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PROBLEM QUESTION
Minnie wanted her furniture transported to her new house on Hollywood Road. Goofy
offered to do the job. His standard contract contained the term “no liability is
accepted for any damage, howsoever caused, to any goods during the course of
transit”. Minnie glanced through the contract and spotted the term, which she did not
understand. When she asked, Goofy explained that it was only applicable if the
damage to the goods was caused by a traffic accident during transit. Goofy also said
that he would drive the lorry himself and that there was little risk of an accident as he
was a careful driver. Upon this assurance, she signed the contract.
While Goofy was transporting the furniture, he left the lorry outside a coffee shop to
get a can of Coke without turning off the engine. On his return, he found his lorry on
fire. The fire destroyed all the furniture. When Minnie asked Goofy to pay for the
furniture, Goofy pointed out that he was not liable as the exemption clause covered
the damage. Advise Minnie. (20 marks) DS/DMS BL/Nov 2016/All Rights Reserved ANSWER
Key Issue: (1 mark)
Minnie signed a standard contract for Goofy’s transport business. It contains an exemption
clause. It completely excludes liability for damaged goods during transit. The key issue is
whether the exemption clause is valid in law.
Applicable Law: (7 marks, Law)
There are three issues:
•
•
• Whether the exemption clause is valid because of incorporation by signature (L’Estrange
v Graucob); (1 m, case law; 1 m for stating rule)
Whether the exemption clause is invalid because of unusual factors (Curtis v Chemical
Drycleaning); (1 m, case law; 1 m for stating rule)
Whether an implied term exists in Minnie’s standard contract (Moorcock and Shirlaw v
Southern Foundries). (2 m, case law; 1 m for stating rule) Application of Law to Facts: Analysis
Issue One: Exemption Clause is Valid (2 marks)
Minnie’s case resembles L’Estrange: the rule is that a party is bound on signing the contract.
It does not matter if the party had read it or not.
In Minnie’s case, she actually read the exemption clause. But she did not understand it.
Hence she asked Goofy to explain. If she still did not understand, she can refuse to sign.
Minnie did not do so. It is arguable that Minnie was assured by Goofy’s explanations. That is
why she signed the contract. Because she signed the contract, it is valid in law (L’Estrange).
Thus Minnie is arguably bound by the contract upon her signature.
Issue Two: Exemption clause invalid because of unusual factors (4 marks)
Though Minnie signed the contract, I argue that this exemption clause is invalid because of
misrepresentation. After incorporation, exemption clauses must be interpreted.1 L’Estrange
applies when there is no misrepresentation.
Goofy told Minnie that the exemption clause only applies to damaged goods in transit, which
are caused by a traffic accident. He assured Minnie that he would drive the lorry himself. He
said that he was a careful driver.
But Goofy was careless. While transporting Minnie’s furniture in transit, he stopped his work
to buy a drink. He did not turn off the engine. Goofy’s actions are inconsistent with his
assurance to Minnie. This is a misrepresentation.
Thus I argue that Minnie’s facts are different from L’Estrange. L’Estrange does not apply.
1
In my slides, I said you must “read the clause carefully” (see p57 PDF; also p 41 old slide number). For exams,
use the words “interpretation” or “construction”. DS/DMS BL/Nov 2016/All Rights Reserved Also Goofy misrepresented the exemption clause’s scope. He told Minnie that this term only
applied to damaged goods in transit which were caused by traffic accidents.
Actually this exemption clause is much wider. It completely excludes liability for any type of
damage, whatever the reasons, during the transit of her furniture. Minnie’s case is similar to
Curtis. In Curtis, it was held that misrepresentation of an exemption clause’s true scope can
be invalid.
Minnie signed the contract because she was assured by Goofy. Importantly, she relied on
his explanation. Without Goofy’s assurance, it is arguable that she would not sign. For these
reasons, Curtis applies to Minnie’s case. The exemption clause is invalid.
Issue Three: Implied Term (4 marks)
There are three ways to imply a term into a contract. We can imply terms through case law,
statute, or based on custom (common business practice). In Minnie’s case, I focus on case
law and custom.
In Moorcock, it was held that a term is implied into a contract because it improves business
efficacy. Though there is no express term, the court in Moorcock implied a term that both
parties intended a wharf business must always be deep enough for ships.
This is the “business efficacy” test in Moorcock. It ensures that businesses can run
effectively. It enables business risks to be shared fairly. It is reasonable that Minnie expects
Goofy’s transport business to take care of her furniture during transit.
My argument is supported by the “officious bystander” test (Shirlaw v Southern Foundries). It
is not just Minnie who reasonably expects Goofy to transport her furniture safely, while in
transit. Many people, in Minnie’s position, would also say “Oh of course!”.
Bonus Mark: s 2(2) Unfair Contract Terms Act (UCTA) (1 mark)
It is unlikely that Goofy can use s2(2) UCTA to exclude his liability. This section only
applies if the negligence was reasonable. As explained above, Goofy’s conduct was
careless. It was not reasonable.
