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Exemption Clause


The case is about exemption clause that Peter seeks to exclude his liability completely due to a breach of contract caused by tortious conduct in the course of performance.  It is likely that Wendy has no room to negotiate once she entered into the contract with the exemption clause pre-printed.  However, the exemption clause will be only effective if Peter can prove: (1) Wendy was given sufficient notice of the existence and contents of the clause before or at the time she entered into the contract; (2) the clause as notified was wide enough to cover the breach complained of. 

Peter argued that the exemption clause was pre-printed on the ticket that reasonable person would aware and understand the impact on her rights, duties or liabilities under the contract.  As per Denning MR in White v Blackmore[1], .it is settled law that a ticket on its face must say: :For condition, see back.;  If it does not say it on the front, it is not sufficient to put a condition on the back.・  As there is no indication of the clause location on the ticket, constructive notice is presumably not sufficed under this circumstance.   

Wendy might treat the ticket as a mere receipt or voucher as reasonable person would assume it to be non-contractual in nature and feel not obliged to read the conditions: Causer v Browne[2]As illustrated in Chapelton v Barry UDC[3], Peter must show that Wendy was actually given sufficient notice of the existence and contents of the exemption clause before or at the time of contract to exclude his liability.  The fact that Peter said: .sign this [the ticket], it is to confirm your booking with me・ without bringing the clause to Wendy・s attention.  Wendy neither read nor signed the ticket.  So she was not legally bound as only the person signed the document would be bound by the exclusion clause: L・Estrange v Graucob Ltd[4]As a result, there was not sufficient actual notice of the clause and Peter cannot rely on it to escape liability. 

For the reason that Peter asked Wendy to sign to confirm the booking, it is more likely that the ticket is contractual in nature. Then Peter must show that constructive notice of the existence and contents of the exemption clause by reasonable steps was brought to the attention of Anna before or at the time of the contract was entered into.  This can be satisfied by prominently displaying sign with the exemption clause that reasonable person would notice before or at the time of the contract: Balmain New Ferry Co v Robertson[5]. It should constitute good notice provided that the sign is not obscured as in the case of Thornton v Shoe Lane Parking Ltd[6].  Thus it is unfavorable to Wendy as she did not read the displayed sign that Peter put at the entrance of the airport in large bold red lettering with .Conditions of Peter・s Charter Flights・ (same exemption clause as on the ticket).  

On the other hand, it is arguable that there was no contract until Peter gave Wendy the ticket as she confirmed the booking by telephone without finalizing payment and vital details.  In MacRobertson Miller Airline Services v Commissioner of State Taxation[7], a passenger booking in a passage is an offer, which is accepted by confirmation of the booking clerk, even though a ticket is issued later.  The contract was therefore constituted when Wendy confirmed the booking over the telephone.  It is obviously that no contemporaneous notice of an exemption clause to Wendy・s attention when she entered the contract.  Hence the clause will not be effective to exclude Peter・s liability as unsupported by consideration: Olley v Marlborough Court[8].  

Peter may argue that Wendy should be aware of the existence of the exemption clause from the prior course of dealing as she planned to finalize the details at the airport .as usual・: Balmain New Ferry Co v Robertson[9].  Wendy might have a lot of experience flying with normal flights.  The fact that .it was her first time on a charter flight・ and the first contract with Peter, therefore, the exclusion does not apply here.   

Even if Peter could show other possibilities to satisfy the requirements of sufficient notice to be a term of the contract, the clause will be read down to determine and restrict its effect: Wallis, Son and Wells v Pratt and Haynes[10].  On its face the clause seems to be wide enough to cover both Wendy・s injury and loss.  It is probably that Peter would be absolved from any liability at least the ruined luggage, which is guarded from the clause .regardless of the cause of such loss or injury・.   

Nevertheless, it also needs to determine whether the exemption clause is wide enough, on its narrowest construction, to exclude liability for non-performance of fundamental obligations: Nissho Iwai Australia Ltd v Malaysian International Shipping Corp, Berhad[11].  It is likely that the clause with .regardless of the cause・ is wide enough to cover even Wendy・s injury.  However, In Woodfactory Pty Ltd v Kiritos Pty Ltd[12], McHugh JA said:  

.The test whether the term is fundamental is whether it is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise and that ought to have been apparent to the promisor・. 

It is obviously that duty of care and skills would be the fundamental term that implied from the contract.  The fact that Peter was a .novice at flying・ and it is not justify if the clause would cover even an inexperience pilot without consideration of personal injury or death. 

As a conclusion to above arguments, Peter is in an unfavorable position as Wendy was not given sufficient notice of the exemption clause and the clause might not be able to cover his fundamental breach of the contract.  Therefore, Wendy can raise a claim in contract against Peter.

[1] [1972] 2 QB 651 at 664

[2] [1952] VLR 1

[3] [1940] 1 KB 532

[4] [1934] 2 KB 394

[5] (1906) 4 CLR 379

[6] [1971] 2 QB 163

[7] (WA) (1975) 133 CLR 125; (1975) 8 ALR 131

[8] [1949] 1 KB 532

[9] (1906) 4 CLR 379

[10] [1911] AC 394

[11] (1989) 167 CLR 219

[12] (1985) 2 NSWLR 105 at 144


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