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THE EFFECTS OF EXCLUSION CLAUSES


by
A VIJAYALAKSHMI VENUGOPAL
LLB (Hons) (London), CLP, MEd (Malaya), Advocate & Solicitor
[2002] CLJ liii
Intellectual Property
Malaysia

Nature
An exclusion clause is a term that is inserted in a contract or other document with the purpose
of excluding or limiting liability which would arise unless the exclusion clause was:
(i) valid as will be discussed below, there are a number of factors the court takes into
account when called on to consider the validity of an exclusion clause, and
(ii) applicable the party intending to rely on the exclusion clause may also have to prove
that the particular exclusion clause in question is applicable to the nature of liability the party
is seeking to avoid. For example, the party relying on the clause may allege that the clause
exempts the party from liability in breach of contract and negligence whereas the court may
decide that the clause only affects one of those two liabilities.
P.S. Atiyah1 observed that:
An exemption clause may take many forms, but all such clauses have one thing in common in that they exempt a
party from liability which he would have borne had it not been for the clause.

G.H.L. Fridman2 notes:


Such a clause3 excludes or modifies contractual obligations. It affects the nature and scope of a party's
performance.

It has been stated in Halsbury's Laws of England4 that:


It is common, particularly in standard form contracts, for one or more parties to seek to exclude or limit liability
for breach of contract or misrepresentation which would otherwise be imposed upon him.

Visu Sinnadurai5 writes:


There has, however, only been very few decisions by Malaysian Court concerning the application of exemption
clauses. This paucity of cases should not be taken as an indication of the extent to which such clauses are being
used in this country. In fact, over the recent years, the use of exemption clauses in contracts have become

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widespread.

The burden of proof lies on:


(i) the party claiming compensation for loss and/or damage to prove that the loss and/or
damage was occasioned by the defendant, and
(ii) the party relying on the exclusion clause to prove that the loss and/or damage claimed is
excused by the clause.
J Beatson6 writes:
The party seeking to rely on an exemption clause must show that the loss or damage to the other party is within
the scope of the clause. But the other party must first plead and prove that the loss or damage which has been
sustained was caused by some breach of contract or duty on the part of the defendant.

A party seeking to rely on an exclusion clause may insert such a clause in almost any
document given to the other party from a contract to a receipt. The party relying on the clause
usually alleges that the other party had notice of the clause as it was in the document handed
to the other party. The problem with this argument is that very often, the other party who
receives the document that contains the exclusion clause does not read or understand the
clause. This party usually only realises the effect of the clause once loss has occurred and
liability is disputed.
Syed Ahmad Alsagoff writes:
These (exclusion) clauses may appear in printed tickets, notices or receipts which are brought to the customers'
attention at the time of the agreement which, in most cases, the consumer has no time or energy to read the
printed words. Even if he reads them, he would probably not understand them. It is only when a dispute arises
that the consumer realises how much of his rights have been excluded by these clauses.7

Andrew Phang Boon Leong writes:


The common law has long been familiar with the attempt of one party to a contract to insert terms excluding or
limited liabilities which would otherwise be his. The situation frequently arises where a document purporting to
express the terms of the contract is delivered to one of the parties and is not read by him.8

Lord Reid in the House of Lords in Suisse Atlantique Societe D' Armement Maritime S.A. v. N.
V. Rotterdamsche Kolen Centrale9 explains:
Exemption clauses differ greatly in many respects. Probably the most objectionable are found in the complex
conditions which are now so common. In the ordinary way the customer has no time to read them, and if he did
read them he would probably not understand them. And if he did understand and object to any of them, he would
generally be told he could take it or leave it. And if he then went to another supplier the result would be the same.
Freedom of contract must surely imply some choice or room for bargaining.

Exclusion clauses have been drafted in exceedingly wide terms which seem to exclude almost
any and all liability. Even if the party against whom this exclusion clause will operate does
know of the existence of the clause, that person is often in too weak a bargaining position to

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object to the clause.
Tommy Thomas10 explains that:
Clauses which absolve a party to a contract from liability for breaking it are no doubt unpopular, particularly
when they are unfair. The common law is founded on the premise that parties are free to bargain and enter into a
contract on whatever terms they wish to. However in reality what is crucial is their bargaining power. The parties
seldom deal on equal terms. In today's commercial world the consumer if he wishes to buy a product or obtain a
service has to accept the terms and conditions of a standard contract prepared by the other party, usually with the
assistance of legal expertise.

Lum Kit-Wye, Victor Yeo and Low Kee Yang11 write:


Exemption clauses may result in injustice, especially if they are allowed to operate freely against consumers or
parties who are in a weaker bargaining position. Such persons may not be in a position to freely negotiate against
the inclusion or the extent of such clauses in their contracts.

Common Law
The source of the law in this area is from cases. As Syed Ahmad Alsagoff12 comments:
The Contracts Act 195013 contains no provision dealing with exemption clauses. The Malaysian courts have
followed English common law when considering this aspect of the law.

Dato' Visu Sinnadurai14 similarly writes:


There is a dearth of cases dealing with exemption clauses in consumer transactions in Malaysia and Singapore.
The Malaysian and Singapore courts are likely to follow English common law when considering this aspect of
law.

Notice Must Be Contemporaneous With The Contract


The party seeking to rely on an exclusion clause alleges that the other party had notice of the
clause and since that party did not object to the clause, the clause should be binding on the
other party. For this argument to find favour, then, the party against whom the exclusion
clause will operate must have had notice of the clause before the contract was concluded as
that party must have had an opportunity to object to the clause before the clause became
binding.
Syed Ahmad Alsagoffi15 explains:
For an exemption clause to be effective, it must be brought to the notice of the contracting parties before or at the
time the contract is made.

The case of Olley v. Marlborough Court Limited,16 the Court of Appeal interpreted the effect
of an exclusion clause put in a notice in a hotel bedroom. This notice stated that:
The proprietors will not hold themselves responsible for articles lost or stolen, unless handed to the manageress

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for safe custody. Valuables should be deposited for safe custody in a sealed package and a receipt obtained.17

In this case, a couple, in accordance with the custom of the hotel, paid for a week's stay in
advance and only saw this notice on arrival in their room. The wife in this case placed their
room key on a hook in the reception office when the couple stepped out of the hotel. Their key
was taken from this hook and valuables were stolen from their room. The couple sued the
hotel company for negligence and the hotel company sought to rely on the exclusion clause in
the notice to exempt themselves from liability.
Singleton LJ, in this case, concluded:
If the defendants, who would prima facie be liable for their own negligence, seek to exempt themselves by words
of some kind, they must show, first, that the words form part of the contract between the parties It is clear that
when the plaintiff and her husband went to the hotel they had not seen the notice. Apparently, by the custom of
the hotel, they were asked to pay a week in advance, and when they went to the bedroom for the first time they
had not seen the notice, and the words at the head of the notice could not be part of the contract between the
parties.18

Denning LJ concluded that:


Now people who rely on a contract to exempt themselves from their common law liability19must prove that
contract strictly. Not only must the terms of the contract be clearly proved, but also the intention to create legal
relations the intention to be legally bound must also be proved. The best way of proving it is by a written
document signed by the party to be bound. Another is by handing him before or at the time of the contract a
written notice specifying its terms and making it clear to him that the contract is on those terms. A prominent
public notice which is plain for him to see when he makes the contract or an express oral stipulation would, no
doubt, have the same effect. But nothing short of these three ways will suffice. So, also, in my opinion,
notices put up in bedrooms do not of themselves make a contract. As a rule, the guest does not see them until
after he has been accepted as a guest. The hotel company no doubt hope that the guest will he held bound by
them, but the hope is vain unless they clearly show that he agreed to be bound by them, which is rarely the
case.20

In Thornton v. Shoe Lane Parking Ltd,21 the plaintiff went to park at a multi-storey automatic
car park owned by the defendant. He had never gone there before. There was a notice on the
outside which bore a statement that 'All cars parked at owners risk'. There was no man at the
entrance. As he drove in, a ticket was pushed out from a machine.
The ticket had a notice that 'This ticket is issued subject to the conditions of issue displayed on
the premises.' The ticket also stated that the customer should present the ticket to the cashier to
claim his car.
Exclusion clauses were also displayed on a pillar opposite the ticket machine and in the
paying office.
There was an accident in the car park premises and the defendant attempted to rely on the
exclusion clauses to exempt themselves from liability. The plaintiff admitted that he looked at
the ticket to see the time printed on it but did not read the other printed words he saw.

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Lord Denning MR in the Court of Appeal clarified:
We have been referred to the ticket cases of former times from Parker v. South Eastern Ry Co22 to McCutcheon
v. David MacBrayne Ltd.23 They were concerned with railways, steamships and cloakrooms where booking
clerks issued tickets to customers who took them away without reading them. In those cases the issue of the ticket
was regarded as an offer by the company. If the customer took it and retained it without objection, his act was
regarded as an acceptance of the offer: see Watkins v. Rymill24 and Thompson v. London, Midland and Scottish
Ry Co.25 These cases were based on the theory that the customer, on being handed the ticket, could refuse it and
decline to enter into a contract on those terms. He could ask for his money back. That theory was, of course, a
fiction. No customer in a thousand ever read the conditions. If he had stopped to do so, he would have missed the
train or the boat.

None of those cases has any application to a ticket which is issued by an automatic machine.
The customer pays his money and gets a ticket. He cannot refuse it. He cannot get his money
back. He may protest to the machine, even swear at it; but it will remain unmoved. He is
committed beyond recall. He was committed at the very moment when he put his money into
the machine. The contract was concluded at that time. It can be translated into offer and
acceptance in this way. The offer is made when the proprietor of the machine holds it out as
being ready to receive the money. The acceptance takes place when the customer puts his
money into the slot. The terms of the offer are contained in the notice placed on or near the
machine stating what is offered for the money. The customer is bound by those terms as long
as they are sufficiently brought to his notice beforehand, but not otherwise. He is not bound by
the terms printed on the ticket if they differ from the notice, because the ticket comes too late.
The contract has already been made: see Olley v. Marlborough Court Ltd.26 The ticket is no more
than a voucher or receipt for the money that has been paid (as in the deckchair case, Chapleton v. Barry Urban
District Council27), on terms which have been offered and accepted before the ticket is issued. In the present case
the offer was contained in the notice at the entrance giving the charges for garaging and saying 'at owners risk',
ie, at the risk of the owner so far as damage to the car was concerned. The offer was accepted when the plaintiff
drove up to the entrance and, by the movement of his car, turned the light from red to green, and 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.28

Sir Gordon Willmer in this case observed:


It seems to me that the really distinguishing feature of this case is the fact that the ticket on which the reliance is
placed was issued out of an automatic machine. I think it is right to say at any rate, it is the fact so far as the
cases that have been called to our attention are concerned that in all the previous so-called 'ticket cases' the
ticket has been proffered by a human hand, and there has always been at least the notional opportunity for the
customer to say, if he did not like the conditions: 'I do not like your conditions. I will not have this ticket.' But in
the case of a ticket which is proffered by an automatic machine, there is something quite irrevocable about the
process. There can be no locus poenitentiae. it seems to me that any attempt to introduce conditions after the
irrevocable step has been taken if causing the machine to operate must be doomed to failure. if one does desire
to impose on one's customers stringent conditions such as these, the least one can do is to post a prominent notice
at the entrance to the premises, warning one's customers that there are conditions which will apply.29

With regard to the effect of the other notices of the exclusion clauses displayed in the
premises, Megaw LJ in this case held:
It does not take much imagination to picture the indignation of the defendants if their potential customers, having
taken their tickets and observed the reference therein to contractual conditions which, they said, could be seen in
notices on the premises, were one after the other to get out of their cars, leaving the cars blocking the entrances to

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the garage, in order to search for, find and peruse the notices! Yet, unless the defendants genuinely intended the
potential customers should do just that, it would be fiction, if not farce, to treat those customers as persons who
have been given a fair opportunity, before the contracts are made, of discovering the conditions by which they are
to be bound.30

In the case of tickets issued by automatic machines, it seems that giving the customer due
notice of conditions printed on the ticket will be to no avail. The contract is concluded once
the money is put into the machine.
This rule is the same as when the ticket is issued by people such as when:
Assuming, however, that an automatic machine is a booking clerk in disguise, so that the old fashioned ticket
cases still apply to it .

Whether the ticket is issued by a person or a machine, for exclusion clauses to be effective,
they must be brought to notice before the contract is concluded. There is just an added touch
of 'finality' when the document containing the exclusion clause is issued by a machine which
is unlikely to yield to even the most fervent efforts in negotiation short of property damage to
the machine.
In Goh Gok Hoon v. Eusuff Bros Sdn. Bhd. & Ors.31 the High Court considered the effect of a
clause contained in receipts for payment of rent which the appellant alleged were binding on
the first respondent. The premises belonging to the appellant was let to the first respondent on
1 October 1959. There was no written contract to this effect. The only available documentary
evidence of this transaction was contained in a letter from the first respondent to the appellant
confirming that the first appellant agreed to rent the premises from the appellant for a monthly
rent of RM125. The receipts for payment of rent, however, contained a clause which stated:
No subtenancy or charge of tenancy will be allowed or recognized without the written consent of the landlord to
that effect.32

In June 1971, the third respondent and his son took over the tenancy from the first respondent
although the rent continued to be paid by the first respondent and the receipts were issued in
the name of the first respondent.
Wan Yahya J concluded with regard to the legal effect of the clause on subtenancy in the
receipts that:
he33 concluded that the restriction on subletting was conveyed to the first respondent only after the tenancy
agreement had been concluded and therefore the first respondent had no notice of it at the time when he wrote the
letter of acceptance. I therefore agree and accept the fact as found by the learned President that (the)
prohibition against subletting did not form a term of the oral contract and consequently the first respondent was
not bound by such a restriction.34

In Ghee Seng Motor v. Ling Sie Ting,35 Haji Abdul Kadir bin Sulaiman J in the High Court
held that:
The exemption clause if at all an exception clause is contained in the disputed exhibit D1(a) tendered by the

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defendant. So it is for the defendant to satisfy the Court that it was in fact given to the plaintiff. Each case
depends on the facts and circumstances of the case and in this case I am satisfied that the provisions of the
exemption clause were never brought to the attention of the plaintiff and the plaintiff was not aware of the
existence of the clause.36

The defendant in this case failed to prove that the plaintiff had notice of the exclusion clause
before the contract was formed and as such, could not rely on the clause.
Notice Must Be Reasonably Sufficient
Signed Documents
The exclusion clause may be contained in a document that is signed by the party against
whom the clause will operate. In such a case, the party who signs the document is deemed to
know its contents including the clause. The exceptions to this rule are fraud and
misrepresentation.
The plaintiff in L'estrange v. F. Graucob, Limited37 was the owner of a caf. The plaintiff
entered into a written contract with the defendant for the defendant to supply the plaintiff an
automatic slot machine. The plaintiff alleged that there the defendant breached an implied
warranty as the slot machine delivered was unfit for the purpose intended. The defendant
disagreed with this allegation.
There was a clause in the contract which stated that:
This agreement contains all the terms and conditions under which I agree to purchase the machine specified
above and any express or implied condition, statement, or warranty, statutory or otherwise not stated herein is
hereby excluded.38

Scrutton LJ, after referring to the cases of Richardson, Spence & Co. and the "Lord Gough"
Steamship Company, Limited v. Minnie Rowntree39 and Parker v. The South Eastern Railway
Company; Gabell v. The South Eastern Railway Company40 stated that:
In cases in which the contract is contained in a railway ticket or other unsigned document, it is necessary to prove
that an alleged part was aware, or ought to have been aware, of its terms and conditions. These cases have no
application when the document is signed. When a document containing contractual terms is signed, then, in the
absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial
whether he has read the document or not.41

In this case, the plaintiff has signed a document headed 'sales agreement,' which she admits
had to do with an intended purchase, and which contained a clause excluding all conditions
and warranties. That being so, the plaintiff, having put her signature to the document and not
having been induced to do so by any fraud or misrepresentation, cannot be heard to say that
she is not bound by the terms of the document because she has not read them.42
Maugham LJ in this case pointed to the fact that the contract was not in a formal character
such as a deed but rather in a 'brown paper document'43 and also that:

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It was an elaborate form containing a number of clauses, and among them certain terms and conditions in
regrettably small print but legible.44

Maugham LJ stated that despite reservations:


I regret the decision to which I have come, but I am bound by legal rules and cannot decide the case on other
considerations.45

In this case it is, in my view, an irrelevant circumstance that the plaintiff did not read, or hear
of, the parts of the sales document which are in small print, and that document should have
effect according to its terms. I may add, however, that I could wish that the contract had been
in a simpler and more usual form. It is unfortunate that the important clause excluding
conditions and warranties is in such small print. I also think that the order confirmation form
should have contained an express statement to the effect that it was exclusive of all conditions
and warranties.46
The plaintiff in this case, thus, was held to be bound by the exclusion clause as she had signed
the document which contained the exclusion clause in the absence of proved fraud or
misrepresentation.
The plaintiff in Curtis v. Chemical Cleaning and Dyeing Co.47 took a white satin wedding
dress to the defendant's shop to be cleaned. The shop assistant in the defendant's shop handed
the plaintiff a piece of paper headed 'receipt' which the plaintiff was asked to sign. When the
plaintiff asked why her signature was required, the plaintiff stated that she was informed that
defendant would not accept certain specified risks including the risk of damage by or to the
beads and sequins on the trimming of the dress. The plaintiff then signed the receipt.
The plaintiff sued the defendant for negligence when the dress, once returned to the plaintiff,
had a stain on it. The defendant relied on the exclusion clause in the receipt to deny liability
which stated:
This or these articles is accepted on condition that the company is not liable for any damage howsoever arising,
or delay.48

The plaintiff alleged that the exclusion clause was not valid as although the plaintiff had
signed the document which contained the exclusion clause, the signature was induced by a
misrepresentation.
Somervell LJ in this case held:
What was conveyed to the plaintiff, in my view, was that there were certain risks, in this case beads and sequins,
which the defendants were not prepared to accept. She was asked to sign this document and she thought that its
purpose was to exempt them from liability for beads and sequins, and that alone. That, I think, plainly is a
misrepresentation. The words on the document purported to exempt them from all liability, howsoever arising. In
those circumstances, I think, owing to that misrepresentation, this exception never became part of the contract
between the parties.49

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Denning LJ in this case explained:
This case is of importance because of the many cases nowadays when people sign printed forms without reading
them, only to find afterwards that they contain stringent clauses exempting the other side from their common-law
liabilities. In every such case it must be remembered that, if a person wishes to exempt himself from a liability
which the common law imposes on him, he can only do it by an express stipulation brought home to the party
affected, and assented to by him as part of the contract: Olley v. Marlborough Court.50If the party affected signs
a written document, knowing it to be a contract which governs the relations between them, his signature is
irrefragable evidence of his assent to the whole contract, including the exempting clauses, unless the signature is
shown to be obtained by fraud or misrepresentation: L'Estrange v. Graucob.51 But what is a sufficient
misrepresentation for this purpose?

