Answering Hypothetical Law Problems

This guide to answering problem questions is posted so that students develop

an understanding of what we expect when you answer a hypothetical law
problem. To get maximum benefit from such a guide, students should (a)
read the advice on methodology in the introductory section of CACL and (b)
attempt a draft before looking at this one.

Guide to answering Question 1 CACL p178

In advising Jill of her rights to sue for the damage done to her car and the loss
of her laptop we need to consider two issues: first are either or both of the
exclusion clauses included in the contract? This is sometimes referred to as
the incorporation question. Second, if so, does the clause (or do the clauses),
as a matter of contractual interpretation, exclude or limit Bilsons liability for
the breach? (I am assuming that Bilsons (as an employer) is vicariously liable
for the acts of its employee and is therefore the one Jill would prefer to sue).

1. The incorporation issue. Where the contractual terms are not contained in a
written document signed by the parties, the basic question is whether the
person seeking to rely on the exclusion clause has given reasonable notice of
the clause to the other side: Baltic Shipping. This is an objective test in
other words, the question is whether a reasonable person would say that, in
these particular circumstances, Bilsons has given reasonable notice.

For notice to be considered reasonable, at the very least, notice must be
given to the other party at or before the time the agreement is made: Olley v
Marlborough Court. Therefore, in cases such as ours, it is critical to
determine precisely when the contract is made, because after that moment,
no terms can be added, without the express or implied consent of both
parties. In this problem I can follow the reasoning of Denning LJ in Thornton v
Shoe Lane Parking because the facts are similar and the precedent, although
not binding, is persuasive. According to Denning LJ, the contract was made
as follows the offer was contained in the notice at the entrance giving the
charges etc and indicating that the car would be parked at the owners risk.
The offer was accepted when Thornton drove up to the entrance and when
the ticket was thrust at him. The contract was then concluded, and it could not
be altered by any words printed on the ticket itself. There are strong parallels
here: the contract was concluded when Jill received the ticket (the fact that
payment would occur later is irrelevant: this is an example of an executory
contract - neither party has performed but the contract is made).

If this is the case, reasonable notice may have been given of the clause
contained in the notice outside the park (it was a large sign and a clear
statement) but not in relation to the exclusion clause contained on the back of
the ticket because the agreement was made before it was brought to Jills
attention.


2. The interpretation issue. In respect of the clause that is included in the
contract, the question is whether the particular clause would be effective in
excluding the liability of the car park. There are a couple of important points
to make here. The first applies to the way in which contractual terms
generally are interpreted. The meaning of contractual terms is determined
objectively - we ask what a reasonable person in the position of the parties
would have understood the terms, including any exclusion clause, to mean.
The parties own personal intentions or meanings are irrelevant: Pacific
Carriers v BNP Paribas. The second point applies to exclusion or limitation
clauses only. For many years, the courts have disapproved of exclusion
clauses because they have been used in situations where there has been an
imbalance in the bargaining position of the parties, where the contract is not
freely negotiated or are found in standard form contracts. That is the position
here: Bilsons is in a dominant position, the contract is a take it or leave it
proposition (who would be prepared to hold up the line of cars while
negotiations take place about the meaning of the clause on the back of the
ticket?) and the clause in question is found on a sign at the front.

Where this is the case, any ambiguity in the exclusion clause, or lack of clarity
about the scope of the clause, will be interpreted contra proferentum that
is, against the party seeking to rely on it: Wallis v Pratt. In this case, the
courts would interpret the phrase no liability accepted narrowly (Kovan
Engineering v Gold Peg) and it would certainly not protect Bilsons from the
outrageous acts of its employee in stealing the car and dumping it in the river.
More specifically I would argue that these acts would be outside the four
corners of the contract as no reasonable person would think that these
actions were authorised by the contract: Sydney City Council v West. There
are, indeed, strong parallels with Sydney City Council where the acts of
SCCs employee in handing a ticket to the rogue operator went outside the
actions (the four corners) contemplated by the parties to the contract.
Alternatively, it could be argued that these actions constitute a fundamental
breach of the contract that is a breach so basic and so gross that a general
phrase like no liability accepted could not hope to protect the company:
compare Photo Productions v Securicor.

(Students who argued that the clause on the ticket was incorporated into the
contract would go on to discuss the interpretation issue. The question is then
whether as a matter of interpretation it is effective. The answer is that it would
not discuss four corners rule/fundamental breach as above).

For these reasons Jill would be able to sue Bilson: neither clause is
ineffective, either because they are not incorporated into the agreement or, as
a matter of contractual interpretation, do not cover the breach in question.