Offer negotiation Offers or invitations to ‘treat’ Acceptance 4

Exemption Clauses – common law

Collins: freedom to allocate risks can reduce cost, but big companies can take advantage of individuals

1. Australia (mordern approach)

• 
  *Darlington v Delco [1986 HC]: interpretation of exclusion clause determined by:
  

1. 
   construing it according to its natural and ordinary meaning,
   

• 
  Selected Seeds v QBEMM: consider contract as a whole, using other clauses
  

2. 
   in the light of the contract as a whole,
   
3. 
   giving weight to the context including the nature and object
   
4. 
   construe clause contra proferentem in case of ambiguity (state regardless of application)
   

• 
  Broker undertook some transactions with longer exposure than authorised. Losses.
  
• 
  Cl 1, exemption: “Agent not responsible for any loss resulting from advise or trading on clients behalf”. Deliberately disregarded instructions to make bigger profit. Clause did not cover dealing
  
• 
  cl 2, limitation: “liability in connection with relationship established shall not in any event exceed one hundred dollars." Clause effective: Unauthorised action still in connection with relationship
  
• 
  Ailsa Craig v Malvern: less strict approach for limitations (England), but varying strictness not possible?
  

2. Secondary “rules” of interpretation (still relevant caution if involving a strained interpretation) (mention all even if only to discount)

2.1 ‘fundamental breach’

• 
  Karsales v. Wallis [1956] WLR: L Denning: no matter how wide the clause, it only applies when carrying out contract, not when guilty of breach going to root
  
• 
  Photo Production v. Securicor [1980] AC: rejected – question of construction.
  

2.2 Negligence

• 
  TNT v May & Baker (1966) [HC]: Delivery agreement, depot closed, kept goods at own house over night, destroyed in fire. rejected “fundamental breach”. Question of construction. The more serious a breach the less likely general words are intended to exclude it.
  
  • 
    Cl9 TNT can carry by any method. Cl 6 ‘no responsibility for any reason whatsoever’
    
  • 
    Protection of clause exists only when B is performing contract (cf darlington).
    

2.3 Serious Breach

• 
  Nisho Iwai v. Malaysian International Shipping (1989) [HC]: Container of prawns Malaysia –Sydney. Stolen after discharge and after placed in stack by stevedores employed by carrier. Bill of Lading clause: In effect, no liability. Cl.1 for any cause “Carrier” could not prevent by reasonable diligence, Cl.2 after delivery or when goods made available to merchant
  
  • 
    Followed Darlington: 1) could apply to non-delivery, 2) couldn't. Mere discharge was not delivery.
    
• 
  Antwerpen [1993] NSWCA: Container terminal allows thieves to collect whisky without bill of lading. restriction of liability in general terms wouldn’t cover deliberate breach but clear wording would?
  

2.4 Contra Proferentem (leads to courts making longer clauses just in case)

• 
  TNT v May: Construe ambiguities against proferens (person relying on clause)
  
• 
  Wallis Son & Wells v. Pratt & Haynes [1911] AC: S gives no “warranty, express or implied”, S sold defective seed, Held not protected against breach of condition
  
• 
  Beck v. Szymanowski [1924]: “Goods delivered shall be deemed in accordance with contract unless complaint in 14 days of arrival”. Did not apply to goods lost and never delivered
  

2.5 “Four Corners”: Protection of clause exists only while B is performing contract

• 
  Sydney Council v West [HC 1965]: Car park ticket. Needed time stamp and payment before delivery. Attendant gave duplicate parking ticket to rogue. “Council does not accept any responsibility for the loss or damage to any vehicle… howsoever [it] may arise or be caused”. Held (3-2) could not rely on clause:
  
  • 
    beyond contemplation of parties on creating the contract
    
  • 
    Barwick C.J. and Taylor J: Action of attendant was an unauthorized and not merely negligent
    
  • 
    Windeyer J: terms required presentation of ticket, allowed release without
    

2.6 “Reading Down” Exemption Clauses

• 
  Van der Sterren v. Cibernetics (1970) [HC]: “No D liability unless notify claim within 14 days delivery”. Walsh J: "terms of exception clauses must sometimes be read down if they can’t be applied literally without creating an absurdity or defeating the main object of the contract .... But such a modification by implication of the language which the parties have used in an exception clause is not to be made unless it is necessary to give effect to what the parties must be understood to have intended.“
  
  • 
    Here clause unambiguous. Part of bargain, P assumed risk when buying from P and selling on
    
  • 
    Reading down exemption clauses will ONLY occur if the clause is absurd, and it is necessary to give effect to it – not in the interests of ‘fairness’
    

2.7 Excluding Liability for Negligence

• 
  Canada Steamship Lines v The King [1952] AC. 3 “rules”:
  

• 
  an express reference to exclusion of liability for negligence is sufficient
  
• 
  where no express reference, clause must be clear enough to apply to circumstances which occurred. doubt resolved by contra proferentem rule.
  

• 
  Quinn: “all liability howsoever caused” – wide enough to cover negligence
  

• 
  if words are wide enough to cover liability, but there is some other basis of liability to which the clause can apply, the clause should generally be applied to that other basis
  
  • 
    Lease of cargo shed. Tenant shall “Not have any claim... for damage to [T’s] goods”. Two possible claims: Strict liability of occupier (Canadian law), Negligence. Held: Exemption applies to strict liability only (unless fanciful).