In my opinion any behaviour, by words or conduct, is sufficient to be a misrepresentation if it


is such as to mislead the other party about the existence or extent of the exemption. If it
conveys a false impression, that is enough. If the false impression is created knowingly, it is a
fraudulent misrepresentation; if it is created unwittingly, it is an innocent misrepresentation;
but either is sufficient to disentitle the creator of it to the benefit of the exemption. In Rex v.
Kylsant52 it was held that a representation might be literally true but practically false, not because of what it
said, but because of what it left unsaid; in short, because of what it implied. This is as true of an innocent
misrepresentation as it is of a fraudulent misrepresentation. When one party puts forward a printed form for
signature, failure to draw attention to the existence or extent of the exemption clause may in some circumstances
convey the impression that there is no exemption at all, or at any rate not so wide an exemption as that which is
in fact contained in the document. The present case is a good illustration. by failing to draw the attention to
the width of the exemption clause, the assistant created a false impression that the exemption only related to the
beads and sequins, and that it did not extend to the material of which the dress was made. It was done perfectly
innocently, but nevertheless a false impression was created. it was a sufficient misrepresentation to disentitle
the cleaners from relying on the exemption, except in regard to beads and sequins.53

Denning LJ also explained54 that the defendant would have been in no better position if the
assistant did not say anything about the existence of the clause as then the receipt would have
been a voucher for the customer to keep and produce to collect the goods.
The defendant could also have not relied on the clause, according to Denning LJ,55 if the
plaintiff had merely signed the receipt and not asked what terms the receipt contained as the
assistant's silence would have created a false impression that the receipt contained no
conditions at all.
Counsel for the defendant argued that even if there was innocent misrepresentation, the effect
of this was to give the plaintiff a right to rescind the contract and not a right in damages. The
plaintiff could not very well rescind the contract and still rely on the contract as a basis to sue
the defendant. Additionally, the contract could not be rescinded as it had already been
executed.
Denning LJ responded that56:
(i) an executed contract could be rescinded in a 'proper case', and
(ii) even if this contract was rescinded, the plaintiff could still sue the defendant for negligence
as once the defendant undertook the task of cleaning the dress, the defendant was under an

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obligation to do so with reasonable care.
Denning LJ concluded that:
In my opinion when the signature to a condition, purporting to exempt a person from his common-law liabilities,
is obtained by an innocent misrepresentation, the party who has made that misrepresentation is disentitled to rely
on the exemption. Whether you call that a rule of law or equity does not matter in these days. We have got too far
beyond 1873 to trouble about distinctions of that kind.57

The Court of Appeal unanimously58 held that the signature in this case was induced by a
misrepresentation and as such, the exclusion clause in the receipt did not absolve the
defendant from liability in negligence although the plaintiff signed the receipt.
The High Court in Tac Construction & Trading v. Bennes Engineering Bhd.59 considered the
effect of a signature of the project manager of the defendant on the progress and final claims
of the plaintiff. The court held that:
those signatures would bind the defendant even if they did not read those documents in question.60

The authorities cited61 by the court for this principle of law were L'estrange v. F. Graucob,
Limited62 and Curtis v. Chemical Cleaning and Dyeing Co.63 Although this Malaysian case did
not involve an exclusion clause, Abdul Malik Ishak J, in this case, did make some general
comments regarding signatures:
I must say something about signatures generally. The case of Geary v. Physic [1826] 5 B. & C. 234 establishes
beyond doubt that even a signature by pencil is sufficient. The signature appearing on a telegraph form can even
be considered to be sufficient and this found favour in at least three old vintage cases. Firstly, Godwin v. Francis
[1870] LR 5 CP 295. Secondly, McBlain v. Cross [1872] 25 LT 804. Thirdly, R. v. Riley [1896] 1 QB 309, 313.
Then there is the principle that a signature by means of a mark is also considered as sufficient (Baker v. Dening
[1838] 8 A. & E. 94 (signature of a will), and Dyas v. Stafford [1881] 7 LR Ir. 590). Signatures by initials have
also been considered to be clearly sufficient (In the Goods of Blewitt [1879] 5 PD 116 (signature of will);
Phillimore v. Barry [1818] 1 Camp. 513; Chichester v. Cobb [1886] 14 LT 433; and Hill v. Hill [1947] Ch. 231,
240).64

Unsigned Documents
The party seeking to rely on the exclusion clause must be able to prove that the clause was
reasonably noticeable.
In Parker v. The South Eastern Railway Company;Gabell v. The South Eastern Railway
Company,65 the Court of Appeal considered whether a person who deposits articles in the
cloak-room of a railway company is bound by a condition on the back of the ticket that the
company would not be liable for losses of goods exceeding 10/.
Mellish LJ in this case explained:
In an ordinary case, where an action is brought on a written agreement which is signed by the defendant, the
agreement is proved by proving his signature, and, in the absence of fraud, it is wholly immaterial that he has not
read the agreement and does not know its contents. The parties may, however, reduce their agreement into

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writing, so that the writing constitutes the sole evidence if the agreement, without signing it; but in that case there
must be evidence of the agreement, without signing it; but in that case there must be evidence independently of
the agreement itself to prove that the defendant has assented to it. In that case, also, if it is proved that the
defendant has assented to the writing constituting the agreement between the parties, it is, in the absence of fraud,
immaterial that the defendant had not read the agreement and did not know its contents. Now if in the course of
making a contract one party delivers to another a paper containing writing, and the party receiving the paper
knows that the paper contains conditions which the party delivering it intends to constitute the contract, I have no
doubt the party receiving the paper does, by receiving and keeping it, assent to the conditions contained in it,
although he does not read them, and does not know what they are.66

Ordinarily, thus, the position seems to be:


(i) a written agreement that is signed the party who signed the document is deemed to know
its contents, whether he read it or not unless this party can prove that his consent was vitiated
by fraud,
(ii) a written agreement that is not signed the party seeking to rely on the terms of the
agreement must prove that the other party agreed to it independently of the agreement itself.
Then, the position is as above, namely, that the parties are deemed to know the terms of the
agreement, whether they read it or not unless there was some fraud, and
(iii) in the course of making a contract, one party delivers to the other a paper containing
writing and the recipient knows that paper contains conditions that the party delivering the
paper intends to constitute the contract by receiving and keeping the paper, the recipient is
deemed to have assented to the conditions contained therein, whether he has read them and
knows what the conditions are or not.
The present case, according to Mellish LJ, poses the problem of whether a person who
receives a ticket, knowing that there is writing on the back of it, is bound by those terms even
though the party did not read the terms and did not know that the writing were conditions of a
contract.
This situation is different from the third situation above as in the third situation above, the
recipient knows that the writing on the paper are conditions. However, in the facts of the case,
the recipient only knew that there was writing on the back of the ticket but did not know that
they were conditions. Therefore, the mere fact that the recipient accepted the ticket and kept it
may not be a sufficient reason to presume that the party assented to those conditions, whether
he read them or not.
Mellish LJ continued:
Now the question we have to consider is whether the railway company were entitled to assume that a person
depositing luggage, and receiving a ticket in such a way that he could see that some writing was printed on it,
would understand that the writing contained the conditions of contract, and this seems to me to depend upon
whether the people in general would in fact, and naturally, draw that inference. The railway company, as it seems
to me, must be entitled to make some assumptions respecting the person who deposits luggage with them: I think
they are entitled to assume that he can read, and that he understands the English language, and that he pays such
attention to what he is about as may be reasonably expected from a person in such a transaction as that of
depositing luggage in a cloak-room. The railway company must, however, take mankind as they find them, and if

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what they do is sufficient to inform people in general that the ticket contained conditions, I think that a particular
plaintiff ought not to be in a better position than other persons on account of his exceptional ignorance or
stupidity or carelessness. But if what the railway company do is not sufficient to convey to the minds of people in
general that the ticket contains conditions, then they have received the goods on deposit without obtaining the
consent of the persons depositing them to the conditions limiting their liability. I am of the opinion, therefore,
that the proper direction to leave to the jury in these cases is, that if the person receiving the ticket did not see or
know that there was any writing on the ticket, he is not bound by the conditions; that if he knew there was
writing, and knew or believed that the writing contained conditions, then he is bound by the conditions; that if he
knew there was writing on the back of the ticket, but did not know or believe that the writing contained
conditions, nevertheless he would be bound, if the delivering of the ticket to him in such a manner that he could
see there was writing upon it, was, in the opinion of the jury, reasonable notice that the writing contained
conditions.67

the real question, namely, whether the railway company did what was reasonably sufficient
to give the plaintiff notice of the condition.68
The test, thus, seems to be that if the person receiving the ticket:
(i) did not see or know that there was any writing on the ticket then he is not bound by the
conditions,
(ii) knew there was writing on the ticket and knew or believed that the writing contained
conditions then he is bound by the conditions, and
(iii) knew that there was writing on the ticket but did not know or believe that the writing
contained conditions (as in the present case):
(a) if the delivery of the ticket in such a manner that he could see there was writing on the
ticket was reasonable notice that the writing contained conditions then he is bound by the
conditions, or
(b) if the delivery of the ticket in such a manner that he could see there was writing on the
ticket was not reasonable notice that the writing contained conditions then he is not bound
by the conditions.
The question in this case appears to be whether a person who deposits luggage in a cloakroom of a railway station should reasonably assume that the writing on the back of the ticket
contains conditions. If this is a reasonable assumption based on the circumstances of the
transaction, then the person would be bound by the conditions stated on the ticket, whether the
person read the conditions or not.
Unfortunately, the court in this case, did not conclude on the facts of this case as to whether it
was a reasonable assumption to make or not. Mellish LJ merely concluded that there was a
misdirection of the jury and ordered a new trial.
Baggallay LJ seemed to lean in favour of concluding it was not reasonable to assume that the
tickets contained conditions:

13
The primary purpose of the ticket is to identify the articles deposited and the party entitled to reclaim them, but
practically, and by reason of the recognised practice of not delivering the ticket until the prescribed charge has
been paid; it becomes a voucher for the payment.69

Baggallay LJ also explained:


Now as regards each of the plaintiffs, if at the time when he accepted the ticket, he, either by actual examination
of it, or by reason of previous experience, or from any other cause, was aware of the terms of purport of effect of
the endorsed conditions, it can hardly be doubted that he became bound by them. I think also that he would be
equally bound if he was aware or had good reason to believe that there were upon the ticket statements intended
to affect the rights of himself and the company, but intentionally or negligently abstained from ascertaining
whether there were any such, or from making himself acquainted with their purport. But I do not think that in the
absence of any such knowledge or information, or good reason for belief, he was under any obligation to examine
the ticket with a view of ascertaining whether there were any such statements or conditions upon it.70

However, Baggallay LJ final order was for a new trial.


Bramwell LJ took a similar view of the case as Baggallay LJ in that Bramwell LJ also strongly
favoured the finding that there was no reasonable notice on the facts of the conditions on the
ticket. However, Bramwell LJ too, ordered a new trial.
Bramwell LJ stated:
The defendants put into the hands of the plaintiff a paper with printed matter on it, which in all good sense and
reason must be supposed to relate to the matter in hand. This printed matter the plaintiff sees, and must either
read it and not object, or does not read it, he must be held to consent to its terms 71

The plaintiff in Richardson, Spence & Co.and the "Lord Gough" Steamship Company, Limited
v. Minnie Rowntree72 was a passenger on board a steamer owned by the defendant. The
defendants attempted to rely on conditions stated on the ticket.
On the ticket it was stated that:
It is mutually agreed for the consideration aforesaid that this ticket is issued and accepted upon the following
conditions.

Condition (d) was that:


The company is not under any circumstances liable to an amount exceeding $100 for loss of injury to the
passenger or his luggage.

The House of Lords in this case unanimously73 dismissed the appeal. The decisions of the
jury74 was confirmed that:
(i) the plaintiff knew there was writing or printing on the ticket,
(ii) the plaintiff did not know that the writing or printing on the ticket contained conditions
relating to the terms of the contract of carriage, and

14
(iii) the defendants did not do what was reasonably sufficient to give the plaintiff notice of the
conditions.
Lord Herschell LC stated:
the plaintiff paid the money for her passage for the voyage in question, and that she received this ticket
handed to her folded up by the ticket clerk, so that no writing was visible unless she opened and read it. There are
no facts beyond those. Nothing was said to draw her attention to the fact that this ticket contained any conditions
75

Lord Ashbourne noted:


The ticket in question in this case was for a steerage passenger a class of people of the humblest description,
many of whom have little education and some of them none. I think, having regard to the facts here, the
smallness of the type in which the alleged conditions were printed, the absence of any calling of attention to the
alleged conditions, and the stamping of red ink across them 76

The House of Lords in this case, in coming to the conclusion that there was insufficient notice
drawn to the exclusion clause, relied on the facts that:
(i) the passengers were not well educated,
(ii) the print of the exclusion clause was small,
(iii) the exclusion clause was obscured by a stamp of red ink, and
(iv) the ticket was handed to the plaintiff folded.
The defendant in Hood v. Anchor Line (Henderson Brothers), Limited77 was a steamship
company which tried to rely on the conditions stated in the passenger's ticket. The plaintiff
sued the defendant for negligence of the defendant's employees.
The ticket was picked up on behalf of the plaintiff by Mr. Paul May who was the plaintiff's
clerk. Mr. May and the plaintiff did not read the ticket. The ticket was enclosed in an
envelope. On the top of the face of the envelope, there was a hand pointing to the statement
printed in capital letters, "Please read conditions of the enclosed contract".
Viscount Haldane in the House of Lords commented:
No doubt the burden of proof lies on the respondents to show that they did all that was reasonably required in
order to bring this condition to the notice of Mr. May, who represented the appellant in the transaction. It is
true that Mr. May did not look at the envelope closely or refer to the condition. He took the contract away and put
it in a safe, and ultimately gave it to the appellant, who did not read it either. But I am of the opinion that the real
question was not whether they did read it, but whether they can be heard to say that they did not read it. If it had
been merely a case of inviting people to put a penny into an automatic machine and get a ticket for a brief
journey, I might think differently. In such a transaction men cannot naturally be expected to pause to look
whether they are obtaining all the rights which the law gives them in the absence of a special stipulation. But
when it is a case of taking a ticket for a voyage of some days, with arrangements to be made, among other things,
as to cabins and luggage, I think ordinary people do look to see what bargain they are getting, and should be

15
taken as bound to have done so and as precluded from saying that they did not know.

The question is not whether the appellant actually knew of the condition. I have no doubt that
he did not. The real question is whether he deliberately took the risk of there being conditions
in the face of a warning sufficiently conveyed that some conditions were made and would
bind him. If he had signed the contract, he certainly could not have been heard to say that he
was not bound to look. The common sense of mankind which the law expresses here would
not permit him to maintain such a position. And when he accepted a document that told him
on its face that it contained conditions on which alone he would be permitted to make a long
journey across the Atlantic on board the steamer, and then proceeded on that journey, I think
he must be treated according to the standards of ordinary life applicable to those who make
arrangements under analogous circumstances and be held as bound by the document as clearly
as if he had signed it.78
Viscount Haldane in this case appears to emphasise the principle that when the court considers
whether the defendant has done all that is reasonably required to give the plaintiff notice of
any exclusion clause, this is an objective question. Whether the plaintiff himself was aware of
the existence and effect of the clause is not material. What is material is whether a reasonable
person would be aware of such a clause. The plaintiff is not allowed to turn a 'blind eye' where
a reasonable person would take the trouble to make enquiries. The plaintiff cannot be
protected by his own careless ignorance.
Another point which may be gathered from this case although it was not specifically
mentioned in this case is that on the facts of the case, the exclusion clause in question was to
the effect " the respondents were not liable in any case of injury to the passenger beyond
the amount of 10/."79 This would seem to be quite a restrictive clause, yet it was held by a
unanimous80 decision of the House of Lords to be valid. Even a wide exclusion clause then
can be valid as long as reasonable notice of it is given.
The court in Thompson v. London, Midland and Scottish Railway Company,81 had to consider
the effect of exclusion clauses printed on a railway ticket. On the ticket issued to the plaintiff
there was a statement that, "Excursion, For conditions see back." On the back of the ticket, it
is stated, "Issued subject to the conditions and regulations of the company's time tables and
notices and excursion and other bills. Return as per bill."
The plaintiff in this case could not read. However, as Lord Hanworth MR stated:
The plaintiff in this case cannot read; but having regard to the authorities, and the condition of education in this
country, I do not think that avails her in any degree.82

The ticket was priced at a lower figure than ordinary. As Lord Hanworth MR stated:
Obviously persons who are minded to go for a day journey of this sort do not take the trouble to make an
examination of all the conditions, but two things are plain, first, that any person who takes this ticket is conscious
that there are some conditions on which it is issued and also, secondly, that is it priced at a figure far below the
ordinary price charged by the railway company, and from that it is a mere sequence of thought that one does not

16
get from the railway company the ticket which they do provide at the higher figure83

The railway company is to be treated as having made an offer to intending travellers that if
they will accept the conditions on which the railway company make the offer they can be
taken at suitable times, on suitable days and by indicated trains from Darwen to Manchester
and back at a price largely reduced from the common price; but upon certain conditions which
can be ascertained, and of the existence of which there are no doubt, for they are indicated
clearly upon the ticket which is issued.84
Additionally, as Lawrence LJ stated:
In these circumstances (the notice on the ticket not being tricky or illusory) it seems to me that there is no room
for any evidence that the company had not done all that was reasonably necessary as a matter of ordinary practice
to call attention to the conditions upon which the ticket was issued.85

Here it cannot be said that the condition in question in this case is an unreasonable one, either
from the point of view of the company or from that of the passenger. It is a condition which
has existed in respect of excursion trains for upwards of half a century, and is, to my mind, a
reasonable condition, which need not have special attention directed to it.86
The court held that the railway company did take sufficiently reasonable steps to bring the
conditions to the notice of its customers. The reasons for this seem to be:
(i) the conditions printed legibly and clearly on the ticket, and
(ii) the conditions were reasonable and typical in this kind of excursion.
The defendant in J. Spurling Ltd v. Bradshaw87 bought eight wooden casks of orange juice and
sent them to the plaintiffs who were warehousemen. The plaintiffs, in turn, sent the defendant
a receipt for the goods.
The front of the receipt contained a statement that the company's conditions were printed on
the back of the receipt. There were a number of conditions printed on the back of the receipt.
The plaintiffs later sent the defendant an invoice stating that the goods were handled subject to
the conditions.
The defendant did not fully pay the warehousing cost to the plaintiffs. Nevertheless, the
plaintiffs released the defendant's goods to a third party as requested by the defendant in a
delivery order issued to the plaintiffs.
Only when the plaintiffs sued the defendant for arrears in payment did the defendant inform
the plaintiffs of a counterclaim for damages in respect of the storage of the barrels. This was
eight months after the foods were collected. The plaintiffs attempted to rely on the exclusion
clauses to exempt themselves from liability for the counterclaim.
Denning LJ in the Court of Appeal held:

17
I agree that the more unreasonable a clause is, the greater the notice which must be given to it. Some clauses
which I have seen would need to be printed in red ink on the face of the document with a red hand pointing to it
before the notice could be held to be sufficient. The clause in this case, however, in my judgment, does not call
for such exceptional treatment, especially when it is construed, as it should be, subject to the proviso that it only
applies when the warehouseman is carrying out his contract and not when he is deviating from it or breaking it in
a radical respect. So construed, the judge was, I think, entitled to find that sufficient notice was given.88

In Burnett v. Westminster Bank Ltd,89 a bank tried to rely on statements printed on the front
cover of a cheque book which they alleged, gave the customer notice that cheques in that book
could only be drawn from the customer's account at the Borough Branch of the bank. The
customer had drawn a cheque which the customer altered to indicate that the cheque was to be
drawn from his account at the Bromley branch of the bank.
The customer later called the Bromley branch of the bank and instructed them to stop payment
on the cheque. The cheque was debited in the Borough branch of the bank. The customer
alleged that the bank had acted without his authority.
This notice had not appeared on previous cheque books of the customer. This new cheque
book was designed to use magnetised ink which a central computer could read. The customer
admitted that he had seen that the front cover of the cheque book contained printed words but
denied that he had read them.
Mocatta J in the High Court held:
I am unable to treat the two sentences on the cheque book cover as adequate notice. Whilst it is true that the
new cheque book differed materially from previous ones in format, the differences were not very marked.
Cheque book covers had never previously been used for the purpose of containing contractual terms and I think
that they fell into the category of documents which the recipients could reasonably assume contained no
conditions: see, for example, per Mellish LJ, in Parker v. South Eastern Ry. Co.90 and Chapelton v. Barry Urban
District Council.91 The position might have been different had the new cheque book been the first issued to the
plaintiff on his opening the account. But in the case of a customer like the plaintiff who has had an account for
some time under the system prevailing down to the issue of the new cheque book, I am of the opinion that the
mere presence of the two sentences on the new cheque book cover is inadequate to affect the pre-existing
contractual relationship. In such circumstances I do not consider that the defendants92could establish that they
had given adequate notice to their customer to bind him to the new restricted use of the cheques unless they could
show that he had read the sentences in question, or had signed some document indicating his agreement to their
effect. I would be prepared to accept as the equivalent of the latter the signature of the customer on a cheque
provided that the cheque itself bore the words limiting its use to the bank, branch and account shown in print on
it. The present cheque bore no such words.93

Mocatta J in this case seemed to emphasise that there was no reasonable notice of the
exclusion clause as:
(i) the plaintiff did not sign on the page the exclusion clause was printed,
(ii) exclusion clauses are normally not printed on cheque book covers, and
(iii) the plaintiff did not have previous notice of this clause from prior dealings with the

18
defendant.
The plaintiffs in the case of Intrefoto Picture Library Ltd v. Stiletto Visual Programmes Ltd94
run a library of photographic transparencies. The defendants are an advertising agency. A
director of the defendants telephoned the plaintiffs and asked the plaintiffs whether they had
photographs of the 1950s which the defendants intended to use in a presentation to a client.
Fourty seven transparencies were delivered to the office of the defendants later that same day
along with a delivery note.
The delivery note bore a notice stated as condition number 2 that the transparencies must be
returned within 14 days from the date of delivery, otherwise a daily holding fee will be
charged for each transparency which is retained longer than the specified period.
Another condition on the delivery note stated that these conditions are understood to have
been accepted unless the package is returned to the plaintiffs immediately. These conditions
were also stated to apply to all the transparencies delivered, whether or not the defendants
completed a request form.
The defendants did not use the photographs in the presentation but did not return the
transparencies to the plaintiff until almost a month later. The plaintiff sent an invoice to the
defendants demanding a holding charge for the transparencies which the defendants refused to
pay.
The High Court awarded the plaintiffs the holding charge stated in the invoice. The following
is the judgment of the Court of Appeal.
Dillon LJ explained:
At the time of the ticket cases in the last century it was notorious that people hardly ever troubled to read printed
conditions on a ticket or delivery note or similar document. That remains the case now. In the intervening years
the printed conditions have tended to become more and more complicated and more and more one-sided in
favour of the party who is imposing them, but the other parties, if they notice that there are printed conditions at
all, generally still tend to assume that such conditions are only concerned with ancillary matters of form and are
not of importance. In the ticket cases the courts held that the common law required that reasonable steps be taken
to draw the other parties' attention to the printed conditions or they would not be part of the contract. It is in my
judgment a logical development of the common law into modern conditions that it should be held, as it was in
Thornton v. Shoe Lane Parking Ltd, that, if one condition in a set of printed conditions is particularly onerous or
unusual, the party seeking to enforce it must show that that particular condition was fairly brought to the attention
of the other party.

