Assessment 1: Contract Law Case Study - Marcus v. Park Safe

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Australian Commercial and Corporations Law
Assessment 1
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Contents
Question 1........................................................................................................................................3
Question 2........................................................................................................................................5
Question 3........................................................................................................................................8
References......................................................................................................................................10
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Question 1
Issue
The legal questions raised in the given case are as follows:
1. Is there is a valid contract formed between Marcus and Park Safe?
2. Are the parties to contract bound by the exclusion clause?
3. Is there any breach of contract by either party?
Rule
Essentials of a valid contract
For a valid contract to be established, there are certain essential requirements that must be
fulfilled. These requirements are as follows:
Offer and acceptance: There must be at least two parties for a valid contract among which one
party makes an offer and the other accepts the offer (McKendrick & Liu, 2015). On acceptance,
such offer becomes acceptance.
Consideration: The parties must have agreed to give something in return for contract
performance. It is called consideration and it must be valid and not illegal.
Mutual Consent: The parties must agree upon the terms of the agreement in the same sense,
meaning they must understand the terms in the same sense. In other words, there must be
mutuality of mind.
The intention of Parties: The parties to contract must have an intention to be bound by the
terms of the agreement (Andrews, 2015). A contract cannot be declared valid unless the parties
have an intention to be bound by its terms.
Competency of Parties: The parties to contract must be legally capable to enter into a contract
i.e. they must not be of unsound mind, minor or otherwise disqualified by law to enter into a
contract.
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Exclusion Clause
This is a clause incorporated in contracts with the intention to protect one party from any legal
consequences in the event of failure to discharge his contractual obligations. In other words, it
restricts or limits the rights of one party against another. The exclusion clauses are valid only
when they are not contracted to the law and they are included in the contract.
The terms of the exclusion clause must be incorporated in the signed contract and it cannot be
tacked on after the contract is signed (Cartwright, 2016). However, in cases of printed documents
in which the terms are stated, they shall be deemed to be included in contract only if they are
bought to the attention of another party.
The exclusion clause must be legal i.e. it cannot exclude the requirements which are otherwise
necessary under the law. For example- the obligations placed on a trader by law with respect to
the consumer cannot be included in the exclusion clause.
The exclusion clauses are part of the contract’s terms and conditions. Therefore, they are
generally made enforceable unless they have not been included in the contract properly or they
are in contradiction to the law.
Breach of Contract
Breach of contract means the violation of agreed terms and conditions of contract by either party.
A contract can be said to have been breached if the following conditions are fulfilled:
 There exists a valid contract
 Defendant failed to perform the contract
 Such failure was unexcused
 This resulted in damages to the plaintiff (McDermott, 2017).
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Question 2
Application
Validity of contract
The park safe and Marcus are two parties to contract and there were a valid offer and acceptance
between the parties. The amount paid by Marcus for parking was a valid consideration and they
both mutually agreed to the contract. Further, they both were legally capable to enter into contact
and they shared a mutual intention to be bound by the contract terms (Poole, 2016). Here, it can
be stated that there was a valid contract formed between Marcus and Park Safe company.
Breach of contract
Based on the requirements for contract breach, the following factors can be considered:
 There was a valid contract between Marcus and Park safe.
 Park safe failed to keep Marcus’s car safe
 He had no valid explanation for such failure
 This resulted in a loss to Marcus for damages occurred in his car.
Therefore, it can be stated that there was a breach of contract between parties. Park safe failed to
perform its contract terms.
Exclusion Clause
The contract law deals with various ticket cases in which a party is handed with a ticket or any
other document containing the terms and conditions and when such ticket or document is
retained by the receiving party, then he or she shall be bound by its terms. In such cases, reading
or not reading the terms of the ticket is irrelevant with respect to its enforceability. When the
ticket is used by the recipient, it is deemed to have signed the document. However, these cases
are significant in terms of exclusion clauses.
There are various decided cases, the facts of which are similar to the facts of the given case
scenario. Marcus parked his car in Park safe. His car was damaged and then stolen and he is now
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looking forward to suing the parking company. However, his parking ticket contains an
exclusion clause based on which the company is not liable for the damages.
With reference to the exclusion clause, they can be binding only under the following
circumstances:
 Signed Document: In case of L'Estrange v F Graucob Ltd [1934], it was decided that
the exclusion clause can be made valid only when they are incorporated in a written
contract. Such a contract must be signed by the parties. In case, the contract is not
signed, the exclusion clause can be enforced only when the party relying on it proves
that it appropriate steps were taken before the contract was made to bring it to the notice
of the other party (Rumore, 2013).
In the given case scenario, there was no contract signed between the park safe or Marcus
and therefore, the exclusion clause cannot be made enforceable under this category. Notice: In case of Parker v. The South Eastern Railway Co (1877), it was established
that the ticket recipient must be given notice of the exclusion clause and in case no
notice is given, the court will decide if a reasonable person would have noticed that the
ticket contained terms (Legal Services Commission, 2019).
The case of Marcus and Park safe company can be linked to the above-discussed case.
The company had not given Marcus any notice of exclusion clause and based on these
facts and the court decision, the exclusion clause cannot bound the parties.
