Unfair Contract Terms Act Review Example

There are two different cases evident. The first concerns Robert with his broken arm and his Rolex watch which is damaged beyond repair. The second concerns Lucy whose coat is stolen from the cloakroom. I will start by looking at Roberts case. The club has a notice up reading, "The club will not accept responsibility for any loss suffered by customers". This notice is referred to by a printed clause on the back of the receipt issued when Lucy and Robert booked their salsa classes in advance. It needs to be decided whether these terms and conditions are incorporated as clauses in the contract.

To determine this we must decide when the contract was complete and whether sufficient notice of the terms and conditions were given. We can look at the case of Chapleton v Barry UDC (1940). We can make comparisons between the ticket obtained in Barry UDC with that obtained in this case. In Chapleton v Barry UDC the court decided that the clause on the ticket was not part of the contract. The ticket was not the sort of document on which a contract term would be expected. It appeared merely to be proof that Mr Chapleton had paid his 2d hire charge.

Assuming that Robert and Lucy paid for the class on booking, the receipt could be seen to be only a 'proof of purchase' as in Chapleton v Barry UDC and not one in which they would be expected to turn over to see if any writing was present on the back. This case however differs slightly as the terms and conditions are only referred to by this ticket, they are not actually incorporated on it. In Thompson v LM&S Railway (1930) we see that it is not necessary for the document or sign itself to contain the terms. There may be incorporation by reference to where the terms may be found.

If the contract was said to be made on paying for the classes, we can then look at Olley v Marlborough Court Hotel (1949) where the court of appeal held that the contract which had been made at the reception desk was made before there had been any opportunity to see the sign ( containing the exclusion clause). The same could be said for Robert, he concluded his contract before being given the opportunity to see the notice on the clubs door, (he was only referred to it on the back of the receipt which he may not have seen anyway.

The basic test for incorporation is derived from Parker v South Eastern Railway Co ltd (1877). It states that "the basic rule for incorporation of a clause contained in an unsigned document or sign is that such a clause is part of the contract if there has been reasonably sufficient notice of it". Robert and Lucy booked their class in advance, however the terms and conditions were only available in the club and it could have happened that they just attended the class without booking, therefore perhaps not even noticing the terms and conditions as they are on the inside of the club door.

A further notice would be needed on the wall of the club, somewhere more obvious, for it to be said that reasonable notice is given. The club however in this instance could use in their defence that Robert had attended classes previously at that club and so should be aware of their terms and conditions and what they state. In Petrotrade Inc v Texaco ltd (2000) Clarke LJ said – "Given the course of dealing… both parties will have made the oral agreement on the basis that the contract would be subject to the same terms as before".

In Roberts case, he had attended dance classes some years before, so this may cancel out the 'consistent course of dealings' rule as the previous event occurred too long ago for it to be recognised, as Robert most likely would not remember the terms and conditions. The receipt states 'For terms and conditions please see the notices in the club'. We are only told of one notice in the club, on the inside of the door, therefore the information on the back of the receipt is misleading and perhaps false as there is only one notice, not notices as stated.

On the matter of incorporation Robert has a strong case backed up by previous examples in past cases. The next thing to look at is how clearly the notice is constructed. The contra proferentem rule states that an exclusion clause will be interpreted against the person putting it forward. If there is ambiguity in the language of the clause it will be interpreted in the claimants favour. The terms and conditions in the club are very vague indeed stating only 'the loss suffered by customers'.

Although this is much more vague then in Hollier v Rambler motors (1972) where fire was stated as the cause of damage which the company excluded liability for, there is still no mention of how the damage may be caused, for example, through negligence as in the Hollier case. Robert has a strong case as the notice in the club is very vague and does not even indicate what loss is included or excluded, whether its to his person or to his belongings and hence it should be interpreted by the courts in Roberts favour. We need to consider now the point at which Paul falls over knocking Robert to the ground.

