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CONTRACT LAW CONTRACT LAW

Trinidad & Tobago Hospitality & Tourism InstituteTrinidad & Tobago Hospitality & Tourism Institute

Hospitality Law & Insurance: BC 229Hospitality Law & Insurance: BC 229

Lecturer: Ms. V. MaharajLecturer: Ms. V. Maharaj

Learning ObjectivesLearning Objectives

Nature of ContractNature of Contract Offer & AcceptanceOffer & Acceptance ConsiderationConsideration Intention To Create Legal RelationsIntention To Create Legal Relations Contract Terms & Exclusion ClausesContract Terms & Exclusion Clauses

Nature of ContractNature of Contract

A Contract is an agreement either written or oral by which two or more parties having legal capacity agree with sufficient certainty in accordance with terms and conditions that are express or implied to perform certain obligations (either for benefit or a detriment) that are not contrary to law or public policy.

OfferOffer

An offer is an expression of willingness to contract on An offer is an expression of willingness to contract on specified terms, made with the intention that it shall specified terms, made with the intention that it shall become as binding as soon as it is accepted by the become as binding as soon as it is accepted by the person to whom it is addressed.person to whom it is addressed.

There is generally no requirement that the offer be made There is generally no requirement that the offer be made in any particular form; it may be made orally, in in any particular form; it may be made orally, in writing or by conduct.writing or by conduct.

OfferOffer

An offer must be distinguished from:-An offer must be distinguished from:-The mere supply of information;The mere supply of information;An invitation to the other party to enter into An invitation to the other party to enter into

negotiations;negotiations;An invitation to make an offer or invitations to An invitation to make an offer or invitations to

treat.treat.

McGowan & Co. v Gomes [1891-93] L.R.B.G. 171McGowan & Co. v Gomes [1891-93] L.R.B.G. 171

FactsFactsA merchant’s stock was offered for sale in an A merchant’s stock was offered for sale in an

advertisement headed “highest offer gets it” and in advertisement headed “highest offer gets it” and in which tenders were invited. The Plaintiff made a which tenders were invited. The Plaintiff made a tender; the defendants refused to sell at the price tender; the defendants refused to sell at the price tendered, there being only one tender.tendered, there being only one tender.

HeldHeldThe advertisement constituted an offer to sell, and there The advertisement constituted an offer to sell, and there

being no condition in the advertisement that there being no condition in the advertisement that there should be more than one offer, the plaintiff’s tender should be more than one offer, the plaintiff’s tender was an acceptance which bound the defendant.was an acceptance which bound the defendant.

Carlill v C. Smokeball Co. (1893)Carlill v C. Smokeball Co. (1893)

In this case the manufacturer’s advertisement In this case the manufacturer’s advertisement was construed as an offer, which was accepted was construed as an offer, which was accepted when the plaintiff bought the product. It was when the plaintiff bought the product. It was an offer to the whole world which the P an offer to the whole world which the P accepted, resulting in a unilateral contract.accepted, resulting in a unilateral contract.

Unilateral ContractUnilateral Contract

A contract based on an offer which was not A contract based on an offer which was not made to one particular person but to the world made to one particular person but to the world at large. at large.

If I offer $500.00 to the person who finds my If I offer $500.00 to the person who finds my lost dog, such offer is a unilateral offer. Offer lost dog, such offer is a unilateral offer. Offer is accepted as soon as person finds the dog.is accepted as soon as person finds the dog.

Invitation to TreatInvitation to Treat

An invitation to treat is simply a willingness to enter An invitation to treat is simply a willingness to enter into negotiations which, it is hoped, will lead to the into negotiations which, it is hoped, will lead to the conclusion of a contract at a later date. conclusion of a contract at a later date.

The distinction between the two is said to be one of The distinction between the two is said to be one of intention: that is, did the maker of the statement intention: that is, did the maker of the statement intend to be bound by acceptance of his terms without intend to be bound by acceptance of his terms without further negotiation or did he only intend his statement further negotiation or did he only intend his statement to be part of the continuing negotiation process.to be part of the continuing negotiation process.

