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Exemption Clause Exemption Clause: Contract I (Universiti Malaya) Contract I (Universiti Malaya)

The document discusses an exemption clause in a contract between Aina and Seng Kong Sdn Bhd for the purchase of marble. It addresses two key issues: 1) Whether the exemption clause was incorporated into the contract. It was found to be incorporated because it was in the order form that Aina signed. 2) Whether the exemption clause applies given that there was a fundamental breach of contract by Seng Kong. It was found that the breach (marble being porous instead of stain-resistant as promised) went to the core of the contract, so the exemption clause could not be relied upon. Therefore, Aina is entitled to damages from Seng Kong.

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Bella Salleh
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153 views4 pages

Exemption Clause Exemption Clause: Contract I (Universiti Malaya) Contract I (Universiti Malaya)

The document discusses an exemption clause in a contract between Aina and Seng Kong Sdn Bhd for the purchase of marble. It addresses two key issues: 1) Whether the exemption clause was incorporated into the contract. It was found to be incorporated because it was in the order form that Aina signed. 2) Whether the exemption clause applies given that there was a fundamental breach of contract by Seng Kong. It was found that the breach (marble being porous instead of stain-resistant as promised) went to the core of the contract, so the exemption clause could not be relied upon. Therefore, Aina is entitled to damages from Seng Kong.

Uploaded by

Bella Salleh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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lOMoARcPSD|3970484

Exemption clause

Contract I (Universiti Malaya)

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Contract Tutorial Week 14

Exemption Clause

A. (i)
The first issue is whether the exemption clause “Seng Kong Sdn Bhd will not be responsible
for any defect in the goods or any damage that may arise after the goods have been
accepted” is part of the contract between Aina and Seng Kong Sdn Bhd.

*-whether the exemption clause is incorporated into the contract


-whether it is brought to the attention to the other party – Olley v Marborough

An exemption clause is any clause in a contract or term in a notice which purports to


restrict, exclude or modify a liability, duty or remedy which would otherwise arise from a
legally recognized relationship between the parties. In order for an exemption to be legally
binding, it must first be a term of the contract. An exemption clause is part of the contract is
there is sufficient notice of the exemption clause being given before or at the time the
contract is formed. First, we shall look at when the contract is formed. In Thornton v Shoe
Lane Parking Co Ltd, the plaintiff parked his car in the defendant’s fully automatic car park.
Outside the car park, there was a traffic light, which showed red, and a notice stating the
charges and that the cars are parked at owner’s risk. As the plaintiff drove in, the light
turned to green and a ticket was pushed out from a machine. The plaintiff took the ticket
from the machine, he saw that there was writing on the ticket, but he did not read it. The
writing read: “This ticket issued subject to conditions displayed on premises”. To find the
conditions, the plaintiff would have to walk around the park, but he did not do so. The
conditions exempted the defendant from liability for damage to car and customers,
howsoever caused. The Court held that the defendant could not rely on those conditions as
they had not been incorporated into the contract. The offer occurred when the machine
was ready to accept payment and the acceptance occurred when the customer put his
money into the slot. Thus, the ticket and the words printed on it were only given after the
contract, hence, not binding. Second, there has to be sufficient notice of the exemption
clause to the other party. To be effectively incorporated, the exemption clause must be in a
document where contractual terms are expected and not merely be found in a receipt.
- Chapelton v Barry Urban District Council
- The notice was given after the contract had been entered into
- The exemption clause was found in a ticket which was merely a receipt

In the present case, Aina signed the order form which contained the exemption clause. It is
reasonable to expect the contractual terms to be found in an order form. Therefore, Aina
should be aware of the exemption clause when she signed the order form. The exemption
clause was also given at the time the contract was formed, which was when Aina signed the
order form. Hence, the exemption clause is part of the contract.

*misrepresentation
-signature rule – a party is bound by the document which contains the exemption clause
once he signed it, even if he did not notice or read the clause.

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- However, the signature rule does not apply if there was fraud or misrepresentation as to
the effect of the exclusion clause.
- the salesman, Hafiz told Aina that the “Onyx” marble would meet Aina’s needs for it to be
hardy and stain resistant but in fact it was actually porous and not stain resistant.

The second issue is whether the exemption clause covers the event which has occurred,
which, in this case is the defect in the marble. If there had been a fundamental breach of the
contract, then an exemption clause cannot be relied upon. The rationale is that a party
should not be entitled to rely on an exclusion clause if he has committed a breach which
goes to the core and the root of the contract.
- Associated Concrete Products (M) Sdn Bhd v Tackoh Sdn Bhd
- there was a breach of fundamental terms

In the present case, there was a breach of fundamental terms – Aina only entered into the
contract after Hafiz told her that the “Onyx” marble would meet her need for it to be hardy
and stain resistant. However, it was later discovered that the marble Aina received were
actually porous and not stain resistant. Hence, there was a breach of fundamental terms,
because, to Aina it is very important for the marble to be stain resistant, and it was the basis
on which she entered into the contract in the first place.

- Sze Hai Tong Bank Ltd v Rambler Cycle Co


- Associated Concrete Products (M)

Since there is a fundamental breach in contract, applying the rule of law in interpreting the
exemption clause, the exemption clause cannot apply. Hence, Aina is entitled to claim
damages from Seng Kong Sdn Bhd for the defect in the marble.

Rule of construction
- Does the exemption clause cover Aina’s situation in this case?
Clause is not clear – apply contra proferentum rule – construed against the maker of the
clause
- Malaysia National Insurance v Abdul Aziz

License expired does not mean that the respondent is the authorized driver

 Aina is not claiming

*Not clear exemption clause- usually argued against the maker of the clause
Photo Production case – very well-drafted exemption clause

EXEMPTION CLAUSE
1) Incorporation
2) Construction – rule of construction

***NEVER stop at “the exemption clause is not incorporated”


- You are only answering the question halfway
Continued – “In the event that the exemption clause is incorporated, …”

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(ii)

Consumer Protection Act 2010


Amendment to s.24(d) – cannot use negligence even if it is stated in the exemption clause
*only apply to consumer

interpret in accordance to the Amendment

Dec 2015/ Jan 2016

2. (i) There was a contract


- When she paid RM1500 – acceptance – contract formed

(ii) Assume contract exists – implied warranty – phone fit for purpose under section 16(2)
SOGA 1957

4. Issues:
- Whether the letter from Home Owners Sdn Bhd was a letter of comfort – no intention to
create legal relations

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