NUS BSP1004 Mid Term Assignment October 08

National University of Singapore
Legal Environment of Business BSP1004
Academic Year 08/09 Semester 1 October 2008
Mid Term Individual Assignment

This question involves exemption clauses and whether David and Julie will be able to claim for damages from the dance club and the owner, Andy.

In this scenario, the exemption clause is pinned up on the inside of the club door of the dance class that has been booked in advance. This casts doubt on whether the exemption clause is part of the contract. Generally, exemption clauses have to be introduced or referred to at the time the contract is formed in order to be valid. In the case of Olley v Marlborough Court Ltd (1949) and also Thornton v Shoe Lane Parking Ltd (1971) the court held in both cases that the contract was made at the point of payment and thus the subsequent exemption clause was not valid. For this scenario, since payment was made before the exemption clause was introduced at the back of the receipt, the clause would not be part of the contract.

However, in the case of J. Spurling Ltd v Bradshaw (1956) where there had been a consistent course of previous dealings in which similar documents with exemption clauses were used, the court held that the defendant was therefore bound by them. For David and Julie, they had previously taken a different dance class at the same club a few years ago. The court would need to consider whether a single previous contract would amount to a consistent course of previous dealings and also whether similar exemption clauses were introduced in the past dealing. In such a situation, even though the clause is not part of the contract, David and Julie would be bound by it.

In addition, in order for the exemption clause to be valid there has to be reasonable notice of it in either the previous or current dealing. In this scenario there was no contractual document and the exemption clause was indirectly referred to on the back of a receipt. In the case of Chapelton v Barry UDC (1940) the court held that the exemption clause was not binding as it was not reasonable to expect contractual terms on a ticket. In the case of Thompson v London Midland & Scottish Railway (1930) the court held that there was reasonable notice although the exemption cause was referred to in another place. Reasonable notice would thus depend on whether David and Julie were informed about this exemption clause or if it was reasonable for them to have noticed it. In Thornton, Lord Denning’s “red hand rule” even stated that such an unusually wide clause would need to be “brought to [the] person’s attention in the most explicit way – printed in red ink with a red hand pointing to it – or something equally startling.” In the more likely case that the court decides that there was no reasonable notice because of the obscure and indirect referral behind the receipt in both the previous and current dealing, the clause would be invalid.

Even if the exemption clause is deemed to be valid, there would be a need to determine if the exemption clause covers the breaches involved. The exemption clause does not clearly state what the word “loss” construes and is thus ambiguous. In the case of Houghton v Trafalgar Insurance (1954) the court held that “load” did not extend to people and so the clause was ineffective to excuse liability. If the exemption clause of the dance club had clearly stated “loss of personal property due to theft” or “damage of personal property during instruction,” it would be more likely to be seen as effective in excusing responsibility for Julie’s stolen jacket or David’s damaged watch respectively. The clause is thus unlikely to cover the breaches involved even if it was valid.

Regarding David’s situation, an overriding factor would be the validity of the exemption clause under the Unfair Contract Terms Act. Section 2(1) provides that a person cannot exclude his liability for negligence in relation to personal injury. Therefore, the clause will be invalid with regard to David’s injury in any situation as long as negligence is established in the tort of negligence. Being a professional dance instructor, Andy owed David a duty of care when teaching. This is reflected in the case of Donoghue v Stevenson (1932) where Lord Atkin’s “neighbour” principle stated that “[One] must take reasonable care to avoid acts or omissions which [one] can reasonably foresee would be likely to injure [one’s] neighbour”. By applying the Bolam Test, Andy had breached that duty of care by demonstrating a potentially dangerous ‘energetic step’ without taking extra precautions that a reasonable professional dance instructor would have taken like asking David to keep a distance. This led directly to David suffering a broken wrist. As negligence will thus be established, Andy is most likely liable for the loss.

In regard to David’s damaged watch, Section 2(2) of the Unfair Contract Terms Act provides that negligence in relation to property damage cannot be excluded unless the clause is reasonable. As Section 11(5) provides that the person alleging that the clause is reasonable has the burden of proving it to be such, Andy will have to prove the reasonability of the clause in addition to the validity of the clause. It is ultimately unlikely that the clause will be valid thus David will likely be able to claim for the damage to his watch. However, Section 3(1) of the Contributory Negligence and Personal Injuries Act provides that damages recoverable will be reduced if a party had suffered damage party due to his own fault. It is possible that dance classes are naturally fraught with risks with regard to damage that may be inflicted on personal property and David should therefore had known better than to wear an expensive watch to class. In the case of Sayers v Harlow UDC (1958) the plaintiff contributed to her injury hence her damages were reduced. Thus, it is likely that the damages David can claim will be reduced.

Regarding Julie’s situation, in order to claim for damages, whether the jacket was reasonably placed under the care of the dance club and whether the club exercised reasonable care in regard to the Julie’s property will have to be determined. Negligence of the dance club will be established if there were no proper safeguards like lockable cabinets for the property of their customers as the club has a duty to ensure the security of their premises. However, in the case that the loss of the jacket was due to Julie’s own carelessness, Julie will not be able to claim for the loss of her jacket.

In conclusion, the exemption clause is most likely invalid when reasonable notice is taken into consideration. Therefore, David and Julie will be able to claim for their losses as long as liability in negligence can be established.