Exclusion clauses

To begin with, there lies a contract for the supply of services between Etienne and Ultraclean Ltd. Thus, Ultraclean is subject to the implied requirement that the contract is carried out with reasonable care as stated in section 13 of the Supply of Goods and Services Act 1982. Unless Ultraclean has made a specific promise to achieve a particular result, they cannot be held liable for the damages caused if they have taken reasonable care to perform the contract.

Ultraclean has guaranteed that they would return the laundry within three days – laundered and pressed, and use only biologically sound, hypo-allergenic soaps. A month later, they have changed the picked up times and used cheap soap powder. It would appear that this level of performance is breach of the contract.

However, Ultraclean Ltd has printed several terms including an exclusion clause on the back of their collection slips. The issue now concerns the extent to which Etienne is bound by the attempted exclusion and restriction of Ultraclean Ltd’s liability. Like any other term of the contract, an exclusion clause must be an integral part of the undertaking if it is to be effective but, as an exclusion clause attempts to remove a liability that would otherwise exist, there are particularly stringent rules regarding the incorporation of such terms in contracts. In the absence of a signature, Etienne must be given reasonable notice of the term. This was emphasised in Parker v. South Eastern Railway where it was held that the notice of the terms is important, not their actual reading or understanding. Most recently, in Interfoto Picture Library Ltd v. Stiletto Visual Programmes established that if the term is particularly onerous or unusual, extra care must be taken to draw its attention to the other party. The term in the present case may seem legible but they are on the reverse of the document and there is no such notice like “See over for conditions” on its face. This may well be fatal to Ultraclean Ltd.

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Furthermore, the notice given must be contemporaneous; Olley v. Marlborough Court Ltd. Here, the clause was not incorporated into contract since the plaintiff had not seen it until she had been accepted as a guest – the notice of the terms came too late. Returning to the present case, it is worthwhile to take note that the collection slip is only given after Ultraclean Ltd has collected the laundry. Therefore, Etienne’s attention would not have been sufficiently brought to the terms at the back of the slip. In view of this, there would be a lack of agreement between the parties. The terms should therefore not be incorporated into the contract and Ultraclean Ltd’s breach of initial guarantee to collect the laundry twice a week, return it within three days and use biologically sound, hypo-allergenic soaps would entitle Etienne to damages he and Lucy have suffered.

Although the conditions regarding the notice are complied with, there are other demands made by the common law. The general rule is that the unsigned document containing the terms must be a contractual document. In Chapelton v. Barry UDC, a ticket which was given for the hire of a deck chair was not such a contractual document but a mere receipt. Reflecting on this authority, the court might strike-down this collection slip.

Should the terms be incorporated under the above rules, any ambiguity would nevertheless be construed against Ultraclean Ltd, that is, contra proferentem. In particular, very clear words are required to exclude or restrict liability for negligence, for example, the use of the phrase ‘howsoever caused’; Smith v. South Wales Switchgear Ltd. It was, however, suggested by the House of Lords in Photo Production Ltd v. Securicor Transport Ltd that any need for a strained and distorted interpretation of contracts in order to control the effect of exemption clauses had been reduced by the Unfair Contract Terms Act 1977 (UCTA).

In this context, these terms are subject to the test of reasonableness set out in section 11 of UCTA. Section 2(1) of the 1977 Act invalidates any attempt by a contract term to exclude or restrict liability for death or bodily injury resulting from negligence. Section 2(2) further states that in the case of ‘other loss or damage’, a person cannot exclude or restrict liability for negligence unless it satisfies the test of reasonableness. In Philips Products Ltd v. Hyland, it was held that the defendant was liable for the negligence of the excavator drive because excluding such a liability was not reasonable. It appears to be indisputable that it is negligent of the Ultraclean van driver when he reverses into Etienne in the driveway and the first term on the back of the collection slip would be ineffective as regards Etienne’s claim for his injuries. As seen in Philips Products Ltd v. Hyland, Ultraclean Ltd would be responsible for the negligence of his employees.

The third term allows Ultraclean Ltd to change their cleaning process without prior notice. The facts indicate that Lucy has developed a rash due to the use of cheap soap powder when Ultraclean has guaranteed Etienne that it would use biologically sound and hypo-allergenic soaps. With such a change, Ultraclean has been negligent and has breached an express term of the contract, and that such negligence to exclude is not allowed by section 2(1) of UCTA. Clearly, Ultraclean Ltd has not taken reasonable care in the performance of the contract. Therefore, the first and third terms are invalid.

Section 3 of UCTA states that:

“(1) This section applies as between contracting parties where one of them deals as consumer or on the other’s written standard terms of contract.

(2) As against that party, the other cannot by reference to any contract term –

(a) when himself in breach of contract, exclude or restrict liability of his in respect of the breach; or

(b) claim to be entitled-

(i) to render a contractual performance substantially different from that which was reasonably expected of him, or

(ii) in respect of the whole or any part of his contractual obligation, to render no performance at all …”

This is clearly applicable to strike-down second term on the collection slip in which Ultraclean reserves the right to alter pick up times without notice. Etienne has engaged Ultraclean Ltd to handle his family’s overwhelming laundry demands and by altering the pick up times from twice a week to once in five days, Etienne’s family cannot cope with the lack of linen and clothing. Such altered pick up times have clearly been a breach of a term in the contract, and thus, Ultraclean cannot seek to exclude or restrict liability by reference to the second term on the slip. In addition to that, altering the pick up times would render the performance of the contract substantially different from what is expected of Ultraclean Ltd. Therefore, the second term cannot be valid.

If Etienne has engaged Ultraclean Ltd to remove the laundry of his dental practice as oppose to his household, the court would then have to examine whether Etienne has dealt as a consumer. Section 12(1) of the 1977 Act states:

“A party deals as a consumer in relation to another party if –

(a) he neither makes the contract in the course of a business; and

(b) the other party does make the contract in the course of a business …”

In R & B Customs Brokers Co Ltd v. United Dominions Trust Ltd, it was held that where a transaction was only incidental to a business activity, a degree of regularity was required before the transaction could be said to be an integral part of the business carried on and so entered into in the course of business.

Applying that authority in the present situation, if removing laundry of the dental practice is an integral part of business, then Etienne is not dealing as a consumer. This is much affected by the degree of regularity of the transaction. If Etienne, however, deals with Ultraclean Ltd on a regular basis, the court would be more ready to consider him dealing in the course of business. Following from this inferential decision then, the court would be reluctant to interfere with the terms of the contract set out as the parties would have equal bargaining powers. The exclusion and limitation terms on the back of the collection slip may be valid.

Bibliography

Ewan McKendrick (2005) Contract Law Text, Cases, and Materials, 3rd ed., Oxford: Oxford University Press

Elliot, E. and Quinn, F. (2005) Contract Law, 5th ed., Pearson Education Ltd.

Jill Poole (2005), Casebook on Contract Law, 7th ed., Oxford: Oxford University Press