In the present case, nothing whatever was done by the plaintiffs to draw the defendants'
attention particularly to condition 2; it was merely one of four columns' width of conditions
printed across the foot of the delivery note. Consequently condition 2 never, in my judgment,
became part of the contract between the parties.95
Dillon LJ highlighted an interesting point that the more onerous the exclusion clause, the
more it should be brought to notice. This approach was also mentioned by Megaw LJ in the
Court of Appeal in Thornton v. Shoe Lane Parking Ltd96 where the term used instead of

19
'onerous' was 'restrictive':
But at least where the particular condition relied on involves a sort of restriction that is not shown to be usual in
that class of contract, a defendant must show that his intention to attach an unusual condition of that particular
nature was fairly brought to the notice of the other party.97

Bingham LJ in this case similarly held that the plaintiffs had not sufficiently brought the
exclusion clause to the notice of the defendants and thus was not entitled to the holding
charges.
The plaintiff in Geier (Formerly Braun) v. Kujawa, Weston (Third Party) and Warne Bros.
(Transport) Ltd. (Third Party),98 while in a car driven by the defendant, was involved in an
accident and sustained injuries. The accident was a collision between the car driven by the
defendant and a 20-ton lorry and loader driven by Mr. Weston. This action is between the
plaintiff and defendant.
The plaintiff alleges the defendant was negligent. The defendant stated that he brought to the
plaintiff's attention a notice situated over the glove compartment on the passenger's side of the
defendant's car which read "Warning. Passengers ride at their own risk and on the condition
that no claim shall be made against the driver or owner in the event of loss or injury."99
There were other issues in this case such as the plaintiff's contributory negligence in not
wearing a safety belt and the defence of volenti non fit injuria. Brabin J in the High Court in
stated with regard to the exclusion clause:
At this time it was not very rewarding to speak to the plaintiff in English because she had very little English at
her command. She could understand a little and spoke less.

I am quite satisfied that the plaintiff did not see and did not read this notice. I would have
thought that since the defendant was speaking German to the plaintiff, because she could not
speak English, that if he wished to call her attention to a notice that was in his motor car he
would have translated it into German so that she could understand that which she was
supposed to see.100
Thus, the language of an exclusion clause is important in that if the defendant is aware that
the plaintiff is unlikely to understand the language the exclusion clause is stated in, the
defendant should take the pains to explain it to the plaintiff if the defendant is seeking to rely
on the exclusion clause to negate liability.
The court in Malaysian Airline System Bhd. v. Malini Nathan & Anor.101 considered the effect
of conditions printed in an airline ticket purchased for the first plaintiff's travel from London
to Malaysia. When the first plaintiff went to check in at Heathrow Airport, she was told that
there was no seat for her on the flight she was booked on. She left on another flight the next
day.
Condition 9 under 'Conditions of Contract' printed on p. 2 of the ticket provided:

20
Carrier undertakes to use its best efforts to carry the passenger and baggage with reasonable dispatch. Times
shown in timetables or elsewhere are not guaranteed and form no part of this contract. Carrier my without notice
substitute alternate carriers or aircrafts, and may alter or omit stopping places shown in the ticket in case of
necessity. Schedules are subject to change without notice. Carrier assumes no responsibility for making
connections.102

Wan Hamzah SCJ held:


In my judgment the defendant's decision not to carry the first plaintiff on flight No. MH 893 on March 26, was
fully covered by condition No. 9. What the defendant did or omitted to do was in accordance with condition No.
9, and therefore there was no breach of contract on the part of the defendant. The plaintiffs103 ought to have
known condition No. 9 and they were presumed to have known it as it was printed on the ticket. Even if it was
true that the defendant had confirmed or represented to the plaintiffs that the first plaintiff had a definite and
certain booking of a seat on that flight, it must be understood that such confirmation or representation was made
subject to condition No. 9. Because it was made subject to condition No. 9 it cannot be said that such
confirmation or representation was made falsely or recklessly.104

The court also found that condition number 9 absolved the defendant from liability for105:
(i) not finding the name of 'Nathan Malini' in the computer when the first plaintiff gave her
name as 'Malini Nathan' at the checking-in counter,
(ii) not allowing the first plaintiff on the flight for which she had a confirmed seat,
(iii) delay as art. 19 of the Warsaw Convention as amended at the Hague in 1955 which was
made applicable to Malaysia from 19 December 1974 though the Carriage by Air Act 1974106
makes carriers liable for delay. However, the court stated that this Article only applied where
the time of carriage is fixed which in this case, it was not due to condition number 9.
Additionally, art. 19 is also subject to art. 3(2) of this Convention states that the ticket shall
constitute prima facie evidence of the conditions107 of the contract of carriage.
The court did not refer to any case as authority for the principles stated. However, perhaps an
airline ticket is a document which a passenger should read and as such, conditions printed on
an airline ticket is reasonably sufficient notice of the exclusion clauses.
Viscount Haldane in the House of Lords in Hood v. Anchor Line (Henderson Brothers),
Limited108 noted:
My Lords, the question on this appeal is of the nature of those in which the boundary line between law and fact is
not of an abstract or definite character. There is a large and varied class of cases where the legal duty of a
member of society to his neighbour cannot be laid down a priority or without examining the special
circumstances of the situation. The duty in these instances is ascertained by a standard which depends, not on
mere general principles fashioned by the jurist, for no such general principles can provide for all the concrete
details of which account must be taken, but on the opinion of reasonable men who have considered the whole of
the circumstances in the particular instance and can be relied on to say how, according to accepted standards of
conduct, a reasonable man ought to behave in these circumstances towards his neighbour towards whom he is
bound by the necessities of the community to act with forbearance and consideration. When the law takes
cognisance of duties imposed by such social standards it usually refers questions relating to them to a tribunal
which is one of fact rather than of abstract legal principle.109

21
Thus, it seems that whichever party is seeking to rely on an exclusion clause bears the burden
of proof that the other party had reasonably sufficient notice of it. This is a question of fact. It
is also an objective question. It does not matter whether the particular plaintiff read the clause
or not. What matters is whether a reasonable person would have taken the pains to inform
himself of the purport of the clause.
The plaintiff in Associated Concrete Products (M) Sdn. Bhd. v. Tackoh Sdn. Bhd.,110 who is a
manufacturer and supplier of reinforced concrete pipes agreed to supply such pipes to the
defendant.
The pipes were delivered broken and cracked, with various other defects. The plaintiff was
aware that the pipes were to be used for a very specific purpose and the pipes supplied by the
plaintiff did not meet the specifications. The plaintiff sought to disclaim liability based on two
clauses printed on the back of the plaintiff's sale orders (AB18 and AB19) which state111:
(i) clause 7(d) the defendant must lodge a written complaint of the defective pipes within 90
days from the date the pipes were despatched from where the pipes were manufactured, and
(ii) clause 9 the plaintiff is exempted from any warranty, guarantee or condition other than
those stated in the contract.
These sales orders had a blank space for the defendant's signature. The defendant did not sign
the documents. One of the sales orders (AB1) also stated that the defendant's order for the
pipes and the plaintiff's acceptance would be formalised by a sale and purchase agreement
which was not done.
Siti Norma Yaakob J in the High Court held that:
Since the defendant had not signed on AB18 and 19, the plaintiff cannot hold the defendant to be bound by the
printed terms and conditions as such terms and conditions do not form part of the agreement under AB1.
Additionally as far as the exemption clause goes, I consider it to be very unjust and inequitable that the plaintiff
when undertaking to manufacture PVC pipes in accordance with specific instructions, should in the very same
document, too, set out terms and conditions exempting itself from all warranties, conditions and guarantees. I
find that the printed conditions exempting the plaintiff from liability are totally repugnant to the spirit and intent
of the agreement.112

The court seems to be referring closely to the intentions of the parties in the transaction:
(i) the defendant was meant to sign the sales order, which the defendant did not do as such,
the defendant did not seem to be bound by the printed exemption clauses therein, and
(ii) the exemption clause in this case stated that the plaintiff would only be bound by the terms
stated in a contract (which was intended to be formalised according to the sales order) but
again, this was not done as such, since there is no contract and especially since the plaintiff
was under specific instructions with regard to this order, it was not the original intention of the
parties for the plaintiff to be bound by no conditions at all. The plaintiff is not permitted to use
the omission of entering into a formal contract with the defendant as an excuse for denying all

22
his contractual obligations.
The plaintiff in Sanggaralingam Arumugam v. Wong Kook Wah & Anor.113 drove his car to an
automatic car park owned by the defendant. As the plaintiff drove in, a ticket was pushed out
from a machine. The plaintiff saw that the ticket contained but did not read it save to see the
time printed on the ticket. It was stated on the ticket that the ticket was issued subject to the
conditions displayed in the premises. The plaintiff would have to walk around in the garage to
read the conditions displayed.
The conditions were lengthy and included the statement that the defendant was not liable for
any damage to the cars or any injury to the customers, however caused, while the car was in
the car park. The plaintiff was severely injured when he came to collect his car.
Ajaib Singh J in this case held:
The defendants were not able to avoid liability by relying on the exempting condition because, in order to show
that the plaintiff was bound by the condition, it was necessary to show either that he knew of it or that the
defendants had done what was reasonably necessary to draw it to his attention; for this purpose, where the
condition was exceptionally wide and destructive of the plaintiff's rights or was one which was not shown to be
usual in that class of contract, it was not sufficient to show that the plaintiff had been given notice that the ticket
was issued subject to conditions; it must be shown that adequate steps had been taken to draw his attention in the
most explicit way to the particular exempting condition relied on; in the present case the defendants had failed to
show that the plaintiff knew of the condition or that they had taken sufficient steps to draw his attention to it.114

The High Court in this case, thus, emphasised that the more wide an exclusion clause and
unusual to the type of contract, the more care the defendant must take to bring the clauses to
the notice of the plaintiff.
Non-Contractual Documents
Mellish LJ in Parker v. The South Eastern Railway Company; Gabell v. The South Eastern
Railway Company115 also highlighted the nature of the document as affecting whether a person
is likely to peruse it intently or not:
Now I am of the opinion that we cannot lay down, as a matter of law, either that the plaintiff was bound or that he
was not bound by the conditions printed on the ticket, but did not know that the writing contained conditions. I
think that there may be cases in which a paper containing writing is delivered by one party to another in the
course of a business transaction, where it would be quite reasonable that the party receiving it should assume that
the writing contained in it no condition, and should put it in his pocket unread. For instance, if a person driving
through a turnpike-gate received a ticket upon paying the toll, he might reasonably assume that the object of the
ticket was that by producing it he might be free from paying toll at some other turnpike-gate, and might put it in
his pocket unread. On the other hand, if a person who ships goods to be carried on a voyage by sea receives a bill
of lading signed by the master, he would plainly be bound by it, although afterwards in an action against the
shipowner for the loss of goods, he might swear that he had never read the bill of lading, and that he did not
know that it contained the terms of the contract of carriage, and that the shipowner was protected by the
exceptions contained in it. Now the reason why the person receiving the bill of lading would be bound seems to
me to be that in the great majority of cases persons shipping goods do know that the bill of lading contains the
terms of the contract of carriage; and the shipowner, or the master delivering the bill of lading, is entitled to
assume that the person shipping goods has that knowledge. It is, however, quite possible to suppose that a person
who is neither a man of business nor a lawyer might on some particular occasion ship goods without the least

23
knowledge of what a bill of lading was, but in my opinion such a person must bear the consequences of his own
exceptional ignorance, it being plainly impossible that business could be carried on if every person who delivers
a bill of lading had to stop to explain what a bill of lading was.116

Apart from illustrating the importance of the nature of documents in the court's deliberation of
whether a reasonable person would read the document, Mellish LJ has also clarified that the
court considers what a reasonable person in the transaction would know and do. An argument
that a carrier was inexperienced in his trade and does not know the nature of a bill of lading,
according to Mellish LJ, would not succeed.
In Chapleton v. Barry Urban District Council,117 the plaintiff, Mr. David Chapleton, went to
the beach and hired two deck chairs, for him and his friend, belonging to the defendants. On
the side of the deck chairs which were piled on the beach was a notice that members of the
public who wished to use the deck chairs were requested to obtain tickets for the chairs from
chair attendants which the plaintiff did. The notice also stated that the tickets must be retained
for inspection.
The plaintiff glanced at the tickets and placed them in his pocket. He stated in the court that he
did not know there were any conditions on the tickets. He put the deck chairs up on the beach
in the ordinary way but when he sat down on them, he went through the canvass.
On the ticket it was stated:
The Council will not be liable for any accident or damage arising from hire of chair.

The Court of Appeal in this case unanimously118 held that the council was liable for the injury
the plaintiff suffered.
MacKinnon LJ explained:
if a man does an act which constitutes the making of a contract, such as taking a railway ticket, or depositing his
bag in a cloak-room, he will be bound by the terms of the document handed to him by the servant of the carriers
or bailees; but if he merely pays the money for something and receives a receipt for it, or does something which
clearly amounts to that, he cannot be deemed to have entered into a contract in the terms of the words that the
creditor has chosen to print on the back of the receipt, unless, of course, the creditor has taken reasonable steps to
bring the terms of the proposed contract to the mind of the man.119

MacKinnon LJ agreed with the learned county court judge in this case that the defendant had
not taken such reasonable steps to draw the plaintiff's attention to the conditions on the ticket
as being part of the contract.
Goddard LJ in this case stated:
In this case the appellant paid 2d. in order to have the right to sit on a chair on the beach, and he was asked to
take a ticket in the form of a receipt for that purpose, and was given a document which shows nothing on the face
of it, except that the man had the right to sit in the chair until 7.30pm120 on the day when the accident occurred
and the fact that the ticket was not transferable. I cannot imagine that anybody paying 2d. under those
circumstances for the privilege of sitting in a chair on the beach would think for one moment that some
conditions were being imposed upon him which would limit his ordinary rights, or that the document he received

24
when paying his 2d. was a contractual document in any shape or form. I think the ticket he received was nothing
but a receipt for his 2d. a receipt which showed him how long he might use the chair.121

One must have regard to the facts of the case and the general circumstances of the case.122
The court seems to emphasise the nature of the transaction and document on which the
exclusion clause was stated was not such that a client would pay particular attention. The
plaintiff was entitled to assume that the ticket was a receipt for payment and as such, unlikely
to contain important terms of the contract.
In Low Kon Fatt v. Port Klang Golf Resort (M) Sdn. Bhd.,123 the plaintiff read an
advertisement in the newspapers regarding the 'Port Klang Golf Resort'. The defendant was
the licence-holder of a golf course at the resort. The plaintiff called at the defendant's office
and was handed pamphlets and a brochure about the resort. The plaintiff became a member in
the resort.
The brochure stated that the resort would have facilities such as a marina, floating seafood
restaurant, floating chalets and facilities for sea-sports. These were not built.
With regard to the contractual effect of the statements in the brochure, Kamalanathan Ratnam
J in the High Court held:
Where the defendant has made a false representation to the plaintiff which had the object and result of inducing
the plaintiff to enter into the licence agreement the plaintiff may in my judgment elect to regard the contract as
rescinded. Whilst I accept the fact that a representation must be distinguished from a mere statement, yet where a
statement is presented in such a way as to represent a fact which would induce a representee to enter into a
contract then it is my duty to hold that such a statement was intended to have contractual force and is thus a
contractual term.

Although the statements made in the brochure are now said to be intended for the future, yet it
is clear that such a statement of intention involves a representation as to the existence of the
intention which is itself a present fact.
At times mere exaggeration cannot be held as [a] representation. A mere puffing and gloating
of one's own goods and of its high esteem ought to be taken with the proverbial 'pinch of salt'.
However, where the puffing or exaggeration has both the object and the result of inducing the
representee to enter into the contract, the puffing or exaggeration must then form a
representation.124
The defendant did not even ascertain from the Port Kelang Authority that prior approval is
required for the construction of sea-sport facilities and as such, the building of these facilities
could not have commenced as the brochure promised until this approval had been obtained.
The court held that the defendant had negligently prepared the brochure and was under a duty
to make such enquiries. This was a misrepresentation under ss. 18(a) and 18(b) of the
Contracts Act 1950.

25
On the last page of the brochure, it is stated:
IMPORTANT NOTE

The contents and information contained herein do not constitute or shall be deemed to
constitute any warranty or representation of whatsoever nature, whether expressed or implied,
on the part of Port Klang Golf Resort Management Sdn Bhd and/or its associates and are
subject to changes without notice at the absolute discretion of Port Klang Golf Resort
Management Sdn Bhd from time to time.125
The court held with regard to the exclusion clause that:
Since I have held that the terms contained in the brochure have contractual force, in effect therefore this is an
exclusion clause.126

An exclusion clause, thus, may be contained in a non-contractual document, especially if the


party whose document it is expect that the party who receives the document would place great
reliance on what was stated therein and this expectation was fulfilled to the extent that the
statements in the non-contractual document actually induced the contract.
Summary
Factors127 the court might consider in deciding whether reasonable notice of the clause was
given could include:
(i) the general characteristics of the clientele, for example:
(a) the clients in Richardson, Spence & Co. and the "Lord Gough" Steamship Company,
Limited v. Minnie Rowntree128 were stated to be not well educated,
(b) the client in Thompson v. London, Midland and Scottish Railway Company129 could not
read, but, this fact was not reflective of the majority of clients,
(c) it was stated in Parker v. The South Eastern Railway Company; Gabell v. The South
Eastern Railway Company130 that even if a particular carrier did not know the nature of a bill
of lading, carriers in general do and it is the general standard which would be considered by
the courts, and
(d) Mellish LJ in Parker v. The South Eastern Railway Company; Gabell v. The South Eastern
Railway Company131 stated the railway company is entitled to make certain presumptions of
the clients:
The railway company, as it seems to me, must be entitled to make some assumptions respecting the person who
deposits luggage with them: I think they are entitled to assume that he can read, and that he understands the
English language, and that he pays such attention to what he is about as may be reasonably expected from a
person in such a transaction as that of depositing luggage in a cloak-room;

26
(ii) the wider the coverage of the clause the more the steps may be required to bring such a
clause to the notice of the clients as was stated by Ajaib Singh J in Sanggaralingam
Arumugam v. Wong Kook Wah & Anor.132;
(iii) the size of the print of the clause, for example:
(a) in Alexander v. Railway Executive,133 Devlin J explained that although the print on the
ticket was small, it was largely and legibly printed on the ticket that there were conditions and
the same conditions were largely and legibly displayed on a notice in the waiting room and
parcels office, and
(b) this factor is often referred to as relevant but by itself may not be conclusive as for
example in L'estrange v. F. Graucob, Limited134 where although the print was small, the
clause was binding as the party against whom the clause operated had signed the document
wherein the clause appeared;
(iv) the location of the clause on the document it would attract more notice if the clause was
in a prominent location;
(v) was the clause obstructed from view such as in Richardson, Spence & Co. and the "Lord
Gough" Steamship Company, Limited v. Minnie Rowntree where the part of the document
where the clause appeared was:
(a) folded,135 and
(b) covered by a stamp;136
(vi) the language of the clause being understandable to the general clientele:
(a) in Parker v. The South Eastern Railway Company; Gabell v. The South Eastern Railway
Company,137 Mellish LJ stated that the railway company is entitled to presume that their
clients understand English,
(b) in Geier (Formerly Braun) v. Kujawa, Weston (Third Party) and Warne Bros. (Transport)
Ltd. (Third Party),138 the defendant was not permitted to rely on an exclusion clause in
English when the defendant was aware that the plaintiff was not well versed in that language,
and
(c) this factor is of particular relevance where Malaysia is a multi-lingual land. This fact
should perhaps be appreciated when drafting exclusion clauses where particular notice should
be taken of the language of choice of the general clientele in a particular transaction;
(vii) the clause must be brought to the attention of the client before or at the time the contract
is made;
(viii) the less important the document on which the clause is stated, the less likely the court

27
would presume that the client would read the document;
(ix) the nature of the transaction in that is it of an important nature such that a client would be
vigilant or not, for example:
(a) a railway ticket for a day journey as in Thompson v. London, Midland and Scottish
Railway Company,139 and
(b) a ticket for a deck chair as in Chapleton v. Barry Urban DistrictCouncil;140 and
(x) if the document which contains the exclusion clause is signed by the plaintiff in the
absence of vitiating factors such as fraud or misrepresentation, the plaintiff is likely to be
bound by the exclusion clause whether or not the plaintiff was aware of the existence and
effect of the clause as stated in such cases as Parker v. The South Eastern Railway Company;
Gabell v. The South Eastern Railway Company141 and L'estrange v F. Graucob, Limited.142
Contra Proferentum
The term 'contra proferentum' has been defined in Trayner's Latin Maxims as:
Against the person from whom it proceeds or against the person advancing it 143

