For an exemption clause to be valid, there must be two main common rules firstly construction and incorporation. Incorporation means that the clause must be included in the contract whereas construction relates to the importance of the clause in covering the breach of the contract. The Unfair Contract Terms Act 1977 (UCTA)1 protects the claiming party before the UCTA courts usually took a more restrictive approach to exemption clauses to protect the consumer. 2
A defendant may only rely on an exclusion clause only if it has been incorporated into the contract. In the case of L’Estrange v Graucob (1934)3, it conveys that anything signed in the written contract is included in the contract. However, this is not always the case as sometimes there can be a misrepresentation of fact that allowed the other party to enter the contract this is seen in Curtis v Chemical Cleaning and Dyeing Co (1951)4. The Claimant wanted to claim damages after she returned the dress with a stain, the exclusion clause was not incorporated. With Georgina, she could easily rely on the exclusion clause due to the unclear incorporation in the contract. It was placed on the 18th page moreover the wording is vague as it does not specifically discuss counterfeits and lastly, it was camouflaged in the text with the rest of the contract. Lord Denning stated that “some exclusion clauses I have seen would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient.”5 Conveying that there is a very low probability that Georgina clearly saw the notice that was incorporated by Jakob.
According to Olley v Marlborough Court Hotel (1949)6, there was a notice of the rear of a hotel room door excluded liability for items which were stolen from the room. These items were stolen due to the hotel’s negligence. The hotel could not rely on the exclusion clause due to the term not being incorporated into the contract, as the contract concluded before entry into the room at the reception desk. Incorporation by previous dealings means that the clause can be automatically incorporated into the contract if it has been in several previous contracts. In Spurling v Bradshaw (1956)7 the clause was incorporated through previous dealings. The claimant was eligible to payment, and the defendant had no right to claim compensation for the damage to the orange juice. In Georgina’s case, even though Jakob had sold paintings to Georgina previously he never included clause 41.1 in any of their deals however this was the first time. This shows that Georgina is not liable since this is a new contract with new terms which have not been incorporated previously henceforth she can sue for damages. 8
After both parties agree to the clause and its incorporation in the contract, parties then must discuss whether the words of the clause are completely well-defined and convey the breach. Contra Proferentum rule is where the interpretation is turned against the defendant due to vagueness and uncertainty of the clause.9 In Georgina’s case, the terms of the contract could have meant different things to the parties. To Jakob, he could have thought that this would protect him from any legal trouble however to Georgina that this clause did not include counterfeits. Jakob is liable because he never stated that the two paintings were fake and even if he didn’t know it is his role as a dealer to check for its authenticity.10
In Baldry v Marshall (1925)11 the claimant asked the defendants who were motor dealers to supply a car that would fit for touring reasons. The defendants recommended a Bugatti which the claimant bought. The contract did not include the defendant’s liability for any guarantee. The car was not suitable for the claimant, so he rejected it and sued to recover what he paid. 12The Court of Appeal held that the requirement that the car is convenient for touring was only a condition. Due to the clause not excluding liability for breach of a condition the claimant was not forced to it. Houghton v Trafalgar Insurance (1954)13 held that the exemption clause did not cover a specific situation where the car was carrying lots of people. Using the word Load does not necessarily refer to humans hence the defendant was unable to rely on the exemption clause. If the defendant tries to exclude liability due to negligence, then well-defined words must be used. 14
Georgina should not fear suing Jakob and should take Christos’s advice, as she is not to be blamed for the torn suit and Jakobs Injury. As there was a sign in the gallery stating “A sign over the door…. on our premises”. According to S.13(1)15 of the Sales of Goods Act, 1979 states that where the buyer sells goods by description, the goods must correspond precisely with the description. As In the case of Beale v Taylor (1967)16 where the defendant advertised a car for sale as being a 1961 Triumph Herald 1200, the claimant inspected and checked and saw a metal disk written 1200.17 After buying he discovered that it was made up of an earlier model Triumph Herald 948. Even though the claimant inspected the car thoroughly the description in the advertisement did not match the car. In Jakob’s case, he stated that the paintings would all be from the sale seller there was no mention of others hence she can use S.13(1)18 as a claim. According to S.1419 all goods sold must be of adequate quality. S.14(2)20 Implies the false goods that Jakob handed to Georgina rather than the quality paintings she was supposed to receive from him. S.2(1) of UCTA197721 shows that Jakob’s incident occurred due to his negligence conveying that this section exactly implies to him. Also, this provision is absolute and is not subject to the requirement of reasonableness. S.2(3)22 mainly deals with breach of contract, due to the fact Jakob has breached the contract established with Georgina by sending her Counterfeit paintings instead of originals as agreed upon. 23
Under S.11(1)24 for an exemption to satisfy the reasonableness test, it must have at the time the contract was established to be fair and reasonable to include the clause taking into account the circumstances known to the parties. Hence Jakob is not exempted from the case, unlike Georgina who has the right to sue Jakob under S.1325 and 1426 of SGA. In Smith V Eric Bush (1990)27 Lord Griffiths advocated that the difficulty of the task and the practical impact of the court’s decision could be considered alongside the guidelines in Schedule 2 UCTA 197728.
In conclusion, Georgina should not be worried of suing Jakob and should listen to Christos’s advice. Due to the paintings being a counterfeit she has the right to sue under the SGA and the UCTA. As per she does not need to worry about Jakob’s counter claim as it means nothing because there was a notice in the gallery stating that the gallery is not to be blamed for any injuries or stolen items.
1 Unfair Contract Terms Act 1977 (UCTA)
2 Ewan McKendrick, Contract Law: Text, Cases, And Materials (5th edn, OUP Oxford 2012).
3 L’Estrange v Graucob (1934)
4 Curtis v Chemical Cleaning and Dyeing Co (1951)
5 Catherine Elliot, Contract Law (10th edn, Pearson 2015).
6 Olley v Marlborough Court Hotel (1949)
7 Spurling v Bradshaw (1956)
8 Jill Poole, James Deveney and Adam Shaw-Mellors, Contract Law Concentrate (3rd edn, Oxford University Press 2017).
9 Ewan McKendrick, Contract Law: Text, Cases, And Materials (5th edn, OUP Oxford 2012).
10 Chris Turner, Key Facts And Key Cases (1st edn, Taylor & Francis Ltd 2013).
11 Baldry v Marshall (1925)
12 Jill Poole, Casebook On Contract Law (Oxford University Press 2016).
13 Houghton v Trafalgar Insurance (1954)
14 Mindy Chen-Wishart, Contract Law (Oxford University Press 2015).
15 Sales of Goods Act 1979
16 Beale v Taylor (1967)
17 Francis Rose, Blackstone’s Statutes On Contract, Tort & Restitution 2009-2010 (28th edn, Oxford University Press 2017).
18 Sales of Goods Act 1979
21 Unfair Contract Terms Act 1977
23 Jill Poole, James Deveney and Adam Shaw-Mellors, Contract Law Concentrate (3rd edn, Oxford University Press 2017).
25 Sales of Goods Act 1979
27 Smith V Eric Bush (1990)
28 Schedule 2 Unfair Contract Terms Act 1977.