against public policy Note: s 29 can only be invoked if the clause absolutely prohibiting the injured party right to claim. CF United Overseas Bank (Malaysia) Bhd v Lee Yaw Lin & Ors , CoA – bank can rely on EC 5. Fundamental Breach - liability for some fundamental breaches of contract could never be excluded no matter how widely the clause was drafted. - Clauses which exempt someone from a serious breach, such as for a term going to the contract’s root (Karsales (Harrow) Ltd v Wallis 1 WLR 936) or a deliberate refusal to perform (Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd AC 576) must be very expressly excluded. 6. Strict Construction 7. Previous Course of Dealings/Usage/Custom 8. Fairness, etc.  EC & STATUTORY PROTECTION S 62 of SOGA 1957 affords little protection to buyer. Allows the exclusion of the implied terms and conditions by express agreement. Section 62 reads: “Where any right, duty or liability would arise under a contract of sale by implication of law, it may be negatived or varied by express agreement or by the course of dealing between the parties or by usage if the usage is such to bind both parties of the contract.”  S 34 of the Hire Purchase Act 1967 however affords better protection on the hirers where it declares void any term in a HP agreement that seeks to exclude, restrict or modify the rights conferred or implied by the Act. S 6 of CPA 1999 – ‘no contracting out’ of the provisions of the Act.  S 24D(1) Consumer Protection (Amendment) Act 2010 - holds that a contract term is substantially unfair when; i. it is in itself harsh; ii. it is oppressive; iii. it is unconscionable; iv. it excludes or restricts liability for negligence; v. it excludes or restricts liability for breach of express or implied terms of the contract “without adequate justification”