Based on the applicable rules in ticket cases, the exclusion clause can be held valid only
when it is bought to the notice of the person buying the ticket. Thorton V Shoe Lane
Parking Limited (1971) is an example of the above-mentioned rule. This case states that
when the parking ticket is taken from the machine and any terms printed on the ticket
shall be binding only when such terms are bought to the attention of the driver or owner
of the vehicle (McKendrick, 2014). The owner of the car park cannot rely on the
exclusion clause for protecting himself from any litigation. Therefore, in this case, it was
decided that the car parking owner shall be liable as no notice was given to the driver or
owner of the exclusion clause.
 Previous course of dealing: In case of McCutcheon v David MacBrayne Ltd [1964], it
was established that when the dealings between parties were ‘regular and consistent’,
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then the court shall consider the facts and also it will take into account the equality of
bargaining power between both the parties. In this case, exclusion clause was held valid
as both parties used to deal ‘regularly and consistently’ and the document containing the
exclusion clause was signed previously, even though it was not signed on the day of the
incident (Cartwright, 2016).
However, the facts of this case are different from the facts of the case of Marcus and
Park Safe. There was the previous course of dealing between parties but the exclusion
clause was not bought to the notice of Marcus and therefore, it cannot be held valid
based on this criteria.
Here, based on the applicable principles of common law, it can be established that Park Safe is
liable to pay for the damages that occurred in Marcus’s car. Here, Park Safe cannot defend itself
relying on the exclusion clause.
Conclusion
Based on the applicable law and its impact on the case of Marcus and Park safe, it can be
concluded that there was a valid contract between the parties. Such contract was breached by
Park Safe and it is trying to take the defence of the exclusion clause. However, the exclusion
clause cannot be held valid under the given circumstances as no notice was given to Marcus by
the Park Safe company of such clause. Therefore, the contract was breached by Park safe and it
is liable to pay damages to Marcus.
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Question 3
As established in the previous question, the Park Safe company is liable for the damage caused
to Marcus’s car. Based on the factual circumstances of the case, there is the possibility of
alternate arguments. The factual circumstance that is being referred to here is the situation where
Marcus left keys in the car and his car was stolen. The issue here is to determine the liability in
the event of theft of Marcus’s car due to his negligence of leaving car keys in the car.
In the cases involving matters relating to exclusion clause, the liability is generally determined
by the courts. Such judicial interpretation is done based considering two circumstances including
Strict Literal Interpretation and Contra Proferentem (Poole, 2016).
Strict Literal Interpretation
For an exclusion clause to operate, determining the type of liability is important. There are two
types of liabilities including strict liability and liability for negligence. Usually, the courts have a
tendency of believing that the party relying on the exclusion clause must have drafted it properly
so as to exempt the party for any liability (Stone& Devenney, 2017). However, in case of any
ambiguity in the clause, the court usually strictly interprets it against the party relying on it. In
case of R&B Customs Brokers Co. Ltd. v. United Dominions Trust Ltd. [1987], the court
refused to allow the exclusion clause as the terms were not clear.
Contra Proferentem
When an attempt is made to interpret the exclusion clause according to its natural and ordinary
meaning of the words and yet there is ambiguity in its interpretation, then the principle of Contra
Proferentem is applied. The term contra means against and the term proferentem means
proposer. This implies that the liability shall be imposed against the person who proposed the
exclusion clause (Rumore, 2013).
In the given case scenario, the exclusion clause is not clear. According to the exclusion clause,
the parking safe shall have no liability in the event of damage or theft of car but since the clause
is ambiguous, the court shall decide the matter in favor of Marcus as the parking safe company is
the proposer.
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In cases where the car is stolen from the parking lot which is operated commercially, the liability
of the operator of parking lot depends on two issues i.e. whether the transaction was bailment or
lease and whether the exclusion clause is valid or invalid.
In a decided case of Nargi v. Parking Associates Corp, the car was stolen from the parking lot.
The court stated that since the car was in possession of parking owner, he owed a duty of care
and therefore, it is a case of bailment. Further, the owner was given no notice of the exclusion
clause and therefore the clause was invalid (Andrews, 2015). As a result, the parking lot owner
was held liable.
However, in all such cases, the common factor is that the car was stolen from the parking lot due
to the negligence of the parking owner. However, in the given case, the car was stolen due to the
mistake of the car owner i.e. Marcus. He left the car keys in the car which resulted in the theft of
the car. Therefore, it is a case where alternate arguments can arise.
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References
 Andrews, N. (2015). Contract law. Cambridge University Press.
 Cartwright, J. (2016). Contract law: An introduction to the English law of contract for
the civil lawyer. Bloomsbury Publishing.
 Legal Services Commission, (2019). What can be included in a contract? [Online].
Available at: https://lawhandbook.sa.gov.au/ch10s02s04.php [Accessed on 25 March
2019].
 McDermott, P. A. (2017). Contract law. Bloomsbury Publishing.
 McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University
Press (UK).
 McKendrick, E., & Liu, Q. (2015). Contract Law: Australian Edition. Macmillan
International Higher Education.
 Poole, J. (2016). Textbook on contract law. Oxford University Press.
 Rumore, C., (2013). Exclusion provisions in contracts - how effective are they? [Online].
CBP.Available at: https://www.cbp.com.au/insights/insights/2013/march/exclusion-
provisions-in-contracts-how-effective?
utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original
[Accessed on 25 March 2019].
 Stone, R., & Devenney, J. (2017). The modern law of contract. Routledge.
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