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Exclusion Clauses and the Unfair Contract Terms Act 1977 case question.

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Introduction

Zero Plc is a large company specialising in the sale and supply of office equipment. Heather is the owner of a small estate agency company called Cellsoon Ltd. In the past, Heather has purchased a number of items of office equipment for her company from Zero Plc. Zero Plc regularly sends copies of its promotional literature to Cellsoon Ltd detailing the range of products which it offers and the different purchase options provided. Zero Plc provides five different purchase options which vary in price depending upon the amount of after-sales service provided and the extent of the liability accepted by the company. The company's literature also states that "Full details of our terms and conditions can be obtained by written request to our Head Office". One day, Heather's office telephone switchboard broke down. Heather urgently needed a replacement and so telephoned Zero Plc. Heather orally agreed to purchase a suitable "low cost" office switchboard machine for Cellsoon Ltd with no after-sales service being provided by Zero Plc. A copy of the printed terms and conditions was subsequently delivered with the machine. Heather noticed a clause in these terms and conditions which stated: "The liability of the company for loss or damage howsoever caused shall be limited to the sum of £1,000. The benefit of this clause shall extend to the company's employees." Three weeks after taking delivery of the machine, it burst into flames, badly burning Heather's arm. ...read more.

Middle

This was too late for it to be incorporated into the contract, as the contract was already concluded when the order was confirmed. * Heather has purchased office equipment from Zero previously; she also receives their advertising literature, which states that Zero offer different levels of service and extent to their liability. The advertising also states that their terms and conditions are available by written request. Heather could have sought clarification of their trading terms during her previous dealings. We know Heather did make previous purchases, but we do not know if it was always the "low Cost" option or how often Heather has dealt with Zero. Assuming their previous transactions were always on the same terms and had been regular, the clause could be incorporated into the contract on the grounds of previous dealings. Stage Two -Construction It is necessary to look at the "words" used in the exclusion clause, and consider; how the courts may construe them in their natural everyday meaning, in comparison to any legal interpretation of the "words"? Generally any wording in a clause, which is ambiguous, would be under the Contra Proferentum rule, meaning it will be construed against the party that included the clause and is seeking to rely on it. The exclusion clause attempts to restrict liability "howsoever caused". This term is wide enough to include both strict liability and negligence. ...read more.

Conclusion

Zero is a large Plc and heather's business, Cellsoon Ltd, is a smaller business. It would be appropriate to expect a large company to have resources available to cover the liability or to insure itself against a liability. Cellsoon Ltd could have insured against damage to their property. Heather purchased a "low Cost" machine for her company which offered no after-sales services, the low cost option could be considered an inducement under Schedule 2 (b). Schedule 2 (c), examines if Heathers could reasonably have known of the terms existence through her previous dealings with Zero, this is similar to the common law test of notice via previous dealings. The Sale of Goods Act 1979, imposes a implied liability, for goods to be of satisfactory quality. Zero cannot limit their liability for goods which are unsafe; the goods heather bought were unsafe and defective, which caused the fire and consequential damage, Rodney was careless in performing his pre-delivery check, therefore the goods were shipped with a safety defect. Zero cannot therefore limit their liability for the consequences. CONCLUSION There is an overlap between the common law approach to exclusion clauses and the statutory provisions of UCTA 1977, but by following the three stage approach it is possible to advise Heather. Liability cannot be limited in respect of her injury; she will have a claim for this. Provided Zero cannot prove that notice by previous dealings was incorporated and reasonable, they will not be able to rely on the exclusion clause in respect of the damage to Heathers premises. ...read more.

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