The case of Wallis, Son & Wells v. Pratt & Haynes144 involved a contract for the purchase of
common English sainfoin. The plaintiffs alleged that the defendants sold them a different kind
of goods than what was promised and sued the defendants. The defendants alleged that they
were not liable due to a clause in the contract stating:
Sellers give no warranty expressed or implied as to growth, description or any other matters.145

The House of Lords unanimously146 held that the exclusion clause did not exempt the
defendants from liability for breach of warranty in not delivering the goods as contractually
stipulated.
Lord Loreburn LC stated:
If a man agrees to sell something of a particular description he cannot require the buyer to take something which
is of a different description, and a sale of goods by description implies a condition that the goods shall correspond
to it.147

There is no doubt that when you are dealing with a commodity the inspection of which does
not enable you to distinguish its exact nature, there are risks both on the buyer and on the
seller if they think fit to sell by description. But if it is desired by a seller to throw the risk of
any honest mistake on to the buyer, then he must use apt language, and I should have thought
the clearer he tries to make the language the better. I do not think he has done so in the clause
to which I have referred 148

28
Lord Alverstone CJ explained:
My Lords, all I can say is I think it is quite impossible to suggest that in the year 1906,149when these parties
made a contract whereby they required that the goods should be common English sainfoin, and the sellers put in a
stipulation that they would not give any warranty, express or implied, it was intended that it was always to be
understood that they were not making themselves liable in regard to any condition as to the goods or for the
consequences of a breach of the condition.150

Lord Shaw of Dunfermline similarly opined:


My Lords, that description151 could by no circumstance have been more clearly certiorated as entering into the
very essence of this contract and being one of its conditions. What has been delivered has been 'giant sainfoin' a
thing as distinct in agricultural knowledge from common English sainfoin as in ordinary commerce, a silver
watch would be distinct from a gold watch.152

I think it is a safer thing to construe this document as it was originally meant to be construed
that is to say, according to the evident intention of the contracting parties at the time the
bargain was made.153
The court, therefore, seems quite strict in the interpretation of the exclusion clause in that the
exclusion clause being expressed as covering a breach of a warranty, it cannot be construed as
covering a breach of a condition as well. This is because a 'condition' and 'warranty' are not
synonymous legal terms. They have different effects if breached.
The court, it seems, will look at the words used in the exclusion clause itself to construe what
forms of liability it was understood by the parties to cover at the time the contract was made.
The Court of Appeal in John Lee & Son (Grantham) Ltd. and Others v. Railway Executive154 a
warehouse situated in the middle of a number of railway sidings and railway properties was
let. Clause 10 of the tenancy agreement provided that:
The tenant shall be responsible for and shall release and indemnify the company and their servants and agents
from and against all liability for personal injury (whether fatal or otherwise) loss of or damage to property and
any other loss[,] damage[,] costs and expenses however caused or incurred (whether by the act or neglect of the
company or their servants or agents or not) which but for the tenancy hereby created or anything done pursuant to
the provisions hereof would not have arisen.155

Sir Raymond Evershed MR explained:


The argument of counsel for the defendants is to the effect that the words must be construed to mean what they
say, and that they were intended to throw the widest possible obligation for indemnity and release on the tenants.
The real question, however, turns on the meaning to be given to the last two lines : 'which but for the tenancy
hereby created or anything done pursuant to the provisions hereof would not have arisen.' It is plain that it is
those words which give the real content to the clause as a whole. Without them the clause would have been of
such wide import as could not possibly have been intended in a document of this sort. The last two lines define
the scope of the obligation.156

We are presented with two alternative readings of this document and the reading which one
should adopt is to be determined, among other things, by a consideration of the fact that the

29
defendants put forward the document. They have put forward a clause which is by no means
free from obscurity and have contended that, on the view for which they argued, it has a
remarkably, if not extravagantly, wide scope, and I think that the rule contra proferentem
should be applied and that the result is that the present claim is not one which obliges the first
plaintiffs to give to the defendants a release and an indemnity.157
Denning LJ in this case also cautioned:
If the wide construction contended for were correct, there would be a serious question whether a contract in such
wide terms would be enforced by the courts. It would, therefore, be a very serious question whether the
defendants are free to exempt themselves in the wide terms which are here contended for. It seems to me
preferable that a limited construction should be put on the clause so that it should be valid 158

The court thus, took a narrower construction of the exclusion clause than that proposed by the
defendant based on the principle of contra proferentem. Indeed, to take the defendant's
construction could mean that the contract itself may not be enforceable. Although parties to a
contract are at liberty to agree to whatever terms they desire, the court still maintains a
supervisory role.
The Federal Court in Sharikat Lee Heng Sdn. Bhd. v. Port Swettenham Authority159 considered
the effect of r. 91(1) of the Port Swettenham Authority By-Laws 1965160 which provides that:
The Port Authority shall not be liable for any loss, destruction or deterioration arising from delay in delivery or
detention or misdelivery of goods or from any other cause, unless such loss, or destruction has been caused solely
by the misconduct or negligence of the Authority or its officers or servants.161

In this case, the plaintiffs claimed for a sum of $936 from the defendants for a case of locksets
which was lost while in the custody of the defendants. The plaintiff delivered four cases to the
defendant's warehouse and when the plaintiff went to the warehouse to collect them, only
three cases were left.
The defendant denied liability relying on r. 91(1) above. Ong CJ stated:
I am of the opinion that the contra proferentem rule should apply to the construction of rule 91(1) just as
much as it does to any exemption clause in a contract.162

Upon the evidence on both sides in the instant case, I think the learned magistrate was fully
justified in coming to the conclusion that the loss had been caused 'solely by the negligence of
the authority or its officers or agents'. There was not a ghost of a suggestion on the part of the
defence that it was otherwise and pure speculation as to other possibilities cannot take the
place of evidence.
Much of the argument of this appeal, however, has been devoted to the question whether r.
91(1) has the effect of shifting the onus form the bailee to the bailor of proving how the loss
came about. I need hardly repeat that the very fact that the question of onus is so hotly
disputed is proof enough that the rule suffers from ambiguity and on that account the contra
proferentum rule ought to be applied. In the absence of clear and unequivocal language to the

30
contrary, I am of the opinion that the onus still lies on the authority to show that it has taken
all reasonable care of the goods and that the loss thereof occurred in circumstances which
showed no lack of care on its part. In the instant case the evidence was conclusive in the
appellant's favour163 .
The court appears to be even willing to construe exclusion clauses in statutes contra
proferentum. Since the rule was ambiguous in terms of which party bears the burden of proof,
it would be construed contrary to the interest of the party seeking to rely on it.
In this case, the defendant bore the burden of proof that the loss was not solely caused by the
negligence of the authority, its officers or its agents. The defendants failed to satisfy this
burden of proof and thus could not rely on r. 91(1) to exempt itself from liability.
In Lee Yee Yew v. United Oriental Assurance Sdn. Bhd. & Another Case,164 Idris Yusoff J in
the High Court commented:
To my mind the words under the 'exclusion clause' are clear and unambiguous and though I am not unmindful
that such clause is to be construed against the insurers with utmost strictness, nevertheless those words, given
their ordinary meanings manifest clear intentions of the parties and which intentions must be made to prevail.165

As such, an exclusion clause can still be valid, even if it is construed contra proferentum.
The court must still interpret an exclusion clause to decide if it is valid and applicable to the
case at hand and in doing so, precedent may be of limited assistance. Sir Raymond Evershed
MR in John Lee & Son (Grantham) Ltd. and Others v. Railway Executive166 stated:
I do not refer to the authorities which have been mentioned, not out of any disrespect to counsel or to the learned
judge below, but on the principle, which I think both counsel accepted, that on a matter of construction of this
kind other cases provide a very uncertain guide and each document must be construed according to its own terms.

Salmon LJ in Hollier v. Rambler Motors (A.M.C.) Ltd.167 commented:


there are many cases in the books dealing with exemption clauses, and in every case it comes down to a
question of construing the alleged exemption clause which is then before the court.168

rules of construction are merely our guides and not our masters; in the end you are driven
back to construing the clause in question to see what it means.169
Negligence
In Rutter v. Palmer,170 the Court of Appeal considered the effect of a clause in a contract
between an owner of a garage and his client, the purpose of which, was to sell a car on
commission. The contract contained a clause that stated:
Customers' cars are driven by your staff at customers' sole risk.171

A member of the defendant's staff took the car out of the garage to show it to a prospective

31
purchaser. While it was being driven for this purpose, it collided with a lamp-post and was
seriously damaged.
The court unanimously172 agreed that the defendant's liability for negligence could be
exempted by the clause above.
Scrutton LJ commented:
In construing an exemption clause certain general rules may be applied: First the defendant is not exempted from
liability for the negligence of his servants unless adequate words are used; secondly, the liability of the defendant
apart from the exempting words must be ascertained; then the particular clause in question must be considered;
and if the only liability of the party pleading the exemption is a liability for negligence, the clause will more
readily operate to exempt him 173

This seems to indicate the reluctance of the court from allowing exclusion clause to operate
against a claim of negligence. The clause will more likely operate against negligence if there
are no other causes of action against which the clause can operate.
Scrutton LJ construed the clause above in the following manner:
There are two obvious limitations to be imposed upon the meaning of those words: First 'staff' must mean
'driving staff; secondly 'driven' must mean driven for the purpose of the bailment, namely, the purpose of selling
the car. The clause does not mean that the garage keeper is to be free from liability if a member of his clerical
staff takes the car out for pleasure. So limited, the clause, which is regularly inserted in all contracts by garage
keepers to sell cars for customers and to run them for that purpose, can have only one meaning, and that is that
the owner of the car must protect himself by insurance against accidents for which without the clause the garage
keeper would be liable, that is against accidents due to the negligence of the garage keeper's servants.174

A similar reasoning was expounded by Atkin LJ where it was stated:


The clause containing the words 'customers' sole risk' is aimed particularly at the special risk incurred by the
appellant when a customer's car is being driven by the appellant' s. 175 servants. That is the risk of liability for
negligence, and it was intended to be thrown upon the owner of the car.

Bankes LJ in this case explained:


A common carrier is liable for the acts of his servants whether they are negligent or not; an ordinary bailee is not
liable for the acts of his servants unless they are negligent. If a common carrier would protect himself from
responsibility for all acts of his servants he must use words which will include those acts which are negligent;
because words which would suffice to protect him from liability for acts properly done by his servants in the
course of their service may fall short of protecting him from negligent acts. But if an ordinary bailee uses words
applicable to the acts of his servants, inasmuch as he is not liable for their acts unless negligent, the words will
generally cover negligent acts, although such acts are not specially mentioned, because otherwise the words
would have no effect. Moreover it is well known to be the common practice for the owners of motor-cars to
insure themselves against all risks in connection with the car, that is to say against damage done not only to the
car but by the car, and damage caused not only by negligent acts but by innocent acts as well.176

The court in this case, thus, did not seem to generalise that a clause placing responsibility back
on the client would always exempt the defendant from the negligence of any of the defendant's

32
employees.
The two important limitations to this clause was that the transaction covered was only that the
car was being driven for the purposes of making a sale and that the employees covered were
only those who were driving the car for the purpose of making a sale.
The court would not necessarily construe all exclusion clauses to cover negligent acts. The
court would have regard to the how the exclusion clause relates to the nature of the
transaction and what was the reasonably understood purpose of the clause.
Salmon LJ in Hollier v. Rambler Motors (A.M.C.) Ltd.177 commented:
It seems to me that in Rutter v. Palmer, although the word 'negligence' was never used in the exemption clause,
the exemption clause would have conveyed to any ordinary, literate and sensible person that the garage in that
case was inserting a clause in the contract which excluded their liability for the negligence of their drivers.
Any ordinary man knows that when a car is damaged it is not infrequently damaged because the driver has driven
it negligently. He also knows, I suppose, that if he sends it to a garage and a driver in the employ of the garage
takes the car on the road for some purpose in connection with the work which the customer has entrusted the
garage to do, the garage could not conceivably be liable for the car being damaged in an accident unless the
driver was at fault. It follows that no sensible man could have thought that the words in that case had any
meaning except that the garage would not be liable for the negligence of their own drivers. That is a typical case
where, on the construction of the clause in question, the meaning for which the defendant was there contending
was the obvious meaning of the clause.

In White v. John Warrick & Co. Ltd.,178 the Court of Appeal considered an exclusion clause in
a contract . The plaintiff was a newsagent and tobacconist. The plaintiff entered into a written
contract to hire from the defendant a tradesman tricycyle for the delivery of newspapers. The
contract was in a printed form used by the defendant.
The contract provided in cl. 2 that the defendant would maintain the tricycle in working order
and supply spare carriers while the machine is being repaired. This clause was put into effect
when the plaintiff's tricycle came in need of repair.
The spare tricycle supplied by the defendant to the plaintiff while the plaintiff's tricycle was
being repaired had a loose saddle. While the plaintiff was on the spare tricycle, the saddle slid
forward and the plaintiff was thrown to the ground.
The plaintiff sued the defendant for breach of warranty in not supplying a spare tricycle that
was fit for the purpose for which it was required and negligence for not ensuring that the spare
tricycle was in a fit and working condition.
The defendant denied liability based on cl. 11 of the contract which provided:
Nothing in this agreement shall render the owners liable for any personal injuries to the riders of the machines
hired for any third-party claims, nor loss of any goods, belonging to the hirer, in the machines.179

The court unanimously180 agreed that this exclusion clause can operate against a breach of
contract but not against negligence. Unfortunately, the lower court did not make a finding on

33
whether there was negligence in this case as the lower court was of the opinion that this
exclusion clause negated liability under negligence. Since the finding of negligence was not
pursued by the lower court, the Court of Appeal ordered for a new trial where the court would
have to consider whether the defendant was negligent as this cause of action was not
exempted by the clause.
Singleton LJ in this case stated:
In the circumstances of the present case the primary object of the clause, one would think, is to relieve the owners
from liability for breach of contract or for breach of warranty. Unless, then, there be clear words which would
also exempt from liability for negligence, the clause ought not to be construed as giving absolution to the owners
if negligence is proved against them.181

Denning LJ in this case held:


If the plaintiff can make out his cause of action in negligence, he is, in my opinion, entitled to do so, although the
same facts also give a cause of action in contract from which the owners are exempt.182

Morris LJ in this case stated:


I have reached the conclusion that cl. 11 is not clear so as to exempt from liability if negligence is proved.183

The court in this case did not discount the idea that an exclusion clause could exempt liability
for negligence. The court only stated that the exclusion clause in this case was not based on
an interpretation of the clause itself.
The plaintiff in Hollier v Rambler Motors (A.M.C.) Ltd.184 sued the defendant for breach of
contract in causing loss to the plaintiff's car by fire at the defendant's premises. The plaintiff
sent his car to the defendant's garage for repairs. The plaintiff alleged that the fire was caused
by the defendant's negligence.
The defendant denied liability based on a clause that the defendant alleged was incorporated
into the oral contract by a course of dealing between the parties. The plaintiff had bought
spare parts from the defendant on many occasions during a period of five years preceding the
damage to the car. The plaintiff had also sent his previous cars for repair to the defendant on
three or four prior occasions.
It was the defendant's practice when doing repairs and servicing cars (but not when supplying
spare parts) to have the customer sign a document entitled an 'invoice' on which it is stated at
the bottom of the document:
The company is not responsible for damage caused by fire to customer's cars on the premises. Customer's cars are
driven by staff at owner's risk.185

The plaintiff signed this form of invoice on at least two prior occasions, once three years
before the fire and another time hurriedly, less than two months before the fire. The defendant

34
retains three carbon copies of this invoice and the customer is given the original copy.
Salmon LJ in the Court of Appeal found that:
The plaintiff did not read the forms on any occasion when he signed them, but there was nothing to have
prevented him from doing so.186

Salmon LJ continued:
I am bound to say that, for my part, I do not know of any other case in which it has been decided or even argued
that a term could be implied into an oral contract on the strength of a course of dealing (if it can be so called)
which consisted at the most of three or four transactions over a period of five years.187

Salmon LJ stated that in case the above view is wrong, the point of whether the exclusion
clause in this case would have excluded the defendant's liability would be considered.
Salmon LJ observed:
It is well settled that a clause excluding liability for negligence should make its meaning plain on its face to any
ordinarily literate and sensible person. The easiest way of doing that, of course, is to state expressly that the
garage, tradesman or merchant, as the case may be, will not be responsible for any damage caused by his own
negligence. No doubt merchants, tradesman, garage proprietors and the like are a little shy of writing in an
exclusion clause quite so bluntly as that. Clearly it would not tend to attract customers, and might even put many
off. I am not saying that an exclusion clause cannot be effective to exclude negligence unless it does so
expressly, but in order for the clause to be effective the language should be so plain that it clearly bears that
meaning. I do not think that defendants should be allowed to shelter behind language which might lull the
customer into a false sense of security by letting them think -unless perhaps he happens to be a lawyer that he
would have redress against the man with whom he was dealing for any damage which he, the customer, might
suffer by the negligence of that person.188

Construing the exclusion clause in this case, Salmon LJ noted:


here I think the ordinary man or woman would be equally surprised and horrified to learn that if the garage
was so negligent that a fire was caused which damaged their car, they would be without remedy because of the
words in the condition. I can quite understand that the ordinary man or woman would consider that, because of
these words, the mere fact that there was a fire would not make the garage liable. Fires can occur from a large
variety of causes, only one of which is negligence on the part of the occupier of the premises, and that is by no
means the most frequent cause. The ordinary man would I think say to himself: 'Well, what they are telling me is
that if there is a fire due to any cause other than their own negligence they are not responsible for it.' To my mind,
if the defendants were seeking to exclude their responsibility for a fire caused by their own negligence, they
ought to have done so in far plainer language than the language here used.189

Salmon LJ, therefore, appears to explain that the effect of an exclusion clause depends on
what it is understood to mean by a reasonable person who reads it. The clause would only
exclude liability for negligence if it is clearly worded to that effect.
Latey J seems to take a similar view of the construction of exclusion clauses as Salmon LJ in
this case. Latey J observed:
the main stream of the law, the basic principle, as I understand it, is that if A enters into a contract with B and

35
wants to include in it a term exempting himself from liability for his own negligence, to be effective that term
must sufficiently clearly convey that it is liability for negligence which is being excluded.190

to my mind these words would not convey to many intelligent laymen that the garage is
saying: 'If your car is damaged by fire we shall not be liable, and this is so even though it is
due to our own fault that the fire happens.' In my opinion, other and plainer words are
required.191
Stamp LJ in this case seems to use different terms in explaining the construction of exclusion
clauses on negligence. Stamp LJ stated:
As I understand the law, it is settled that where in a contract such as this you find a provision excluding liability
capable of two constructions, one of which will make it applicable where there is no negligence by the defendant,
and the other will make it applicable where there is negligence by the defendant, it requires special words or
special circumstances to make the clause exclude liability in case of negligence: see, for example, Price & Co. v.
Union Lighterage Co. [1940] 1 KB 412. Similarly, I would hold that, where the words relied upon by the
defendant are susceptible either to a construction under which they become a statement of fact in the nature of a
warning or to a construction which will exempt the defendants from liability for negligence, the former
construction is to be preferred. The words here are, in my judgment, certainly susceptible to a construction
which would regard them as a mere statement of fact in the nature of a warning .192

Stamp LJ too seems to state that for a clause to exclude liability for negligence, it must clearly
have this effect based on the words used. However, it appears unclear what is the meaning of a
'statement of fact in the nature of a warning'. The effect of this is not to exclude liability for
negligence.
The Court of Appeal unanimously193 held that the exclusion clause in question was not
imported into the oral contract by prior dealings between the parties and that the words of the
exclusion clause were not sufficiently clear in excluding liability for negligence on the part of
the defendant.
In Ailsa Craig Fishing Co. Ltd. v. Malvern Fishing Co. Ltd. and another et c contra,194 the
plaintiff owned a fishing boat which sank while the boat was berthed in Aberdeen harbour.
The defendant was a security company and was obligated, under contract with a fishing boat
owners' association, to provide security services in the harbour. The plaintiff was a member of
the fishing boat owners' association. The defendant was required to provide a continuous
security cover for the plaintiff's boat. The defendant relied on an exclusion clause in the
contract to limit liability.
Lord Wilberforce in this case explained:
Whether a condition limited liability is effective or not is a question of construction of that condition in the
context of the contract as a whole. If it is to exclude liability for negligence, it must be most clearly and
unambiguously expressed, and, in such a contract as this, must be construed contra proferentum. I do not think
that there is any doubt so far. But I venture to add one further qualification, or at least clarification: one must not
strive to create ambiguities by strained construction, as I think the appellants195 have striven to do. The relevant
words must be given, if possible, their natural, plain meaning. Clauses of limitation are not regarded by the courts
with the same hostility as clauses of exclusion; this is because they must be related to other contractual terms, in
particular to the risks to which the defending party may be exposed, the remuneration which he receives and