Counter OfferCounter Offer

Counter-OffersCounter-Offers

When a person makes an offer and the person to When a person makes an offer and the person to whom the offer is made responds by proposing whom the offer is made responds by proposing changes to the terms of the offer, the law changes to the terms of the offer, the law considers the response of that party not as an considers the response of that party not as an acceptance but rather a counter-offer.acceptance but rather a counter-offer.

The effect of a counter offer is to ‘kill off’ the The effect of a counter offer is to ‘kill off’ the original offer so that it cannot subsequently be original offer so that it cannot subsequently be accepted by the offereeaccepted by the offeree..

Hyde v Wrench [1840] 3 Beav. 334Hyde v Wrench [1840] 3 Beav. 334

FactsFactsThe Defendant offered to sell some land to the Plaintiff for The Defendant offered to sell some land to the Plaintiff for ₤1000 ₤1000

and the Plaintiff replied by offering to purchase the land for and the Plaintiff replied by offering to purchase the land for ₤950. The Defendant refused to sell for ₤950. So the Plaintiff ₤950. The Defendant refused to sell for ₤950. So the Plaintiff then wrote to the Defendant agreeing to pay the ₤1000 but the then wrote to the Defendant agreeing to pay the ₤1000 but the Defendant still refused to sell.Defendant still refused to sell.

HeldHeldThere was no contract between the Parties. The Plaintiff’s offer There was no contract between the Parties. The Plaintiff’s offer

was a counter-offer which killed off the Defendant’s original was a counter-offer which killed off the Defendant’s original offer so as to render it incapable of subsequent acceptance.offer so as to render it incapable of subsequent acceptance.

Termination of OfferTermination of Offer Lapse of Time -Lapse of Time - where offer is expressed to last for a where offer is expressed to last for a

specified time. specified time.

RevocationRevocation- offeror may revoke his offer at any time - offeror may revoke his offer at any time before acceptance.before acceptance.

Rejection-Rejection- offer can be rejected outright or by a offer can be rejected outright or by a counter-offer. counter-offer.

Death-Death- death of both the offeree and the offeror death of both the offeree and the offeror terminates the offer, especially if offer involves a terminates the offer, especially if offer involves a personal service such as teaching.personal service such as teaching.

AcceptanceAcceptance

Acceptance mAcceptance may be by express words or by actionay be by express words or by action (and may (and may even be implied from conduct) but it must be quite even be implied from conduct) but it must be quite clear, the language used must be such as would clear, the language used must be such as would convey to a reasonable person in the position of the convey to a reasonable person in the position of the offeror a clear and definite decision by the offeree to offeror a clear and definite decision by the offeree to be bound by the terms of the offer leaving nothing be bound by the terms of the offer leaving nothing further to be negotiated.further to be negotiated.

An acceptance must be communicated to the offeror. An acceptance must be communicated to the offeror. The acceptance is generally only validly The acceptance is generally only validly communicated when is actually brought to the communicated when is actually brought to the attention of the offeror. attention of the offeror.

AcceptanceAcceptanceTHE POSTAL RULETHE POSTAL RULE

Acceptance is from the date of letter not when offeror opens. Thus, Acceptance is from the date of letter not when offeror opens. Thus, when a contract is made by post, it is clear law that the acceptance is when a contract is made by post, it is clear law that the acceptance is complete as soon as the letter is put into the box and that is the place complete as soon as the letter is put into the box and that is the place where the contract is made.where the contract is made.

So if it reasonable to reply to an offer by post, there will be a So if it reasonable to reply to an offer by post, there will be a binding contract as soon as the letter is properly stamped, addressed binding contract as soon as the letter is properly stamped, addressed and posted. Even if it never arrives. and posted. Even if it never arrives.

The postal rule does not apply in respect of ‘instantaneous’ The postal rule does not apply in respect of ‘instantaneous’ communications such as telephone or telex. Actual communication communications such as telephone or telex. Actual communication of an acceptance must be made.of an acceptance must be made.