Conclusion: (1 mark)
On balance, Minnie can argue that the exemption clause she had signed is invalid at law. On
this basis, she can ask Goofy to pay for the damaged furniture. DS/DMS BL/Nov 2016/All Rights Reserved TIPS: HOW TO WRITE A GOOD ANSWER
Key Issue: (1 mark) Comment [d1]: Structure. Please copy
this in your assignment and exams. Minnie signed a standard contract for Goofy’s transport business. It contains an exemption
clause. It completely excludes liability for damaging goods during transit. The key issue is
whether the exemption clause is valid in law.
Applicable Law: (7 marks, Law)
There are three issues:
•
•
• Whether the exemption clause is valid based on incorporation by signature (L’Estrange v
Gracub);
Whether the exemption clause is invalid because of unusual factors (Curtis v Chemical
Drycleaning);
Whether an implied term exists in Minnie’s standard contract (Moorcock and Shirlaw v
Southern Foundries). Comment [d2]: I give 1 mark for stating
law and 1 mark for case law’s name. Application of Law to Facts: Analysis Comment [d3]: Structure. Please copy
this for assignment and exams Issue One: Exemption Clause is Valid (2 marks) Comment [d4]: I give 1 mark for stating
law and 1mark for case law’s name. Minnie’s case resembles L’Estrange: the rule is that a party is bound on signing the contract.
It does not matter if the party had read it or not.
In Minnie’s case, she actually read the exemption clause. But she did not understand it.
Hence she asked Goofy to explain. If she still did not understand, she can refuse to sign.
Minnie did not do so. It is arguable that Minnie was assured by Goofy’s explanations. That is
why she signed the contract. Because she signed the contract, it is valid in law (L’Estrange.
Thus Minnie is arguably bound by the contract upon her signature.
Issue Two: Exemption clause invalid because of unusual factors (4 marks)
Though Minnie signed the contract, I argue that this exemption clause is invalid because of
misrepresentation. After incorporation, exemption clauses must be interpreted.2 L’Estrange
applies when there is no misrepresentation.
Goofy told Minnie that the exemption clause only applies to damaged goods in transit, which
are caused by a traffic accident. He assured Minnie that he would drive the lorry himself. He
said that he was a careful driver.
But Goofy was careless. While transporting Minnie’s furniture in transit, he stopped his work
to buy a drink. He did not turn off the engine. Goofy’s actions are inconsistent with his
assurance to Minnie. This is a misrepresentation. 2
In my slides, I said you must “read the clause carefully” (see p57 PDF; also p 41 old slide number). For exams,
use the words “interpretation” or “construction”. DS/DMS BL/Nov 2016/All Rights Reserved Comment [d5]: This is application. You
are explaining why it’s similar. I give 1
bonus mark. Comment [d6]: Structure. Copy these
sub headings for assignments and exams. Thus I argue that Minnie’s facts are different from L’Estrange. L’Estrange does not apply.
Also Goofy misrepresented the exemption clause’s scope. He told Minnie that this term only
applied to damaged goods in transit which were caused by traffic accidents.
Actually this exemption clause is much wider. It completely excludes liability for any type of
damage, whatever the reasons, during the transit of her furniture. Minnie’s case is similar to
Curtis. In Curtis, it was held that misrepresentation of an exemption clause’s true scope can
be invalid. Comment [d7]: You can answer this
only if you read the question very carefully!
What Goofy said to Minnie is close but
different from the exact words of the
exemption clause: “no liability is accepted
for any damage, howsoever caused, to
any goods during the course of transit”. Minnie signed the contract because she was assured by Goofy. Importantly, she relied on
his explanation. Without Goofy’s assurance, it is arguable that she would not sign. For these
reasons, Curtis applies to Minnie’s case. The exemption clause is invalid.
Issue Three: Implied Term (4 marks)
There are three ways to imply a term into a contract. We can imply terms through case law,
statute, or based on custom (common business practice). In Minnie’s case, I focus on case
law and custom. Comment [d8]: Always state the
general rule of implying terms first. You get
marks. In Moorcock, it was held that a term is implied into a contract because it improves business
efficacy. Though there was no express term, the court in Moorcock implied a term that both
parties intended a wharf business must always be deep enough for ships.
This is the “business efficacy” test in Moorcock. It ensures that businesses can run
effectively. It enables business risks to be shared fairly. It is reasonable that Minnie expects
Goofy’s transport business to take care of her furniture during transit.
My argument is supported by the “officious bystander” test (Shirlaw v Southern Foundries). It
is not just Minnie who reasonably expects Goofy to transport her furniture safely, while in
transit. Many people, in Minnie’s position, would also say “Oh of course!”.
Bonus Mark: s 2(2) Unfair Contract Terms Act (UCTA) (1 mark)
It is unlikely that Goofy can use s2(2) UCTA to exclude his liability. This section only
applies if the negligence was reasonable. As explained above, Goofy’s conduct was
careless. It was not reasonable.
Conclusion: (1 mark)
On balance, Minnie can argue that the exemption clause she had signed is invalid at law. On
this basis, she can ask Goofy to pay for the damaged furniture. DS/DMS BL/Nov 2016/All Rights Reserved Comment [d9]: Use this term in your
conclusion.
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