Elphinstone v Monkland iron & coal company Ltd 1886 13 R (HL) 98
There was a lease that stated that tenants had to put the land that they moved back once they had finished mining. The tenants did not do this. In the lease there was a ‘penalty clause’ that stated £100 per acre was needed to be paid for every acre that wasn’t put back by the stated date. The court held that just because the clause in the contract was called a ‘penalty clause’ didn’t mean it actually was one. When in fact it was actually a liquidate damages clause, this is because it wasn’t a lump sum payment but was a payment that was in relation to the extent of the breach. The court decided to uphold the clause.
Dingwall v Burnett 1912 SC 1097
In this case a hotel had a lease that described different obligations for its customers, each of different importance. In the lease it says £50 in liquidate damages was to be paid if there was any breach. A customer of the hotel broke one of the obligations. In court it was held that the £50 clause in the lease was unenforceable as it was a penalty clause and not a valid liquidate damages clause, this is because the amount that is required to be paid has no relation to the seriousness of the breach. As the court ruled that the clause was unenforceable the court would decide what damages would be paid out. In this case the court awarded £300, this is higher than what was originally in the clause but the courts can do this in relation to an actual loss.
Clydebank Engineering & Shipbuilding Co v Castaneda (1904) 7 F (HL) 77
The Spanish Government had made an order of four torpedo boats from Clydebank Engineering & Shipbuilding Co. In the contract between the two parties there was a very large delay clause in case there was late delivery. The order of the boats ended up being months late, therefore the delay clause was activated and the total amount that was due totalled up to £75,000, Clydebank then refused to pay this as they thought this clause was a penalty clause and not a liquidate damages clause. As this argument went on the entire Spanish fleet of boats had been sunk. The House of Lords upheld the clause because it would have been impossible to make an accurate pre-estimate of loss.
My advice regarding your first point is for you to pay the £1750 to Tay your order limited as I feel that this is a valid liquidate damages clause. If you decide not to pay then if it goes to court I feel that the courts will make you pay it anyway. I suggest you pay what Tay your order are asking and avoid going to court.
With regards to your second point (b), whether you are bound by the exclusion clause depends on whether the clause was included clearly and was noticeable in the contract between yourself and Trottick Telephony Limited. With the information that you have supplied me with I will give you information that relates to whether you did get proper notice of the exclusion clause or not.
An exclusion clause is normally when a person or company puts a clause into the contract to try and save themselves or limit the liability if there is a breach of contract or a fault through their own negligence.
There is a three-step process to see if an exclusion clause is valid: -
- Is the contract incorporated into the contract?
- Does the clause limit in this case?
- Does the Unfair Contract Terms Act 1977 control validity?
Exclusion clauses are normally found in express terms or by a term that is incorporated by reference. An express term is where the terms are of the exclusion clause are agreed by both parties in writing or verbally. A term that is incorporated by reference is where a term is made reference to in the contract but the full details are set out elsewhere.
In common law the clause will only be valid if all of the terms are stated in the contract. If the clause is an express term in the contract then the clause will stand. The clause could be considered to be invalid according to the provisions in the Unfair Contract Terms Act 1977.
These provisions show that the levels of liability that can be avoided in the clauses are now being limited by contract terms or non-contractual notices. Only part 2 applies just to Scotland and part 3 applies to the whole UK.
The Unfair Contract Terms Act 1977 has control over the use of exclusion clauses. Certain exclusion clauses could be upheld and also others can be made void. Void means that the clause wont be valid. The clause is only upheld if the court feels that it is ‘fair and reasonable’ in that particular case’s circumstances.
In section 15 it shows what type of contracts that the Unfair Contract Terms act applies to: -
- Contracts where goods are changed over from one person to another.
- Employment.
- Contracts of service.
- Liability of a person who owns land or buildings toward people who use the land.
- Contract where a person is doing work on someone else land.
The Law Reform (miscellaneous provisions) (Scotland) Act 1990 s. 68 has amended the 1977 Act. This has changed the non-contractual notices and is now part of the Acts provisions.
In section 14(2) of the Sale of goods Act 1979 it deals with satisfactory quality. The section says that in the case of goods being sold with regards to business, an implied term says that the goods must be of satisfactory quality.
There are 3 ways in which this doesn’t apply: -
- If the defect has been pointed out to the buyer before the sale.
- If the person who is away to but the goods examines the good before the sale.
- Sale by sample.
Satisfactory quality is known as what a reasonable person would expect to buy according to the price, description etc.
In section 14(2b), it states that the goods must be satisfactory relating to: -
- The goods are able to do what they were bought for.
- They look like what they are supposed to.
- They don’t have anything wrong with them.
- They are safe to use.
- Last a reasonable time.
Here is a few cases that might help demonstrate what all of this means.
Thornton v Shoe lane parking Ltd [1971] 2 QB 163
Owners of a car park tried to exclude any liability to them if there was any damage to cars or any personal injury. They put an exclusion clause on the parking ticket and also put signs up in the car park. It was held that this exclusion clause was invalid as when u got your ticket at the entrance you already made the contract without seeing the clause and also the sign were up within the car park
Taylor v Glasgow Corporation 1952 SC 440
Taylor went to the public baths in Glasgow, she bought a ticket then went into the baths. On the front of the ticket it said conditions on the other side, in the conditions it had a clause stating that Glasgow Corporation were not liable if any of the bathers hurt themselves. When Taylor was going into the bathes she fell down the stairs and got hurt. She blamed Glasgow Corporation’s employee’s negligence. Glasgow Corporation said she couldn’t claim damages because of the exclusion clause on the ticket. Taylor knew there were conditions but never read them. The court held that the ticket was not an appropriate place to have terms and conditions. The exclusion clause was invalid and Taylor was able to claim damages.
Hood v The Anchor Line 1918 SC (HL) 143
In this case there was enough notice given to the customers on the conditions of the exclusion clause. They printed on the envelope a note that advised all customers to read the conditions of the contract. The ticket in question also had a warning on it saying that it was subject to the terms and conditions and again advised customers to read the contract thoroughly. The courts held that sufficient notice of the conditions was given and therefore the clause was valid.
Taking all of this into consideration the only advise I can give to you is that if the exclusion clause was included in the contract and was in legible writing and you were able to understand the clause then I am afraid you are bound to the clause. If the clause wasn’t included in the contract then I would advise you to claim for damages.
I hope I have been some help to you and good luck.
Yours sincerely
Robert lochhead
