Problem question David v Photoprint - advise David

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1 Problem question David v Photoprint - advise David In order for David to gain a remedy for the loss of the photos, there are several arguments he can advance. This essay will examine these arguments and comment on the validity of each argument and the likely. 1) The limitation clause is not incorporated into the contract: If David is able to prove that the limitation clause was not part of the contract Photoprint will be liable for his loss and he will be able to seek a remedy. To do this David will need to prove that neither the limitation clause displayed on the sign, nor his irregular signing of the receipt, nor the ticket he received, result in the incorporation of the clause in the contract. The sign: In Olley 1 Denning LJ stated that persons who rely on a contract to exempt themselves from their common law liability must prove that contract strictly a prominent public notice which was plain for [the other party] to see when he made the contract 2 would be a way of proving such a contract. Olley 3 stressed, that the notice must be visible before the contract is made. 4 It can be assumed from the fact that the assistant was able to point to the sign on David s return to Photoprint, that the liability clause was on prominent display, this seems clear to incorporate the clause in David s contract with Photoprint. David could possibly argue that Vine 5 applies and that even the prominently displayed notice was insufficient as he had neither read it nor agreed to its terms. However, Vine can almost certainly be distinguished, as in that case the action was in tort, for wrongful interference with goods, rather than contract. 6 In this case there is no valid 1 Olley v. Marlborough Court [1949] 1 K. B ibid, at 532, per: Denning LJ 3 ibid 4 Applebey, G., Contract Law, 2001, Sweet & Maxwell, London, pp Vine v Waltham Forest LBC [2000] 4 All E.R see: Applebey (op.cit.), pp.272 1

2 argument that David did not intend to form a contract, therefore, this exception is unlikely to apply. In the highly unlikely event that the sign was not found sufficient to incorporate the clause in the contract, Photoprint could still argue that the receipt and the consistent course of dealing were constitutive of incorporation. The receipt: David could argue successfully that he neither knew, nor was it reasonable to expect him to believe, that the receipt was a document containing contractual conditions. 7 A mere receipt will not pass this test 8 and Photoprint would need to prove that they had taken reasonable steps to bring the conditions to David s attention. 9 One such reasonable and normally definitive step is the act of signing a document, this did not occur on this occasion. 10 In this case the ticket he was given, might reasonably be understood to be [no more than] a voucher to produce when collecting the [photos]. 11 If, on the other hand, the ticket David was handed had a notice on the front referring him to the back for terms this would be sufficient to limit liability applying Parker 12. David was not presented with a receipt to sign, and assuming that the ticket not contain any terms, this would not result in incorporation. Should David have effectively argued to this point that the ticket was not incorporated, Photoprint would argue that consistent course of dealing result in incorporation. This argument too is likely to fail. Consistent course of dealing: 7 Grogan v Robin Meredith Plant Hire [1996] C.L.C. 1127, at 1130, per Auld LJ; see also: Bahamas Oil Refining Co v Kristiansands Tankrederie (The Polyduke) [1978] 1 Lloyd s Rep 211, at , per Kerr J 8 see: Grogan v Robin Meredith Plant Hire [1996] C.L.C Applebey (op.cit.), pp See: L Estrange v F Graucob Ltd [1934] 2 K.B Curtis v. Chemical Cleaning and Dyeing Co. [1951] 1 K.B. 805, at 809, per: Denning LJ 12 Parker v South Eastern Railway Company [1877] 2 C.P.D