He is demonstrating an energetic step, however as teacher of the salsa class he should be able to perform this, or at least should know to stand right back when demonstrating this step so as not to create any injury if the step should go wrong. We could rationalize that this injury to Robert and damage to his watch occurred through negligence on Paul's behalf. Canada steamship lines ltd v R (1952) sets out a three stage test of exclusion of negligence, the first in which states that there must be express reference to negligence – which the notice does not do.

As long as Robert can prove that his injuries to his property were done through Paul's negligence, he has a strong case. Section 2 of the Unfair Contract Terms Act (1977) will back up this claim on the base of negligence as it states – 'A person cannot by reference to any contract term or to a notice given to persons generally or to particular persons exclude or restrict liability for death or personal injury resulting from negligence'. However this will only support Robert's claim for his broken arm.

A defence that the club might use however against Robert, suing for his broken watch, may be to use the argument that it was unsuitable for Robert to be wearing a Rolex watch to attend salsa classes in as it is quite an energetic activity and hence it is a known fact without being stated, as in a sports activity, that damage may occur. There is a known risk involved in undertaking the activity. Turning now to look at Lucy's case. There are many details which are not included which would be helpful for us to know -Was the cloakroom free to use and unmanned or did she pay for example i??

1 and there was a cloakroom attendant present? Did Lucy receive a ticket for her coat stating any terms or conditions on? Was the coat stolen out of negligence on the clubs behalf? Was there a notice in the cloakroom? (If there was, this could solve the problem of whether there was more then one sign, as referred to by the note on the back of the receipt). As we are given none of these details I will look at two different situations that may have happened in turn. The first situation I will look at is if we presume that the cloakroom is unattended and coats are hung on pegs by the owners of the coats themselves.

Lucy case here differs from Roberts as when Lucy deposits her coat in the cloakroom it is reasonable to presume, now she is in the club itself she has seen the notice restricting liability for the club and she chooses to put her coat in the cloakroom knowing the risk, that the club will not accept liability if it goes missing. Lucy could try to get round this exclusion of liability by saying that the notice was too vague and did not state anything about the use of the cloakroom.

If there is not a sign in the cloakroom itself, then Lucy could try to claim on the basis that the notice in the club was ambiguous to its meaning and was not easily interpreted to mean the loss occurring in the cloakroom, just in the club itself as no precise reference is made excluding liability in the cloakroom. If no money was paid by Lucy for depositing her coat in the cloakroom then it could be said that no contract has been made, as no consideration has taken place.

Therefore unless Lucy could argue that the price of the cloakroom was included in the price of the class she would not be in a position to claim at all from the club for the loss of her jacket. Now looking at the other situation, if Lucy had deposited her coat in a cloakroom manned by a cloakroom attendant. When in this case Lucy's jacket was stolen Lucy would have a good case against the club as when depositing her jacket it was reasonable for Lucy to presume it would be safe as an attendant was watching at all times.

The only way I can imagine her coat being stolen is through a negligent act of the attendant and therefore unless a notice was present in the cloakroom restricting the clubs liability for negligence, Lucy has a good case against the club for loss of personal belongings through negligence. If a notice was however present in the cloakroom and did not mention negligence directly, it would have to pass the three stage test set out in Canada Steamship lines ltd v R to exclude the club from its negligent act.

I would advise Robert to claim against the club for his broken arm on the basis of negligence committed by them and using section 2 of the Unfair Contract Terms Act (1977) to back this claim up. For his Rolex watch which is damaged beyond repair, I would advise Robert to claim on the basis of incorporation. He should claim that the exclusion clause on the wall of the club was not incorporated into the contract and therefore does not exclude liability. In Lucy's case, I would suggest that, in the first situation I stated for her, her best chance of claiming any damages would be 'construction'.

She should show that the salsa class and the cloakroom were different situations and that the notice in the club excluded liability only for losses which occurred in the class and no express reference was made to the cloakroom and no sign was present there either to give sufficient notice. Lucy's case in this situation is not that strong as many defences could be brought by the club against her. In the second situation Lucy has a stronger case. I would advise her to claim on the basis of negligence on the clubs behalf as no exclusion of this had been made.