Contract Law: Exclusion Clause and Reasonableness Doctrine

This article discusses the application of exclusion clause and reasonableness doctrine in contract law through a case study. It covers the rules and regulations related to contract law in the UK, including the Unfair Contract terms under section 11 and the UK Contract Law of 1977. The article also explains the three rules laid down by the Privy Council in the matter of Steamship Lines Ltd. v. The King and the case of Security Mut. Cas. Co. v. O'BRIEN. The article concludes that exclusion clauses should be clear, precise, and noticed by the parties to the contract, and any negligence resulting in peculiar loss to the movable and immovable property cannot exclude any parties to the contract to compensate for the damage.

Contract law

Table of Contents
INTRODUCTION...........................................................................................................................1
FACTS OF THE CASE..............................................................................................................1
Issues...........................................................................................................................................2
Arguments...................................................................................................................................2
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Contract is a legal and detailed document which lays down the terms and condition of the
party to the contract. It is formal written document and includes main clauses which aims to
reduce the liability and provides legal rights in case of any dispute arises in future. It is a general
rule that clauses are mentioned towards the end of the contract after fulfilling the essential
elements of a legal agreement which includes, offer, acceptance, intention to create legal
relationship and consideration etc1. The main clauses provides fair standards and precisely
defined to avoid misunderstanding between the parties. In the given facts, matter is addressed
before the Court of appeal to settle the dispute as matter is connected to the contract law.
FACTS OF THE CASE
In this fact, Aviel Siima is an advocate and comes to clean his dress and black gown at a shop.
There was a small sign on the wall mentioning the two clause which includes “ All clothes are
left totally on the consumer's very own risk and clients are counseled to protect their very own
belongings towards any destruction”. On the same day, the wall was shrouded with the dresses
which were waiting to be collected. Aviel made the statement that he has noticed the sign while
he mused at the prom dresses. However, he was hurry to visit the Royal Courts of justice for
presenting his appeal matter before the court and not even told the manager to remove the
dresses so, he is able to read the sign. After making all the payments, Aviel took his payment
card so that he can reclaim his garments. When Aviel proceed to collect his clothes , he told the
supervisor about his dress including black gown was destroyed instead of restore through the
carelessness of the worker of the Sincere Washing Ltd. After lot of discussion with the director
of the Sincere Cleaning Ltd. ,she refused to compensate for the loss. The matter brought before
the trial Court and judge found that an exempted provision has not inserted into the contract and
declared the principle of reasonableness under the UK contract law is invalid. Now, the Sincere
Cleaning Ltd. raise an issue before the appellant Court for the certain arguments.
1 Deineka V, 'ESSENTIAL CONDITIONS OF THE LABOR CONTRACT' (2019) 58
Uzhhorod National University Herald. Series: Law
1

Issues
 Whether exempted clause was inserted in contract.
 Whether the application of doctrine of reasonableness under the UK legislation is
declared as valid.
Arguments
 Whether exempted clause was inserted in contract.
In this present case, the respondent contended that the exclusion clause was not incorporated as
clauses was shaded with the bundle of dresses and unable to notice the terms of the contract. The
nature of exclusion clause is binding and enforceable in a court of law and exclude the liability
of one party. Exclusion clause is also known as exception clause and limitation clause and it
should be reasonably noticed by the parties. In the matter of Steamship Lines Ltd. v. The King,
the Privy Council laid down the three rules which must be applied to exclusion clauses that are :
 When a clause defines language which explicitly exclude an individual which may arise
due to effect of the carelessness activities of his employee2.
 When no provision is specifies for the act of negligence then necessary action can take by
the Court to settle the matter against the employees.
 If the words are broad enough then court will consider the damage suffered can be used
for the act of carelessness. That reason can have defined as unambiguous and vague that
servant protect himself form any other liability.
Therefore, the damages caused by the employee liable him to compensate for the loss. Also,
exclusion clause is incorporated by way of signature, notice, custom etc3. In this case, contract is
entered by way of notice according to the appellant but respondent was not actually aware with
the terms neither he noticed that nor be given sufficient notice to them before they can be
2 'Contract Strength Requirements-Cores Versus In Situ Evaluation' (2017) 74 ACI
Journal Proceedings
3 'Judge Decides College Did Not Breach Contract' (2018) 15 College Athletics and the
Law
2

incorporated. In the case of Security Mut. Cas. Co. v. O'BRIEN the Court held the claim by
company was invalid on the ground of any ambiguities in the incorporation of exclusion clause
may mislead even the consumers with the contracts . Therefore, the Unfair contract legislation
under common law restrict the exclusion clause in case of negligence, breach of contract,
reasonableness. The UK Contract Law of 1977, describes true construction in condition of the
contract and defines negligence as a violation of any duty happens due to any expressive clause
which is required to take essential case in the discharge of terms and comply them to execute
an obligation as per occupier's liability Act, 1957 . This Act empowers excluding contract to be
void in case of negligence or restrict liability in case of any injury and loss.
 Whether the application of doctrine of reasonableness under the UK legislation is
declared as valid.
In this, respondent contended before the honourable Court that Unfair Contract terms under
section 11 defines the concept of reasonableness which states that terms included in a contract
shall be fair and reasonable and must have knowledge to the parties and reasonably possess
knowledge when agreeing with the term of the contractual obligation4. The party has to prove
the case so that they are agree to rely on such define clause. The matter of Regus v. Epcot
Solutions Limited the appellant Court held that reasonable fact does not exclude an obvious
remedy required to the claimant. In other words, the loss suffered by respondent could be
determined by assessing the value of his dress which was damaged by the act of negligence of
his employee of Sincere Cleaning Ltd5. Therefore, the word “reasonable “ is not defined in any
statutory law but various likely to defined by the judiciary place the burden of proving
reasonable in order to exclude the liability terms from the contract. The UCTA applies if any of
the party attempts to meet the requirements of reasonable then they cannot exclude them from
4 'Contract Strength Requirements-Cores Versus In Situ Evaluation' (2017) 74 ACI
Journal Proceedings
5 Torsello M, 'Substantive And Jurisdictional Aspects Of International Contract
Remedies: A Comment On Avery Katz's “Remedies For Breach Of Contract Under The
CISG”' (2015) 25 International Review of Law and Economics
3

compensating the parties who has suffered loss. Therefore, the clause was invalid due to lack of
knowledge of the facts about the notice and exclusion clause of the contract and can claim for
damages.
CONCLUSION
From the above cases, it has been concluded that Indian contract are based on fundamental
approach for inserting exclusion clause which should be clear , precise and noticed to the parties
to the contract. The exclusion clause will be called as unreasonable when the words are vague,
unclear and unnoticed by the parties. Often, any negligence resulted in peculiar loss to the
movable and immovable property can never exclude any parties to the contract to compensate for
the damage. Therefore, parties can enter into contract when they notice that on the shop but if it
is remain unnoticed than it cannot be defined as exclusion clause and aggrieved party can claim
for damage.
4

REFERENCES
Books and Journals
Deineka V, 'ESSENTIAL CONDITIONS OF THE LABOR CONTRACT' (2019) 58 Uzhhorod
National University Herald. Series: Law
'Contract Strength Requirements-Cores Versus In Situ Evaluation' (2017) 74 ACI Journal
Proceedings
Torsello M, 'Substantive And Jurisdictional Aspects Of International Contract Remedies: A
Comment On Avery Katz's “Remedies For Breach Of Contract Under The CISG”'
(2015) 25 International Review of Law and Economics
'Judge Decides College Did Not Breach Contract' (2018) 15 College Athletics and the Law
5