36
possibly also the opportunity of the other party to insure.196

Lord Wilberforce also explained that:


Because cl. A casts doubt on the meaning of cl. B, it does not follow at all that the converse is true and that cl. B
casts doubt on the meaning of cl. A. Clause B must be looked at on its own, and may turn out to be perfectly
clear. The possibility of construction of a clause does not amount to ambiguity: that disappears after the court
has pronounced the meaning.197

Lord Fraser of Tullybelton explained:


There are later authorities which lay down very strict principles to be applied when considering the effect of
clauses of exclusion or indemnity In my opinion these principles are not applicable in their full rigour when
considering the effect of conditions merely limiting liability. Such conditions will of course be read contra
proferentum and must be clearly expressed, but there is no reason why they should be judged by the specially
exacting standards which are applied to exclusion and indemnity clauses. The reason for imposing such standards
on these conditions is the inherent improbability that the other party to a contract including such a condition
intended to release the proferens from a liability that would otherwise fall on him. But there is no such high
degree of improbability that he would agree to a limitation of the liability of the proferens .198

The House of Lords unanimously199 held that the exclusion clause was clear and had the
effect of limiting liability.
This case seems to highlight that the court may be more willing to uphold an exclusion clause
which seeks to limit liability in negligence as opposed to exclude liability altogether as the
parties to the contract may have been more likely to have agreed to the former but not the
latter consequence of the clause. However, in either case, it is still a matter of interpreting the
clause in each case.
The defendant in Scottish Special Housing Association v. Wimpey Construction UK Ltd200
carried out works of modernisation to 128 houses owned by the plaintiff. The plaintiff sued
the defendant for the negligence of the defendant's employees in causing a fire to one of the
houses. The defendant denied liability based on certain clauses in their contract.
Lord Keith of Kinkel201 in the House of Lords held:
The opening words of cl. 18(2) make it clear that the liability of the contractor for damage to property caused by
his negligence or that of a sub-contractor or of anyone for whom either of them is responsible is subject to an
exception. The ambit of the exception is to be found in cl. 20(C). Clause 20(C) provides that the existing
structures and contents owned by the employer are to be at his sole risk as regards damage by, inter alia, fire. No
differentiation is made between fire due to the negligence of the contractor and that due to other causes. The
remainder of the catalogue of perils includes some which could not possibly be caused by the negligence of the
contractor, such as storm, tempest and earthquake, but others might be, such as explosion, flood and the bursting
or overflowing of water pipes. There is imposed on the employer an obligation to insure against loss or damage
by all these perils, in quite general terms. I have found it impossible to resist the conclusion that it is intended that
the employer shall bear the whole risk of damage by fire, including fire caused by the negligence of the
contractor or that of sub-contractors. The exception introduced by the opening words of cl. 18(2) must have that
effect that certain damage caused by the negligence of the contractor or of sub-contractors, for which in the
absence of these words the contractor would be liable, is not to result in liability on his part. The nature of such
damage is to be found in cl. 20(C), which refers in general terms to damage by fire to the existing structures. No
sensible content can be found for the words of [the] exception in cl. 18(2) if they are not read as referring to

37
damage of the nature described in cl 20(C). In substance, question at issue comes to be one as to which party
had the obligation to insure against damage to existing structures due to fire caused by the negligence of the
contractors or of sub-contractors.202

As such, the House of Lords unanimously held that the defendant was not liable to
compensate the plaintiff for the damage done to the plaintiff's house by the fire caused by the
employees of the defendant as it was the plaintiff's obligation to insure the house against
damage from perils such as fire from various causes including the negligence of the contractor
or sub-contractor.
The court, thus, is willing to uphold the validity of exclusion clauses if they clearly bear the
meaning that the defendant is not liable.
Denning LJ in Olley v. Marlborough Court Limited203 observed:
In order to exempt a person from liability in negligence, the exemption should be clear on the face of the
contract.

Lord Denning MR in Gillespie Brothers & Co. Ltd. v. Roy Bowles Transport Ltd. and
Another204 explains:
What is the justification for the courts, in this or any other case, departing from the ordinary meaning of the
words205? If you examine all the cases, you will, I think, find that at [the] bottom it is because the clause
(relieving a man from his own negligence) is unreasonable, or is being applied unreasonably in the circumstances
of the particular case. So they construe the clause 'strictly'. They cut down the ordinary meaning of the words and
reduce them to reasonable proportions. They use all their skill and art to this end.

The plaintiffs, who were importers of goods, in Jackson's Malaya Berhad v. Penang Port
Commission206 sued the defendant for breach of contract in respect of one carton of
merchandise as the defendant only delivered one carton of merchandise from the defendant's
warehouse where there were supposed to be two cartons of merchandise.
The defendant alleged that its liability was limited by r. 79 of the Penang Port Commission
By-Laws 1957207 which provides:
The Commission shall not be responsible to a greater extent than $1,000 for loss of or damage to any package of
goods which exceeds in value $1,000 or which in total value in relation to the total cubic measurement exceeds
$200 per cubic foot, unless, in respect of any package of goods not exceeding in value $2,000 written notice of
the marks, number contents and value thereof has been received and acknowledged in writing by the Traffic
Manager prior to delivery into the custody of the Commission. For such package special charges will be made.

This by-law was passed under the powers conferred upon the Commission under s. 66 of The
Penang Port Commission Ordinance 1955.208
Chang Min Tat J in this case referred to various sections in the Ordinance and held that:
if it was the intention of Parliament to permit the Commission to limit its liability for loss of or damage to
goods in its custody, such an intention would be expressed specifically in a section in this part of the
Ordinance,209 and that since there is none, by-law 79 made under section 66 of the Ordinance in Part V, Duties

38
and Powers of the Commission is, if purporting to limit its liability, ultra vires the Ordinance.210

If the Commission accepts goods into its custody, as it must do, and fails to exercise its
powers to be insurers, on a sound actuarial footing, of the goods in its custody or to exercise
its powers adequately and properly, then, in the absence of statutory provisions and by-laws
properly made, it must come under the common-law liability for all damages occasioned as a
reasonable consequence of its default or neglect.211
The plaintiffs were allowed their claim against the defendant for the loss of goods without the
operation of the limitation in r. 79.
Statutory exclusion clauses, it seems, must be duly and properly passed before such clauses
can be valid and applicable.
The Privy Council in Port Swettenham Authority v. T.W. Wu and Company (M) Sdn. Bhd.212
The plaintiffs were consignees of 93 cases of pharmaceutical products which were shipped
from Hong Kong to Port Kelang in Malaysia. All these cases were unloaded from the ship and
stored in shed number 8. These cases were inspected by the Chief Forwarding Clerk of the
plaintiffs and a Customs Officer in shed number 8. However, later only 29 of the 93 cases
were found in the shed. 64 cases weighing about 5.65 tons had disappeared.
Rule 91(1) of the Port Swettenham Authority By-Laws 1965213 was relied on by the defendant
to exclude liability for negligence. This rule provides that:
The Port Authority shall not be liable for any loss, destruction or deterioration arising from delay in delivery or
detention or misdelivery of goods or from any other cause, unless such loss, or destruction has been caused solely
by the misconduct or negligence of the Authority or its officers or servants.

The defendant argued that it could not be held responsible as according to r. 91(1), the loss
must have been caused solely by its negligence, its officers or its servants. In this case, the loss
was also caused by the criminal conduct of the thieves who stole the pharmaceutical products.
Therefore, r. 91(1) exempts the authority from liability for negligence.
This by-law was passed under s. 29 of the Port Authorities Act 1963.214 Section 29(1)(g) of
this Act provides:

29(1) The authority may with the approval of the Minister make by-laws for:
(g) limiting the liability for the authority in respect of any loss, damage or

injury to any person occurring without the actual fault or privity of the
authority (whether in any vessel operated or maintained by them or on any
wharf, quay or other part of the port);
Lord Salmon215 in this case held:
In their Lordships' view, the by-law is ultra vires section 29(1)(g) of the Port Authorities Act, 1963.

Clearly, any by-law which purports to limit the Authority's liability in respect of a loss

39
occurring with the actual fault or privity of the Authority would be ultra vires; and that is
precisely what by-law 91(1) does. It distinguishes between the misconduct or negligence of
the Authority itself and that of its servants for which it is also responsible. If anyone could
properly be described as the alter ego of the Authority, for example, its managing director, had
been privy to the theft of the 64 missing cases, this would constitute a loss occurring with the
actual fault or privity of the Authority (see Lennard's Carrying Co. Ltd. v. Asiatic Petroleum
Co. Ltd.216), yet the defendants would be exempt from liability because the loss would have been caused partly
by the actual thieves and therefore not solely by the fault of the Authority. There is, however, no power under s.
29 to make a by-law which limits the liability of the Authority in respect of any loss occurring with its actual
fault or privity. The by-law, in their Lordships' view, would also be ultra vires because it does not only limit, it
wholly excludes, the defendants' liability for the loss of any goods caused by their own misconduct or
negligence; and s. 29(1)(g) of the Act of 1963 confers no power to exclude but only to limit liability. Further, in
their Lordships' opinion, the defects in the by-law cannot be cured by striking out any part of it.217

The defendant's attempt at relying on r. 91(1) to exclude liability for negligence in this case
utterly failed. Not only were the defendant not permitted to exclude liability, the defendant
could not even limit liability for negligence as the by-law was declared to be ultra vires the
Act.
The High Court in 'The Taveechai Marine'; Owners of cargo lately laden on board the ship or
vessel 'Taveechai Marine' v. Owners of and other persons interested in the ship or vessel
'Taveechai Marine'.218 The plaintiff in this case one of the parties who consigned 388 bundles
of sawn timber. This cargo was shipped from the port of Sandakan, Sabah on board a vessel
chartered by the defendant. The cargo was discharged to a warehouse in Bangkok.
The plaintiff alleges that the defendant breached their contract expressed in the bill of lading
and/or the defendant was negligent in delivering the cargo to the consignee without production
of the bill of lading. The defendant, according to the plaintiff, had thereby committed the tort
of conversion of the cargo.
The plaintiff claims for the sum of RM388,410.80 which is the sale price of the 388 bundles
of cargo. The defendant contends that even if the defendant is liable, the defendant is only
liable to the extent of RM329,800 because of cl. 2(a) of the bill of lading which states:
so long as the goods remain in the actual custody of the carrier or his servants the carrier shall not be liable
in any event for an amount exceeding the declared value of goods paying freight on ad valorem basis or the
invoice value which ever shall be least or in the case of other goods the invoice value of sterling pounds 100 per
package or unit or sterling pounds 25 per cubic foot or half underweight, whichever shall be least .219

Ian Chin J in this case stated:


It is important to bear in mind that, broadly, there are three categories of exemption clauses, viz:

(1) clauses which purport to limit or reduce what would otherwise be the defendant's duty, for
example, by limiting liability to cases of wilful neglect or default;
(2) clauses which purport to exclude or restrict liability which would otherwise attach to a

40
breach of contract, such as liability to be sued for breach or be liable in damages; and
(3) clauses which purport to exclude or restrict the duty of the party in default fully to
indemnify the other part, for example, by limiting the amount of damages recoverable against
him (See 26 Chitty on Contracts (26th Ed), at para 943.)220
Ian Chin J also quoted221 the principle in Ailsa Craig Fishing Co. Ltd. v Malvern Fishing Co.
Ltd. and another et c contra222 that the courts might be more likely to uphold a clause which
limits liability rather than excludes it completely as this is more likely to accord with the
intentions of the parties' to the contract.
Ian Chin J stated that the case of Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd.223 which
was relied on by counsel for the plaintiff was inappropriate as this was a case in the second
category of exclusion clauses stated above. The case of Ailsa Craig Fishing Co. Ltd. v.
Malvern Fishing Co. Ltd. and another et c contra224 was a more appropriate authority in the
present case as both cases are within the third category of exclusion clauses discussed above.
In the present case, the freight was RM22,898.85 (D8) whereas the potential loss was RM388,410.80. In the
event, the limited loss amounted to RM329,800. The freight was less than 6% (5.895%) of the value of the cargo.
This limitation must surely have been intended by the parties and must therefore be given their plain and ordinary
meaning. Since the limitation is not a clause excluding all liability it cannot be regarded as unreasonable or
counter the object or intent of the contract. I therefore hold that the limitation clause is valid and if it does apply it
means the amount of damages recoverable by the plaintiff would only be the sum of RM329,800. But, as I
mentioned earlier, the operative words for this clause to apply are: 'so long as the goods remain in the actual
custody of the carrier or his servants'. I have found as a fact that the 388 cargo was not longer in the actual
custody of the defendant nor with their servant. The 388 cargo was in fact already delivered to the consignee.
Hence this clause cannot be called upon by the defendant to limit its liability .225

The court here seems to have looked at the effects of the application and non-application of
the exclusion clause to consider which consequence would have more likely been intended by
the parties. It seems more likely that the parties intended for liability to be limited.
Additionally, as stated in Ailsa Craig Fishing Co. Ltd. v. Malvern Fishing Co. Ltd. and
another et c contra,226 parties are generally more likely to have agreed to a limitation rather
than an exclusion of liability.
However, the exclusion clause in question here could not apply as the precondition that the
goods must still be in the 'actual custody of the carrier or his servants' was not fulfilled.
The plaintiff and defendant in Sekawan Guards Sdn. Bhd. v. Thong Guan Sdn. Bhd.227 had a
written contract whereby the defendant would provide security services to the plaintiff's
premises in consideration of the plaintiff paying the defendant RM1,076 per month.
A burglary occurred at the plaintiff's premises resulting in the loss of the plaintiff's goods. The
plaintiff alleged that this loss was due to the breach of contract and/or negligence of the
defendant.
The defendant contended that it was not liable for negligence as cl. 7 of the written contract

41
states:
The company shall not be liable for any loss suffered by the owner due to burglary, theft, fire, or any other cause
whatsoever, unless such loss is solely caused by the negligence of the company's own employee acting in the
course of their employment.228

Wan Adnan J in the High Court held that since the defendant did not plead the issue of cl. 7 in
the defence, the defendant could not raise this issue on appeal. However, Wan Adnan J stated
that:
Even if cl. 7 can be raised, the burden is on the defendant to show that the clause applies, as cl. 7 is an exclusion
clause: see Malaysia National Insurance Sdn Bhd v. Malaysia Rubber Development Corp [1986] 2 CLJ 285.229

The defendant must prove that there was negligence on the part of the other people.230
The court did not seem to discount the possibility of the exclusion clause operating if:
(i) it had been pleaded, and
(ii) the defendant can prove that the loss was not due solely to the defendant's employees
acting within the course of their employment.
The plaintiff in Chin Hooi Nan v. Comprehensive Auto Restoration Service Sdn. Bhd. &
Anor.231 left his car with the defendant to be waxed and polished. The plaintiff was given a
receipt with which he could claim his car when the work was done. When the plaintiff came to
collect his car, the plaintiff found that his car was damaged.
The defendant denies liability on the basis of an exclusion clause which appears on the back of
the receipt which states:
The company is not liable for any loss or damage whatsoever of or to the vehicle, its accessories or contents.
Vehicle and goods are at owner's risk.232

The court found that on the facts, the defendant was negligent. The plaintiff's car was
damaged in an accident when an employee of the defendant was driving the car to a different
floor of the car park.
Siti Norma Yaakob J in the High Court in this case held:
The law on this is quite settled in that an exemption clause however wide and general does not exonerate the
respondents233 from the burden of proving that the damages caused to the car were not due to their negligence
and misconduct. They must show that they had exercised due diligence and care in the handling of the car.234

The authorities cited for this principle of law were Sze Hai Tong Bank Ltd. v. Rambler Cycle
Co. Ltd.235 and Port Swettenham Authority v. T. W. Wu and Company (M) Sdn. Bhd.236
In the first cited case, Lord Denning explained that the exclusion clause in the bill of lading
had to be limited from too wide an interpretation. The limit suggested was against allowing a

42
fundamental breach of contract. In the latter cited case, Lord Salmon held that the exclusion
clause in the by-law was ultra vires the Act under which the by-law was passed.
These two authorities, therefore, do not seem to categorically state that an exclusion clause
cannot ever absolve a party from negligence. Indeed, the other cases from England and
Malaysia237 discussed above seem to leave the possibility of a party being able to exclude
liability for negligence open, as long as the clause is drafted so as to clearly reflect the parties'
awareness that negligence was intended to be excluded by the clause.
Based on the authorities cited, it may be too much of a generalisation to use Siti Norma
Yaakob J's decision as a basis for stating that exclusion clauses are never effective against a
negligence suit in Malaysia. Perhaps, the Siti Norma Yaakob J's judgment was highlighting
the court's disfavour with allowing exclusion clauses to be effective against a claim of
negligence. However, the court may still have to uphold an exclusion clause where it clearly
evinces an intention of the parties' to exclude liability for negligence.
In Premier Hotel Sdn. Bhd. v. Tang Ling Seng,238 the plaintiff was a guest in the defendant's
hotel. After the plaintiff had returned from an outing and went to the receptionist to get the
key to the plaintiff's room, the plaintiff was told that somebody had taken the key. The
plaintiff then found a number of articles missing from his room.
The defendant relied on an exclusion clause in the Hotel Regulation which states that:
The Hotel will not assume responsibility for valuables or money lost from the room.239

Elizabeth Chapman JC in the High Court in this case held, after referring to Halsbury's Laws
of England,240 that the exclusion clause in this case " did not clearly and specifically
exempt liability for negligence." On the facts, the defendant was held to be negligent in failing
to take better care of the room key.
This case, thus, did not automatically state that exclusion clauses could not cover negligence.
The case restricted its findings to the particular exclusion clause on the facts. This seems to
leave open the possibility that if an exclusion clause were sufficiently clear in excluding
negligence, the court would uphold it.
Steve Shim J in Syarikat Cheap Hin Toy MFE Sdn. Bhd. v. Syarikat Perkapalan Kris Sdn.
Bhd. & Anor.241 held:
It seems clear that the said clause242makes no mention of exempting the carrier from liability for negligence. If
exemption for negligence were to apply it would have been expressly stated. As Charlesworth on Negligence (6th
Edn.) said at p. 1286:

there are numerous cases in which it has been held that a clause in the contract of carriage
exempting liability for loss or damage but not referring to negligence, does not exempt them
from liability for negligence.243
The High Court in this case may not be stating a new requirement that for exclusion clauses to

43
protect someone from liability against negligence, the word 'negligence' must appear in the
clause. Perhaps the court is merely emphasising that the words used in the clause must clearly
indicate that liability for negligence was understood by the parties as excluded by the clause,
including contracts for carriage.
Fundamental Breach
The plaintiff and a friend in Alexander v. Railway Executive244 deposited his trunks in a
waiting room in a railway station for storage. The plaintiff received a ticket in respect of the
trunks. The friend informed the parcels clerk that the ticket for the parcels was probably lost
and was allowed to remove articles from the trunks without the ticket by paying the excess
deposit money and signing an indemnity, which the friend did. The plaintiff sued the railway
station for the loss of luggage which was taken by the friend.
The defendant relies on exclusion clauses stated on the ticket and upon a large notice
displayed in the waiting room and parcels office.
Devlin J in this case held that the defendant committed a fundamental breach of contract and
as such, could not rely on the exclusion clauses as protection from liability.
Devlin J observed:
where there has been a breach of a fundamental term of a contract giving the other party the right to rescind it,
then, unless and until, with full knowledge of all the facts, he elects to affirm the contract and not to rescind it,
the special terms of the contract go and cannot be relied upon by the defaulting party.245

The court thus seems to explain that because the contract is breached in a fundamental manner
by the defendant, unless the plaintiff affirms the contract, the contract is terminated. As such,
the defendant can no longer rely on the terms in the contract to protect himself from liability,
including exclusion clauses.
Denning LJ in the Court of Appeal in J Spurling Ltd v. Bradshaw246 stated:
All these exempting clauses are held nowadays to be subject to the overriding proviso that they avail to exempt a
party only when he is carrying out his contract, not when he is deviating from it or is guilty of a breach which
goes to the root of it. Just as a party who is guilty of a radical breach is disentitled from insisting on the further
performance by the other, so also he is disentitled from relying on an exemption clause.247

This seems strong support for the principle that exclusion clauses cannot cover fundamental
breaches of contract.
Denning LJ also addressed the question of whether negligence is a fundamental breach of
contract:
The essence of a contract by a warehouseman is that he will store the goods in a contractual place and deliver
them on demand to the bailor or to his order. If he stores them in a different place, or if he consumes or destroys
them instead of storing them, or if he sells them, or delivers them without excuse to somebody else, he is guilty
of a breach which goes to the root of the contract and he cannot rely on the exempting clause. If, however, he

44
should happen to damage them by some momentary piece of inadvertence, then he is able to rely on the
exemption clause, because negligence by itself, without more, is not a breach which goes to the root of the
contract (see The Albion [1953] 2 All ER 679), any more than non-payment by itself is such a breach: see Mersey
Steel & Iron Co. v. Naylor Benzon & Co. ([1884] 9 App. Cas. 434 at p. 443). I would not like to say, however,
that negligence can never go to the root of the contract. If a warehouseman were to handle the goods so roughly
as to warrant the inference that he was reckless and indifferent to their safety, he would, I think, be guilty of a
breach going to the root of the contract and could not rely on the exemption clause. He cannot be allowed to
escape from his obligation by saying to himself: 'I am not going to trouble about these goods because I am
covered by an exempting clause'.248

What is a fundamental breach of contract seems to be a question of fact, as is, the question of
whether the negligence committed is to such an extent to be a fundamental breach of contract.
In Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd.249 the plaintiff shipped bicycles made by
the plaintiff company to its customer in Singapore. The shipping company allowed the
customer to take the goods without the customer producing a bill of lading. The customer only
produced a letter from indemnity from the customer's bank (who is the defendant in this case).
The customer never paid for the goods.
Lord Denning250 explained:
It is perfectly clear law that a ship-owner who delivers without production of the bill of lading does so at his
peril. The contract is to deliver, on production of the bill of lading, to the person entitled under the bill of lading.
In this case it was 'unto Order or his or their assigns,' that is to say, to the order of the Rambler Cycle
Company,251 if they had not assigned the bill of lading, or to their assigns, if they had. The shipping company did
not deliver the goods to any such person. They are therefore liable for breach of contract unless there is some
term in the bill of lading protecting them. And they delivered the goods, without production of the bill of lading,
to a person who was not entitled to receive them. They are therefore liable in conversion unless likewise so
protected.252

The defendants relied on s. 2 of the bill of lading to avoid liability which stated:
During the period before the goods are loaded on or after they are discharged from the ship on which they are
carried by sea, the following terms and conditions shall apply to the exclusion of any other provisions in this Bill
of Lading that may be inconsistent therewith in all other253 cases the responsibility of the carrier, whether as
carrier or as cutodian or bailee of the goods, shall be deemed to commence only when the goods are loaded on
the ship and to cease absolutely after they are discharged therefrom.254

Lord Denning held that:


The exemption, on the face of it, could hardly be more comprehensive, and it is contended that it is wide enough
to absolve the shipping company from responsibility for the act of which the Rambler Cycle Company
complains, that is to say, the delivery of the goods to a person who, to their knowledge, was not entitled to
receive them. If the exemption clause upon its true construction absolved the shipping company from an act such
as that, it seems that by parity of reasoning they would have been absolved if they had given the goods away to
some passer-by or had burnt them or thrown them into the sea. If it had been suggested to the parties that the
condition exempted the shipping company in such a case, they would both have said: 'Of course not.' There is
therefore an implied limitation on the clause, which cuts down the extreme width of it: and, as [a] matter of
construction, their Lordships decline to attribute to it the unreasonable effect contended for.