AcceptanceAcceptance

Telex, Facsimile & EmailTelex, Facsimile & Email

Telex, Telegram, facsimile and email are considered Telex, Telegram, facsimile and email are considered as forms of instantaneous communications and as forms of instantaneous communications and they are treated in accordance with the general rule they are treated in accordance with the general rule of acceptance which is that a contract is formed at of acceptance which is that a contract is formed at the place where acceptance is communicated to the the place where acceptance is communicated to the offeror.offeror.

CertaintyCertaintyIn order to create a binding contract , the parties must express their agreement In order to create a binding contract , the parties must express their agreement

in a form which is sufficiently certain for the courts to enforce.in a form which is sufficiently certain for the courts to enforce.

May and Butcher v R [1934] 2 KB 17May and Butcher v R [1934] 2 KB 17

The Parties entered into a written agreement under which the British Gov’t The Parties entered into a written agreement under which the British Gov’t was to sell tentage to the Plaintiff and the agreement provided that “the was to sell tentage to the Plaintiff and the agreement provided that “the price shall be agreed upon from time to time”price shall be agreed upon from time to time”

It was held that the Parties not having reached an agreement on these matters , It was held that the Parties not having reached an agreement on these matters , no contract had been concluded. The reasoning behind this judgment was no contract had been concluded. The reasoning behind this judgment was that an agreement between two Parties to enter into an agreement in which that an agreement between two Parties to enter into an agreement in which some critical part of the contract matter is left undetermined is no contract some critical part of the contract matter is left undetermined is no contract at all.at all.

To be a good contract there must be a concluded bargain, and a concluded To be a good contract there must be a concluded bargain, and a concluded bargain is one which settles everything that is necessary to be settled and bargain is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the Parties. leaves nothing to be settled by agreement between the Parties.

Dixon v Francis [1956-60] 7 J.L.R. I (C.A.)Dixon v Francis [1956-60] 7 J.L.R. I (C.A.)

FactsFacts

The Appellant agreed that the Respondent would have the right The Appellant agreed that the Respondent would have the right to live in her house ad occupy the garage free of cost “so long to live in her house ad occupy the garage free of cost “so long as he and his wife live together in peace”. The question was as he and his wife live together in peace”. The question was whether this stipulation rendered the agreement void for whether this stipulation rendered the agreement void for uncertainty.uncertainty.

Dixon v Francis [1956-60] 7 J.L.R. I (C.A.)Dixon v Francis [1956-60] 7 J.L.R. I (C.A.)HeldHeld

In order to constitute a valid contract the parties must so In order to constitute a valid contract the parties must so express themselves that their meaning can be determined express themselves that their meaning can be determined with a reasonable degree of certainty. The words “so long with a reasonable degree of certainty. The words “so long as he and his wife live together in peace” are uncertain as he and his wife live together in peace” are uncertain and the proviso is void. and the proviso is void.

There are two grounds on which a court ought to hold that There are two grounds on which a court ought to hold that there was never a contract. The first is that the language there was never a contract. The first is that the language used was so obscure and so incapable of any definite or used was so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the precise meaning that the court is unable to attribute to the Parties any particular contractual intention.Parties any particular contractual intention.

ConsiderationConsideration

There are three fundamental aspects of consideration:-There are three fundamental aspects of consideration:-

i.i. Consideration must be sufficient but it need not be Consideration must be sufficient but it need not be adequate;adequate;

ii.ii. Past consideration is not good consideration; andPast consideration is not good consideration; and

iii.iii. Consideration must move from the promisee.Consideration must move from the promisee.

ConsiderationConsiderationSufficiency of considerationSufficiency of consideration

If the promisor gets what he asks for in return for his promise, he has If the promisor gets what he asks for in return for his promise, he has received sufficient consideration and is bound. It is immaterial that his received sufficient consideration and is bound. It is immaterial that his promise if far more valuable than the price he asked for it. The courts promise if far more valuable than the price he asked for it. The courts are generally concerned only with the question whether the promisor are generally concerned only with the question whether the promisor made a bargain, not whether he has made a good bargain.made a bargain, not whether he has made a good bargain.

