Exclusion Clause In Contracts And Statutory Rights Of Consumers

1. This group assignment consists of 2 parts. Part A is a case study on Contract law, and Part B is a question involving Civil Liability (the Law of Torts and Negligence). Both questions must be answered.

2. The total word limit for the group report is 2,000 words (+/- 10% allowed) with each part having a maximum word count of 1,000 words. Word count limits are strictly enforced. A deduction of 2 marks will be imposed for every 50 words over the word count for either part of the report. Anything over the word count will not be read by your lecturer.

3. The total word count for the report as well as each part must be clearly written on the cover sheet of the assignment. A paper will not be marked if the word counts are not written on the cover sheet.

The parties who form a contractual relationship between each other are bound by the terms of the contract. The contractual parties can legally enforce each other to comply with the terms. In case these terms of the contract are breached, then the aggrieved parties have the right to demand compensation from the breaching party. Thus, a liability can be imposed on the contractual parties in case they did not comply with the terms of the contract. However, the parties have the right to exempt themselves from the liability which they face for breaching the contractual terms by relying on the exclusion clause (Gibson, 2017). The parties of a contract can include the exclusion clause into the contract which allows them to eliminate their liability arise in case the contractual terms are breached. The objective of including exclusion clause in a contract by a party is to exclude their liability completely or limit their liability to a fixed sum of money. In the case of companies or businesses, exclusion clauses are often displayed by them on the premises in the way of notice or on printed tickets or receipts (Sekendiz, Ammon & Cannaughton, 2016). Many times parties incorporate these clauses in the contract while entering into a contractual relationship third parties. While determining whether the exclusion clause is valid or not, the court enquiries upon the circumstances in which those terms become a part of the contract.

The general rule of incorporation of an exclusion clause in the contractual terms provides that the term must be brought into the attention of the contracting party while the contract is being formed or before its incorporation. In this context, a relevant judgement was given by the court in the case of Olley v Marlborough Court [1949] 1 KB 532. In this case, a hotel room was booked by the claimant who signed a contract on the reception desk of the hotel. Later when she when into her room, a notice was mentioned behind customers’ hotel room to exclude the liability of the hotel if their belongings are damaged or stolen. It was held by the court that this notice is not valid based on which the liability of the hotel cannot be removed because it was not incorporated while complying with the general rule (Stone, 2013). It was not brought into the attention of the claimant when she signed in the contract at the reception desk or before signing the contract. It is important that reasonable steps are taken by the party to being the exclusion clause in the attention of another party while the contract is formed or before its formation.

Incorporation of Exclusion Clauses in Contracts

In the case exclusion clause is written on a ticket, then the circumstances of the case are evaluated by the court to determine whether it is valid or not. A relevant judgement was given in Causer v Browne [1952] VLR 1 in relation to ticket or receipt containing terms. In this case, the court provided that it is important to determine would a reasonable person assumes that the ticket is a part of the contract or whether it is a mere receipt, acknowledgement of voucher and not a contractual document at all (Graw, 2012). Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 is another relevant case in this context. In this case, the claimant has issued a ticket by putting money in a parking machine while he was entering into the car parking. In small print, it was mentioned on the ticket that there are certain terms and conditions which are binding on customers and they are mentioned inside the parking. The terms stated an exclusion clause which provided that the parking will not be held liable in case the customers were injured. Due to the negligence of the defendant, an injury was suffered by the claimant. A suit was instituted by the claimant, and a question was raised whether the terms were mentioned while the contract was formed between the parties (Monaghan & Monaghan, 2013). The court provided that the claimant gave his acceptance by putting his money in the machine and the ticket was given after the acceptance took place; thus, the exclusion clause was not incorporated in the contract, and the defendant cannot rely on its defence.

In the given case study, Jones was injured when she comes back into the car parking to get her car. A notice was written outside the parking which stated that the owners park their vehicles at their own risk. Jones has issued a ticket by the ticket machine in which it was mentioned that certain terms are applied on the customers which are written inside the parking. The terms provided that the car parking company will not be held liable for any injury suffered by the customer on the premises. As per the general rule of incorporating the exclusion clause discussed in the case of Thornton v Shoe Lane Parking Ltd, the notice written outside the car parking was brought into the attention of Jones before she formed a contract with the car parking based on which it is valid. A contract was formed when Jones gave her acceptance to the machine after which a ticket was issued to acknowledge the payment. The ticket was issued after a contract was constructed between the parties based on which it is not the part of the contract. Thus, the terms written inside the car parking are not enforced on Jones. As discussed in the case of Thornton v Shoe Lane Parking Ltd, since the terms were not a part of the contract, the car parking cannot rely on the exclusion clause to eliminate its liability towards Jones.

Statutory Protections for Consumers

The Competition and Consumer Act 2010 (Cth) (CCA) is introduced in order to provide standards relating to trade and commerce in order to prohibit unfair trade practices and promote consumer protection policies. Section 2 of this act provides its object which is to enhance the welfare of Australians through the promotion of competition between corporations and ensuring fair trading by enterprises. Schedule 2 of CCA provides the key provisions which provide the necessary safeguard and protection to customers to ensure that their rights are not breached by unethical trading practices (Gibson, 2017). Along with contractual remedies, statutory protection is available for customers in relation to unconscionable conduct. Section 20 to 22 of the CCA provides the key provisions to protect customers from unconscionable conduct. It is referred to a statement or action which is so unreasonable that it defies good conscience. Section 21 of the Australian Consumer Law (ACL) prohibits corporations from engaging in unconscionable behaviour in connection to supplying of goods and services or the acquisition of goods and services while engaging in business related transactions (Austlii, n.d.). Pursuant to section 22 of the CCA, there are certain elements or circumstances which comes under the definition of unconscionable conduct. Section 22 (a) provides that the use of relative strengths of the bargaining position by the supplier against the customer while setting the goods or services is considered as unconscionable conduct (Gibson, 2017).