But their Lordships go further. If such an extreme width were given to the exemption clause, it

45
would run counter to the main object and intent of the contract. For the contract, as it seems to
their Lordships, has, as one of its main objects, the proper delivery of the goods by the
shipping company, 'unto order or his or their assigns,' against production of the bill of lading.
It would defeat this object entirely if the shipping company was at liberty, at its own will and
pleasure, to deliver the goods to somebody else, to someone not entitled at all, without being
liable for the consequences. The clause must therefore be limited and modified to the extent
necessary to enable effect to be given to the main object and intent of the contract .
To what extent is it necessary to limit or modify the clause? It must at least be modified so as
not to permit the shipping company deliberately to disregard its obligations as to delivery. For
that is what has happened here. The shipping company's agents in Singapore acknowledged:
'We are doing something we know we should not do.' Yet they did it. And they did it as agents
in such circumstances that their acts were the acts of the shipping company itself. They were
so placed that their state of mind can properly be regarded as the state of mind of the shipping
company itself. And they deliberately disregarded one of the prime obligations of the contract.
No court can allow so fundamental a breach to pass unnoticed under the cloak of a general
exemption clause .255
The Privy Council, thus, held that what the defendants did in this case, that is, delivering the
goods to a person not entitled to receive them was a fundamental breach of contract. Such a
fundamental breach of contract could not be ignored and liability escaped by means of an
exclusion clause.
The Privy Council in this case distinguished the case of Chartered Bank of India, Australia
and China v. British India Steam Navigation Company Limited256 where the Privy Council in
that case held that the shipping company was not liable for the actions of the servant of the
landing agents who fraudulently misappropriated the goods in collusion with the consignees
due to an exclusion clause which included the statement:
In all cases and under all circumstances the liability of the company shall absolutely cease when the goods are
free of the ship's tackle, and thereupon the goods shall be at the risk for all purposes and in every respect of the
shipper or consignee.257

That case was distinguishable from the present case, according to Lord Denning, as in that
case, the actions of the fraudulent servant was not imputed to the shipping company unlike the
present case. As such, the shipping company in that case could avail themselves of the
protection of the exclusion clause unlike the shipping company in the present case.258
This point of distinction seems to imply that an exclusion clause will not absolve a
fundamental breach of contract by the defendant or the defendant's agents when the acts of the
defendant's agent can be imputed to the defendant. If, on the other, hand, the acts of the
defendant's agent cannot be imputed to the defendant, the defendant may be protected by the
exclusion clause, even against a fundamental breach of contract.
The plaintiff in U. G. S. Finance Ltd. v. National Mortgage Bank of Greece and National
Bank of Greece, S. A.259 bought up Greek bonds with coupons attached and are now seeking
payment on the bonds and coupons from the defendant. The defendant relies on a condition

46
that the coupons must be presented within six years of the due date before payment will be
made.
One of the arguments advanced by the plaintiff was that by the defendant not making payment
on the coupons, this was a fundamental breach of contract. The plaintiff also argues that the
time bar clause is like an exemption clause and as such, a fundamental breach of contract
could not be negated by the exemption clause.
Lord Justice Harman in the Court of Appeal explained what is a 'fundamental breach' in the
following manner:
A fundamental breach in my understanding of those words means one that in effect makes the bargain something
wholly different, as in the instance much cited in argument of the supply of oak logs in a contract which
stipulated for mahogany logs.260

Lord Denning MR261 in this case explained:


The doctrine of 'fundamental breach' is a recent introduction into our law. It has been developed so as to get over
an injustice of 'standardized contracts'. A trader undertakes to warehouse goods, or to carry them, to sell them or
to let them on hire purchase, and he issues a printed form of contract which he gets the customer to sign: but
somewhere on the form he inserts exemption clauses in which he purports to exempt himself from all liability.
No customer has any choice but to accept the form. He must sign on the given line or go without a contract at all.
No customer or not one in a thousand ever reads the exemption clauses, and it is a fiction to suggest that he
agrees to them. So the Courts have held that they cannot be used by the trader so as to avoid the fundamental
obligations which he has undertaken.

If you find an obligation, express or implied, which goes to the very core of the contract, and
the defendant then seeks by an exemption clause to deny the plaintiff redress for a breach of it,
the courts will not allow him to do so: for the simple reason that an exemption clause can only
avail a party when he is carrying out the contract in its essential respects, and not when he is
departing from it in a radical manner. This is established by a long series of cases in this
Court, of which the chief examples are perhaps Bontex Knitting Works, Ltd. v. St. John's
Garage [1943] 60 TLR 44, and Karsales (Harrow), Ltd. v. Wallis [1956] 1 WLR 936, and by
two recent cases in the Privy Council, Sze Hai Tong Bank, Ltd. v. Rambler Cycle Company,
Ltd. [1959] AC 576; [1959] 2 Lloyd's Rep. 114, and Adel Bosholi v. Allied Commercial
Exporters, Ltd. (No. 51 of 1959, unreported).
The doctrine does not depend on the customer electing to disaffirm the contract. Usually he
has no option open to him. The contract has been broken irretrievably before he gets to know
of it, and the only course for him is to sue for the breach. So the point does not very often
arise. But even if he does get to know of it, in time to affirm or disaffirm, he can still treat the
contract as in being, and sue for the breach (without being defeated by the exemption clause)
provided always that the breach itself is continuing to operate and cause damage to him. That
appears from the recent decision in this court in Charterhouse Credit Company, Ltd. v. Tolly
[1963] 2 WLR 1168. It would be different, of course, if the breach itself had been waived so
that it ceased to be a cause of damage, for that is what happened in Tate & Lyle, Ltd. v. Hain
Steamship Company, Ltd. [1936] 55 LILR 159; [1936] 41 Com. Cas. 350. The ship had
deviated, but she had, with the consent of the charterers, resumed the contract voyage. So far

47
as the charterers were concerned, the breach had been waived, so that the shipowners, at the
time she stranded, were carrying out the contract in its essential respects and were entitled to
the protection of the exceptions.262
Lord Denning MR held263 that there was no fundamental breach of contract on the facts. The
objection to payment here was not an exemption clause, but rather, it was a statute of
limitation.
Lord Justice Pearson in this case commented:
As to the question of 'fundamental breach', I think there is a rule of construction that normally an exception or
exclusion clause or similar provision in a contract should be construed as not applying to a situation created by a
fundamental breach of the contract. This is not an independent rule of law imposed by the Court on the parties
willy-nilly in disregard of their contractual intention. On the contrary it is a rule of construction based on the
presumed intention of the contracting parties. It involves the implication of a term to give to the contract that
business efficacy which the parties as reasonable men must have intended it to have. This rule of construction is
not new in principle but it has become prominent in recent years in consequence of the tendency to have standard
forms of contract containing exemption clauses drawn in extravagantly wide terms, which would produce absurd
results if applied literally.264 I will give a very simple example.

Suppose there is a contract for the sale of a ton of cheese, and the seller, contract form is used,
and it has an exceptions clause containing, among other exorbitant and oppressive provisions,
a provision that no failure of the goods delivered to correspond with the contract description
shall entitle the buyer to reject the goods or recover damages. The seller delivers (whether
wittingly or unwittingly) a ton of chalk, and claims that the exceptions clause should be
applied literally and therefore the buyer must accept the ton of chalk and pay for it the contract
price and cannot recover any damages. As that would be an absurd result, which the parties as
reasonable men cannot have intended, the Court says: 'There is here a fundamental breach of
the contract; the exceptions clause does not apply to the situation thereby created; the buyer is
entitled to reject.'265
Lord Denning MR in this case seems to quite definitely state that exclusion clauses would not
cover fundamental breaches of contract. However, Lord Justice Pearson seems to explain that
although this is the general position, it is based on the presumed intentions of the parties,
which appears to imply that this presumed intention can be rebutted. If it can be shown that
the parties to the contract understood that the exclusion clause would apply to a fundamental
breach of contract, it would seem that this must be upheld by the court.
The defendant in Suisse Atlantique Societe D' Armement Maritime S.A. v. N. V. Rotterdamsche
Kolen Centrale266 chartered a vessel from the plaintiff. The charterparty provided that there
was a specified time for loading and if this period was exceeded, $1,000 a day demurrage was
payable. There was a delay in unloading and discharging the vessel by the defendant.
One of the arguments advanced by the plaintiff was that this delay was a fundamental breach
of contract and as such, the demurrage provision (like an exclusion clause which limits
liability) did not apply. The plaintiff was thereby entitled to recover the full loss they had
suffered.

48
Viscount Dilhorne in the House of Lords explained that a 'fundamental breach' of contract is
not exactly the same as the 'breach of a fundamental term':
Although the terms are sometimes used as if their meaning was the same, a fundamental breach differs from a
breach of a fundamental term. In Smeaton Hanscomb v. Sassoon 1. Setty, Son & Co. (No. 1),267Devlin J said that
he though a fundamental term was 'something which underlies the whole contract so that, if it is not complied
with, the performance becomes something totally different from that which the contract contemplates.'

In relation to a fundamental breach, one has to have regard to the character of the breach and
determine whether in consequence of it the performance of the contract becomes something
totally different from that which the contract contemplates.268
Viscount Dilhorne noted:
These269 are all cases which illustrate the principle that where there has been a fundamental breach and
deviation is a fundamental breach or a breach of a fundamental term, the party guilty of the breach cannot
successfully rely on the provisions in the contract designed for his protection in the performance of the contract.

In a number of cases there are judicial observations to the effect that exempting clauses, no
matter how widely they are drawn, only avail a party when he is carrying out the contract in
its essential respects. In my view, it is not right to say that the law prohibits and nullifies a
clause exempting or limiting liability for a fundamental breach or breach of a fundamental
term. Such a rule of law would involve a restriction on freedom of contract and in the older
cases I can find no traces of it.
In each case not only have the terms and scope of the exempting clause to be considered but
also the contract as a whole. In the cases I have cited above, I think that, on construction of the
contract as a whole, it is apparent that the exempting clauses were not intended to give
exemption from the consequences of the fundamental breach. Any provision that does so must
be expressed in clear and unambiguous terms It must be apparent that such is its purpose
and intention.270
Lord Hodson stated:
Sometimes it has been declared that where a fundamental breach of contract had occurred an exceptions clause
could not as a matter of law be relied upon, but the better view on the authorities, and that accepted by both sides
before your Lordships, is that as a matter of law be relied upon, but the better view on the authorities, and that
accepted by both sides before your Lordships, is that as a matter of construction normally an exception or
exclusive clause or similar provision in a contract should be construed as not applying to a situation created by a
fundamental breach of contract.

So long as one remembers that one is construing a document and not applying some rule of
law superimposed upon the law of contract so as to limit the freedom of the parties to enter
into any agreement they like within the limits which the law prescribes one can apply one's
mind to each contract as it comes up for consideration.271
Lord Upjohn commented:

49
There was much discussion during the argument upon the phrases 'fundamental breach' and 'breach of a
fundamental term' and I think it is true that in some of the cases these terms have been used interchangeably; but
in fact they are quite different. I believe that all of your Lordships are agreed and, indeed, it has not seriously
been disputed before us that there is no magic in the words 'fundamental breach'; this expression is no more than
a convenient shorthand expression for saying that a particular breach or breaches of contract by one party is or
are such as to go to the root of the contract which entitles the other party to treat such breach or breaches as a
repudiation of the whole contract. Whether such breach or breaches do constitute a fundamental breach depends
on the construction of the contract and on all the facts and circumstances of the case. The innocent party may
accept that breach or those breaches as a repudiation and treat the whole contract at an end and sue for damages
generally or he may at his option prefer to affirm the contract and treat it as continuing on foot in which case he
can sue only for damages for breach or breaches of the particular stipulation or stipulations in the contract which
has or have been broken.

But the expression 'fundamental term' has a different meaning. A fundamental term of a
contract is a stipulation which the parties have agreed either expressly or by necessary
implication or which the general law regards as a condition which goes to the root of the
contract so that any breach of that term may at once and without further reference to the facts
and circumstances be regarded by the innocent party as a fundamental breach and thus is
conferred on him the alternative remedies at his option that I have just mentioned.272
the question as to whether there has been a fundamental breach must be a question of fact
and degree in all the circumstances of the case, but one of the elements in reaching a
conclusion upon that matter is necessarily the question as to whether there has been a wilful
breach, for as a practical matter it cannot be doubted that it is easier to find as a fact, for such
it primarily is, that the charterers are evincing an intention no longer to be bound by the terms
of the contract and are therefore guilty of repudiatory conduct if it can be established that the
breaches have been wilful and not innocent.273
Lord Upjohn explained:
But where there is a breach of a fundamental term the law has taken an even firmer line for there is a strong,
though rebuttable, presumption that in inserting a clause of exclusion or limitation in their contract the parties are
not contemplating breaches of fundamental terms and such clauses do not apply to relieve a party from the
consequences of such a breach even where the contract continues in force. This result has been achieved by
robust use of a well-known canon of construction, that wide words which taken in isolation would bear one
meaning must be so construed as to give business efficacy to the contract and the presumed intention of the
parties, upon the footing that both parties are intending to carry out the contract fundamentally.274

Lord Wilberforce similarly explained:


One may safely say that the parties cannot, in a contract, have contemplated that the clause should have so wide
an ambit as in effect to deprive one party's stipulations of all contractual force: to do so would be to reduce the
contract to a mere declaration of intent. To this extent it may be correct to say that there is a rule of law against
the application of an exceptions clause to a particular type of breach. But short of this it must be a question of
contractual intention whether a particular breach is covered or not and the courts are entitled to insist, as they do,
that the more radical the breach the clearer must the language be if it is to be covered.

In application to more radical breaches of contract, the courts have sometimes stated the
principle as being that a 'total breach of the contract' disentitles a party to rely on exceptions
clauses. This formulation has its use so long as one understands it to mean that the clause

50
cannot be taken to refer to such a breach but it is not a universal solvent: for it leaves to be
decided what is meant by a 'total' breach for this purpose a departure from the contract? but
how great a departure?' a delivery of something or a performance different from that
promised? but how different? No formula will solve this type of question and one must look
individually at the nature of the contract, the character of the breach and its effect upon future
performance and expectation and make a judicial estimation of the final result.275
The plaintiff in Photo Production Ltd. v. Securicor Transport Ltd.276 owned a factory which
was destroyed by a fire. The defendant provided security services for the plaintiff's factory.
The defendant relies on an exclusion clause in the contract between the plaintiff and defendant
to negate liability.
Lord Wilberforce in the House of Lords commented that Lord Denning MR in the Court of
Appeal in this case277 and in Harbutt's "Plasticine" Ltd. v. Wayne Tank & Pump Co. Ltd.278
discussed a 'rule of law' that exclusion clauses could not cover a fundamental breach of
contract. The authority cited in support of this principle was Suisse Atlantique Societe D'
Armement Maritime S.A. v. N. V. Rotterdamsche Kolen Centrale.279
Lord Wilberforce stated that:
so far from following this House's decision in the Suisse Atlantique it is directly opposed to it and that the
whole purpose and tenor of the Suisse Atlantique was to repudiate it.280

For I am convinced that, with the possible exception of Lord Upjohn whose critical passage,
when read in full, is somewhat ambiguous, their Lordships, fairly read, can only be taken to
have rejected those suggestions for a rule of law which had appeared in the Court of Appeal
and to have firmly stated that the question is one of construction, not merely of course of the
exclusion clause alone, but of the whole contract.281
I have no second thoughts as to the main proposition that the question whether, and to what
extent, an exclusion clause is to be applied to a fundamental breach, or a breach of a
fundamental term, or indeed to any breach of contract, is a matter of construction of the
contract. Many difficult questions arise and will continue to arise in the infinitely varied
situations in which contracts come to be breached by repudiatory breaches, accepted or not,
by anticipatory breaches, be breaches of conditions or of various terms and whether by
negligent, or deliberate action or otherwise. But there are ample resources in the normal rules
of contract law for dealing with these without the superimposition of a judicially invented rule
of law.282
Lord Wilberforce held that even applying the contra proferentum rule, the words of the
exclusion were sufficiently clear to exclude liability for negligence and other deliberate acts
on the part of the defendant.
Lord Diplock observed:
Parties are free to agree to whatever exclusion or modification of all types of obligations as they please within the
limits that the agreement must retain the legal characteristics of a contract; and must not offend against the

51
equitable rule against penalties; that is to say, it must not impose upon the breaker of a primary obligation a
general secondary obligation to pay to the other party a sum of money that is manifestly intended to be in excess
of the amount which would fully compensate the other party for the loss sustained by him in consequence of the
breach of the primary obligation. Since the presumption is that the parties by entering into the contract intended
to accept the implied obligations exclusion clauses are to be construed strictly and the degree of strictness
appropriate to be applied to their construction may properly depend upon the extent to which they involve
departure from the implied obligations. Since the obligations implied by law in a commercial contract are those
which, by judicial consensus over the years or by Parliament in passing a statute, have been regarded as
obligations which a reasonable businessman would realise he was accepting when he entered into a contract of a
particular kind, the court's view of the reasonableness of any departure from the implied obligations which would
be involved in construing the express words of an exclusion clause in one sense that they are capable of bearing
rather than another, is a relevant consideration in deciding what meaning the words were intended by the parties
to bear. But this does not entitle the court to reject the exclusion clause, however unreasonable the court itself
may think it is, if the words are clear and fairly susceptible of one meaning only.283

Lord Salmon commented:


Any persons capable of making a contract are free to enter into any contract they may choose: and providing the
contract is not illegal or voidable, it is binding upon them. In the end, everything depends upon the true
construction of the clause in dispute .284

Lord Scarman similarly noted:


what the parties agreed (expressly or impliedly) is what matters; and the duty of the courts is to construe their
contract according to its tenor.285

David G. Pierce286 explains:


In the renowned case of Photo Production Ltd. v. Securicor Transport Ltd the House of Lords went a long way
towards sorting out the conceptual tangle which, in the form of the doctrine of fundamental breach, had come to
plague the English law of contract.

Catherine Tay and K. L. Ter287 quote a statement from the judgment of Lord Wilberforce in
Photo Production Ltd. v. Securicor Transport Ltd.288 that:
the question whether, and to what extent, an exclusion clause is to be applied to a fundamental breach, or a
breach of a fundamental term, or indeed to any breach of contract, is a matter of construction of the contract.