3 Where there is insufficient notice, a limitation clause may nonetheless be incorporated by the course of business and conduct of the parties 13. In this case David sometimes contracted orally and other times, where he signed the receipt, he had a written contract. Differing kinds of contract were held to be indicative of an inconsistent course of dealing in McCutcheon 14. Furthermore, the courts are more reluctant to incorporate terms on the basis of consistent course of dealing in consumer contracts. In Hollier 15 the court held that there was no consistent course of dealing where there were at most three or four transactions over a period of five years. David could argue that bringing photos to be developed less than once a month was not consistent dealing. David may also be able to argue that consistent dealing is irrelevant, as each time he only received the receipt after the conclusion of the contract, and, therefore, on no past occasion was the clause ever incorporated. In Kendall 16 it was held that notice must be reasonably contemporaneous with the formation of the contract and that consistent notification of the standard terms after the conclusion of the contract was unsatisfactory. 17 It is difficult to establish whether in David s case the courts would find that the receipt was introduced at the appropriate stage of the transaction. 18 On one hand, there is not the same temporal separation as there was in Olley and Kendall. On the other hand, in Thornton 19, it was held that the words on a ticket issued at the gate of a car park could not alter the contract, which had been made seconds before. David will probably succeed in convincing the courts that the consistent course of dealing fails to justify incorporation. 13 J. Spurling Ltd. v. Bradshaw [1956] 1 W.L.R. 461, at 467, per: Denning LJ; British Crane Hire Corporation Ltd v Ipswich Plant Hire Ltd [1975] Q.B McCutcheon v David MacBrayne Ltd [1964] 1 W.L.R Hollier v Ramble Motors (AMC) Ltd [1972] 1 All E.R Kendall v Lillico [1969] 2 AC see also: Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163; Olley v. Marlborough Court [1949] 1 K. B Elizabeth Macdonald, Incorporation of contract terms by a consistent course of dealing, 1988, Legal Studies, Volume 8, Issue 1, 48, pp Thornton v Shoe Lane Parking [1971] 2 Q.B

4 Conclusion on incorporation: The prominently displayed sign renders it extremely probable that the limitation clause was incorporated. 2) The limitation clause does not cover the acts which occurred and the clause is not permitted to limit liability for these acts: Prima facie, the clause covers the act concerned; the limitation clause covers any claim loss or damage and the act in question was clearly negligent damage to the film. However, David may successfully argue that the clause is not permitted to limit liability for negligence. Exclusion clauses, unless clearly stated, as held in White 20, cannot limit liability for negligence. However, this strict rule was relaxed in Canada Steamship 21, which held that if the ordinary meaning of the words covered negligence then it could be excluded. 22 Ailsa Craig Fishing 23 further relaxed the rules of construction with regard to limitation clauses. 24 Nonetheless, this is a restrained relaxation of the rules and the words [of the clause] must be given, if possible, their natural, plain meaning 25. Shell Chemicals 26 demonstrated that ordinary meaning is interpreted strictly, and the court held that a clause excluding all claims and demands whatever was not adequately clear. In the case of any doubt the contra proferentum 27 rule, that the courts should construe each term narrowly against the party seeking to rely on it, should be applied. 28 Nevertheless, it is uncertain whether the courts would find Photoprint clause to be sufficiently precise to limit liability for negligence. The phrase in Shell Chemicals is 20 White v John Warwick and Co [1953] 2 All E.R Canada Steamship Lines Ltd v The King [1952] A.C ibid, at 208, per Lord Morton of Henryton 23 Ailsa Craig Fishing Co. Ltd. v. Malvern Fishing Co. Ltd. [1983] 1 Lloyd's Rep see obiter dicta in :EE Caledonia v Orbit Valve plc [1995] 1 All E.R. 174, at 179, per Steyn LJ 25 Ailsa Craig Fishing Co. Ltd. (op.cit.), at 184, per Lord Wilberforce 26 Shell Chemicals UK Ltd v P&O Roadtanks [1995] 1 Lloyd s Rep see: Applebey (op.cit.) pp.275; Houghton v Trafalgar Insurance Co [1953] 2 All ER see: Andrew Bros (Bournemouth) Ltd v Singer & Co. Ltd [1933] All E.R

5 very similar to the caveat, howsoever caused, used in the current case. This would suggest that Photoprint would be unable to limit their liability for negligence. Unfortunately for David, the relaxation of the rules with regard to limitation clauses, as well as the introduction of UCTA, has resulted in a less rigorous attitude displayed by the courts towards the substance of limitation clauses. It is likely that the courts will determine that the clause does satisfy the construction rules. 3) The limitation clause does not satisfy the statutory tests and is inapplicable: Invalidating the clause under the Supply of Goods and Services Act 1982: This is a contract of service and, therefore, the Supply of Goods and Services Act (SGSA) 1982 is applicable. David has a contract for supply of service with Photoprint and there is an implied term that the supplier will carry out the service with reasonable care and skill 29. Where the incorrect solution was used there is arguably a breach of this implied term. Once the implied term has been established under SGSA David can seek to apply UCTA, to have the limitation clause effectively invalidated. UCTA clearly applies, as Photoprint is a business 30 which satisfies section 1(3)(a) of UCTA, and, assuming that his business is not photography, David falls within the definition of consumer. 31 David could rely on either section 2(2), for negligence, or section 3, for breach, to have the limitation clause nullified. In this case it is immaterial which section David seeks to rely on, as both impose the reasonableness test 32 and would result in the same outcome. The reasonableness test: 29 Supply of Goods and Services Act 1982, section definition in Unfair Contract Terms Act 1977, section 14: business includes a profession 31 Unfair Contract Terms Act 1977, section 12(1)(a); see: Kristina Sheffield v Pickfords Removals Ltd [1997] T.L.R. 337, Lord Woolf M.R. says that as a matter of practice a defendant should include in his defence a statement that his conditions were reasonable 32 Unfair Contract Terms Act 1977, section 11 and Schedule 2 5

