Standard Contract Notes

Reasonable Notice: It is the duty of the person who is delivering a document to give
adequate notice to the offeree of the printed terms and conditions. The acceptor will not be
bound by the terms where it is not done. It is the duty of the person who is delivering a
document to give adequate notice to the offeree of the printed terms and conditions. The
acceptor will not be bound by the terms where it is not done.

Henderson Background: The plaintiff bought a steamer ticket on the face of these
v. words only: “Dublin to Whitehaven”; on the back were printed certain
Stevenson conditions, one of which excluded the company's liability for loss, injury,
or delay to the passenger or his luggage. The plaintiff did not see the back
of the ticket, nor was there any indication on the face about the conditions
on the back. The plaintiff’s luggage was lost in the shipwreck caused by
the fault of the company’s servants.
Issue: 1. Can Henderson claim the damages for losing his luggage?
2. Was there a proper reasonable notice given to the plaintiff about the
exemption clause in the contract or given in the ticket?
Rule: An exemption clause is a contractual term by which one party
attempts to cut down either the scope of his contractual duties or regulate
the other party's right to damages or other possible remedies for breach of
contract. It means that the exemption clause is a phrase in an agreement
that gives a limitation to contracting parties. The exemption clause
generally is called an exclusion clause as well.
But for the application of the exemption clause, there should be an
application of reasonable notice given by the company providing the
exemption clause, about the presence of the same. If reasonable notice
about the exemption clause is not given by the company, then they are
liable to give the compensation.
Analysis: In this case, the ticket did not have proper notice about the
exemption clause provided by the company the notice was provided in the
back of the ticket without any kind of instruction stating the presence of
the same in the back. Hence a reasonable man would not be able to
 apprehend about the presence of the same in the back of the ticket and
thus, the exemption clause would go unnoticed by the other party of the
contract.
Hence, the application of the exemption clause is not the case in this case
law and the plaintiff can claim compensation for his lost luggage.
Conclusion:

Parker v. Background: Mr Parker left a bag in the cloakroom of Charing Cross

South railway station, run by the South Eastern Railway Company. On depositing
Eastern his bag and paying two pence he received a ticket. On the front, it said "see
Railway
back". On its back, it stated that the railway was excluded from liability for
items worth £10 or more. Mr Parker failed to read the clause as he thought
the ticket was only a receipt of payment. However, he admitted that he
knew the ticket contained writing. Mr Parker's bag, which was worth more
than £10, was lost. He sued the company. The question of law put to the
court was whether the clause applied to Mr Parker. At trial, the jury found
for Mr Parker that it was reasonable for him not to read the ticket.
Issues: 1. Was the notice given by Southeastern Railways on the receipt
and the cloakroom a proper and reasonable notice?
2. Whether the terms and the exemption clause of the contract bind Mr.
Parker?
Rule: Reasonable Notice: It is the duty of the person who is delivering a
document to give adequate notice to the offeree of the printed terms and
conditions. The acceptor will not be bound by the terms where it is not
done. It is the duty of the person who is delivering a document to give
adequate notice to the offeree of the printed terms and conditions. The
acceptor will not be bound by the terms where it is not done.
Analysis: even though Mr. Parker won the case in the divisional court, it
was pointed out in the court of appeal that the notice of something, be it
whatsoever, was provided on the contract with very clear use of language
and was provided very clearly. It was then the liability of Mr. Parker to
read the terms provided on the other side of the receipt. Thus, it was the
duty of the offeree to read the notice once it is proved that reasonable and
clear notice was given by the offeror and the offeree is bound by the terms
of the contract even if he/she does not read it the offeror is bound by the
terms of the contract and the exemption clause, as to get the knowledge of
the exemption clause once it is mitigated by the offeror clearly and
reasonably is the duty of the offeror.
Conclusion: The majority of the Court of Appeal held there should be a
retrial. They said that if Mr Parker knew of the conditions he would be
bound. If he did not know, he would still be bound if he was given the
ticket in such a way as amounted to "reasonable notice". Mellish LJ said
the following.