Catherine Tay and K. L. Ter289 continue:


Viewed against the history of the doctrine of fundamental breach, this statement seems to indicate that the
chequered career of the doctrine has finally been laid to rest. But whether its bones have been permanently
interred remains to be seen.

The first defendant in Malayan Thread Co. Sdn. Bhd. v. Oyama Shipping Line Ltd. & Anor.290
was a shipping company which issued a bill of lading held by the plaintiff for the delivery of
cotton sewing thread. The goods were discharged from the ship and placed in a shed in the
port. When the agent of the plaintiff went to the shed in the port to collect the cargo, the
shipment was one case and 15 cartons short.

52
The first defendant denied liability on the basis of two clauses in the bill of lading:291
(i) clause 2 the shipping company shall not be responsible for losses resulting from robbery,
theft or pilferage by persons in the employment or service of the company or otherwise, and
(ii) clause 15 the company's liability shall cease as soon as the goods leave the ship's deck
and/or tackle.
Raja Azlan Shah J held that the exemption clauses in this case seem to protect the first
defendant from this type of loss, that is, theft by person or persons unknown. The court
confirmed the principle in Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd.292 that the
principal cannot rely on an exclusion clause where his servant or agent has " deliberately
flouted one of the bounden obligations of the contract ."293 However, this is not the case
here.
The court did, however, also comment that the court must consider whether there has been:
a breach of a fundamental term of the contract because no court can allow such a breach to pass unnoticed
under the cloak of an exemption clause.294

The court held that there was no fundamental breach on the facts. The authorities referred to
by the court on the point of an exclusion clause not covering a fundamental breach of contract
included Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd. The court merely seemed to refer
to this statement of the law as the prevailing law at the time.
Ian Chin J in the High Court in 'The Taveechai Marine'; Owners of cargo lately laden on
board the ship or vessel 'Taveechai Marine' v. Owners of and other persons interested in the
ship or vessel 'Taveechai Marine'295 approved the principles in Sze Hai Tong Bank Ltd. v.
Rambler Cycle Co. Ltd.296 that:
(i) the contract made between the parties cannot be interpreted so widely so as to exclude the liability of the
defendant for their own fault.297; and

(ii) a shipowner who delivers without production of the bill of lading does so at his peril
and that in delivering the goods without the production of the bill of lading to a person who, to
its knowledge, was other than the one entitled under the bill of lading to receive them, was
liable for breach of contract and for conversion.298
Ian Chin J in 'The Taveechai Marine'; Owners of cargo lately laden on board the ship or
vessel 'Taveechai Marine' v. Owners of and other persons interested in the ship or vessel
'Taveechai Marine'299 did not make any statements with regard to whether an exclusion clause
can absolve a fundamental breach of contract or whether this was a fundamental breach of
contract on the facts. The court merely stated that:
I have already found fault on the part of the defendant and this article cannot be relied on as exempting the
defendant from liability.300

53
The 'article' relied on in this case to exempt liability was art. IV, reg. 2(g) of the Merchant
Shipping (Implementation of Convention Relating to Carriage of Goods by Sea and to
Liability of Shipowner and Others) Regulations 1960 which provides:
Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from any other cause
arising without the actual fault or privity of the carrier or without the fault or neglect of the agents or servants of
the carrier .301

The High Court in Chin Hooi Nan v. Comprehensive Auto Restoration Service Sdn. Bhd. &
Anor.302 seems to imply that despite the existence of wide exclusion clauses, this will not
protect a party from a claim of negligence.
The authorities cited for this principle of law were Sze Hai Tong Bank Ltd. v. Rambler Cycle
Co. Ltd.303 and Port Swettenham Authority v. T. W. Wu and Company (M) Sdn. Bhd.304
In the first cited case, Lord Denning explained that the exclusion clause in the bill of lading
had to be limited from too wide an interpretation. The limit suggested was against allowing a
fundamental breach of contract. In the latter cited case, Lord Salmon held that the exclusion
clause in the by-law was ultra vires the Act under which the by-law was passed.305
These two authorities, therefore, do not seem to categorically state that an exclusion clause
cannot ever absolve a party from negligence. Indeed, the other cases from England and
Malaysia306 discussed above seem to leave the possibility of a party being able to exclude
liability for negligence open, as long as the clause is drafted so as to clearly reflect the parties'
awareness that negligence was intended to be excluded by the clause.
Based on the authorities cited, it may be too much of a generalisation to use Siti Norma
Yaakob J's decision as a basis for stating that exclusion clauses are never effective against a
negligence suit in Malaysia. Perhaps, the Siti Norma Yaakob J's judgment was highlighting
the court's reluctance in allowing exclusion clauses to be effective against a claim of
negligence. However, the court may still have to uphold an exclusion clause where it clearly
evinces an intention of the parties' to exclude liability for negligence.
The High Court in 'The Taveechai Marine'; Owners of cargo lately laden on board the ship or
vessel 'Taveechai Marine' v. Owners of and other persons interested in the ship or vessel
'Taveechai Marine'307 also seemed to make quite general comments that exclusion clauses
cannot absolve a party from liability for their own fault. However, the authority cited in
support of this principle was also Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd.308 which
only seemed to bar an exclusion clause from applying to a fundamental breach of contract.
Additionally, Ian Chin J also seemed to approve309 the case of Ailsa Craig Fishing Co. Ltd. v.
Malvern Fishing Co. Ltd. and another et c contra310 which also did not preclude the
possibility of an exclusion clause applying to a claim of negligence. It depended on the
interpretation of the clause.

54
Kamalanathan Ratnam J in Low Kon Fatt v. Port Klang Golf Resort (M) Sdn. Bhd.311 held:
Coming to the case at hand, I have no hesitation that the provision of the seasports facilities was the alluring high
point that had induced the plaintiff to enter into this contract and since from the outset, there was no way that
such a facility could have been provided due to the fact that the Port Kelang Authority had subsequently refused
such permission, the failure or the inability must go to the root of the contract. The defendant therefore cannot
avail itself of this exclusion clause.312

Steve Shim J in Syarikat Cheap Hin Toy MFE Sdn. Bhd. v. Syarikat Perkapalan Kris Sdn.
Bhd. & Anor.313 referred to the case of Sze Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd. and
affirmed that the exclusion clause in the Malaysian case:
must therefore be limited and modified to the extent necessary to enable effect to be given to the main object
and intent of the contract.314

The High Court in both these cases315 did not clarify whether the exclusion clause did not
avail the defendants because such clauses cannot ever excuse a fundamental breach of contract
or whether it did not do so on the construction of the clause based on the contract as a whole.
Gunn Chit Tuan J in Talam Leasing Sdn. Bhd. v. Batu Wong Koon Sdn. Bhd. & Ors.316 stated:
Whether or not any particular exclusion clause is sufficient to relieve the lessor of liability depends upon
whether the clause in question, construed in the light of its wording and the commercial or other purpose of the
contract, was intended by the parties to cover the liability which it is sought to exclude. Moreover, if there was a
fundamental breach of the contract the question whether an exception clause is applicable is one of true
construction of the contract concerned (Suisse Atlantique Societe D'Armament Maritime S.A. v. N.V.
Rotterdamsche Kolen Centrale) [1967] 1 AC 361.317

This High Court case, thus, seems to clearly affirm the position that whether exclusion clauses
exempt fundamental breaches of contract depends on the construction of the contract.
High Court cases in Malaysia, thus, seem to have referred to cases in England that have held
that exclusion clauses do not cover fundamental breaches and whether it does or not is a
question of construction. The latter view, however, seems to be the more currently popular
view.
Unfair Contract Terms Act
The English Unfair Contract Terms Act 1977318 is particularly relevant to exclusion clauses.
Section 2319 of this Act provides the law with regard to excluding liability for negligence:
(1) A person cannot by reference to any contract term or to a notice given to persons generally or to particular
persons exclude or restrict his liability for death or personal injury resulting from negligence.

(2) In the case of other loss or damage, a person cannot so exclude or restrict his liability for
negligence except in so far as the term or notice satisfies the requirement of reasonableness.
(3) Where a contract term or notice purports to exclude or restrict liability for negligence a

55
person's agreement to or awareness of it is not of itself to be taken as indicating his voluntary
acceptance of any risk.
Section 3320 of this Act states the law with regard to excluding contractual liability:
(1) This section applies as between contracting parties where one of them deals as consumer or on the other's
written standard terms of business.

(2) As against that party, the other cannot be reference to any contract term:
(a) when himself in breach of contract, exclude or restrict any liability of his in respect of that
breach; or
(b) claim to be entitled:
(i) to render a contractual performance substantially different from that which was reasonably
expected of him, or
(ii) in respect of the whole or any part of his contractual obligation, to render no performance
at all,
except in so far as (in any of the cases mentioned above in this subsection) the contract term
satisfies the requirement of reasonableness.
Section 9 of this Act deals with the issue of the validity of an exclusion clause in a contract
after the contract has been rescinded or affirmed by the other party based on, or despite of, a
breach of contract:
(1) Where for reliance upon it a contract term has to satisfy the requirement of reasonableness, it may be found to
do so and be given effect accordingly notwithstanding that the contract has been terminated either by breach or
by a party electing to treat it as repudiated.

(2) Where on a breach the contract is nevertheless affirmed by a party entitled to treat it as
repudiated, this does not of itself exclude the requirement of reasonableness in relation to any
contract term.
Section 11 of this Act defines what is the term of 'reasonableness' in Part I of this Act:
(1) In relation to a contract term, the requirement of reasonableness for the purposes of this Part of this Act is
that the term shall have been a fair and reasonable one to be included having regard to the circumstances which
were, or ought to have been, known to or in the contemplation of the parties when the contract was made.

(3) In relation to a notice (not being a notice having contractual effect), the requirement of
reasonableness under this Act is that it should be fair and reasonable to allow reliance on it,
having regard to all the circumstances obtaining when the liability arose or (but for the notice)
would have arisen.

56
(5) It is for those claiming that a contract term or notice satisfies the requirement of
reasonableness to show that it does.
Section 4(1)(a) of the Application of English Law Act321 provides that the English enactments
listed in the First Schedule shall apply in Singapore to the extent as specified in the fourth
column of the First Schedule. The Unfair Contract Terms Act 1977322 is listed in Part II of the
First Schedule of this Act.
Joanna Rasamalar Jeremiah323 writes:
In Malaysia, the Contracts Act 1950 is exhaustive. Therefore, the UCTA 1977324 does not apply to any contracts
and furthermore, there are no equivalent provisions to UCTA in Malaysia.

Andrew Phang Boon Leong writes:


The Unfair Contract Terms Act does not stand alone; indeed it forms part of a worldwide pattern. In the past
thirty years many countries have sought to tackle the problems of standard form contracts, inequality of
bargaining power and exemption clauses by legislation.325

Ho Peng Kee326 writes:


The main focus of the Act327 is on the test of reasonableness which is applied in assessing the validity of
exemption clauses.

Tommy Thomas328 concludes:


The best solution would be for Parliament to enact a similar act as the Unfair Contract Terms Act to apply to
consumer and other standard contracts to ensure that exclusion clauses only be applied with regard to what is just
and reasonable. Otherwise in the name of the freedom to contract exclusion clauses would be left with a long life.

Public Policy
Section 10(1) of the Contracts Act 1950 in Malaysia includes in its requirements of a valid
contract, inter alia, that the contract is made for a lawful consideration and for a lawful object.
Section 24(e) of this Act explains that the consideration and object of a contract is not lawful
if it is opposed to public policy.
Visu Sinnadurai329 reminds the Malaysian courts that the application of exclusion clauses may
be limited, in appropriate cases, under s. 24(e) of the Contracts Act 1950 on the grounds of
public policy as in the Indian case of Lily White v. R. Munuswami.330
In this case, a firm of launderers relied on a printed condition on the back of a bill which was
handed to the customer when the launderer received articles for dry-cleaning which stated that
the customer would only be entitled to claim 50% of the market price or value of the article in
case of loss. One of the garments the customer gave to the launderer was lost due to
negligence.

57
The court held:
It appears to me to be very clear that a term which is prima facie opposed both to public policy and to the
fundamental principles of the law of contract, cannot be enforced by a court, merely, because it is printed on the
reverse of a bill and there is a tacit acceptance of the term when the bill was received by the customer. Certainly,
the conditions printed on the reverse of a bill may well govern or modify any simple contract, such as the
contract in the present case, which was to entrust an article for dry cleaning and to pay due charges for that
service, subject to the obligation on the part of the businessman to perform the process properly and to return the
articles safe and intact. But if a condition is imposed, which is in flagrant infringement of the law relating to
negligence, and a bill containing this printed condition is served on the customer, the court will not enforce such
a term which is not in the interests of the public and which is not in accordance with public policy.331

This seems to be a novel use of s. 24(e) of the Contract Act 1950 and may perhaps be applied
if public policy is clearly violated by the particular exclusion clause. However, once this
argument is accepted by the courts, it may become a 'slippery slope' as the boundaries of
public policy are flexible and uncertain.
Conclusion
The courts do not seem to rise to the challenge of how widely an exclusion clause can be
construed. Often, it is quite the reverse. Visu Sinnadurai332 writes:
The courts, themselves have not been too bashful in expressing their contempt for such clauses.333

The courts recognise the freedom of the parties to contract which is a fundamental premise
running through the entire law on contracts. However, this 'freedom' seems scrupulous
supervised in the case of exclusion clauses, especially when the parties have unequal
bargaining power and one party is not aware of the existence or extent of the exclusion clause
in question. Denning LJ in John Lee & Son (Grantham) Ltd. and Others v. Railway
Executive334 stated:
Above all, there is the vigilance of the common law which, while allowing for freedom of contract, watches to
see that it is not abused.

Various guidelines seem to have emerged from the cases for an exclusion clause to be valid
and applicable:
(i) the party against whom the exclusion clause operates must have had reasonable notice of
the clause before or at the time the contract is made,
(ii) if the exclusion clause is in a document that is signed by the party against whom the
exclusion clause operates, this party is deemed to know of the clause, whether this party has
actual notice of the clause or not unless this party can prove fraud or misrepresentation,
(iii) if the exclusion clause is in a document that is not signed by the party against whom the
exclusion clause operates, then the party the exclusion protects must ensure that the other
party had reasonably sufficient notice of the clause,

58
(iv) any ambiguity in the meaning of the exclusion clause will generally be construed contra
proferentum, that is, contrary to the interests of the party seeking to rely on the clause for
protection against liability,
(v) an exclusion clause must clearly indicate as operating against liability in negligence for
the clause to have this effect, and
(vi) an exclusion clause must clearly indicate that there is no liability for a fundamental
breach of contract for the clause to have this effect.
All these rules are based on the construction of the exclusion clause and the yardstick the court
employs to guess the intentions of the parties is 'reasonableness'.
The concept of 'reasonableness' is a central feature of the Unfair Contract Terms Act 1977.
The Act leaves this feature to be interpreted in each case. Therefore, enacting a similar piece
of legislation or adopting this Act in Malaysia may not result in the law being that much
clearer or certain.
Public policy may be used as another check on exclusion clauses, but public policy also, is not
always clear or certain.
The main issues in the law on exclusion clauses seem to be reasonable notice and the
construction of the clause. This makes it difficult to express the law in clear and certain terms.
Precedent is of limited assistance. There are, however, some guidelines the courts seem to
generally follow.
Bibliography
1) Andrew Phang Boon Leong, Cheshire, Fifoot and Furmston's Law of Contract, Second
Singapore and Malaysian Edition, Butterworths Asia, 1998.
2) Catherine Tay and K. L. Ter, 'The Photo Production Case: The Rule of Law Burnt Out?'
[1981] 2 MLJ cliii-clix.
3) David G. Pierce, 'Exemption Clauses in Contracts Since Photo Production' [1984] 1 MLJ
xxvii-xxxvi.
4) Dato' Visu Sinnadurai, The Law of Contract in Malaysia and Singapore: Cases and
Commentary, 2nd edn, Butterworths (Singapore), 1987.
5) G.H.L. Fridman, The Law of Contract in Canada, Third Edition, Carswell Thomson
Professional Publishing, 1994.
6) Halsbury's Statutes of England and Wales, 4th edn, vol. 11, London: Butterworths, 2000.
7) Ho Peng Kee, 'Exemption Clauses and the Unfair Contract Terms Act: The Test of

59
Reasonableness' [1985] 2 MLJ ccxxiv-ccxxxi.
8) J. Beatson, Anson's Law of Contract, Twenty-Seventh Edition, Oxford University Press,
1998.
9) Joanna Rasamalar Jeremiah, 'Restrictive Interpretation of Exclusion Clauses in Personal
Accident Policies' [1993] 3 MLJ cvi-cxii.
10) Lum Kit-Wye, Victor Yeo and Low Kee Yang (editor), Contract Law, Butterworths Asia,
1998.
11) Lord Mackay of Clashfern, Halsbury's Law of England, 4th edn reissue, vol. 9(1),
Butterworths (London), 1998.
12) P. S. Atiyah, An Introduction to the Law of Contract, 5th edn, Clarendon Press (Oxford),
1995.
13) Visu Sinnadurai, 'Exemption Clauses v. Public Policy and Inequality of Bargaining
Power' [1978] 2 MLJ cxxx-cxxxvii.
14) Syed Ahmad Alsagoff, Principles of the Law of Contract in Malaysia, Malayan Law
Journal Sdn. Bhd., 1996.
15) Trayner's Latin Maxims, 4th edn, W. Green/Sweet & Maxwell, 1993.
16) Tommy Thomas, 'The Resurrection of the Exclusion Clause' [1980] 13(1) INSAF 39-40.
Footnotes
1. P. S. Atiyah, An Introduction to the Law of Contract, 5th edn, Clarendon Press (Oxford), 1995, at p. 196.

2. G.H.L. Fridman, The Law of Contract in Canada, 3rd edn, Carswell Thomson Professional
Publishing, 1994, at p. 571.
3. The author is referring to an exclusion clause.
4. Lord Mackay of Clashfern, Halsbury's Law of England, 4th edn Reissue, vol. 9(1),
Butterworths (London), 1998, at p. 552, para. 797.
8. Andrew Phang Boon Leong, Cheshire, Fifoot and Furmston's Law of Contract, Second
Singapore and Malaysian Edition, Butterworths Asia, 1998, at p. 264.
9. [1967] AC 361, at p. 406.
10. Tommy Thomas, 'The Resurrection of the Exclusion Clause' [1980] 13(1) INSAF 39, at p.

60
39.
11. Lum Kit-Wye, Victor Yeo and Low Kee Yang (editor), Contract Law, Butterworths Asia,
1998, at p. 202.
12. Syed Ahmad Alsagoff, Principles of the Law of Contract in Malaysia, Malayan Law
Journal Sdn. Bhd., 1996, at p. 107.
13. Act 136.
14. Dato' Visu Sinnadurai, The Law of Contract in Malaysia and Singapore: Cases and
Commentary, 2nd edn, Butterworths (Singapore), 1987, at p. 209.
15. Syed Ahmad Alsagoff, Principles of the Law of Contract in Malaysia, Malayan Law
Journal Sdn. Bhd., 1996, at p. 107.
16. [1949] 1 KB 532.
17. [1949] 1 KB 532, at p. 546.
18. [1949] 1 KB 532, at p. 547.
19. In this case, this referred to the common law liability in negligence.
20. [1949] 1 KB 532, at p. 549.
21. [1971] 1 All ER 686.
22. [1877] 2 CPD 416.
23. [1964] 1 All ER 430; [1964] 1 WLR 125.
24. [1833] 10 QBD 178, at p. 188.
25. [1930] 1 KB 41, at p. 47; [1929] All ER Rep 474, at p. 478.
26. [1949] 1 All ER 127.
27. [1940] 1 All ER 356.
28. [1971] 1 All ER 686, at p. 689.
29. [1971] 1 All ER 686, at p. 693.
30. [1971] 1 All ER 686, at p. 693.

61
31. [1990] 2 MLJ 421.
32. [1990] 2 MLJ 421, at p. 421.
33. The learned President in the lower court.
34. [1990] 2 MLJ 421, at p. 422.
35. [1994] 1 CLJ 382.
36. [1994] 1 CLJ 382, at p. 388.
37. [1934] 2 KB 394.
38. [1934] 2 KB 394, at pp. 401-402.
39. [1894] AC 217. Scrutton LJ referred to this case at p. 402 of the judgment.
40. [1877] 2 CPD 416. Scrutton LJ referred to this case at pp. 402-403 of the judgment.
41. [1934] 2 KB 394, at p. 403.
42. [1934] 2 KB 394, at p. 404.
43. [1934] 2 KB 394, at p. 405.
44. [1934] 2 KB 394, at p. 405.
45. [1934] 2 KB 394, at p. 405.
46. [1934] 2 KB 394, at p. 407.
47. [1951] 1 KB 805.
48. [1951] 1 KB 805, at p. 807.
49. [1951] 1 KB 805, at p. 808.
50. [1949] 1 KB 532.
51. [1934] 2 KB 394.
52. [1932] 1 KB 442.
53. [1951] 1 KB 805, at pp. 808-809.

