« Home

Home » Law » Contract Law » Taylor & Taylor: Contract Law Directions » Student resources » Guidance for end of chapter questions » Chapter 6 Question 1

Taylor & Taylor: Contract Law Directions

Chapter 6 Question 1

Question

Bob regularly hires a rubbish skip from Tidy Skips. On each of the last five occasions, the invoice, received afterwards, has had the following printed on the reverse: 'Tidy Skips shall not be liable for any loss or damage howsoever caused to the customer's premises and if, notwithstanding the foregoing, any liability for damage to customer's property should arise, that liability shall be limited to a total of £100.'

Bob telephones Tidy Skips and orders a skip to be delivered to his home on the following day. Syd, an employee of Tidy Skips, negligently drives the delivery vehicle into Bob's wall causing it to collapse on to Bob's new car. The wall costs £500 to rebuild and the repairs to the car cost £800.

Advise Bob.

Answer

The best way to tackle a problem question involving an exemption clause is to ask the following questions:

  1. What is the liability sought to be excluded?

  2. Has the exemption clause been incorporated into the contract?

  3. If so, can it be interpreted to exclude the liability?

  4. Is the exemption clause invalid according to UCTA 1977 or UTCCR?

You could organise your answer to the current problem in the following way:

Paragraph 1 - Liability

The liability in question is Tidy Skips' breach of its tortious duty of care to drive their vehicle with reasonable skill and care (although we don't know the express terms of the contract it is likely that such a duty could also be implied in the contract).  They are, at first sight, liable to pay £1300 (£500 + £800) in damages.

Paragraph 2 - Incorporation

An exemption clause must be incorporated into the contract at the time of contracting (Olley v Marlborough Court Ltd. (1949)) therefore the fact that the exemption clause might appear on the invoice sent to Bill is too late as the contract appears to have been concluded on the telephone.

However, it is possible that the exemption clause may have been incorporated into the contract by the parties' course of dealing (as in Hardwick Game Farm v Suffolk AA (1969)). We know that Bob and Tidy Skips have contracted on 5 previous occasions and the frequency of these dealings may affect a court's willingness to incorporate a term on this basis. You should also point out that it is not at all clear that the parties ever incorporated the exemption clause into their previous contracts if the clause was only ever included on the invoice sent after the conclusion of a contract. It is, therefore, doubtful whether there was ever a consistent course of dealing to include the exemption clause.

Paragraph 3 - Interpretation

The clause can easily be split into two: an exclusion of all liability for any loss or damage to premises; and a limitation of liability for damages to property. Clearly the damage to the car cannot be excluded since the car is not covered by the word premises but it may be limited by the second part of the clause referring to property - you could mention the contra preferentem rule and cases such as Houghton v Trafalgar Insurance here.

The clause seeks to exclude liability for negligence and so you should mention and apply the Canada Steamship guidelines. The clause does not expressly exclude negligence and so you should argue whether or not there are any other heads of liability that it may cover; e.g. are the facts closer to The Raphael or EE Caledonian v Orbit Value?

The limitation clause may be treated more leniently (see Lord Wilberforce in Ailsa Craig Fishing) and may be severable from the exemption clause if the latter is ineffective. You may note in favour of enforcing the limitation clause that the limit - £100 - represents a fairly substantial proportion of the actual damages.

Paragraph 4 - Validity

It is unclear whether Bob is a business (e.g. a sole trader) or a consumer. The fact that he has hired a skip from Tidy Skips on 5 previous occasions may suggest that he works in a business which regularly hires a skip, on the other hand, he may be an individual renovating his house and may have hired the skip a number of times over a few months.

You should note that UCTA applies to exclusions of 'business liability' (s.1(3)) and that the liability in question clearly arose from things done 'in the course of business.' The first part of the clause seeks to exclude liability for damage to premises and might be attacked on the basis that it seeks to exclude liability for negligence and must therefore be reasonable (s.2(2)).Refer to s.11 of UCTA and the burden of proof under s11(5) and the test under s.11(1) of whether the term was a fair and reasonable one to have included at the time of the contract and how this test was interpreted in Stewart Gill v Horatio Myer

The UTCCR will only apply if Bob is a consumer. If that is the case you should note that the UTCCR will not apply if the clause is a 'core term' or if it has been individually negotiated (which does not appear to be the case in this problem). If the UTCCR apply then you will need to argue whether or not the clause is 'unfair'.

Paragraph 5 - Conclusion

It can sometime be tricky to draw together all the threads of your answer to a problem question and you should be aware that this is not the place to repeat all the above analysis. If there have been a lot of 'if this is the case, then the following analysis applies…', as in the current problem, you may not be able to give a definitive answer but you may want to use a sentence to explain what you think is the most likely outcome and follow that reasoning through to the end.