Mountford v Scott [1975] 1 All E.R. 198 (C.A.)Mountford v Scott [1975] 1 All E.R. 198 (C.A.)In consideration for the payment of In consideration for the payment of £1, granted in writing an option to O £1, granted in writing an option to O

to purchase V’s house for £10,000, exercisable within six months. to purchase V’s house for £10,000, exercisable within six months. Before the option was exercised, V purported to withdraw his offer. P Before the option was exercised, V purported to withdraw his offer. P exercised the option and it was held that he was entitled to specific exercised the option and it was held that he was entitled to specific performance of the contract to sell the house. The offer was irrevocable performance of the contract to sell the house. The offer was irrevocable even though the consideration for it might be described as token even though the consideration for it might be described as token payment; and it as the contract for sale which was specifically enforcedpayment; and it as the contract for sale which was specifically enforced

ConsiderationConsiderationIntangible ReturnsIntangible Returns

Natural affection of itself is not sufficient consideration.Natural affection of itself is not sufficient consideration.

White v Bluett [1983] 23 LJ Ex. 36White v Bluett [1983] 23 LJ Ex. 36

A son’s promise not to bore his father with complaints about the father’s A son’s promise not to bore his father with complaints about the father’s distribution of his property among his children was held not to be good distribution of his property among his children was held not to be good consideration for the father’s promise not to sue his son on a debt owed consideration for the father’s promise not to sue his son on a debt owed by the son to the father.by the son to the father.

HeldThe son had no right to complain to his father, because it was for the father The son had no right to complain to his father, because it was for the father

to decide how he wanted to distribute his property, and so in giving up to decide how he wanted to distribute his property, and so in giving up his habit of complaining, he had not provided any consideration.his habit of complaining, he had not provided any consideration.

ConsiderationConsideration Duty Under LawDuty Under Law

If a party is under an agreement to perform a duty by virtue of a legal If a party is under an agreement to perform a duty by virtue of a legal obligation then the performance of such a duty is not good consideration obligation then the performance of such a duty is not good consideration to create an enforceable legal obligation.to create an enforceable legal obligation.

Collins v Godefroy [1831] K.B. Collins v Godefroy [1831] K.B. Godefroy brought an action against one Dalton, and caused Collins to be Godefroy brought an action against one Dalton, and caused Collins to be

subpoenaed to attend. Collins who attended for six days, but was no subpoenaed to attend. Collins who attended for six days, but was no called, demanded for Godefroy six guineas as his fee for attendance.called, demanded for Godefroy six guineas as his fee for attendance.

HeldHeldIf it be a duty imposed by law upon a Party regularly subpoenaed to attend If it be a duty imposed by law upon a Party regularly subpoenaed to attend

from time to time to give his evidence then a promise to give him from time to time to give his evidence then a promise to give him remuneration for loss of time incurred in such attendance is a promise remuneration for loss of time incurred in such attendance is a promise without consideration. without consideration.

ConsiderationConsiderationGlasbrook v Glamorgan County Council [1925] A.C. 270Glasbrook v Glamorgan County Council [1925] A.C. 270

The appellants were the owners of a valuable group of mines about two miles The appellants were the owners of a valuable group of mines about two miles from Swansea that was the subject of industrial action. Picketing which was from Swansea that was the subject of industrial action. Picketing which was not of a peaceful nature took place and as a result the safety men said that not of a peaceful nature took place and as a result the safety men said that they would no longer work because of insufficient police protection. The they would no longer work because of insufficient police protection. The appellants requested that a police garrison be established at the mines but appellants requested that a police garrison be established at the mines but this request was refused. The police indicated that they already has a small this request was refused. The police indicated that they already has a small presence at the colliery and was prepared to rapidly dispatch a large force at presence at the colliery and was prepared to rapidly dispatch a large force at the sight of trouble but the Appellants insisted on a garrison.the sight of trouble but the Appellants insisted on a garrison.

