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L’Estrange v. F Graucob Ltd. [1934] 2 K.B. 394; X bought an automatic cigarette vending machine for use in her cafe. X signed a’ sales agreement’ which provided that ‘any express or implied condition, statement or warranty, statutory or otherwise, not stated herein is hereby excluded’. She did not read this document and was completely unaware of the sweeping exclusion clause hidden in the small print. The machine did not work properly but it was held that X was still bound to pay for it because by signing the agreement and in the absence of fraud, X had effectively signed her rights away.
Thus in Curtis v. Chemical Cleaning and Dyeing Co. [1951] 1 K.B.805, X took a wedding dress to be cleaned by Y. 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 (Y) 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 Y’s assistant.
Thus, in Chapelton v. Barry Urban District Council [1940] 1 K.B.532, X took a deck chair from a stack near which was a notice which gave the price of hire at so much per session of so many hours and requested the public to obtain tickets from the chair attendant and retain them for inspection. He obtained a ticket which he put into his pocket without reading. Each ticket contained a clause exempting the Council from liability for ‘any accident or damage arising from the hire of the chair’. X was injured when the chair he sat on collapsed. He successfully sued the Council. The court held that a reasonable man would assume that the ticket was a mere receipt and not a contractual document which might contain conditions. The Council had not succeeded in incorporating the exemption into their contract with X. Furthermore, the Court held that the ticket was a mere receipt for the hire charge.
Thus, in Olley v. Marlborough Court Ltd. [1949] 1 K.B.532, X booked in for a week’s stay at Y’s hotel. There was a notice in the bedroom, which stated that the proprietors will not hold themselves responsible for articles lost or stolen unless handed to the manager for safe custody’. A stranger gained access to X’s room and stole some of his belongings. The court held that Y were liable since X saw the notice only after the contract had been concluded at the reception desk. The exclusion clause could not protect Y because it had not been incorporated into the contract with X.
Thus, in J. Spurling v. Bradshaw [1956] 1 Lloyd’s Rep.392, D delivered 8 barrels of orange juice to C who were warehousemen. A few days later D received a document from C which acknowledged receipt of the barrels. It also contained a clause exempting D from liability for loss or damage ‘occasioned by the negligence, wrongful act or default’ caused by themselves, their employees or agents. When D collected the barrels some were empty, and some contained dirty water. D refused to pay the storage charges and was sued by C. Although D did not receive the document containing the exclusion clause until after the conclusion of the contract, the clause had been incorporated into the contract as a result of a regular course of dealings between the parties over the years. D had received similar documents on previous occasions and he was now bound by the terms contained in them. Cf. Poseidon Freight Forwarding Co. Ltd. v. Davies Turner Southern Ltd. 2 Lloyd’s Rep.388, C and D were freight forwarders. In 1992 D misdelivered two consignments shipped by C and was liable for the loss unless it could be shown that the contract between C and D incorporated the British International Freight Association (B.I.F.A.) Standard Trading Conditions 1989 edition. D argued that the terms were incorporated either initially by means of documents transmitted to C by D or by a course of dealing. Seven documents and 69 faxes were received by C before 1992 and although the documents bore the B.I.F.A. terms on the back, none of the faxes did, although many stated that they did. It was held that reasonable notice of the BIFA terms was not given to C. The terms were only actually sent regarding eastbound shipments and therefore C was entitled to assume that the terms did not apply to westbound shipments.
Finska Cellulosaforeningen (Finnish Cellulose Union) v. Westfield Paper Co. Ltd. [1940] 68 Ll. L. Rep.75; a C.I.F. seller tendered a bill of lading to the buyer which contained the words ‘all conditions and exceptions as per charter-party’. It was held that the seller was not obliged to tender the charter-party since there had been a long standing course of dealing between the parties on the terms of the standard form of charter-party, which was known to the buyer.
Thus, in Scruttons Ltd. v. Midland Silicones Ltd. [1962] A.C.446, X, a shipping firm, agreed to ship a drum of chemicals belonging to Y from N. York to London. The contract of carriage limited the liability of the carrier, i.e. X, for damage to £179 per package. The drum was damaged by the negligence of Z, a firm of stevedores, who had been engaged by X (the carrier) to unload the ship. Y sued Z in tort for the full extent of the damage, which amounted to £593. Z claimed the protection of the limitation clause. It was held that as Z were not parties to the contract of carriage (between X and Y), Y’s action succeeded. The Court in this case said that a way in which the benefit of an exemption could be made available to a third party, such as the firm of stevedores, by fulfilling the following four conditions: (a) A contract of carriage must specifically state that the stevedore is intended to be protected by the exemption clause; (b) the carrier must make it clear that he is contracting both on his own behalf and as agent for the stevedores; (c) the carrier has authority from the stevedore to act in this way, and (d) there is some consideration moving from the stevedore.
This doctrine of privity gave rise to injustice; Beswick v. Beswick [1967] 2 All E.R.1197. This was particularly so, where a third party was a beneficiary of a contract, but if there was a breach of such contract, only the parties which concluded it could sue in their own name. Hence, such a third party was considerably disadvantaged. However, by s.1 of the Contracts (Rights of Third Parties) Act 1999, a third party may now sue to enforce a contractual term if the contract expressly states that he can, or if the contract confers a benefit upon him. Nevertheless, difficulties still exist in this area, in circumstances where the person who suffers loss is not a party to the contract he may have difficulties pursuing a claim; see Alfred McAlpine Construction Ltd. v. Panatown Ltd. (No.1) [2001] A.C.518, H.L.