6 Photoprint, as the party who inserted the clause, and thus seek to rely on it, has the burden to prove that it is reasonable in the circumstances. 33 Reasonableness is left to the discretion of the courts to decide with the help of the guidelines. 34 In this case it would be difficult for Photoprint to prove reasonableness. Under section 11(1) there is a general requirement that the term is fair and reasonable having regard to the circumstances in the contemplation of the parties when the contract was made. David could apply the very similar facts of Warren 35 to argue that the limitation clause falls down on this test. In Warren silver wedding photographs were lost by the defendants. The court held that a clause limiting the replacement to the value of a new film was not reasonable and that the defendants ought to have foreseen that some of the films sent to them would be of a particular significance to their customers 36. Specific reference to limitation clauses is made in section 11(4), which holds that the opportunity to use insurance, as well as the resources available to the defendant, should be taken into consideration when considering reasonableness. David could rely on George Mitchell 37 to argue that Photoprint s clause was unreasonable due the possibility of easily obtaining insurance to cover a claim such as his. Clarke J also argues in Woodman 38 that it would be reasonable to satisfy claims out of their resources by increased charges to customers. Salvage Association 39 held that where the company had resources which were easily sufficient to cover liabilities in excess of the limit imposed that could be unreasonable. David could successfully argue that Photoprint has resources in excess of the cost of the replacement film, which renders the clause unreasonable. The lack of alternatives argument: 33 Unfair Contract Terms Act 1977, section 11(5); see: Turner, C., Unlocking Contract Law, 2004, Hodder & Stoughton Educational, London, pp.190; 34 ibid, Schedule 2 35 Warren v Truprint [1986] BTLC ibid, at 344; see also: Smith v Eric S Bush [1990] 1 AC George Mitchell Ltd v Finney Lock Seeds Ltd [1983] 2 AC Woodman v Photo Trade Processing Ltd [1981] Exeter County Court (unreported), see: Ramsay, I., Consumer Protection: Texts and Materials, 1989, Weidenfeld and Nicolson, London, pp Salvage Association v CAP Financial Services [1995] F.S.R

7 Where there is inequality of bargaining power this can be indicative of unreasonableness. 40 Bargaining power can be determined by the ability of each of the parties to negotiate the contract and the alternatives open to the party who does not like the conditions of the other. The alternatives, or lack thereof, available to the customer will also reflect the reasonableness of the clause. In Peek 41 a monopoly which realistically forced the customer to agree to their terms of business rendered a term unreasonable. Warren and Woodman, both state that by adopting the same terms as the rest of the trade, the company offered the claimant no choice but to accept. Through applying these two cases and Peek, David could successfully argue that a lack of alternative forced him to entrust the film to Photoprint. Setting the clause aside under the Unfair Terms in Consumer Contracts Regulations (UTCCR) : Amongst other things, the UTCCR offers consumers protection from terms which inappropriately limit liability for total, partial or inadequate performance. 43 In this case David would have a strong argument that the limitation clause is inappropriate and he could seek to have the clause set aside 44. Conclusion on limiting liability: David will almost certainly obtain a remedy. Arguably the clause was never even incorporated in the contract. However, if it was held to be incorporated, under the reasonableness test in UCTA, the inappropriate limitation test in UTCCR and the case law in Warren and Woodman, it is likely that the limitation clause will be set aside. What remedies are available to David? The only remedy available to David is damages. In Woodman 23 of 36 photos were ruined and damages of 75 for distress and disappointment were awarded against the 40 Applebey (op.cit.), pp Peek v North Staffordshire Railway [1863] 10 HLC the UTCCR implements the EC Directive on Unfair Terms in Consumer Contracts (93/13/EC) 43 Unfair Terms in Consumer Contracts Regulations 1999, Schedule 2(1)(b) 44 ibid, section 8 7