I think, therefore, that the proper direction to leave to the jury in these
cases is, that if the person receiving the ticket did not see or know that
there was any writing on the ticket, he is not bound by the conditions; that
if he knew there was writing, and knew or believed that the writing
contained conditions, then he is bound by the conditions; that if he knew
there was writing on the ticket, but did not know or believe that the writing
contained conditions, nevertheless he would be bound, if the delivering of
the ticket to him in such a manner that he could see there was writing upon
it, was, in the opinion of the jury, reasonable notice that the writing
contained conditions.

Baggallay LJ concurred and predicted that the same result would be

reached by the jury (in Mr Parker's favor). Bramwell LJ dissented, holding
 that reasonable notice should be a question of law, and that held have
decided in favor of the railway company.

Richardson Background: The plaintiff was a passenger in the defendant’s steamer.

, Spence & The passage ticket that was given to her contained a term limiting the
Co V liability of the defendants to $100 for any injury to the passenger of his
Routree
luggage. The ticket was given to the plaintiff folded up. Moreover, most of
the tickets have their terms and conditions obliterated by a stamp being put
on them. The plaintiff sustained injuries during the voyage and demanded
proper and reasonable compensation. The defendant pointed out the
presence of an exemption clause in the ticket which made the defendant
liable for paying only $100 in compensation.
Issues: 1. Whether the defendant liable for compensation amounting to
more than $100?
2. Whether there a reasonable notice given by the defendant to the plaintiff
about the exemption clause in the contract?
3. Whether the plaintiff is bound by the terms and conditions of the
contract?
Rule: Reasonable Notice: It is the duty of the person who is delivering a
document to give adequate notice to the offeree of the printed terms and
conditions. The acceptor will not be bound by the terms where it is not
done. It is the duty of the person who is delivering a document to give
adequate notice to the offeree of the printed terms and conditions. The
acceptor will not be bound by the terms where it is not done.
Analysis: in the above the exemption clause was not provided in the
proper reasonable manner in the ticket most of the tickets given by the
steamboat company were either folded up or obliterated thus showing the
absence of proper notice given by the offeror to the offeree making the
binding effect of the exemption clause not applicable and the defendant
liable for the payment of compensation of more than 100 dollars to the
plaintiff.
Conclusion: Even though the claimant was illiterate and could not read the
 ticket, the Court of Appeal held that the clause was still valid because
"reasonable steps" had been taken to bring it to the claimant's attention.
This does not necessarily apply if the other party is aware of any
disabilities - in Richardson, Spence & Co v Rowntree [1894] AC 217 the
courts made the opposite decision because the term was in small print.
Because of a known condition of the claimant, he could not have been
expected to read it.

Notice should be contemporaneous with the contract: If a party to the contract wants to
have an exemption from liability, he must give notice about the exemption while the
contract is being entered into and not thereafter. If the contract has been entered into
without any exemption clause, then subsequent notice regarding the exemption from
liability will be ineffective.

Olley v. Marlborough Court Ltd. Background: Olley was a guest in the

(1949) 1 KB 532
defendant's hotel. On arrival, Olley paid for
a week’s board in advance and then went to
the room. In the room, a notice was
displayed stating the proprietors would not
be responsible for any items lost or stolen
unless handed to them for safekeeping.
Olley left the room and deposited her key on
the board in reception before leaving the
hotel. The key was taken and several items
were stolen from her room. Olley sought
damages for negligence.
Issues: Olley contended the hotel was
negligent in failing to appropriately
safeguard the keys to guest rooms. She
further claimed there was an implied term
within the contract between herself and the
hotel that they would take reasonable care
of her property in her bedroom. Olley
asserted the failure to supervise the keys
amounted to a breach of that contract. The
hotel argued the guests were bound by the
terms displayed on the notice in the
bedrooms, and therefore, the hotel had
effectively excluded liability even if they
had been negligent. The notice was visible
in the bedrooms and the exclusion clause
unambiguously absolved the hotel of any
liability for stolen items. The hotel also
argued that Olley had been contributorily
negligent by depositing her key on the board
in reception.
Rule: Notice should be contemporaneous
with the contract: If a party to the contract
wants to have an exemption from liability,
he must give notice about the exemption
while the contract is being entered into and
not thereafter. If the contract has been
entered into without any exemption clause,
then subsequent notice regarding the
exemption from liability will be ineffective.
Analysis: in the above case the notice given
by the hotel officials was not
contemporaneous with the terms and
conditions of the contract the notice of
exemption clause was given after the terms
and conditions of the contract were provided
and the parties decided to form a legally
binding contract. This makes the notice of
the exemption clause not applicable in this
case, as the notice of the hotel not being
liable for any damage or any loss of goods
occurring to the guests while staying in the
premises of the hotel was not given in notice
to the offeree during the formation of the
contract. Thus, making the application of
the notice invalid.
Conclusion: Denning LJ, Singleton LJ, and
Bucknell LJ found, firstly, that the hotel had
failed to take reasonable care as they were
required to do contractually and under
Innkeepers' Liability Act 1863 section 1.

