liability or a legal duty which would otherwise arise.’ Such a clause/ term is known as
an exemption clause and a distinction can be drawn between exclusion clauses and
limitation clauses. Exclusion clauses seek to limit all liability for certain breeches and
are common in standard form contracts. In Denise and Cerise’s circumstances there
are two exclusion clauses, one of which is ‘All belongings are left in the rooms at the
owners’ own risk’. The purpose of such clauses is to allocate risks, reduce costs of
litigation and also are said to provide certainty.
Exclusion clauses are currently treated more rigorously and restrictively than
other terms and are treated as defences to a breach of contract as opposed to duty-
defining terms. The hostility of the courts and parliament to exclusion clauses
illustrates consumer welfarism and an altruistic concern for the other party.
Traditionally, there are three methods employed to examining the validity of an
exemption clause, incorporation and construction common law controls and also
legislation.
An exclusion clause will normally be regarded as being incorporated if the
affected party knew of the clause and reasonable steps were taken to bring the term to
the party’s notice. Such a term may be incorporated by signature, degree of notice and
by previous course of dealings.
As Denise and Cerise booked the holiday via the internet, it is more than likely
that there were no documents signed. However, if documents were signed, Denise and
Cerise would be bound to the terms stated whether read or understood as established
in L’Estrange v Graucob (1934).
Secondly, be reasonable degree of notice, can be split into three elements – time,
form and effect of the exemption clause. The time at which the contract was made
was prior to seeing the sign in the reception as they presumably booked online.
However, as it is not stated, it is possible that the contract was not concluded until
arriving at the hotel. In Olley v Marlborough Court Hotel, a similar situation arose
whereby only after Olley had checked in at the hotel was she made aware of the
exclusion clause for lost property. Olley was successful in her claim for damages for
her stolen coat. This supports Denise and Cerise, as the stolen camera and vandalised
car took place after they had checked in, when they were not aware of the exclusion
clauses at the contract’s conclusion.
Furthermore, the fact that the notice in the reception required the claimants to
further find the terms and conditions may be considered to be exhaustive as described
by Auld LJ in Cragan v Robin Meredith Plant Hire. The form of notice isn’t as crucial
to ensure the exclusion clause has been incorporated. This can be neatly demonstrated
by the case of Chappleton v Barry.
The effect of the clause plays a vital role in that if the term is of an unusual
nature, Denise and Cerise’s attention should have been brought extensively to the
terms as demonstrated in one case where Lord Denning placed emphasis on the need
to bring sufficient notice to the parties accredited, for example by bold font/ red font/
arrowhead pointing to the clause. Since the exclusion clauses for the valuables and the
car are exclusionary rather than limitation clauses, the hotel should have taken greater
steps to incorporate the term.
Since there is no mention of a previous course of dealings it is unlikely that the
courts would indicate that Cerise and Denise would have been aware of such
exclusion clauses principle case being British Crane Hire v Ipswich Plant Hire
Once it is established that an exemption clause has been incorporated it must
then be construed to identify whether the damage which has occurred (lost camera
and vandalised car) fell within the boundaries of the exemption clause.
Courts will take the initial presumption of ‘contra proferentem’ whereby the
consumers will be favoured if there is any ambiguity as to the meaning of the words.
The form of the clause will be looked at as opposed to the substance of the actual
contract. Indeed, historically the courts have been very willing to favour the consumer
and find ambiguity.
Other forms of construction include the right of the courts to strike out an
exemption clause if it is contrary to the main purpose (Evans v Andrea Mezario) and
also the fundamental breach doctrine previously governed by the Suisse Atlantique
case. However, in the given situation, there does not appear to be an exemption clause
or a fundamental breach here.
Legislation is now the most important control on the use of exemption clauses,
predominantly by the unfair Contract Term Act 1977 and also the unfair terms in
Consumer Contracts Regulations (1999) enacted as a result of an EC Directive.
UCTA governs and controls the use of exemption clauses and as it is an act of
Parliament, the exact words must be studied and applied. UCTA uses two key
methods, rendering an exemption clause void or susceptible to the requirement of
reasonableness under s. 11 of UCTA.
As the ‘losses’ do not concern personal injury or death it is s2(2) which applies,
which governs that exemption clauses for the negligence of any other loss will b void
unless reasonable. The exemption clauses concerning the valuables and vehicles in the
car park will be susceptible to fairness and reasonableness according to circumstances
known to the parties at the time, as illustrated by Mitchell v Finney Lock Seeds Ltd
where a limitation clause was held to be unreasonable. It is likely that both the
exemption clauses of the hotel would fall foul to the reasonableness test due to the
facts known to Denise and Cerise at the time of contracting.
UTCCR is likely to further grant Cerise and Denise’s action as it covers terms
which bind consumers when they have had no real opportunity to discover them.
Courts would also consider whether the terms are unfair as described by Reg 5 as ‘any
term contrary to the requirement of good causes a significant imbalance in the rights
and obligations of the parties to the detriment of the consumer’.
In conclusion, as the exemption clauses seem to both have been sufficiently
incorporated into the contract, it is unlikely that Barry would succeed in excluding all
liability. S 2(2) of UCTA and the requirement of reasonableness are also likely to
support their claim.