The police agreed provided that a requisition be signed with a promise to pay The police agreed provided that a requisition be signed with a promise to pay as such garrison would be a special duty. An agreement was signed and as such garrison would be a special duty. An agreement was signed and then the appellants refused to pay claiming that the contract lacked then the appellants refused to pay claiming that the contract lacked consideration. It was agued that, when a subject has need of police consideration. It was agued that, when a subject has need of police protection and has done nothing to increase the risk, he is entitled to protection and has done nothing to increase the risk, he is entitled to protection without payment and an agreement to pay is without protection without payment and an agreement to pay is without consideration and contrary to public policy.consideration and contrary to public policy.

ConsiderationConsiderationHeld Held

It does not appear to follow that it was the duty of the police authority It does not appear to follow that it was the duty of the police authority to provide the garrison. They were no doubt bound to protect the to provide the garrison. They were no doubt bound to protect the safety man from violence, but it was not for the safety men to decide safety man from violence, but it was not for the safety men to decide the form in which that protection should be given.the form in which that protection should be given.

The appellants who deliberately entered into an agreement to pay for The appellants who deliberately entered into an agreement to pay for the services and maintenance of the police garrison and did not the services and maintenance of the police garrison and did not dispute their liability until they had had the benefit of those services dispute their liability until they had had the benefit of those services for a period of nearly two months, cannot now repudiate their for a period of nearly two months, cannot now repudiate their agreement.agreement.

Intention to Create Legal RelationsIntention to Create Legal Relations

An agreement is not binding as a contract if it was made without any intention An agreement is not binding as a contract if it was made without any intention to create legal relations.to create legal relations.

Balfour v Balfour [1919] 2 K.B. 571Balfour v Balfour [1919] 2 K.B. 571

FactsFacts

The Defendant, who was a civil servant stationed in Ceylon came to England The Defendant, who was a civil servant stationed in Ceylon came to England with the Plaintiff, his wife. They remained in England until the husband's with the Plaintiff, his wife. They remained in England until the husband's leave was up and he had to return. The Plaintiff, on the doctor’s advice, leave was up and he had to return. The Plaintiff, on the doctor’s advice, remained in England, and the husband before sailing, promised to give her remained in England, and the husband before sailing, promised to give her £30 a month until she returned,£30 a month until she returned,

Later the husband wrote saying that it would be better is they remained apart Later the husband wrote saying that it would be better is they remained apart and the wife obtained a divorce. The Plaintiff sued on the promise to pay and the wife obtained a divorce. The Plaintiff sued on the promise to pay her £30 a month. her £30 a month.

Intention To Create Legal RelationsIntention To Create Legal RelationsHeldHeld

It is necessary to remember that the are agreements between Parties It is necessary to remember that the are agreements between Parties which do not result in contracts and one of the most usual forms which do not result in contracts and one of the most usual forms of agreement which do not constitute a contract appears to me to of agreement which do not constitute a contract appears to me to be the arrangements which are made between husband and wife. be the arrangements which are made between husband and wife.

Although such arrangements made between husband and wife are Although such arrangements made between husband and wife are arrangements in which there are mutual promises, or in which arrangements in which there are mutual promises, or in which there is consideration in form, they are not contracts because the there is consideration in form, they are not contracts because the parties did not intend that they should be attended by legal parties did not intend that they should be attended by legal consequences.consequences.

The consideration that really obtains for them is natural love and The consideration that really obtains for them is natural love and affection, which counts for so little in these cold courts.affection, which counts for so little in these cold courts.

Intention To Create Legal RelationsIntention To Create Legal Relations

The rule laid down in The rule laid down in BalfourBalfour has been interpreted as a has been interpreted as a presumption that Parties into a domestic and/or social presumption that Parties into a domestic and/or social agreement do not intend to create legal relations. The opposite agreement do not intend to create legal relations. The opposite presumption lies for commercial agreements where the presumption lies for commercial agreements where the presumption is that parties did intend to create legal relations.presumption is that parties did intend to create legal relations.

The policy which underpins these presumptions is one of keeping The policy which underpins these presumptions is one of keeping contract in its place; to keep it in the commercial sphere and contract in its place; to keep it in the commercial sphere and out of domestic cases, except where the judges think it has a out of domestic cases, except where the judges think it has a useful role to play.useful role to play.

