EXEMPTION CLAUSES
• If you have ever played Monopoly then you know
that a ‘get out of jail free’ card is a useful card to
draw. Can you think of any other games where you
can escape a penalty or loss?
• Draw up a list.
• Some penalties that you may think of include: three
strikes and you are out in baseball, finding an
immunity idol in Survivor or a similar item in other
reality shows
HOW THEY WOULD DECIDE THE CASES
(COULD THE BUSINESS INVOLVED RELY
ON THE EXCLUSION CLAUSE?):
• A.) Nate was on holiday in a regional town and hired a bike.
After paying for the hire of the bike, he received a docket.
Nate did not read the docket, so did not notice that there was
an exclusion clause on the reverse side which stated: ‘We will
not be liable for any accident or damage arising from the hire
of a bike’. A sign next to the cash register told customers that
tickets were to be retained for inspection. The wheels on the
bike came loose and Nate was injured. He sued the business for
breach of contract.
• B.) Alison drove into a car park, taking a parking ticket from the
machine at the entrance. A sign on the machine displayed an
exclusion clause which stated: ‘We will not be liable for any
damage to cars or theft from cars while using this car park’. The
exclusion clause was also printed on the back of the ticket.
When Alison returned to her car, she discovered that it had
been broken into and her laptop had been stolen.
KEY CONCEPT
• Some contracts involve one party participating in a
dangerous activity, such as bungy jumping or
skydiving. As there is a high risk of injury and even
death, what can businesses do to reduce the
possibility of court action against them in case of an
accident? This section examines what steps a
business, group or person can take to limit their
liability.
DEFINITION
• An exemption clause is a term in a contract that seeks to
limit the liability of one of the parties to a contract
• It is common business practice for one of the parties to
include an exemption clause in a contract. The purpose
of such clauses is to limit or exclude the party's liability
that would otherwise exist under the contract. For
instance, when entering a contract to park your car at a
commercial car park it is usual to see a notice advising
that parking ‘is at the risk of the car owner’.
• The courts have shown a reluctance to enforce
exclusion clauses, particularly if the parties do not have
equal bargaining power. Further, an exemption clause
will only be effective if reasonable notice is given by the
party relying on the clause.
CASE: LE MANS GRAND PRIX CIRCUITS
PTY LTD V. ILIADIS
• In the case Le Mans Grand Prix Circuits Pty Ltd v. Iliadis
[1998] 4 VR 661, Iliadis was injured while driving a go-kart.
He had signed a document that included an exclusion
clause to the effect that he would not take legal action
against Le Mans if he was injured while go-kart racing on
their property. The document was headed, ‘To help with
our advertising’. Iliadis was led to believe the document
was for marketing purposes and was given no time to
read it before signing. The court held that Le Mans could
not rely on the exemption clause as Iliadis had no reason
to believe it was a contractual document and had little
practical opportunity to read the document.
PROVIDERS OF RECREATIONAL SERVICES SUCH AS GO-KART
RACING MAY INCLUDE AN EXEMPTION CLAUSE IN A
CONTRACT TO EXCLUDE LIABILITY FOR INJURIES. HOWEVER,
TO BE EFFECTIVE, THE OFFEREE MUST BE GIVEN REASONABLE
NOTICE OF ITS EXISTENCE BEFORE AGREEMENT TO ENTER A
CONTRACT IS REACHED.
• In some situations it is not always clear whether or not
the exemption clause is actually part of the contract,
particularly if there is no written, signed document.
• CASE
• In Causer v. Browne [1952] VLR 1, Causer left a dress for
dry-cleaning but it was returned stained. Browne relied
on a notice printed on a docket given to Causer that
stated, ‘No responsibility is accepted for loss or injury to
articles through any cause whatsoever’. The court held
the docket was not part of the contract as it was
reasonable for the consumer to believe its purpose was
customer identification when collecting the goods
DEFENCES IN CONTRACT LAW
• A party who does not wish to be bound by a contract
may be able to argue one of the following defences:
• that a valid contract did not exist — one of the elements was
missing. For instance, a party may claim there was never an
intention to create a legal relationship in the first place.
• that a particular statement was not a term in the contract and,
therefore, the statement is unenforceable
• that on face value, a valid contract did exist but that it is
unenforceable because: – one of the parties lacked the
capacity to form a contract – there was a lack of genuine
consent – the subject matter was illegal.
CASE WHITE V. BLUETT (1853)
• In this old English case a father promised to excuse
a debt owed to him by his son if the son promised to
stop boring his father. The son had often
complained that the father had treated him less
favourably than his brothers. After the father died,
the executor (White) sued the son (Bluett) for
recovery of the debt. The son tried to defend the
claim by arguing that he had carried out his side of
the bargain and therefore the debt should be
excused. However, the court held that the son's
promise was too vague to amount to real
consideration in contract law and the debt could
be recovered.
SIMPLY DESTROYING A CONTRACT IS NOT A SOLUTION IN
CONTRACT LAW. THERE MAY, HOWEVER, BE VALID DEFENCES
THAT CAN BE USED TO AVOID BEING BOUND BY THE
CONTRACT.
APPLY YOUR UNDERSTANDING
• 2.) Consider the following two scenarios and explain
whether or not a contract has been breached.
• Paul and Anna were going on a holiday and decided to leave
their dog at a boarding kennel. When delivering the dog and
paying the deposit, a contract was provided that stated the
boarding kennel was ‘not responsible for any injury or illness to
animals’. Upon return they discovered their dog had died.
• Peter left two suits for dry-cleaning. After paying for the service
he received a docket detailing the amount paid and the date
for collection. A statement was also included stating, ‘No
responsibility is accepted for loss or damage to items through
any cause whatsoever’. When Peter collected his suits he
discovered both had large discolouration marks.
• 3.) Examine the following scenarios and provide reasons whether a
contract exists or not, whether the contract is enforceable or not and, if
not, what reason may be used to void the contract.
• Sixteen-year-old Allan signs a contract to buy a car from a dealer who
provides finance at 15 per cent per annum. After six months he is unable
to continue making the repayments. The car dealer wishes to start legal
action to recover the balance owing.
• Rhys and Jessica are looking to buy their first house. At an inspection the
real estate agent encourages them to sign a contract because ‘we have
lots of people interested in this property and it will sell quickly’. Two weeks
after signing the contract they discover they will not be able to pay for the
property and wish to withdraw from the contract. The estate agent insists
they be held to the terms of the contract.
• Bryan and his friends sign up for a game of ‘paintball’. One of the friends
pays for all the players and the receipt contains a statement, ‘Players play
at their own risk’. During the course of the day Bryan is hit in the eye by a
paintball and loses the sight in that eye. He wishes to sue the operator.
• Michelle inspects a second-hand car that has been advertised as having
a new engine. After inspecting the car, Michelle agrees to purchase it.
Upon collecting the car the following week she notices that the engine
appears to be older than the one she inspected. She asks for a refund or
for the engine to be replaced at no cost. The seller refuses.
• Frank goes to a store to buy a TV. The price tag indicates the TV will cost
$900. Is Frank obliged to pay the $900? Frank offers the sales assistant $800.
Is the shop assistant obliged to accept this offer? Why or why not?