62
54. [1951] 1 KB 805, at p. 809.
55. [1951] 1 KB 805, at pp. 809-810.
56. [1951] 1 KB 805, at p. 810.
57. [1951] 1 KB 805, at p. 810.
58. Somervell LJ, Singleton LJ (concurring) and Denning LJ.
59. [1999] 2 CLJ 117.
60. [1999] 2 CLJ 117, at p. 143.
61. [1999] 2 CLJ 117, at pp. 144-145.
62. [1934] 2 KB 394.
63. [1951] 1 KB 805.
64. [1999] 2 CLJ 117, at p. 145.
65. [1877] 2 CPD 416. This case has been referred to in other judgments such as that of
Mocatta J in the High Court in Burnett v. Westminster Bank Ltd [1965] 3 All ER 81, at p. 87,
Lord Denning MR in the Court of Appeal in Thornton v Shoe Land Parking Ltd [1971] 1 All
ER 686, at pp. 689-690 and Bingham LJ in the Court of Appeal in Intrefoto Picture Library
Ltd v. Stiletto Visual Programmes Ltd [1988] 1 All ER 348, at p. 353 where Parker v. The
South Eastern Railway Company was referred to as " the leading case ".
66. [1877] 2 CPD 416, at p. 421.
67. [1877] 2 CPD 416, at p. 423.
68. [1877] 2 CPD 416, at p. 424.
69. [1877] 2 CPD 416, at p. 424.
70. [1877] 2 CPD 416, at pp. 425-426.
71. [1877] 2 CPD 416, at p. 428.
72. [1894] AC 217.
73. Lord Herschell LC, Lord Watson and Lord Ashbourne.

63
74. [1894] AC 217, at p. 219.
75. [1894] AC 217, at p. 220.
76. [1894] AC 217, at p. 221.
77. [1918] AC 837.
78. [1918] AC 837, at pp. 845-846.
79. [1918] AC 837, at p. 845.
80. Lord Finlay LC, Viscount Haldane, Lord Dunedin and Lord Parmoor.
81. [1930] 1 KB 41.
82. [1930] 1 KB 41, at p. 46.
83. [1930] 1 KB 41, at p. 46.
84. [1930] 1 KB 41, at p. 47.
85. [1930] 1 KB 41, at p. 52.
86. [1930] 1 KB 41, at p. 53.
87. [1956] 2 All ER 121.
88. [1956] 2 All ER 121.
89. [1965] 3 All ER 81.
90. [1877] 2 CPD 416.
91. [1940] 1 KB 532.
92. That is, the bank.
93. [1965] 3 All ER 81, at pp. 87-88.
94. [1988] 1 All ER 348.
95. [1988] 1 All ER 348, at p. 352.
96. [1971] 1 All ER 686.

64
97. [1971] 1 All ER 686, at p. 692.
98. [1970] 1 Lloyd's LR 364.
99. [1970] 1 Lloyd's LR 364, at p. 368. There was a dispute as to the wording of this notice,
however, Brabin J held at p. 368 of the judgment that the wording of the notice was more
likely to be that as above and anyway " it makes no difference to this case." This is because
of the reason stated above with regard to the language of the notice.
100. [1970] 1 Lloyd's LR 364, at p. 368.
101. [1985] 1 CLJ 340; ([1985] CLJ (Rep) 569).
102. [1985] 1 CLJ 340, at p. 345 (p. 572).
103. The second plaintiff was the mother of the first plaintiff.
104. [1985] 1 CLJ 340, at p. 345. (pp. 572-573)
105. [1985] 1 CLJ 340.
106. Act 148. Section 3(1) of this Act makes this Convention applicable to Malaysia.
107. Such as condition number 9.
108. [1918] AC 837.
109. [1918] AC 837, at p. 843.
110. [1992] 2 CLJ (Rep) 133.
111. [1992] 2 CLJ (Rep) 133, at p. 139.
112. [1992] 2 CLJ (Rep) 133, at p. 139.
113. [1987] 2 CLJ 255; [1987] CLJ (Rep) 964.
114. [1987] 2 CLJ 255 at p. 256; [1987] CLJ (Rep) 964 at p. 966.
115. [1877] 2 CPD 416.
116. [1877] 2 CPD 416, at p. 422.
117. [1940] 1 KB 532.

65
118. Slesser LJ, MacKinnon LJ and Goddard LJ.
119. [1940] 1 KB 532, at p. 539.
120. It was stated on the ticket that the chair could be used for three hours for a fee of 2d. The
exclusion clause was stated on the other side of the ticket.
121. [1940] 1 KB 532, at p. 539.
122. [1940] 1 KB 532, at p. 540.
123. [1998] 3 CLJ Supp 301.
124. [1998] 3 CLJ Supp 301, at pp. 306-307.
125. [1998] 3 CLJ Supp 301, at p. 305.
126. [1998] 3 CLJ Supp 301, at p. 308.
127. See also the principles discussed in Lord Mackay of Clashfern, Halsbury's Law of
England, 4th edn Reissue, vol 9(1), Butterworths (London), 1998, at p. 557.
128. [1894] AC 217, at p. 221.
129. [1930] 1 KB 41, at p. 46.
130. [1877] 2 CPD 416, at p. 422.
131. [1877] 2 CPD 416, at p. 423.
132. [1987] CLJ (Rep) 964, at p. 966.
133. [1951] 2 KB 882, at p. 886.
134. [1934] 2 KB 394, at p. 407.
135. [1894] AC 217, at p. 220.
136. [1894] AC 217, at p. 221.
137. [1877] 2 CPD 416.
138. [1970] 1 Lloyd's LR 364, at p. 368.
139. [1930] 1 KB 41, at p. 46.

66
140. [1940] 1 KB 532, at p. 539.
141. [1877] 2 CPD 416, at p. 421.
142. [1934] 2 KB 394, at pp. 404 and 407.
143. Trayner's Latin Maxims, 4th edn, W. Green/Sweet & Maxwell, 1993, at pp. 108-109.
144. [1911] AC 394.
145. [1911] AC 394, at p. 395.
146. Lord Loreburn LC, Lord Ashbourne, Lord Alverstone CJ and Lord Shaw of
Dunfermline.
147. [1911] AC 394, at p. 395.
148. [1911] AC 394, at p. 396.
149. Lord Alverstone CJ referred to various sections of the Sale of Goods Act 1893 (56 & 57
Vict. c. 71) as an authority. This Act was also referred to by Lord Shaw of Dunfermline in this
case.
150. [1911] AC 394, at p. 398.
151. This refers to the contractual term that the goods were described as 'common English
sainfoin'.
152. [1911] AC 394, at p. 399.
153. [1911] AC 394, at p. 400.
154. [1949] 2 All ER 581.
155. [1949] 2 All ER 581, at p. 582.
156. [1949] 2 All ER 581, at p. 582.
157. [1949] 2 All ER 581, at p. 583. This paragraph of Sir Raymond Evershed MR's judgment
was quoted by Ong CJ in Sharikat Lee Heng Sdn. Bhd. v. Port Swettenham Authority [1971] 2
MLJ 27, at p. 29.
158. [1949] 2 All ER 581, at p. 584.
159. [1971] 2 MLJ 27.

67
160. L.N. 127/1965.
161. It should be noted that the Privy Council in Port Swettenham Authority v. T. W. Wu and
Company (M) Sdn. Bhd [1978] 2 MLJ 137, at p. 140 held that this rule was ultra vires s. 29 of
the Port Authorities Act 1963 (Act 488 - Revised 1992) under which this by-law was passed.
162. [1971] 2 MLJ 27, at p. 29.
163. [1971] 2 MLJ 27, at p. 30.
164. [1998] 4 CLJ 763.
165. [1998] 4 CLJ 763, at p. 766.
166. [1949] 2 All ER 581, at p. 583.
167. [1972] 2 QB 71.
168. [1972] 2 QB 71, at p. 79.
169. [1972] 2 QB 71, at p. 80.
170. [1922] 2 KB 87. This case was cited with approval by Singleton LJ in Olley v. Marlborough

Court Limited[1949] 1 KB 532 (Court

of Appeal), at p. 546.

171. [1922] 2 KB 87, at p. 91.


172. Bankes LJ, Scrutton LJ and Atkin LJ.
173. [1922] 2 KB 87, at p. 92. This passage was quoted by Morris LJ in White v. John Warrick
& Co. Ltd. [1953] 2 All ER 1021, at p. 1027.
174. [1922] 2 KB 87, at p. 93.
175. This refers to the defendant.
176. [1922] 2 KB 87, at p. 90.
177. [1972] 2 QB 71, at p. 79.
178. [1953] 2 All ER 1021.
179. [1953] 2 All ER 1021, at p. 1023.
180. Singleton LJ, Denning LJ and Morris LJ.

68
181. [1953] 2 All ER 1021, at p. 1025.
182. [1953] 2 All ER 1021, at p. 1026.
183. [1953] 2 All ER 1021, at p. 1027.
184. [1972] 2 QB 71.
185. [1972] 2 QB 71, at p. 75.
186. [1972] 2 QB 71, at p. 76.
187. [1972] 2 QB 71, at p. 76.
188. [1972] 2 QB 71, at p. 78.
189. [1972] 2 QB 71, at p. 81.
190. [1972] 2 QB 71, at p. 83.
191. [1972] 2 QB 71, at p. 84.
192. [1972] 2 QB 71, at p. 83.
193. Salmon LJ, Stamp LJ and Latey LJ.
194. [1983] 1 All ER 101.
195. The plaintiff.
196. [1983] 1 All ER 101, at pp. 102-103.
197. [1983] 1 All ER 101, at p. 103.
198. [1983] 1 All ER 101, at p. 105. Lord Bridge of Harwich in George Mitchell (Chesterhall)
Ltd. v. Finney Lock Seeds Ltd. [1983] 2 AC 803, at p. 813 quoted and affirmed this passage.
199. Lord Wilberforce, Lord Fraser of Tullybelton, Lord Elwyn-Jones, Lord Salmon and Lord
Lowry (the last three Law Lords concurring with the first two Law Lords).
200. [1986] 2 All ER 957.
201. Lord Brandon of Oakbrook, Lord Brightman, Lord Mackay of Clashfern and Lord
Ackner concurred.

69
202. [1986] 2 All ER 957, at pp. 959-960.
203. [1949] 1 KB 532, at p. 549.
204. [1973] 1 All ER 193, at p. 200.
205. This refers to the words in an exclusion clause.
206. [1973] 2 MLJ 27.
207. L.N. (N.S.) 93/1957. The applicable Rule is in its form before the amendments in 1970
(P.U. (A) 250/1970).
208. No. 56 of 1955 which has since been superseded by the Penang Port Commission Act
1955 (Act 140).
209. Section 66 is in Part V of the Ordinance dealing with the 'Duties and Powers of the
Commission'. Part VI of the Ordinance deals with 'Limitation of Liability'.
210. [1973] 2 MLJ 27, at p. 28.
211. [1973] 2 MLJ 27, at pp. 28-29.
212. [1978] 2 MLJ 137. This case was affirmed by the High Court in Chin Hooi Nan v.
Comprehensive Auto Restoration Service Sdn. Bhd. & Anor. [1995] 1 BLJ 25.
213. L.N. 127/1965. This rule was also considered by the Federal Court in Sharikat Lee Heng
Sdn. Bhd. v. Port Swettenham Authority [1971] 2 MLJ 27 discussed above.
214. Act 488 (Revised 1992).
215. Who delivered the judgment of the Board which consisted of Lord Wilberforce, Viscount
Dilhorne, Lord Salmon, Lord Fraser of Tullybelton and Sir Garfield Barwick.
216. [1915] AC 705, at p. 715.
217. [1978] 2 MLJ 137, at p. 140.
218. [1995] 1 CLJ 720.
219. [1995] 1 CLJ 720, at p. 738.
220. [1995] 1 CLJ 720, at pp. 740.
221. [1995] 1 CLJ 720.

70
222. [1983] 1 All ER 101.
223. [1959] 25 MLJ 200.
224. [1983] 1 All ER 101.
225. [1995] 1 CLJ 720, at p. 740.
226. [1983] 1 All ER 101.
227. [1995] 2 CLJ 304.
228. [1995] 2 CLJ 304, at p. 307.
229. Lee Hun Hoe CJ (delivering the judgment of Seah & Syed Agil Barakbah SCJJ) in the
Supreme Court in this case stated at p. 290 that, "We do not think the learned judge was
wrong to say that the burden of proving the exception was on the appellant who was relying
on the exception to escape liability." The appellant in this case was the insurance company
(the defendant).
230. [1995] 2 CLJ 304, at p. 307.
231. [1995] 1 BLJ 25.
232. [1995] 1 BLJ 25, at p. 26.
233. The defendant.
234. [1995] 1 BLJ 25, at p. 26.
235. [1959] 25 MLJ 200.
236. [1978] 2 MLJ 137. This case was affirmed by the High Court in Chin Hooi Nan v.
Comprehensive Auto Restoration Service Sdn. Bhd. & Anor. [1995] 1 BLJ 25, at p. 26.
237. See Sekawan Guards Sdn. Bhd. v. Thong Guan Sdn. Bhd. [1995] 2 CLJ 304.
238. [1995] 4 MLJ 229.
239. [1995] 4 MLJ 229, at p. 232.
240. Volume 9, at paras. 370 and 373.
241. [1995] 4 CLJ 84.

71
246. [1956] 2 All ER 121.
247. [1956] 2 All ER 121, at p. 124.
248. [1956] 2 All ER 121, at pp. 124-125.
249. [1959] 25 MLJ 200. This is a decision of the Privy Council on an appeal from the Court
of Appeal in Singapore. This case was affirmed by the High Court in Chin Hooi Nan v.
Comprehensive Auto Restoration Service Sdn. Bhd. & Anor. [1995] 2 MLJ 100, at p. 103.
250. Who delivered the judgment of the Board consisting of Lord Denning, Lord Jenkins and
the Rt. Hon. L. M. D. de Silva.
251. Who is the plaintiff.
252. [1959] 25 MLJ 200, at p. 201.
253. There were two other specific exceptions in this section.
254. [1959] 25 MLJ 200, at pp. 201-202.
255. [1959] 25 MLJ 200, at p. 202.
256. [1909] AC 369. The Privy Council decision was delivered by Lord Macnaghten on behalf
of the Board consisting of Lord Macnaghten, Lord Atkinson, Lord Collins and Sir Arthur
Wilson.
262. [1964] 1 Lloyd's LR 446, at pp. 450-451.
263. [1964] 1 Lloyd's LR 446, at p. 451.
264. This passage is cited and affirmed by Viscount Dilhorne in the House of Lords in Suisse
Atlantique Societe D' Armement Maritime S.A. v. N. V. Rotterdamsche Kolen Centrale [1967]
AC 361, at p. 393.
265. [1964] 1 Lloyd's LR 446, at p. 453. Lord Justice Pearson goes on to cite a number of
cases which support the principle that an exception clause, it is presumed by the courts, would
not have been meant to apply to a fundamental breach of contract.
266. [1967] AC 361.
267. [1953] 1 WLR 1468, at p. 1470.
268. [1967] AC 361, at p. 393.
269. Viscount Dilhorne cited and quoted from a number of cases which supported the

72
principle that exclusion clauses do not cover a fundamental breach of contract, at pp. 390-393.
270. [1967] AC 361, at pp. 392-393.
271. [1967] AC 361, at p. 410.
272. [1967] AC 361, at p. 422.
273. [1967] AC 361, at p. 429.
274. [1967] AC 361, at p. 427.
275. [1967] AC 361, at p. 432.
276. [1980] AC 827. This case was referred to by Dato' Hj. Abdul Malik bin Hj. Ishak J in the
High Court in Ng Chai Huat v. Sim Kui Kian [1995] 3 BLJ 262, at p. 267-268.
277. [1978] 1 WLR 856.
278. [1970] 1 QB 447. Lord Wilberforce and Lord Diplock held at pp. 844-845 and 847
respectively that this case should be overruled.
279. [1967] AC 361.
280. [1980] AC 827, at p. 841.
281. [1980] AC 827, at p. 842.
282. [1980] AC 827, at pp. 842-843.
283. [1980] AC 827, at pp. 850-851.
284. [1980] AC 827, at p. 853.
285. [1980] AC 827, at p. 853.
286. David G. Pierce, 'Exemption Clauses in Contracts Since Photo Production' [1984] 1 MLJ
xxvii, at p. xxvii.
287. Catherine Tay and K. L. Ter, 'The Photo Production Case: The Rule of Law Burnt Out?'
[1981] 2 MLJ cliii, at p. cliii.
288. [1980] AC 827, at p. 842-843.
289. Catherine Tay and K. L. Ter, 'The Photo Production Case: The Rule of Law Burnt Out?'

73
[1981] 2 MLJ cliii, at p. cliii.
290. [1973] 1 MLJ 121.
291. [1973] 1 MLJ 121, at p. 122.
292. [1959] 25 MLJ 200.
293. [1973] 1 MLJ 121, at p. 122.
294. [1973] 1 MLJ 121, at p. 122.
295. [1995] 1 CLJ 720.
296. [1959] 25 MLJ 200.
297. [1995] 1 CLJ 720, at p. 738.
298. [1995] 1 CLJ 720, at p. 738.
299. [1995] 1 CLJ 720.
300. [1995] 1 CLJ 720, at p. 738.
301. [1995] 1 CLJ 720, at p. 738.
302. [1995] 1 BLJ 25.
303. [1959] 25 MLJ 200.
304. [1978] 2 MLJ 137. This case was affirmed by the High Court in Chin Hooi Nan v.
Comprehensive Auto Restoration Service Sdn. Bhd. & Anor. [1995] 1 BLJ 25.
305. There was a similar finding in Jackson's Malaya Berhad v. Penang Port Commission
[1973] 2 MLJ 27.
306. See Sekawan Guards Sdn. Bhd. v. Thong Guan Sdn. Bhd. [1995] 2 CLJ 304.
307. [1995] 1 CLJ 720.
308. [1959] 25 MLJ 200.
309. [1995] 1 CLJ 720.
310. [1983] 1 All ER 101.

74
311. [1998] 3 CLJ Supp 301. The facts of this case was discussed above under the topic, 'NonContractual Documents.'
312. [1998] 3 CLJ Supp 301, at p. 308.
313. [1995] 4 CLJ 84.
314. [1995] 4 CLJ 84, at pp. 90-91.
315. Low Kon Fatt v. Port Klang Golf Resort (M) Sdn. Bhd. [1998] 3 CLJ Supp 301 and
Syarikat Cheap Hin Toy MFE Sdn. Bhd. v Syarikat Perkapalan Kris Sdn. Bhd. & Anor. [1995]
4 CLJ 84.
316. [1988] 2 CLJ (Rep) 455.
317. [1988] 2 CLJ (Rep) 455, at p. 460.
318. 1977, Chapter 50. See Halsbury's Statutes of England and Wales, 4th edn, vol. 11,
London: Butterworths, 2000, at pp. 229-245.
319. Refer to Schedule 1 of this Act with regard to the limitations on the application of this
section to different types of contracts.
320. Refer to Schedule 1 of this Act with regard to the limitations on the application of this
section to different types of contracts.
321. Chapter 7A (1994 edn).
322. The fourth column of the First Schedule of this Act, however, provides that parts of the
Unfair Contract Terms Act 1977 that applies in Singapore is limited to Part I (except ss.
1(1)(c), 1(3)(b) and the amendment to s. 1 by the Occupiers' Liability Act 1984) and Part III of
the Act.
323. Joanna Rasamalar Jeremiah, 'Restrictive Interpretation of Exclusion Clauses in Personal
Accident Policies' [1993] 3 MLJ cvi, at p. cvi.
324. This refers to the Unfair Contracts Terms Act 1977 from England.
325. Andrew Phang Boon Leong, Cheshire, Fifoot and Furmston's Law of Contract, Second
Singapore and Malaysian Edition, Butterworths Asia, 1998, at p. 317.
326. Ho Peng Kee, 'Exemption Clauses and the Unfair Contract Terms Act: The Test of
Reasonableness' [1985] 2 MLJ ccxxiv, at p. ccxxiv.
327. This refers to the Unfair Contract Terms Act 1977 from England.

75
328. Tommy Thomas, 'The Resurrection of the Exclusion Clause' [1980] 13(1) INSAF 39, at
p. 40.
329. Visu Sinnadurai, 'Exemption Clauses v. Public Policy and Inequality of Bargaining
Power' [1978] 2 MLJ cxxx, at p. cxxx, at pp. cxxxiii and cxxxvi.
330. [1966] AIR Mad. 13.
331. [1966] AIR Mad. 13, at pp. 13-14.
332. Visu Sinnadurai, 'Exemption Clauses v. Public Policy and Inequality of Bargaining
Power' [1978] 2 MLJ cxxx, at p. cxxx.
333. This refers to exemption clauses.
334. [1949] 2 All ER 581, at p. 584.

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