Intention to Create Legal RelationsIntention to Create Legal RelationsWestmoorings Ltd v National Insurance Property Dev. Ltd. [1993]Westmoorings Ltd v National Insurance Property Dev. Ltd. [1993]FactsFactsThe applicant had an agreement with the owner of Edingborough Estate to The applicant had an agreement with the owner of Edingborough Estate to

purchase 420 acres of the said estate. The applicant has discussions with the purchase 420 acres of the said estate. The applicant has discussions with the respondent to convert the 420 acres to a housing estate. Following respondent to convert the 420 acres to a housing estate. Following discussion, the applicant by letter made certain proposals to the respondent. discussion, the applicant by letter made certain proposals to the respondent. The said letter referred to the number of housing units to be constructed The said letter referred to the number of housing units to be constructed over a five year period. The respondent after further discussions issued a over a five year period. The respondent after further discussions issued a letter of intent to the applicant. This was issued pending te execution of a letter of intent to the applicant. This was issued pending te execution of a formal agreement. formal agreement.

Immediately upon receipt of the letter of intent, the applicant embarked on the Immediately upon receipt of the letter of intent, the applicant embarked on the construction of the housing estate. No formal agreement was executed construction of the housing estate. No formal agreement was executed although the drafts were produced and commented upon. An issue arose although the drafts were produced and commented upon. An issue arose with respect to some outstanding terms that emerged from the construction with respect to some outstanding terms that emerged from the construction of the housing estate.of the housing estate.

Intention to Create Legal RelationsIntention to Create Legal Relations

HeldHeld

On a careful perusal of those documents that the Parties had arrived at a On a careful perusal of those documents that the Parties had arrived at a consensus on the essential aspects of the bargain. The Parties had consensus on the essential aspects of the bargain. The Parties had not however fixed a date for the completion of the contract but a not however fixed a date for the completion of the contract but a court in such circumstances will always read into an agreement and court in such circumstances will always read into an agreement and imply a term that the completion will take place within a reasonable imply a term that the completion will take place within a reasonable time. time.

There was a binding agreement between Westmoorings and NIPDEC There was a binding agreement between Westmoorings and NIPDEC and the formal contract contemplated by the Parties was one which and the formal contract contemplated by the Parties was one which was intended to put into more correct form a completed agreement.was intended to put into more correct form a completed agreement.

Contract TermsContract Terms

A contract consists of a number of terms. However not everything that A contract consists of a number of terms. However not everything that is said or written during the course of negotiations constitutes a term of is said or written during the course of negotiations constitutes a term of the contract. Whether or not a statement becomes a term of the contract the contract. Whether or not a statement becomes a term of the contract depends substantially on the intention of the Parties.depends substantially on the intention of the Parties.

EXPRESS TERMSEXPRESS TERMS

These are terms that are contained in a contract and are openly These are terms that are contained in a contract and are openly articulated by the Parties to the Contract. articulated by the Parties to the Contract.


Incorporation by Express ReferenceIncorporation by Express Reference

Terms may be incorporated into an agreement by express reference to a Terms may be incorporated into an agreement by express reference to a third party document. Three hurdles must be overcome before such third party document. Three hurdles must be overcome before such terms can be incorporated:-terms can be incorporated:-

i.i. Notice of the terms must be given at or before the time of Notice of the terms must be given at or before the time of concluding the contract;concluding the contract;

i.i. The terms must be contained or referred to in a document which The terms must be contained or referred to in a document which was intended to have contractual effect; andwas intended to have contractual effect; and

i.i. Reasonable steps must be taken to bring the terms t the attention Reasonable steps must be taken to bring the terms t the attention of the other Party.of the other Party.


Implied TermsImplied Terms

Terms may be implied in a contract:-Terms may be implied in a contract:-

i.i. Based on custom or usage;Based on custom or usage;

ii.ii. As the legal incidents of a particular class of kind on contract;As the legal incidents of a particular class of kind on contract;

iii.iii. Based on the presumed intentions of the parties where the implied Based on the presumed intentions of the parties where the implied term must be necessary to give “business efficacy” to a contract; term must be necessary to give “business efficacy” to a contract;

iv.iv. As meeting the “officious bystander” test as a term which the As meeting the “officious bystander” test as a term which the Parties would say, if questioned, that they had obviously Parties would say, if questioned, that they had obviously assumed.assumed.