Secondly, the disclaimer was not part of the

contract and the hotel could not rely upon it.
The contract for the storage of the coat was
formed at the reception desk. There was no
way that Mrs Olley could have been aware
of the disclaimer at that point so it could not
be part of the contract.

The only other point in the case is whether

the hotel company is protected by the notice
that they put in the bedrooms, "The
proprietors will not hold themselves
responsible for articles lost or stolen unless
handed to the manageress for safe custody."
The first question is whether that notice
formed part of the contract. Now people
who rely on a contract to exempt themselves
from their common law liability must prove
that contract strictly. Not only must the
terms of the contract be proved, but also the
intention to create legal relations – the
intention to be legally bound – must also be
proved. The best way of proving it is by a
written document signed by the party to be
bound. Another way is by handing him
before or at the time of the contract a
written notice specifying its terms and
making it clear to him that the contract is on
those terms. A prominent public notice
which is plain for him to see when he makes
the contract or an express oral stipulation
would, no doubt, have the same effect. But
nothing short of one of these three ways will
suffice. It has been held that mere notices
put on receipts for money do not make a
contract. (See Chapelton v. Barry Urban
District Council) So, also, in my opinion,
notices put up in bedrooms do not of
themselves make a contract. As a rule, the
guest does not see them until after he has
been accepted as a guest. The hotel
company no doubt hopes that the guest will
be held bound by them, but the hope is in
vain unless they clearly show that he agreed
to be bound by them, which is rarely the
case. Assuming, however, that Mrs. Olley
did agree to be bound by the terms of this
notice, there remains the question of
whether on its true interpretation, it
exempted the hotel company from liability
for their negligence. It is said, and, indeed,
with some support from the authorities, that
this depends on whether the hotel was a
common inn with the liability at common
law of an insurer, or a private hotel with
liability only for negligence. I confess that I
do not think it should depend on that
question. It should depend on the words of
the contract. To exempt a person from
liability for negligence, the exemption
should be clear on the face of the contract. It
should not depend on what view the courts
may ultimately take on the question of
whether the house is a common inn or a
private hotel. In cases where it is a common
inn or, indeed, where it is uncertain whether
it is a common inn or a private hotel, I think
that notice in these terms would not exempt
the hotel company from liability for
negligence but only from any liability as
insurers. Indeed, even if it were not a
common inn but only a private hotel, I
should agree. Ample content can be given to
the notice by construing it as a warning that
the hotel company is not liable, in the
absence of negligence. As such it serves a
useful purpose. It is a warning to the guest
that he must do his part to take care of his
things himself, and, if need be, insure them.
It is unnecessary to go further and to
construe the notice as a contractual
exemption of the hotel company from their
common law liability for negligence. I agree
that the appeal should be dismissed.
Theory of Fundamental Breach: Another device that has been adopted to protect the
interest of the weaker of the parties to the contract when they have an unequal bargaining
position is to see that enforcing the terms of the contract does not result in the
fundamental breach of contract. In a standard form of contract, the party having a
stronger bargaining power may likely insert such an exemption clause in the contract
that his duty to perform the main contractual obligation is thereby negative.

