Contract Law Non-Assessed Coursework

The notice: 'The club will not accept responsibility for any loss suffered by customers', would appear to be, what the dance club would define as, an exclusion clause. However, a number of factors need to be taken into account before we can determine whether this exclusion clause is, in fact, legitimate. In terms of the common law (combined with statutes) we need to take into account three areas: 'incorporation' and 'construction', and more recently, legislation such as the Unfair Contract Terms Act 1977. 'Incorporation' refers to whether the exclusion clause is actually part of the contract witnessed and signed by both parties.

There are no problems with incorporation as long as both parties know all of the terms contained in the contract. In this case, I would advise Robert and Lucy that the 'exclusion clause' is in fact, not part of the contract they agreed on with the dance club as they viewed the notice in the club after they had paid (their consideration). I justify my decision based upon the ratio decidendi of Olley v Marlborough Court, Ltd, 1949 where the exclusion clause was not considered to be a part of the relevant contract as 'the plaintiff had not seen it until after she had been accepted as a guest'1.

Legislation also supports this. For example, the Unfair Terms in Consumer Contracts 1999 has a list of unfair terms which can be considered unfair: 'terms which have the object or effect of… (i) irrevocably binding the consumer to terms with which he had no real opportunity of becoming acquainted before the conclusion of the contract'2. The type of notice of the clause can also be relevant here. The 'red hand rule', famously advocated by (the now) Lord Denning, says that 'the more unreasonable a clause is, the greater the notice which must be given of it'3.

Obviously in Robert and Lucy's case, the clause exempting the dance club from any loss suffered by customers could be considered extreme or unreasonable. Therefore a court would expect the dance club to have made every attempt to ensure the customers were aware of the clause. Although a big sign on the club door could be deemed reasonable, the printed clause on the back of the receipt leading to the notice does not seem to be an example of the club making every attempt to ensure the customers are aware of the exclusion clause.

After all many customers do not look at a receipt and simply place it in their pocket. Mellish LJ establishes this point, saying 'If a person… received a ticket upon paying the toll… might put it in his pocket unread'4. However in the case of Parker v South Eastern Railway Co Ltd [1877], to put the clause on the back of the ticket after writing on the front something to the effect of 'see back', was deemed reasonable and that the company should not be held liable for Parker failing to read the clause.

To be honest I cannot decide one way or another how the court would judge on this particular point. The judges obviously look at each case individually, despite the significance of statutes, but the test of 'reasonableness' is important here. This test is assessed within section 11 of the Unfair Contract Terms Act 1977 by considering whether the clause was '… a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made'.

The clause on the inside of the dance club door could perhaps not be seen by customers which would mean that if they had not read their receipt, would be unaware of the clause. However, the notice is a big one which could be considered 'reasonable'. It is not said within the question whether anything on the front of the receipt points to the back or even the notices inside the club. If the club had done so then the case for the type of document not being suitable as to contain contractual terms would be weakened. Another point to consider is the fact that Robert and Lucy attended ballroom dance classes at the same club a few years ago.

It would appear that because salsa dance classes were so popular, they had changed their method of payment to that of pre-booking (and therefore I would assume, pre-paying). Consequently I would like to find out how Robert and Lucy had paid for their previous classes and whether the same receipt was produced. If this had so happened, and if Robert and Lucy wanted to claim that they were unaware of the exclusion clause, this would be extremely difficult to prove. As well as considering the type of clause and its location; we also need to ascertain the parties' intention as to why the clause was brought about in the first place.

This involves the principle of 'construction' where we look at the language of the clause and its possible interpretations as well as using the contra proferentum rule (legally supported buy the Unfair Terms in Consumer Contracts Regulations 1999) which assesses whether the language contained in the clause could be considered to be ambiguous. Indeed 'any loss' could refer to a number of things. Does the clause mean to insinuate property or injury? The language of the exclusion clause can be taken as too vague and broad.

Indeed Salmon's quote: 'they ought to have done so in far plainer language than the language here used6', from Hollier v Rambler Motors (1972), can apply to Robert and Lucy's situation too. Courts tend to dislike non-specific clauses which the 'reasonable person' would not understand or be able to clarify by themselves. For a club to try to exclude liability or responsibility is now prevented by the Unfair Contract Terms Act 1977. In Robert's case where he has suffered a personal injury, the club cannot, 'by reference to any contract term or to a notice given to persons generally…

exclude or restrict his liability for death or personal injury resulting from negligence'7. Therefore the test here would be if negligence had occurred, whether it was the dance club's responsibility for perhaps employing an under-qualified dance instructor or the instructor's himself. In Lucy's case, the Unfair Contract Terms Act 1977 supports her in so far as stating: 'In the case of other loss or damage, a person cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness'8.

Obviously again it is up to the court to decide if the notice can be deemed 'reasonable' but the fact remains that Lucy had every right to expect the cloakroom to take every measure to ensure her coat was not stolen. The previous case, Olley v Marlborough Court, Ltd, 1949 could determine the result of Lucy's case, were she to take it to court. One needs to ascertain as to whether Lucy actually had a contract with the club/cloakroom. If she paid a small fee to leave her coat there then that would suffice; alternatively it could be considered to be part of the contract formed when Robert and Lucy pre-booked the classes and received the receipt.

Presuming that Lucy does indeed have a contract, where the cloakroom is concerned, then as Singleton, LJ says in Olley v Marlborough Court Ltd, she is 'entitled to expect that the defendants would perform their duty and their part of the contract'9. Since the Unfair Terms in Consumer Contracts Regulations 1999, courts require an element of 'good faith', where the exclusion clause is concerned. I. e. it must not take advantage of the consumer. 'Good faith' states that the exclusion clause must be very clear and that clarity of expression is essential. Neither of these things can be found in the 'exclusion clause' in Robert and Lucy's case.

As I stated before, 'any loss' is not specific enough to be valid (in my opinion) and the entire clause is in violation of the exclusion of negligence rule – by stating 'will not accept responsibility'. Additional information such as the contract the dance instructor Paul has with the dance club (in Robert's situation) needs to be looked at, as well as the kind of contract or agreement Lucy (in Lucy's situation) had with the cloakroom and/or club before I could advise Robert and Lucy whether to take their cases further or not. In conclusion, I feel where the exclusion clause is concerned; there is most certainly a case to be to be made.