8 photographic processors. In Warren 50 was awarded for the loss of a photographic film, on appeal Judge Kingham 45 did not alter the award, but expressed, obiter, that he held 150 to be a more appropriate sum. It is difficult to advise David of the amount he would receive in damages. In this case David has not suffered any direct distress or disappointment other than failing to fulfil his promise to Sue. This will be a factor limiting the amount awarded. However, an aggravating factor is the loss of two complete films, double the loss in Warren. It is certain that he will be awarded more than the cost of two replacement films and a fair estimate based on the case law and the facts of David s case would be 300 to Words: 2, Warren v Truprint [1986] BTLC 344, at this figure accounts for inflation 8

9 Bibliography Books Applebey, G., Contract Law, 2001, Sweet & Maxwell, London Hooley, R., Commercial & Consumer Contract Law, 2 nd Edition, 1999/2000, Butterworths, London, Edinburgh, Dublin McKendrick, E., Contract Law: Texts, Cases and Materials, Second Edition, 2005, Oxford University Press Pitch, H.D., Damages for Breach of Contract, 1985, The Carswell Company Ltd, Toronto Ramsay, I., Consumer Protection: Texts and Materials, 1989, Weidenfeld and Nicolson, London Turner, C., Unlocking Contract Law, 2004, Hodder & Stoughton Educational, London Journals Elizabeth Macdonald, Incorporation of contract terms by a consistent course of dealing, 1988, Legal Studies, Volume 8, Issue 1, 48 Mustafa, Z., The Treatment of Exemption Clauses by the Sudan Courts: I, 1967, Journal of African Law, Vol. 11, No Case Law Ailsa Craig Fishing Co. Ltd. v. Malvern Fishing Co. Ltd. [1983] 1 Lloyd's Rep. 183 Andrew Bros (Bournemouth) Ltd v Singer & Co. Ltd [1933] All E.R. 479 Bahamas Oil Refining Co v Kristiansands Tankrederie (The Polyduke) [1978] 1 Lloyd s Rep 211 British Crane Hire Corporation Ltd v Ipswich Plant Hire Ltd [1975] Q.B. 303 Canada Steamship Lines Ltd v The King [1952] A.C. 192 Curtis v. Chemical Cleaning and Dyeing Co. [1951] 1 K.B. 805 EE Caledonia v Orbit Valve plc [1995] 1 All E.R. 174 George Mitchell Ltd v Finney Lock Seeds Ltd [1983] 2 AC 803 Grogan v Robin Meredith Plant Hire [1996] C.L.C Hollier v Ramble Motors (AMC) Ltd [1972] 1 All E.R. 399 Houghton v Trafalgar Insurance Co [1953] 2 All ER 1409 J. Spurling Ltd. v. Bradshaw [1956] 1 W.L.R. 461 Kendall v Lillico [1969] 2 AC 31 Kristina Sheffield v Pickfords Removals Ltd [1997] T.L.R. 337 L Estrange v F Graucob Ltd [1934] 2 K.B

10 McCutcheon v David MacBrayne Ltd [1964] 1 W.L.R. 125 Olley v. Marlborough Court [1949] 1 K. B. 532 Parker v South Eastern Railway Company [1877] 2 C.P.D. 416 Peek v North Staffordshire Railway [1863] 10 HLC 493 Salvage Association v CAP Financial Services [1995] F.S.R. 654 Shell Chemicals UK Ltd v P&O Roadtanks [1995] 1 Lloyd s Rep. 297 Smith v Eric S Bush [1990] 1 AC 831 Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 Vine v Waltham Forest LBC [2000] 4 All E.R. 169 Warren v Truprint [1986] BTLC 344 White v John Warwick and Co [1953] 2 All E.R Woodman v Photo Trade Processing Ltd [1981] Exeter County Court (unreported) Legislation Supply of Goods and Services Act 1982 Unfair Contract Terms Act 1977 Unfair Term in Consumer Contracts Regulation

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