Findlay v Couldwell, (1976) 69 DLR Background: The car in question was

(39) 320, Canada
purchased by the plaintiffs on December 6,
1974, from the defendant carrying on
business under the firm name of Beywood
Motors. Five days later the engine blew up
while the plaintiff was driving the car along
the freeway towards Chilliwack.
Issues: 1. Whether the defendant is liable to
provide compensation for the damaged car
2. Whether the exemption clause applies in
the case of damage to the car?
Rule: Another device that has been adopted
to protect the interest of the weaker of the
parties to the contract when they have an
unequal bargaining position is to see that
enforcing the terms of the contract does not
result in a fundamental breach of contract.
In a standard form of contract, the party
having a stronger bargaining power may
likely insert such an exemption clause in the
contract that his duty to perform the main
contractual obligation is thereby negative.
Analysis: A car was sold on an “as is” basis
and without any warranty or guarantee
whatever. Even so, the seller was held liable
 five days after the engine of the car blew up.
It was not a ‘car’ which was delivered.
Hence the contract was held to be
fundamentally broken
Conclusion: The car in question was
purchased by the plaintiffs on December 6,
1974, from the defendant carrying on
business under the firm name of Beywood
Motors. Five days later the engine blew up
while the plaintiff was driving the car along
the freeway towards Chilliwack. I am
satisfied with the evidence that the plaintiff
could not possibly have contributed to the
cause of disintegration and the result was
that the engine had to be completely
replaced. In those circumstances, this
appeared a clear case of breach of the
seller's fundamental obligation to deliver an
article reasonably fit for the buyer's
disclosed purposes.

Alexander v. Railway Executive, Background: The plaintiff deposited his

(1951) 2 KB 882 baggage at the parcel office of a railway
station and received a ticket after paying the
ordinary charges. The ticket contained terms
and conditions one of which exempted the
Railway Executive from any liability arising
from the misdelivery or loss of any goods
valued more than five pounds unless a
special charge was rewarded. The defendant
permitted the friend of the defendant to take
the luggage with him.
Issue: 1. Whether the above-mentioned
exemption clause would be applied in the
contract?
2. Whether there is a fundamental breach of
contract when the goods were given to an
unknown person?
3. Whether theory of fundamental breach is
applied?
Rule: Theory of Fundamental Breach:
Another device that has been adopted to
protect the interest of the weaker of the
parties to the contract when they have an
unequal bargaining position is to see that
enforcing the terms of the contract does
not result in the fundamental breach of
contract. In a standard form of contract, the
party having a stronger bargaining power
may likely insert such an exemption clause
in the contract that his duty to perform
the main contractual obligation is thereby
negative.
Analysis: In the above case, it is very
evident that the exemption clause cannot be
applied because there was a fundamental
breach of contract. The contract between the
plaintiff and the defendant is to keep the
safety and maintain the proper quality of the
goods delivered. The same essence of the
contract was breached when the goods were
given away to a stranger without a ticket;
thus leading to a fundamental breach of
contract.
The plaintiff filed a suit against the
defendants claiming reliance on the
exemption clause. The Court held that it was
the duty of the executive to take care of the
deposited goods and permitting an
unauthorized person to take the luggage
away amounted to a fundamental breach of
contract. Therefore, the exemption clause
won’t protect them from liability.
Conclusion: In Alexander v. Railway
Executive, the plaintiff deposited his
luggage in the defendants’ cloakroom and in
return received a ticket. A term printed on
the ticket exempted the defendant from
liability for loss or mis-delivery of the
luggage. The plaintiff’s luggage was
delivered to an unauthorized person without
the production of the ticket. It was held that
the non-delivery of the luggage to the
plaintiff amounted to a fundamental breach
of contract for which the defendant was
liable.
Strict Construction: Exemption clauses are construed strictly particularly where a clause
is so widely expressed as to be highly unreasonable. Any ambiguity in the mode of
expressing an exemption clause is resolved in favor of the weaker party.