When attempting to interpret a contractual provision, a Court must ‘place itself in the same factual matrix as that on which the parties were. All of these opinions seem to me implicitly to recognise that, in the search for the relevant background, there may be facts, which form part of the circumstances in which the parties contract in which one, or both, may take no particular interest, their minds being addressed to or concentrated on other facts, so that if asked they would assert that they did not have these facts in the forefront of their mind, but that will not prevent those facts from forming part of an objective setting in which the contract is to be construed’, per Wilberforce, L.J., The Diana Prosperity (1976) 2 Lloyd’s Rep.621, 625.
Thus, in Baldry v. Marshall [1925] 1 K.B.260, X asked Y, who were car dealers, to supply a car that would be suitable for touring purposes. Y recommended a Bugatti, which X bought. The written contract excluded Y’s liability for any ‘guarantee or warranty, statutory or otherwise’. The car turned out to be unsuitable for X’s purposes, so he rejected it and sued to recover what he had paid. It was held that the requirement that the car be suitable for touring was a condition. Since the clause did not exclude liability for breach of a condition, X was not bound by it.
Thus, in White v. John Warwick & Co. Ltd. [1953] 2 All E.R.1021, C hired a cycle from D. The written hire agreement stated that ‘Nothing in this agreement shall render the owners liable for any personal injury’. While C was riding the cycle, the saddle tilted forward and he was injured. D might have been liable in tort (for negligence) as well as in contract. It was held that the ambiguous wording of the exclusion clause would effectively protect D from their strict contractual liability, but it would not exempt them from liability in negligence. See also Pera Shipping Corporation v. Petroship S.A., (The Pera) [1984] 2 Lloyd’s Rep.363, where a clause D had introduced relating to the time to bring a claim D was held to be ambiguous and hence D could not rely to avoid C’s claim.
Thus, in J. Evans & Sons (Portsmouth) Ltd. v. Andrea Merzario Ltd. [1976] 2 Lloyd’s Rep. 165, C had imported machines from Italy for many years and for this purpose C used the services of D, who were forwarding agents. When D changed over to containers C was orally promised to be stowed below deck. On one occasion C’s container was stored on deck and it was lost overboard. It was held that D could not rely on an exemption clause contained in the standard conditions of the forwarding trade, on which the parties had contracted, because it was repugnant to the oral promise that had been given.
As to charter-parties, see infra, p.261.
It would seem that the expression ‘person’ in this context may include a legal entity, e.g. a limited company; R. & B. Customs Brokers Co. Ltd. v. United Dominions Trust Ltd [1988] 1 All E.R.847, where the purchase of a car by a limited company for use by the company’s directors was treated as a consumer transaction on the basis that such transaction was not a regular one within the business of the company. More recently, in Feldaroll Foundry Plc. v. Hermes Leasing (London) Ltd. [2004] EWCA Civ. 747, the Court of Appeal stated that the words ‘deals as a consumer’ in the 1977 Act, was consistent with the wider meaning which the Court gave to the words’ seller in the course of a business’ in the Sale of Goods Act 1979. The fact that C, the buyer, was a public company and in R. & B. Customs Brokers case involved a one man private company was insufficient to distinguish the present case on the facts. A declaration made by the car’s driver in the agreement that the car was to be used for business purposes was also irrelevant, as it was not directed to the capacity in which C, the buyer, was dealing. Cf. Regulation 3(1) of Unfair Terms in Consumer Contracts Regulations 1999, (S.I. 1999, No.2083), see infra, p.188.
Regulation 14(2), of the Sale and Supply of Goods to Consumers Regulations 2002, (S.I.2002, No.3045), implementing Directive 1999/44/E.C. on Certain Aspects of the Sale of Consumer Goods and Associated Guarantees (O.J. No. L 171, 07/07/1999, p.12), amends this definition of ‘dealing as consumer’ by providing that where the consumer/party dealing as consumer is an individual the requirement that the contract involves the supply of goods ordinarily supplied for private use or consumption can be ignored.
Thus, in Waldron-Kelly v. British Railways Board [1981] C.L.Y.303, C placed a suitcase in the care of B.R. at Stockport railway station for delivery to Haverford West railway station. B.R.’s General Conditions of Carriage limited their liability for non-delivery to an amount assessed by reference to the weight of the goods. The suitcase disappeared and C claimed £320.32 as the full value of the suitcase. B.R. sought to rely on their conditions which limited their liability to £27. It was held that B.R. could not rely on the exemption clause because it did not satisfy the requirement of reasonableness. C was awarded £320.32.
Granville Oil & Chemicals Ltd. v. Davies Turner & Co. [2003] 2 Lloyd’s Rep.356; Watford Electronics Ltd. v. Sanderson C.F.L. Ltd., [2001] 1 All E.R. (Comm) 696.
Thus, in Lally and Weller v. George Bird 23 May 1980, (unreported), C agreed to undertake a house removal for D for £100.80. The contract contained exemption clauses which limited C’s liability for losses or breakages to £10 per article and excluded all liability unless claims were made within three days. It was held that these clauses were unreasonable. Stewart Gill Ltd. v. Horatio Myer & Co. Ltd. [1992] 1 Q.B.600; a clause in a sale contract provided inter alia that ‘The customer shall not be entitled to withhold any amount due to the company under the contract by reason of.... set off counterclaim allegation of incorrect or defective goods’, was held to be ineffective.
In relation to consumer guarantees, Regulation 15, of the Sale and Supply of Goods to Consumers Regulations 2002, (S.I.2002, No.3045), provides that where goods are supplied with a consumer guarantee, such guarantee would take effect as a contractual obligation.
S.I.1999, No.2083. These Regulations implement Council Directive 93/13/EEC on Unfair Terms in Consumer Contracts (O.J. No. L 95, 21/04/1993, p.29).
Regulation 5(1).
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(2006). Exemption Clauses. In: Principles of Law Relating to International Trade. Springer, Boston, MA. https://doi.org/10.1007/0-387-30699-4_7
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