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Advise Vincent whether he is bound by the words on the receipt or

sign
Introduction
Vincent, a painter, is requesting monetary compensation from Claude, a local paint
manufacturer, for the financial losses and damages incurred from the paints provided by him.
However, Claude denies this claim and any liability for Vincents financial loss by
contending that his claim is null and void, due to exclusion clauses printed on the receipt, and
sign. In order to legally advise Vincent an examination of pertinent facts and application of
the common contract law must be administered to assess whether a contract exists between
both parties, if the exclusion clause is integrated into the contract, and subsequently if any
breaches in the contract are covered by the exclusion clause.
Is there a contract?
In order for Vincent to be bound by Claudes exemption clause and claim financial losses
from him, it must be determined whether any contractual relations actually exist. Despite the
formality of any contract for it to become legally enforceable they must all contain the
following components: offer, acceptance, consideration and the intention to be legally
bound.1 Its stated that Vincent has bought paint from Claude over the past two years and
assuming he makes a similar offer to Claude as per usual, and Claude has accepted the
monetary exchange for his goods, the preceding components necessary for a contract to be
legally enforceable are satisfied. Legal capacity, genuine consent and legality are also
important elements of a contract that need to be satisfied, however do not apply in this
scenario2. According to Edwardss v Skyways (1964), there is also the rebuttable presumption

1
2

Latimer P Australian Business Law, 33rd ed, 2014, CCH Australia at 289
Ibid at 315

that in commercial transactions, legal relations are intended. 3 Thus, since Vincent and Claude
finalised the transaction they both have entered a valid contract.
Do the words on the sign or the receipt have contractual effect?
An exclusion clause is a term in a contract that explicitly seeks to limit or restrict rights of
one or more parties through exemption of liability. For exclusion clauses to hold they must be
included into the contract, usually through incorporation by signature. With respect to this
case for the exclusion clause to exclude Claude from liability it must have been incorporated
into the contract and this incorporation can be either in the form of signed or unsigned
documents. According to LEstrange v Graucob Ltd (1934), where a party signs a document
with contractual effect which contains the exclusion clause they are legally bound to the
contract and its terms, irrespective of whether they have an understanding of the contract.4
From analysing the case its reasonable to assume that both the sign and receipt are unsigned
documents.
This questions the validity of these two unsigned documents', and if either alternative is to be
considered as to have incorporated the exclusion clause. In the circumstance where a contract
is an unsigned document, the clause must be integrated into a document that is contractual in
nature, and sufficient notice must be provided to the other partys attention before the contract
is initiated. This was evident in Chapelton v Barry Urban District Council (1940), where
Lord Justice Slesser, MacKinnon and Goddard came to a shared conclusion that the issued
ticket was merely a proof of payment, and that the exclusion clause could not be considered
as being incorporated due to the insufficient notice provided to Mr Chapelton.5 The ticket
issued to Mr Chapelton is similar to the receipt supplied to Vincent, the receipt is simply

3
4

Edwards v Skyways Ltd (1964) 1 WLR 349


LEstrange v Graucob Ltd (1934) 2 KB 394

Chapelton v Barry Urban District Council (1940) 1 KB 532

proof for the payment of goods supplied by Claude, and denies the validity of the exclusion
clause as it was brought to Vincents attention after the purchase of the paint.
Thus for Vincent to be bound by the exclusion clause it would have to be through the words
presented on the sign, however the questions lies on whether sufficient notice was supplied to
Vincent before the contract began. As shown through Olley v Marlborough Court Hotel
(1949), where Mrs Olley was not provided sufficient notice before the contract was made for
her stay at the hotel, and thus could not have been aware of the disclaimer.6 Since the
contract relating to the coat was placed at the reception desk it couldnt possibly be brought to
Mrs Olleys attention which results in the disclaimer being null and void. In the case between
Vincent and Claude, the sign was displayed on the counter before the contract was made so it
can be said that Vincent was given ample time before the contract was made. However there
are other variables to consider such as the positioning of the sign, legibility and size of the
handwriting, which signifies that a definite conclusion cannot be reached based on the
understanding that the sign was present on the counter.
Another way to prove the incorporation of an exclusion clause is if there was a consistent
stream of dealings in the past, despite insufficient notice provided to the other party.
According to McCutcheon v David MacBrayne Ltd (1964) 7, McCutcheon believed that the
exclusion clause would be assumed due to past dealings between both parties, and thus
protect him from being liable to pay for the damages of the car. However the exclusion clause
in his contract would not hold as the past dealings between both parties were inconsistent.
This result also held true in Hollier v Rambler Motors (AMC) Ltd (1971), where the exclusion
clause created by Rambler motors did not protect them from liabilities because Mr Hollier
had only used the services of the garage a handful of times over a course of 5 years, and thus