Lee (John) & Sons (Grantham) Ltd. V Background: In 1949, the plaintiff leased a
Railway Executive; (1949) 2 All ER railway warehouse to the defendant. There
581 was a clause in the lease contract that
exempted the defendant from any liability
that occurred in case of loss or damage to
the company. After some time, the goods
were kept in the warehouse for damage by
fire because of the negligence of the
defendant.
The defendants set up a clause in the
tenancy agreement that exempted them from
loss of or damage to property however
caused, whether by act or neglect of the
company or their servants or agents or not)
which “but for the tenancy hereby created”.
Issues: 1. Whether the plaintiff have to be
bound by the exemption clause of the
contract?
2. Whether the terms of the exemption
clause are clear or not?
3. Whether the principle of strict
construction be applied?
Rule: Exemption clauses are construed
strictly particularly where a clause is so
widely expressed as to be highly
unreasonable. Any ambiguity in the mode
of expressing an exemption clause is
resolved in favor of the weaker party.
Analysis: The company was nevertheless
held liable. The Court was of the opinion
that the words “but for the tenancy hereby
created” were confined to liabilities which
arose by reason of the relationship of
landlord and tenant.
The defendant took the exemption clause
from the contract but the court held and
applied the Contra proferentem rule in this
case and highlighted the words ‘but for
tenancy by created’. The clause, therefore,
had a wider meaning and it was held by the
court that it had to be interpreted against the
grantor and hence the defendant was not
exempted from their liability.
Conclusion: John Lee & Son (Grantham)
Ltd & others V. Railway Executive [1949]
2AII ER 581 the following passage appears
(per Sir R. Evershed, MR.)

“We are presented with two alternative

readings of this document and the reading
which one should adopt is to be determined,
among other things, by a consideration of
the fact that the defendants put forward the
document. They have put forward a clause
that is by no means free from obscurity and
has contended that, on the view for which
they argued, it has a remarkably, if not an
extravagantly, wide scope, and I think that
the rule contra proferentem should be
applied and that the result is that the present
claim is not one which obliges the first
plaintiffs to give to the defendants a release
and an indemnity”.
Akerib v Booth (1961) 1 ALL ER 380 Background: It was held that the exception
clause must be limited to the purpose of the
contract. The purpose was to exempt the
defendants from liability for goods that
came to their possession for packing or
making up, etc. The exemption clause must
be confined to this and was not to apply to
any other goods and accordingly, the
defendants were held liable.
Rule/ Analysis: Contra Proferentem: The
clause is read contra proferentem if there is
an ambiguity. This means that where there
is an ambiguity, the clause will be read
strictly against the party trying to rely upon
it (Akerib v Booth). The exclusion clause
will only provide protection if it clearly and
unambiguously states the situations in
which it will operate.

Liability in Tort: Even where an exemption clause is exhaustive enough to exclude all
kinds of liability under the contract, it may not exclude liability in tort.

White v/s John Warwick & Co Ltd. Background: 1. Plaintiff (White), a

(1953) 1 WLR 1285
newspaper and tobacco vendor at
Canonbury, entered a written contract with
Defendant (John Warwick & Co Ltd)
wherein Defendant had to supply a
newspaper delivery tricycle to Plaintiff in
working condition and also to repair the
damages with no other charges except
punctures.
2. At the end of May 1950, the plaintiff
informed the defendant to repair the
tricycle, as it was in need to be repaired.
3. The defendant’s representative left a
spare tricycle in exchange for the one that
was to be repaired. The plaintiff, without
examining, used it and was injured because
of the faulty and loose saddle.
4. Anthony (plaintiff’s employee) is deposed
and the saddle slips back, which causes him
to lose control. He tried to tighten it but the
nuts were too rusty.
5. The written agreement stated that
“Nothing in this agreement shall render the
owners liable for any personal injury”.
While the plaintiff was riding the cycle, the
saddle tilted forward and he was injured.
Issue: 1. The defendant breached the
warranty as he failed to provide a
reasonably fit tricycle. Therefore, he is
liable to pay for the damages.
2. The defendant was negligent, i.e., had not
taken reasonable care as he provided an
unfit cycle with no examination which
resulted in the injury to the plaintiff.
3. Defendant contended he is not liable for
any personal injuries to any rider of the
cycle as per clause 11 of the agreement.
Rule: Even where an exemption clause is
exhaustive enough to exclude all kinds of
liability under the contract, it may not
exclude liability in tort.
Rule: Even where an exemption clause is
 exhaustive enough to exclude all kinds of
liability under the contract, it may not
exclude liability in tort.
Analysis: The defendants might have been
liable in tort (for negligence) as well as in
contract. The Court of Appeal held that the
ambiguous wording out of the exclusion
clause would effectively protect the
defendants from their strict contractual
liability, but it would not exempt them from
liability in negligence.
Conclusion: 1. Court held the defendant
liable. When there is negligence, a clause
can’t be a bar for the action of the damages.
2. If the exemption from negligence had
already been mentioned, then the defendant
would not have been liable. Here, the clause
only exempts the defendant from strict
liability but not from negligence. The facts
giving rise to tort and breach of contract can
be the same.
3. In the White vs John Warwick case,
negligence is founded on the tort, as if the
plaintiff’s servant had been riding a tricycle,
and if he could show negligence by the
defendant, then the defendant is held liable
as the exemption clause would not be a
defense in this case.
Background: A car was given to the
Ruther v Palmer, (1922) 2 KB 87 defendants for sale under a contract which
provided that while on the trial run car
would be driven at the customer’s risk. An
accident took place while the car was on a
trial run. The defendants were held not
 liable, for they had by express words shifted
the risk to the customers.

