Case Study: Photoproduction vs. Securecor
-Securecor a security company, an employee [of the photo production company]
burned down the factory (warehouse) on purpose.
- Exclusion clause says they are not responsible for anything that happens, unless they
didn’t properly screen their employees (which they did). Employee wilfully burned
down the place, no negligence. Properly screen and foreseeable accident?
- hired security guards [contract]
-Doctrine of fundamental breach: courts are reluctant to enforce exclusion clauses
because they are fundamentally unfair. If the breaching party is so severe in their
actions, and it denies the innocent party any benefit, the contract fails. Doctrine was
not in place for long.
- Rule of law? But… changed their minds.
- Clear language of the contract is important. Doctrine of contra proferentum:
doctrine or rule of interpretation that all we have to use. “that’s the rule we should
apply” if there are any ambiguity in the contract, it must be resolved against the
interest of the author. If there isn’t ambiguity, must abide the contract.
- on appeal, the court of appeal reversed the decision. Fundamental breach assisted the
- House of lords: “freedom to contract” turned their mind to the issue of allocation of
risk. “who can best afford? Who can allocate the risk” why should the court interfere
with the parties that wilfully entered into a contract. No ambiguity, parties chose to
allocate the risks.
- Lord diplock—after the performances and obligations, how do you know if they
have been performed? Taking away the diligence to decide themselves how to
allocate the risks themselves. Exclusion clause must be in clear language… as it is
written, has secondary obligations to pay for damages? Can still sue for damages.
-Since parties are so small and had made agreements with each other, they should be
allowed to assess risk among each other.
-Parliament passed a law that said “in a consumer contract, exclusion clauses won’t
apply”. These two entities in question are not consumers. They have equal bargaining
power. Two sophisticated business entities.
-If the terms are ambiguous in a written contract they should be read to the
disadvantage of the author.
-Clause was clearly written, facts come inside the clause, defendant succeeds.
-Securecor only asks a modest fee. The richer plaintiff should take on the risk and
bear the cost of insurance. Clause was written clearly and protects them from liability.
-Secondary obligation to pay damages can not be a penalty
penalty- extremely expensive damages, inordinate
liquidated damages- damages upon a breach87
Case Study: Rider vs. Microsoft
-Rider signed up for Microsoft online service with a reverse or negative option
billing: where you are billed at a later date unless you say you don’t want it -Rider tries to get a hold of Microsoft to determine how much money they have taken
from him and others. Starts a class action law suite: where a lot of people who have
all been injured in the same way pool their resources and file a claim.
-Rider decides he is the representative of 89,000 people
-Files a class action law suite in Toronto. Microsoft decides he can’t sue them in
Toronto. Clause (15): forum selection clause: clicking “I agree” means you agree to
all terms in the agreement. You must sue them at home in Washington.
-Rider claims he never saw that, the court said he had a lot of time to read it, all fonts
were the same size, he just didn’t bother to read it. No “fine print”.
-Case was permanently stayed. Could never proceed in Toronto. ,
-Established that clicking “I agree” is the same thing as a signature on a contract, and
that contracts that say things like that do not count as “fine print”.
Different result. Internet infancy time. Paid monthly fee to subscribe to internet. Filed a class action
law suit. Brought a motion [by Microsoft] mini proceeding before trials. “there is a term on the contract
that says you cannot have a trial.”
Forum selection clause: court jurisdiction, decides where you can sue.
-Company “trust” comes from copyright: government enforced monopoly. Obligates
you to use that monopoly for the greater good of society.
To the fullest extent permitted by the law
Newell et al. vs. Canadian Pacific Airlines ltd.
-Newell had just had a heart attack, went to Mexico to relax. Brought dogs with him who were in
perfect health when they l