Section 22 (d) prohibits the businesses from using undue influence or unfair trading practices to put pressure on the customer or a person who is acting on behalf of the customer in relation to supply of the goods or services. Section 22 (e) provides that the amount for which the customer can acquire identical or equivalent goods or services other than the supplier can come under unconscionable conduct if the supplier is charging more from the specific customer (Legislation, n.d.). This principle established by the High Court in the judgement of Blomley v Ryan [1956] HCA 81. In this case, the court established that intoxication might preclude capacity of a person to form a contractual relationship. The court provided that the supplier should not take unfair advantage of the condition where he/she can dominate the customer to form a particular contractual relationship in relation to goods or services (Brereton, 2013). Moreover, a relevant judgement was given by the court in the case of Commercial Bank of Australia Ltd v Amadio [1983] HCA 14. In this case, the respondent was an elderly Italian migrant couple, Mr and Mrs Amadio, who give guarantee to the bank for their son’s loan.

Unconscionable Conduct

The bank manager knew that their son had misrepresented the facts to his parents while giving the guarantee; however, the bank manager continued with the guarantee. The son and the bank manager took unfair advantage of the poor English skills of the respondents to enter them into a legal relationship. The court provided that Mr and Mrs Amadio can set aside the contract based on the principle of unconscionable conduct (Kiefel, 2016). They misused their dominant position in order to enforce the respondents to form a contractual relationship. They also take unfair advantage of their poor English skills to enforce the contractual terms on them. The court provided that the rights of customers were breached by the applicants based on which the contract can be set aside, and it cannot be considered as valid (Fee, 2018). Thus, the unfair contact which is formed between seller and customer in relation to supply of goods or services which is based on unconscionable conduct is considered as invalid. Moreover, the Competition and Consumer Amendment (Payment Surcharges) Act 2016 imposed a ban on corporations operations in Australia on 25^th February 2016 in relation to the imposition of excessive surcharges on their products (ACCC, 2016). The objective of this ban is to stop the businesses from charging surcharges on their customers which are excessive.

In the given case study, John is an unemployed 19 years old who formed a contractual relationship with Brown Suppliers Pty Ltd. He left the school when he was 14. The contract formed between the parties specific that John would receive electronic appliances for the next 12 months. The contract also specifies that the goods which are supplied to John are subject to a 20 percent surcharge on the sales price. John later found out that the company is charging more from him for the appliances than compared to the normal price. The rights of John as a customer are protected under the ACL. As per section 21 of the Act, Brown Suppliers Pty Ltd is prohibited from using unconscionable conduct against its customers while supplying its goods to them. In the given scenario, John left the school when he was 14 years old due to which he was in an inferior position. Brown Suppliers Pty Ltd used its dominant position to form a contact with John in which he had to pay a surcharge of 20 percent above the sales prices which is a violation of section 22 (e). The company is charging way higher prices to John than compared to normal prices by misusing its dominant position. The judgement of Commercial Bank of Australia Ltd v Amadio applies in this scenario since the company misused the fact that John had left school when he was 14 years old to form a contract which is unfair. Moreover, the imposition of excessive surcharge is prohibited by the government under the Competition, and Consumer Amendment (Payment Surcharges) Act 2016 as well.

In conclusion, John has rights under the ACL which were breached by Brown Suppliers Pty Ltd by misusing its position and using unconscionable conduct to form a contract with John. Thus, John can set aside the contract and claim remedies for his loss.

References

Causer v Browne [1952] VLR 1

Gibson, A. (2017) Business Law (3rd ed). Sydney: Pearson.

Graw, S. (2012). An introduction to the law of contract. Toronto: Thomson Reuters.

Monaghan, C., & Monaghan, N. (2013). Beginning Contract Law. Abingdon: Routledge.

Olley v Marlborough Court [1949] 1 KB 532

Sekendiz, B., Ammon, R., & Connaughton, D. P. (2016). An Examination of Waiver Usage and Injury-Related Liability Claims in Health/Fitness Facilities in Australia. Journal of Legal Aspects of Sport, 26(2), 144-161.

Stone, R. (2013). Q&A Contract Law 2013-2014. Abingdon: Routledge.

Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163

ACCC. (2016). Payment surcharges. Retrieved from https://www.accc.gov.au/business/pricing-surcharging/payment-surcharges

Austlii. (n.d.). Competition and Consumer Act 2010 – Schedule 2. Retrieved from https://classic.austlii.edu.au/au/legis/cth/consol_act/caca2010265/toc-sch2.html

Blomley v Ryan [1956] HCA 81

Brereton, P. (2013). Binding or bound to fail?: Equitable remedies and rectification of financial agreements. Australian Family Lawyer, 23(2), 31.

Commercial Bank of Australia Ltd v Amadio [1983] HCA 14

Competition and Consumer Act 2010 (Cth)

Competition, and Consumer Amendment (Payment Surcharges) Act 2016

Fee, J. (2018). Undue Influence: Inspirations from Australia?. Hong Kong Law Journal, 48, 375-388.

Gibson, A. (2017) Business Law (3rd ed). Sydney: Pearson.

Kiefel, S. (2016). Good faith in contractual performance: A background paper for the Judicial Colloquium. Brief, 43(5), 26.

Legislation. (n.d.). Competition and Consumer Act 2010. Retrieved from https://www.legislation.gov.au/Details/C2013C00620