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Law 2101 - Mar. 25.docx

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Law 2101

Law 2101 Tuesday March 25 Contract Law Standard Form Contract and Exclusion Clauses • Standard Form Agreements typically contain an exclusion clause. • Exclusion Clause: A clause in a contract that purports to exclude or limit one party’s liability • Exclusion clauses are mass-produced as a cost-saving feature to make it easier for the company (each individual doesn’t negotiate individually with Bell or Rogers) • The downside is that most consumers don’t read the exclusion clauses, and they are all-or-nothing (there is no room to negotiate) • In some instances, the courts will not enforce them (they will step in and protect the consumer) Some Examples: • In a contract for home insurance: “This policy does not insure loss or damage caused by criminal or wilful act or omission of the insured.” • In a contract for storage of goods: “The company will not be responsible for any item exceeding the value of $50.” o They are limiting their liability • Car parking: You pay your money to a machine, and there is no one to negotiate with o “The company is not responsible for theft of valuables from customer’s car occurring while the customer’s car is on the property.” • Bungee jumping: For dangerous sporting activities, they will ask you to sign something to limit their liability o “The jumper assumes all risks involved in taking the jump and the company is not responsible for any injury howsoever caused.” • Concert ticket: “Ticket holder acknowledges all risks incidental to any game or event for which this ticket is issued, whether occurring before, during or after the game or event, and hereby agrees to assume same…” o Most people don’t flip over the ticket to read the fine print Enforcement of Exclusion Clauses • 1) The Incorporation Issue o Has the exclusion clause been incorporated into the contract? o eg. When you pay for parking and the ticket contains terms and conditions, have those terms and conditions been incorporated into the contract? o The general rule is that the exclusion clause must be brought to the customer’s attention before the contract was entered into, or while the contract was being entered into o Two ways in which incorporation may be established:  1. Signature • As a general rule, a person who signs a contractual document is bound by its terms, including any exclusion clauses, even if he or she has not read the document. (L’Estrange v. Graucob, 1934) • Exceptions: Fraud, you have been misled in some way • Exception: Tilden Rent-A-Car v. Clendenning o If there is an unusual or onerous term in a contract that has not been brought to your attention, you will not be bound o C rented a car from Tilden at an airport o C was asked by Tilden’s clerk if C desired additional insurance coverage at a cost of $2/day o C agreed without reading the conditions. The agent didn’t ask C to read it, and he didn’t point out unusual terms on the back of the contract (which excluded insurance coverage if the driver had consumed any amount of alcohol). o C damaged the rental car in a collision with another vehicle o C pleaded guilty to a charge of driving while impaired o The insurance company denied coverage based on the agreement. C claimed he was lead to believe the insurance had complete coverage because he was paying an additional $2/day. o Issue: Is C liable for the damage caused to the rental car, by reason of the exclusionary provisions in the contract? o The Court concluded that C was not bound because of:  The unusual and onerous terms • eg. if the driver exceeded the speed limit by 1 mile/hour, parked in a no-parking area, or had one glass of wine or beer, the renter was responsible for any damage to the vehicle  The circumstances under which the contract was signed • The contract was signed under a hurried situation at an airport o Ratio/Rule: If there is a lengthy contract with unusual or onerous terms, you will not be bound unless the company draws those terms to your attention  2. Notice • There are contracts where your signature is not required, yet you are still bound by an exclusion clause • eg. parking ticket, concert ticket, dry cleaning receipt • The question is not whether the customer has read the receipt/ticket, but whether they were given reasonable notice • Notice must be given before the other party gives consent to enter into the contract • If the terms are particularly onerous or unusual, they must be drawn to the attention of the party • Case: Parker v. South Eastern Railway Co. and Gabell v. South Eastern Railway Co. o P and G deposited their bags in a cloak room at the railway station. They paid the clerk a sum and received a ticket. On the one side of the ticket was a number, and it said “see back”. On the back, it said the company wouldn’t be responsible for any package exceeding $10. o When they presented their tickets, the bags were not there. o They each claimed $24 as the value of their bag. The
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