Unreasonable term: Another mode of protection is to exclude unreasonable terms from the
contract. A term is unreasonable if it would defeat the very purpose of the contract or if it is
repugnant to public policy.
The principle of excluding unreasonable clauses has now found statutory recognition in the
(English) Unfair Contract Terms Act, 1977. the Act provides that in respect of any loss
caused by the breach of contract, any restricting or excluding clause shall be void unless it
satisfies the requirement of reasonableness.
A terms will regarded as reasonable if it is “a fair and reasonable one to be included having
regard to the circumstances which were, or ought to have been reasonably known to or in
the contemplation of the parties when the contract was made”.

Lilly White v Mannuswami, AIR Background: An action was brought by one

(1966) Mad 13 at pp. 13-14 of the customers against a firm of launderers
and dry cleaners, M/s Lily White, but the
same was lost. The plaintiff claimed the full
price of the saree which was 220 rupees; but
the defendant offered to pay only 50% of
the price on the ground that there was a
printed term on the back of the receipt given
to the customer stipulating that in case of
loss of a garment, the customer would be
entitled to only 50% of the market price or
the value of the same.
Held: it was held that the same cannot be
used as a proper clause in the contract, as
the clause is unreasonable defeats the
essence of the contract, and is against public
policy, as it would lead to laundry owners
misappropriating the garments of the
 customers. Thus the customer would not be
bound by the terms of the exemption clause
and the defendant is liable to pay the whole
price of the saree, which is 220 rupees.

Central Inland Water Transport Background: service agreement whereby the

Corpn. V B. N. Ganguly, (1986) 3 service of a permanent employee could be
SCC 156. terminated by giving him a 3-month notice
or 3 months’ salary.
Held: it was held that such a clause was
unreasonable against the public policy and
void under section 23 of the Indian Contract
Act.

Exemption Clauses and Third Parties: One of the basic principles of the law of contract is
that a contract is a contract only between the parties to it and no third party can either enjoy
any rights or suffer any liability under it.

Haseldine v C.A. Daw & Son Ltd. Background: The case involved a hydraulic
(1941) 2 KB 343, at p. 379
lift which was used to access the upper floor
flats of an apartment block that were rented
out to tenants. The landlord remained in
occupation of the lift and had insurance
against third-party risks in the course of
using the lift. The insurance company made
occasional inspections of the lift in this
respect. There was also an agreement made
between the landlord and an engineering
company to maintain the lift each month
and report issues. The engineers told the
landlord the rams were badly worn but not
that it was dangerous to use. On one visit,
one of the engineers failed to repack the
machinery properly, leaving it weakened for
the next use. The next day, the plaintiff used
the lift and was injured when the lift broke.
The plaintiff brought an action against the
landlord and engineers.
Issue: The issue, in this case, was whether
the occupiers of the premises were liable for
the injury caused to the plaintiff. Or whether
the engineering company was to be held
liable for not effectively repairing the lift.
Rule: One of the basic principles of the law
of contract is that a contract is a contract
only between the parties to it and no third
party can either enjoy any rights or suffer
any liability under it.
Analysis: The occupiers were not held liable
because they had employed engineers who
appeared to be competent to undertake the
work. They could not be expected to check
if the work had been done properly since it
was too technical.