Terms Implied by LawTerms Implied by Law

Terms can be implied by law on the basis of Statute.Terms can be implied by law on the basis of Statute.

Sale of Goods Act, Chap. 82:30, Laws of Trinidad and TobagoSale of Goods Act, Chap. 82:30, Laws of Trinidad and Tobago

Unfair Contract Terms Act No. 28 of 1995, Laws of Trinidad and Unfair Contract Terms Act No. 28 of 1995, Laws of Trinidad and TobagoTobago

Exemption ClausesExemption Clauses

An Exemption Clause is a clause in a contact or a term in a notice An Exemption Clause is a clause in a contact or a term in a notice which appears to exclude or restrict liability or a legal duty which which appears to exclude or restrict liability or a legal duty which would otherwise arise.would otherwise arise.

A Party relying on a Exemption Clause that limits or excludes liability A Party relying on a Exemption Clause that limits or excludes liability must from the start demonstrate that the clause is incorporated into must from the start demonstrate that the clause is incorporated into the contract (by signature, notice or course of dealing) governing his the contract (by signature, notice or course of dealing) governing his performance of the contract and that it provides protection against performance of the contract and that it provides protection against the consequences of breach if contract for which he is accused.the consequences of breach if contract for which he is accused.

The law of exemption clauses has been revolutionized by the Unfair The law of exemption clauses has been revolutionized by the Unfair Contract Terms Act, which precludes exemption clauses which Contract Terms Act, which precludes exemption clauses which purport to exempt liability for personal injuries caused by someone purport to exempt liability for personal injuries caused by someone acting negligently. acting negligently.

Exemption ClausesExemption ClausesUnfair Contract Terms Act: Chapter 82:37Unfair Contract Terms Act: Chapter 82:37

4.4. (1) For the purposes of this Part, “ (1) For the purposes of this Part, “negligencenegligence” means the breach—” means the breach—

(a) (a) of any obligation, arising from the express or implied terms of any obligation, arising from the express or implied terms of a of a contract, to take reasonable care or exercise reasonable contract, to take reasonable care or exercise reasonable skill in the performance of skill in the performance of the contract;the contract;

(b)(b) of any common law duty to take reasonable care or exercise of any common law duty to take reasonable care or exercise reasonable skill, but not any stricter duty.reasonable skill, but not any stricter duty.

(3) In the case of both contract and tort, … liability for breach of (3) In the case of both contract and tort, … liability for breach of obligations or obligations or duties arising—duties arising— (a) (a) from things done or to be done by a person in the course of from things done or to be done by a person in the course of a a business (whether his own business or another’s); orbusiness (whether his own business or another’s); or (b)(b) from the occupation of premises used for business purposes from the occupation of premises used for business purposes

(4) In relation to any breach of duty or obligation, it is immaterial …whether the breach (4) In relation to any breach of duty or obligation, it is immaterial …whether the breach was inadvertent or intentional, or whether liability for it arises directly or vicariously.was inadvertent or intentional, or whether liability for it arises directly or vicariously.


5. 5. (1) A person cannot by reference to any contract term or to a (1) A person cannot by reference to any contract term or to a notice given to persons generally or to particular persons notice given to persons generally or to particular persons exclude or restrict his liability for death or personal injury exclude or restrict his liability for death or personal injury resulting from negligence.resulting from negligence.

(2) In the case of other loss or damage, a person cannot so (2) In the case of other loss or damage, a person cannot so exclude or restrict his liability for negligence except in so far exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of as the term or notice satisfies the requirement of reasonableness.reasonableness.

(3) Where a contract term or notice purports to exclude or (3) Where a contract term or notice purports to exclude or restrict liability for negligence a person’s agreement to or restrict liability for negligence a person’s agreement to or awareness of it is not of itself to be taken as indicating his awareness of it is not of itself to be taken as indicating his voluntary acceptance of any risk.voluntary acceptance of any risk.

