Exclusion Clause in Contract Law: Case Study of Brisbane Diamond Jewellery vs Transglobal Alarm Monitoring Pty Ltd

Australian Commercial and Corporations Law

Question 1
Issue
The key issue is whether the owner of Brisbane Diamond Jewellery will succeed in a legal
action against Transglobal Alarm Monitoring Pty Ltd to recover damages for the loss
suffered by him?
Law
The terms of a contract are binding on the parties, and breach of any term result in legal
consequences. In case a party failed to fulfil the term of the contract or did not comply with
it, then another party has the right to file a suit for breach of contract against him and claim
for damages. An exclusion clause is referred to a contractual term which is included in a
contract by a person to eliminate his/her liabilities or duties which raised due to breach of
such contract’s terms. This principle has the ability to terminate the right of a party to claim
damages from breaching party in case terms are not meet by him (Lawson 2011). The
inclusion of these terms in the contract is also called unfair terms since the objective of
these terms are to terminate the liability of a party. By using an exclusion or exemption
clause, the parties can limit the right of other parties to claim for remedy or demand
damages in case of breach of the contract. However, in order to rely on an exclusion clause,
certain elements are required to be fulfilled by the parties without which they cannot claim
the defence of the exclusion clause. Firstly, the general rule of exemption clause provides
that the contracting parties must bring in the attention of another party the exclusion clause
before or at the time the contract was formed (Anson et al. 2010).
The exclusion clause which did not bring in the attention of the contracting party cannot be
considered as accepted by the party. In Olley v Marlborough Court (1949) 1 K.B. 532 case,
the court provided that the exclusion clause must bring into notice by the party at the time
when contract was formed or before it (Sharrock 2010). Similar judgement was given by the
court in the case of Thornton v Shoe Lane Parking (1971) 2 WLR 585 case. The judgement
given by the court in the case of L’Estrange v Graucob (1934) 2 KB 394 is relevant to this
case study. The court provided in this case that when a written contract is formed between
parties, then both parties are bound by its terms irrespective of the fact whether they are
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aware of the exclusion clause or not. However, the court provided in the judgement of
Curtis v Chemical Cleaning (1951) 1 KB 805 case that if the term is included based on
misrepresentation then it cannot be considered as effective. Thus, the exclusion clause
protects the party of a contract from the liability to pay for damages by restricting the right
of another party to claim for damages (Koffman & Macdonald 2010).
Application
In the present case study, a contract for security and alarm monitoring services has formed
between Brisbane Diamond Jewellery and Transglobal Alarm Monitoring Pty Ltd. The
contract is in written format, and it bound both the parties into its terms. The contract is
formed for a period of 5 years, and till 2017, the security and monitoring system was
working fine. In June 2017, the owner of Brisbane Diamond Jewellery visited his store as
usual and found out that the security and monitoring system is not working. He later found
out the many pieces of diamond jewellery is stolen from the store. The owner had not
insured the premises in case a robbery took place in the shop. In order to receive his money
back and compensate for the loss, he is demanding damages from Transglobal Alarm
Monitoring Pty Ltd because the robbery occurred due to failure of its security and
monitoring system. However, Transglobal Alarm Monitoring Pty Ltd provided that clause 10
of their contract clearly provides that the company along with its employees will not be held
liable for any damages suffered by the party which are caused due to use of security and
monitoring infrastructure of the corporation.
As discussed above, this is an exclusion clause which protects Transglobal Alarm Monitoring
Pty Ltd from liabilities of damages suffered by its clients. Furthermore, the exclusion clause
also restricts the right of the owner of Brisbane Diamond Jewellery to file for damages from
Transglobal Alarm Monitoring Pty Ltd due to failure of its security and monitoring system. In
Olley v Marlborough Court case, a hotel room was booked by the claimant, and he filled the
contract at the reception. While signing of the contract, the exclusion clause was not
specified by the hotel staff. Furthermore, the claimant found out that a notice is written in
the back of the door in the hotel room which excludes the liability of the hotel in case of
lost, damage or theft of belongings of customer residing in the hotel. Later, the claimant
reported to the hotel staff that her coat is stolen (Stone 2013). The court provided in the
case that the notice written in the back of the hotel room door is ineffective. The principle of
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