6
7

Olley v Marlborough Court Hotel (1949) 1 KB 532


McCutcheon v David MacBrayne Ltd (1964) 1 WRL 165

it was concluded that the exclusion clause could not be incorporated because that there was
neither a regular or consistent course of dealings with client.8 Since Claude and Vincent have
had a history of dealings, two times a month for two years, it justifies the incorporation of the
exclusion clause in the sign, and its irrelevant whether it was brought to Vincents attention.
This is supported by Balmain New Ferry Co Ltd v Robertson (1906), where Mrs Robertson
had regularly used the wharf, and the exclusion clause was brought to her knowledge with
sufficient notice over the course of her past dealings.9
Is there a breach in the contract, and are the damages caused by the paint covered by
the sign?
Assuming the exclusion clause has been incorporated based on the deductions made above; it
must now be proven from Vincents standpoint whether the clause is broad enough to cover
Claudes breach. To identify whether the clause covers the breach there are a number of
approaches, and rules of construction established by courts for the purpose of interpreting an
exemption clause:
(1) Contra Proferentem
(2) Four Corners Rule
(3) The exclusion clause must be interpreted according to express agreement
According to Darlington Futures Ltd v Delco Australia Pty Ltd (1986), the exclusion clause
is to be interpreted according to its natural and ordinary meaning, read in light of the
contract as a whole.10 Contra Proferentem states that in the instance there is a possibility for
ambiguity embedded in the exclusion clause, the clause will be read strictly against the party

Hollier v Rambler Motors (AMC) Ltd (1971) 2 WLR 401


Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379
10
Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500
9

using the clause to protect themselves from liabilities.11 This can be applied to Vincent and
Claudes case where Claudes exclusion clause explicitly states that he exempt for any losses
or damages caused by the paint. This justifies that the contract is not ambiguous in nature,
and that the $20000 worth of damages cannot be retained from Claude as he is protected by
his exclusion clause.
It must now be determined whether Claude is required to compensate Vincent for the
damages and losses amounting to $40000. Claude is protected by the exclusion clause,
however Claudes exclusion clause strictly limits the exemption to himself, and this leads to
the possibility that he may be liable for losses through the actions of his employees. In the
case, Sydney City Council v West (1965), the council could avoid liability for loss and
damages to the vehicle and its contents because they acted inside the terms of the contract. 12
This leads to the question of whether Pablo has acted within the four corners of the
contract, as the exclusion clause would not hold if he had acted outside the terms of the
contract.13 Based on logical reasoning its certain that Pablo has breached the four corners
of the contract due to the unlikelihood of spontaneous paint explosions, leading to the
conclusion that it was a deliberate repudiatory breach on Pablos behalf.

14

As stated

previously Claudes exclusion clause


e has exclusively exempted him from any liability with the exclusion of Pablo, and since
Pablo is Claudes subordinate Claude is fully accountable for the actions of his employees.
This leads to the conclusion that Claude is not protected by the exclusion clause for the
$40000 in damages and losses incurred as a result of his employees actions.

11

Latimer P Australian Business Law, 33rd ed, 2014, CCH Australia at 440
Sydney City Council v West (1965)114 CLR 481
13
Latimer P Australian Business Law, 33rd ed, 2014, CCH Australia at 441
12

14 W Carter, Carters Guide to Australia Contract Law (LexisNexis Butterworths, 2nd ed, 2011) at 185.

Would it have made any difference to your answer if Vincent had read the sign at the
time of buying the paint and had asked what it meant and been told by Claudes
salesman that it excluded Claude for liability only if the paint fumes affected people
with an allergy to those fumes?
If there was a misrepresentation of the information provided by Claudes salesmen to Vincent
its a breach in the contract and it would result in Claude being liable for all relevant damages
and losses, which is also accentuated in the Curtis v Chemical Cleaning & Dying Co (1951)
case.15 According to the law of agency an agent or subordinate can be authorised on behalf of
another individual to make contractual relations to a third party, and the liabilities created as a
result of the actions of these subordinates are transferred to the main party. Since the clause is
misinterpreted by Claudes salesmen stating that the paint is specifically covered in the event
of allergic reactions to the paint fumes it results in the clause being void, and ultimately
cannot protect Claude from the damages and losses accumulating to sixty thousand dollars
arising as a result of the paint.
Tentative Conclusion
In summation, it can be concluded based on the facts provided and assumptions that the
exclusion clause has been effectively incorporated into the contract, and Vincent will be
bound by its terms effectively protecting Claude from the losses amounting to $20000.
However, this does not impede his right to claim compensation for the $40000 worth of
damages to his artwork as a result of Pablos breach in the contract, and as Claudes
subordinate Claude is liable to compensate Vincent for the $40000. In the scenario where
Claudes salesman misinterprets the exclusion clause it voids the clause of its terms, resulting
in Claude being liable to not only compensate Vincent for the $40000 but also the $20000 as
he is no longer protected by the exclusion clause.
15

Curtis v Chemical Cleaning & Dying Co (1951) 1 KB 805

Bibliography
Articles/Books/Reports
Carter, J W, Carters Guide to Australia Contract Law (LexisNexis Butterworths, 2nd ed,
2011)
Khoury, Daniel and Yvonne Yamouni, Understanding Contract Law, (LexisNexis
Butterworths, 2010)
Gillies, Peter and Niloufer Selvadurai, Law of Contract (The Federation Press, 2009)
Latimer P Australian Business Law, 33rd ed, 2014, CCH Australia

Cases
Edwards v Skyways Ltd (1964) 1 WLR 349
LEstrange v Graucob Ltd (1934) 2 KB 394
Chapelton v Barry Urban District Council (1940) 1 KB 532
Olley v Marlborough Court Hotel (1949) 1 KB 532
McCutcheon v David MacBrayne Ltd (1964) 1 WRL 165
Hollier v Rambler Motors (AMC) Ltd (1971) 2 WLR 401
Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379
Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500
Sydney City Council v West (1965)114 CLR 481
Curtis v Chemical Cleaning & Dying Co (1951) 1 KB 805