Exemption ClausesExemption ClausesRoger Rahamut & National Ins. Property Dev. Co v Airport Authority Roger Rahamut & National Ins. Property Dev. Co v Airport Authority of Trinidad and Tobago [1995] of Trinidad and Tobago [1995]

FactsFactsThe Plaintiff parked his car in Car park B. He asked the attendant whether it The Plaintiff parked his car in Car park B. He asked the attendant whether it

could be left there for three days and the cost of doing so. He was then could be left there for three days and the cost of doing so. He was then given a car park ticket which sets out certain “conditions of parking’ on given a car park ticket which sets out certain “conditions of parking’ on the reverse side. The Plaintiff returned to the car park three days later the reverse side. The Plaintiff returned to the car park three days later where he discovered his car was missing. He reported the matter and where he discovered his car was missing. He reported the matter and sought to negotiate a settlement for damages to his vehicle, without avail. sought to negotiate a settlement for damages to his vehicle, without avail.

The Plaintiff claimed damages for negligence, claiming that he was not The Plaintiff claimed damages for negligence, claiming that he was not aware of a sign/notice on the eastern wall of the car park showing rates. aware of a sign/notice on the eastern wall of the car park showing rates. There was no warning sign on the guard booth or a disclaimer sign. He There was no warning sign on the guard booth or a disclaimer sign. He did not see a disclaimer in block letters. He got the ticket after he parked did not see a disclaimer in block letters. He got the ticket after he parked the car. He did not look at the words on the ticket “PTO for conditions of the car. He did not look at the words on the ticket “PTO for conditions of parking”. parking”.

Exemption ClausesExemption ClausesHELDHELD

The first question is whether the disclaimer has been incorporated into the The first question is whether the disclaimer has been incorporated into the contract. The second is how must the disclaimer be construed. The third is contract. The second is how must the disclaimer be construed. The third is whether the customer was notified or his attention drawn to the disclaimer or whether the customer was notified or his attention drawn to the disclaimer or exempting condition. exempting condition.

The general rule is that if a person pays for a service and receives a ticket which The general rule is that if a person pays for a service and receives a ticket which contains a disclaimer on the reverse he is not bound by the conditions contains a disclaimer on the reverse he is not bound by the conditions therein, because the ticket is a receipt for the money paid. The notice was not therein, because the ticket is a receipt for the money paid. The notice was not put in a prominent place, neither was it drawn to his attention in any explicit put in a prominent place, neither was it drawn to his attention in any explicit way. way.

The general rule regarding disclaimer notices (exemption clauses), is that they The general rule regarding disclaimer notices (exemption clauses), is that they are to be construed strictly against the Party who introduced them and seeks are to be construed strictly against the Party who introduced them and seeks to rely on them- the to rely on them- the contra preferentum rulecontra preferentum rule. Therefore an ambiguous . Therefore an ambiguous disclaimer should be construed so that the meaning is not extended in favour disclaimer should be construed so that the meaning is not extended in favour of the Party seeking to rely on it.of the Party seeking to rely on it.


Section 4 (2) of the Unfair Contracts Act (28/1985) sets out Section 4 (2) of the Unfair Contracts Act (28/1985) sets out the ‘reasonableness test’ which applied to this case the ‘reasonableness test’ which applied to this case evidences that the bargaining position of the Parties was evidences that the bargaining position of the Parties was unequal. unequal.

The Plaintiff has to park his car in one of the car parks: the The Plaintiff has to park his car in one of the car parks: the card/ticket is ambiguous (a representation and an card/ticket is ambiguous (a representation and an disclaimer), the Plaintiff was not informed nor was the disclaimer), the Plaintiff was not informed nor was the disclaimer or notice drawn to his attention. The contract disclaimer or notice drawn to his attention. The contract was unfair to the Plaintiff. He could not bargain and for was unfair to the Plaintiff. He could not bargain and for these reasons the case is decided in favour of the Plaintiff.these reasons the case is decided in favour of the Plaintiff.

End of Lecture