Source: M., Lambie S., Scottish Business Law, Second Edition p45, 46, 47
- Consent – the persons involved in a contract must agree to contract with each other, with the intention to be legally bound. This term is brought in to void a contract when force and fear has been used to obtain consent for a contract. If a person has been forced to participate in a contract then it becomes void.
- Capacity to contract – this means that the law recognises the ability to make a legally binding contract. Certain groups of people do not have this capacity, one group that has no capacity to contract at all are under 16s and the insane. 16 and 17 year olds have some capacity but have limitations. There are also limitations placed on companies acting as a legal person, (an artificial legal person)
- Formality – certain contracts require certain formalities, if this is required but not constituted in formal writing then the contract is invalid.
- Not illegal and not impossible to carry out – The contract must not be illegal, agreements that are prohibited by law are called Pacta Illicita, and these agreements will not be enforced by a court. When a contract has already been formed and the law changes making it illegal the contract is then brought to an end. When an agreement is illegal and two parties try to form a contract no contract comes into existence.
- Finally the terms of the contract must be clear, exact and not be impossible to perform If before the contract is formed it is impossible to carry out the actions then no contract is formed, if this happens after the contract has been formed but before it is required to be carried out the contract may be brought to an end. Finally if the impossibility comes into place through no fault of either party then the contract becomes terminated by frustration and both parties are relieves of their contractual obligations.
In this question there is no doubt that a contract has been formed but what is being asked is whether the contract has been carried out fully by Pyramid holidays. In the scenario Pyramid holidays wrote exclusion clauses into their contract with Angus, what I will now look at is how effectively these clauses were incorporated into the contract.
Source: M., Lambie S., Scottish Business Law, Second Edition p45, 46, 47
“Before a ticket will have effect on at common law:
- the ticket should be of a type which a reasonable person might expect to form part of the contractual document; and
- Reasonable steps must have been taken to bring the condition to the notice of the persons receiving the ticket.”
This basically means that in order for an exclusion clause to stand if shown on a ticket it must be proved that the ticket is an essential part of the contract not just a voucher to obtain the use of a good or service. It also must be proven that at the time of the contract being made the party was made aware of the exclusion clause, if not the clause will not be upheld by the court.
The first exclusion clause brought forward by Pyramid holidays was an article in the brochure used to advertise their holidays. It stated that the company would not be held responsible for any loss, illness or injury, Because Angus had read this brochure before entering into a contract with the company it is reasonable to expect that the clause came to his attention. Therefore I feel that the exclusion clause was incorporated into the contract effectively.
The second clause is on a voucher for accommodation. On the voucher it states that the company could not guarantee specific accommodation would be available. This voucher was received three weeks after the contract had been made. In order to make this exclusion clause valid it must be proved that the clause was brought to Angus’ attention before the contract was made, in this instance I will make the assumption that it was not. Therefore the exclusion clause in this instance has not been effectively incorporated into the contract and is not valid. Furthermore the voucher issued in this instance is not essential to the contract therefore any exclusion clause printed on it dose not become part of the contract. The case which sets a precedent for this rule is Taylor v Glasgow Corporation; the case ruled that because the voucher was not essential in the contract between Mrs Taylor and the swimming pool she was entitled to damages because the exclusion cause in this case was printed on it.
Sources: McMillan M., Lambie S., Scottish Business Law, Second Edition p108
Finally the third exclusion clause was displayed on a leaflet in Angus’ hotel room once he had actually arrived at his destination. Previous to that on the voucher he had received after paying for the holiday there was a notice stating that it was subject to the terms and conditions. This exclusion clause is not valid for two reasons. The first reason is that although the voucher stated that the contract was subject to terms and conditions, as far as I am aware none of these terms and conditions were made available to Angus before arriving at his hotel room thus making it too late for him to back out of the contract. The second point is that similarly to the second exclusion clause the voucher issued, it is assumed, did not arrive until after the contract was made and the holiday was paid for, once again making notification of this clause too late for it to be valid. Therefore I believe that the exclusion clause was not effectively incorporated into the contract.
The first exclusion clause brought forward by Pyramid holidays, I feel, is valid. The company did warn Angus before he entered into the contract that they would not be liable for any loss, illness or injury. Because this clause was given before the making of the contract Angus was made aware of it and could decide whether or not to back out of making the contract. Angus would not have any claim for compensation with regards to him contracting food poisoning.
The second exclusion clause, I feel, is not valid. This clause was brought to Angus’ attention after the contract was made and also shown on a voucher not essential to the contract making it invalid. Because it was brought to his attention after the contract made inadequate notice was given and the exclusion clause would not be incorporated into the contract. The legal authority for this is Henderson and others v Stevenson (1875) 2 R (HL), in which there was a disclaimer printed on the back of a ticket but it was ruled that because the ticket was only given after the contract was made it was invalid. Therefore Angus could make a claim for compensation against the holiday company with regards to being given accommodation that differs from what he paid for.
Sources: McMillan M., Lambie S., Scottish Business Law, Second Edition p108
The final exclusion clause is also not valid. This clause once again was not given at the time of making the contract, therefore making it not valid. Although there was warning that there were terms and conditions to the contract, the company did not provide Angus with these making it impossible for him to have known about them, also because the voucher stating that there were terms and conditions did not arrive until after the contract made there was no way Angus could have known about these when making the contract. The legal authority for this is Thornton v Shoe Lane Parking Ltd 1971 2 QB 163. In this case the exclusion clause was shown on the ticket used to gain access to the car park and also on the inside of the car park, in both these instances the contract would have already been formed so therefore were not part of the contract. In this instance Angus could claim compensation against pyramid holidays for cancellation of his diving classes.
Overall Angus could make a claim for compensation from Pyramid holidays for the cancellation of his diving classes that he had already paid for and also for them providing different accommodation to what he paid for. The most likely compensation would be a refund of the full price of the accommodation and diving classes together.
Sources: McMillan M., Lambie S., Scottish Business Law, Second Edition p108
Word Count 1828
Bibliography
1.) McMillan M., Lambie S., Scottish Business Law, Second Edition, Pitman Publishing.
