Advanced Contract Law
Seminar 3
1. Tony has contracted with Neil for the construction of Greenmeadows. After a number of
legal wrangles arising from their earlier contract for the construction of Greenacres, Tony
and Neil decide simply to shake hands on the deal for Greenmeadows. The day after they
have shaken hands on the deal, Neil sends Tony a written aide memoire summarising the
principal heads of agreement and stating that the contract is subject to Neil’s usual terms
and conditions.
Incorporation
* Contract can be formed verbally – contracts can be formed verbally. However, it is not
advisable because if things go wrong, then the parties will be in evidential crisis.
Aide memoir – summary of what was sent – record of what was sent.
Previous course of dealings – Hollier v Rambler Motors, British Crane v Ipswich Plant
In this case, only one previous dealing – incorporation by notice.
One of Neil’s standard terms and conditions provides:
“The contractor (Neil) accepts no responsibility for any loss or damage whatever or
howsoever occasioned (Has not used the word negligence in this part, uses general terms
such as ‘any loss or damage howsoever occasioned’, hence it is not valid) nor for the
negligence of any other party to the building project (Word negligence used, hence he has
excluded his responsibility for Clement’s negligence).”
* Hence Neil has not excluded his liability for negligence.
* Neil has not excluded Clement’s responsibility for negligence
*However, Neil has successfully excluded Neil’s responsibility for Clement’s negligence
(because the word ‘negligence’ is used in the second part of the clause).
Dividing the clause into two parts
* The contractor accepts no responsibility for any loss or damage whatever or howsoever
occasioned – Shell Chemicals v P&O road-tanks, Canada Steamship v The King 1952 –
general terms such as ‘loss howsoever caused’ etc; will not suffice
* Nor for the negligence of any other party to the building project – word negligence used,
therefore valid – Canada Steamship v The King 1952
Meaning, the contractor is not responsible for damage caused to him or for negligence of
any other third party – he is not exempting Clement, whereas he’s exempting himself.
Hence if Clement commits a mistake, then Neil is not responsible.
, Construction
The more onerous the clause is the more effort the party must put in to bring it to the
notice of the defendant – Interfoto Pictures, Spurling v Bradshaw – Red hand rule
* The parties have to expressly exclude ‘negligence’
• Clause must expressly mention that consequences of negligence is being excluded.
• No general terms would suffice. Therefore general terms like ‘loss howsoever
caused’ or ‘damage howsoever arising’ does not exclude liability. Shell Chemicals UK
Ltd. V P&O Roadtanks Ltd [1995] 1 Lloyd’s Rep 297
• If the clause does not refer to negligence then we have to check if the clause is wide
enough to cover negligence.
• If the clause is so wide that it covers both negligent and non-negligent liability then
the clause can be only used to exclude non-negligent liability.
During the work, Neil has occasion to use a JCB machine that he has hired for the contract
from Clement. Tony is on site to discuss the project when, as a result of the joint
carelessness of Neil and Clement (who is operating the JCB), the JCB collides with Tony’s car.
The car is damaged, and Tony suffers a broken leg.
Tony wants to know whether the exclusion clause in Neil’s standard terms part of the
contract is and, if so, whether it will defeat his claim for compensation against Neil and
Clement.
Answer
Issue
Is the exclusion clause valid?
Rule
The following conditions have to be met with for an exclusion clause to be valid:
Canada Steamship principles:
Clause must expressly mention that consequences of negligence is being excluded.
No general terms would suffice. Therefore, general terms like ‘loss howsoever
caused’ or ‘damage howsoever arising’ does not exclude liability
• If the clause does not refer to negligence then we have to check if the clause is wide
enough to cover negligence.
• If the clause is so wide that it covers both negligent and non-negligent liability then
the clause can be only used to exclude non-negligent liability.
Validity?
Has the term been incorporated? – Is the exclusion clause incorporated into the contract?
Seminar 3
1. Tony has contracted with Neil for the construction of Greenmeadows. After a number of
legal wrangles arising from their earlier contract for the construction of Greenacres, Tony
and Neil decide simply to shake hands on the deal for Greenmeadows. The day after they
have shaken hands on the deal, Neil sends Tony a written aide memoire summarising the
principal heads of agreement and stating that the contract is subject to Neil’s usual terms
and conditions.
Incorporation
* Contract can be formed verbally – contracts can be formed verbally. However, it is not
advisable because if things go wrong, then the parties will be in evidential crisis.
Aide memoir – summary of what was sent – record of what was sent.
Previous course of dealings – Hollier v Rambler Motors, British Crane v Ipswich Plant
In this case, only one previous dealing – incorporation by notice.
One of Neil’s standard terms and conditions provides:
“The contractor (Neil) accepts no responsibility for any loss or damage whatever or
howsoever occasioned (Has not used the word negligence in this part, uses general terms
such as ‘any loss or damage howsoever occasioned’, hence it is not valid) nor for the
negligence of any other party to the building project (Word negligence used, hence he has
excluded his responsibility for Clement’s negligence).”
* Hence Neil has not excluded his liability for negligence.
* Neil has not excluded Clement’s responsibility for negligence
*However, Neil has successfully excluded Neil’s responsibility for Clement’s negligence
(because the word ‘negligence’ is used in the second part of the clause).
Dividing the clause into two parts
* The contractor accepts no responsibility for any loss or damage whatever or howsoever
occasioned – Shell Chemicals v P&O road-tanks, Canada Steamship v The King 1952 –
general terms such as ‘loss howsoever caused’ etc; will not suffice
* Nor for the negligence of any other party to the building project – word negligence used,
therefore valid – Canada Steamship v The King 1952
Meaning, the contractor is not responsible for damage caused to him or for negligence of
any other third party – he is not exempting Clement, whereas he’s exempting himself.
Hence if Clement commits a mistake, then Neil is not responsible.
, Construction
The more onerous the clause is the more effort the party must put in to bring it to the
notice of the defendant – Interfoto Pictures, Spurling v Bradshaw – Red hand rule
* The parties have to expressly exclude ‘negligence’
• Clause must expressly mention that consequences of negligence is being excluded.
• No general terms would suffice. Therefore general terms like ‘loss howsoever
caused’ or ‘damage howsoever arising’ does not exclude liability. Shell Chemicals UK
Ltd. V P&O Roadtanks Ltd [1995] 1 Lloyd’s Rep 297
• If the clause does not refer to negligence then we have to check if the clause is wide
enough to cover negligence.
• If the clause is so wide that it covers both negligent and non-negligent liability then
the clause can be only used to exclude non-negligent liability.
During the work, Neil has occasion to use a JCB machine that he has hired for the contract
from Clement. Tony is on site to discuss the project when, as a result of the joint
carelessness of Neil and Clement (who is operating the JCB), the JCB collides with Tony’s car.
The car is damaged, and Tony suffers a broken leg.
Tony wants to know whether the exclusion clause in Neil’s standard terms part of the
contract is and, if so, whether it will defeat his claim for compensation against Neil and
Clement.
Answer
Issue
Is the exclusion clause valid?
Rule
The following conditions have to be met with for an exclusion clause to be valid:
Canada Steamship principles:
Clause must expressly mention that consequences of negligence is being excluded.
No general terms would suffice. Therefore, general terms like ‘loss howsoever
caused’ or ‘damage howsoever arising’ does not exclude liability
• If the clause does not refer to negligence then we have to check if the clause is wide
enough to cover negligence.
• If the clause is so wide that it covers both negligent and non-negligent liability then
the clause can be only used to exclude non-negligent liability.
Validity?
Has the term been incorporated? – Is the exclusion clause incorporated into the contract?
