EXEMPTION CLAUSES

• If you have ever played Monopoly then you know that a ‘get out of jail free’ card is a useful card to draw. Can you think of any other games where you can escape a penalty or loss? • Draw up a list.• Some penalties that you may think of include:

three strikes and you are out in baseball, finding an immunity idol in Survivor or a similar item in other reality shows

HOW THEY WOULD DECIDE THE CASES (COULD THE BUSINESS INVOLVED RELY ON THE EXCLUSION CLAUSE?):

• A.) Nate was on holiday in a regional town and hired a bike. After paying for the hire of the bike, he received a docket. Nate did not read the docket, so did not notice that there was an exclusion clause on the reverse side which stated: ‘We will not be liable for any accident or damage arising from the hire of a bike’. A sign next to the cash register told customers that tickets were to be retained for inspection. The wheels on the bike came loose and Nate was injured. He sued the business for breach of contract.

• B.) Alison drove into a car park, taking a parking ticket from the machine at the entrance. A sign on the machine displayed an exclusion clause which stated: ‘We will not be liable for any damage to cars or theft from cars while using this car park’. The exclusion clause was also printed on the back of the ticket. When Alison returned to her car, she discovered that it had been broken into and her laptop had been stolen.

KEY CONCEPT

• Some contracts involve one party participating in a dangerous activity, such as bungy jumping or skydiving. As there is a high risk of injury and even death, what can businesses do to reduce the possibility of court action against them in case of an accident? This section examines what steps a business, group or person can take to limit their liability.

DEFINITION • An exemption clause is a term in a contract that seeks to

limit the liability of one of the parties to a contract

• It is common business practice for one of the parties to include an exemption clause in a contract. The purpose of such clauses is to limit or exclude the party's liability that would otherwise exist under the contract. For instance, when entering a contract to park your car at a commercial car park it is usual to see a notice advising that parking ‘is at the risk of the car owner’.• The courts have shown a reluctance to enforce exclusion

clauses, particularly if the parties do not have equal bargaining power. Further, an exemption clause will only be effective if reasonable notice is given by the party relying on the clause.

CASE: LE MANS GRAND PRIX CIRCUITS PTY LTD V. ILIADIS

• In the case Le Mans Grand Prix Circuits Pty Ltd v. Iliadis [1998] 4 VR 661, Iliadis was injured while driving a go-kart. He had signed a document that included an exclusion clause to the effect that he would not take legal action against Le Mans if he was injured while go-kart racing on their property. The document was headed, ‘To help with our advertising’. Iliadis was led to believe the document was for marketing purposes and was given no time to read it before signing. The court held that Le Mans could not rely on the exemption clause as Iliadis had no reason to believe it was a contractual document and had little practical opportunity to read the document.

PROVIDERS OF RECREATIONAL SERVICES SUCH AS GO-KART RACING MAY INCLUDE AN EXEMPTION CLAUSE IN A CONTRACT

TO EXCLUDE LIABILITY FOR INJURIES. HOWEVER, TO BE EFFECTIVE, THE OFFEREE MUST BE GIVEN REASONABLE

NOTICE OF ITS EXISTENCE BEFORE AGREEMENT TO ENTER A CONTRACT IS REACHED.

• In some situations it is not always clear whether or not the exemption clause is actually part of the contract, particularly if there is no written, signed document.

• CASE• In Causer v. Browne [1952] VLR 1, Causer left a dress

for dry-cleaning but it was returned stained. Browne relied on a notice printed on a docket given to Causer that stated, ‘No responsibility is accepted for loss or injury to articles through any cause whatsoever’. The court held the docket was not part of the contract as it was reasonable for the consumer to believe its purpose was customer identification when collecting the goods

DEFENCES IN CONTRACT LAW• A party who does not wish to be bound by a contract

may be able to argue one of the following defences: • that a valid contract did not exist — one of the elements was

missing. For instance, a party may claim there was never an intention to create a legal relationship in the first place.

• that a particular statement was not a term in the contract and, therefore, the statement is unenforceable

• that on face value, a valid contract did exist but that it is unenforceable because:– one of the parties lacked the capacity to form a contract– there was a lack of genuine consent– the subject matter was illegal.

CASE WHITE V. BLUETT (1853)

• In this old English case a father promised to excuse a debt owed to him by his son if the son promised to stop boring his father. The son had often complained that the father had treated him less favourably than his brothers. After the father died, the executor (White) sued the son (Bluett) for recovery of the debt. The son tried to defend the claim by arguing that he had carried out his side of the bargain and therefore the debt should be excused. However, the court held that the son's promise was too vague to amount to real consideration in contract law and the debt could be recovered.

SIMPLY DESTROYING A CONTRACT IS NOT A SOLUTION IN CONTRACT LAW. THERE MAY, HOWEVER, BE VALID DEFENCES

THAT CAN BE USED TO AVOID BEING BOUND BY THE CONTRACT.

APPLY YOUR UNDERSTANDING • 2.) Consider the following two scenarios and explain

whether or not a contract has been breached.• Paul and Anna were going on a holiday and decided to leave

their dog at a boarding kennel. When delivering the dog and paying the deposit, a contract was provided that stated the boarding kennel was ‘not responsible for any injury or illness to animals’. Upon return they discovered their dog had died.

• Peter left two suits for dry-cleaning. After paying for the service he received a docket detailing the amount paid and the date for collection. A statement was also included stating, ‘No responsibility is accepted for loss or damage to items through any cause whatsoever’. When Peter collected his suits he discovered both had large discolouration marks.

• 3.) Examine the following scenarios and provide reasons whether a contract exists or not, whether the contract is enforceable or not and, if not, what reason may be used to void the contract.

• Sixteen-year-old Allan signs a contract to buy a car from a dealer who provides finance at 15 per cent per annum. After six months he is unable to continue making the repayments. The car dealer wishes to start legal action to recover the balance owing.

• Rhys and Jessica are looking to buy their first house. At an inspection the real estate agent encourages them to sign a contract because ‘we have lots of people interested in this property and it will sell quickly’. Two weeks after signing the contract they discover they will not be able to pay for the property and wish to withdraw from the contract. The estate agent insists they be held to the terms of the contract.

• Bryan and his friends sign up for a game of ‘paintball’. One of the friends pays for all the players and the receipt contains a statement, ‘Players play at their own risk’. During the course of the day Bryan is hit in the eye by a paintball and loses the sight in that eye. He wishes to sue the operator.

• Michelle inspects a second-hand car that has been advertised as having a new engine. After inspecting the car, Michelle agrees to purchase it. Upon collecting the car the following week she notices that the engine appears to be older than the one she inspected. She asks for a refund or for the engine to be replaced at no cost. The seller refuses.

• Frank goes to a store to buy a TV. The price tag indicates the TV will cost $900. Is Frank obliged to pay the $900? Frank offers the sales assistant $800. Is the shop assistant obliged to accept this offer? Why or why not?