It is first necessary to determine whether the clause has been incorporated as a term of the contract. Regarding to incorporation by signature, generally if China signed the contract, then they tend to be bound by the terms of the agreement, even If they did not read It, (Lagrange v Curaçao), where It was stated that the claimant would be bound by all the terms of the agreement because she signed It and the fact that she did not read the terms was Irrelevant. Incorporation by notice could also be applied in the case provided. For the term to be incorporated by notice, it is not necessary for Rocket to have actual notice of it.
A reasonable notice will also be incorporated. In Thompson v ALMS Railway, a reasonable man in the same circumstances would have had notice of it, therefore it was held that she was bound by the clause even though she could not have had notice of it due to disability, unless the company had been aware of her disability. The determinants of reasonableness are listed in the following. Firstly, degree of notice required is an essential factor. In Thornton v Shoe Lane Parking, Lord Deeding MR. stated that the content of a clause can be significant when determining whether the notice given was reasonable.
If it is unusual or particularly onerous then It seems a higher degree of notice would be required. Also, In Spurning v Bradshaw, he stated that some clauses which he has seen would have 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. Therefore, it could be said that one of many printed in very small print on the back of the contract would be insufficient to be a reasonable notice. To satisfy the test of reasonableness for the unusual practice in the industry, the party who seeks to rely on the clause needs to bring it to the there parties’ attention.
This could also be explained in Interferon Picture Library v Stiletto. Secondly, the notice must be on a contractual document. This was supported by Chaperon v Barry DC. A reasonable man would thinks ticket as a proof of purchase. To be effectively incorporated into a contract, a clause must have been brought to the other parties’ attention and not hidden In some document where a term of a contract would not be expected. Thirdly, the timing of the notice Is also very Important. An effective notice must have been given before or at the time the contract is made otherwise it will be too late.
After the agreement stage, attempts to include further terms must be supported by fresh consideration. This was illustrated in Alley v Marlborough Court Hotel and Thornton v Shoe Lane Parking. Incorporation by a consistent and frequent course of dealings could be seen as one of the arguments in the case provided. It was said that China has used Rocket’s service on occasion for 10 years. In Holler v Rambler Motors, It was held that 3-4 occasions In a period of 5 years were not sufficient to establish a consistent course of dealings.
The notion of a previous course of dealings Is difficult to define. Even If an exemption clause is incorporated into the contract, it does not necessarily mean that procurement rule and statutory control known as Unfair Contract Terms Act 1977 have been taken to protect vulnerable parties from exemption clauses. Under Contra Procurement rule, if there is any ambiguity in the wording, it is construed strictly against the party seeking to rely on it. Rocket’s any loss or damage howsoever caused could be viewed as ambiguity. Rocket’s clause is both exclusion and limitation.
Limitation clauses are usually construed in a more liberal manner as they are not as rash as exclusion clauses. In Alias Craig Fishing v Manlier, Lord Fraser referred to the strict principles applied when construing exclusion clauses and stated that these principles are not applicable in their full rigor when considering the effect of clauses merely limiting liability. As such if Rocket’s clause is clear and free from ambiguity, its effectiveness cannot be denied, even if it covers a fundamental breach, and the contra procurement rule is limited. This was supported by Photo Productions v Securing.
However, the clause must satisfy the Unfair Contract Terms Act 1977 to e valid. Under section 1(3) in Unfair Contract Terms Act 1977, the Act only applies to business liability which is liability for things done in the course of business or from premises used for the purpose of business. S. L (4) states that a business includes a trade or profession or the activities of any government department or local public authority. These apply to Rocket’s clause. Under the Act, the validity of some exemption clauses is made subject to a test of reasonableness by the courts, for example, under s. (2) clauses that attempt to exclude or limit liability for any image caused by negligence. Under s. 1 1(1) with regard to the knowledge of both parties at the time contract was entered into a clause is reasonable if in all circumstances of the case it is reasonable. Under s. 1 1(5) the burden of proving the clause is reasonable is on the party seeking to rely on it. Therefore Rocket must prove that the clause is reasonable. The factors above should be considered in the case of Rocket and China. Under s. 11(4) two additional factors must be considered when determining the reasonableness of a limitation clause.
Firstly the resources available o the party seeking to limit the liability, secondly the question of who is in the best position to insure against the risk of loss created by the breach. Rocket is a limited company which has the resources of a profit making business and would also be able to insure against the risk of such losses. Extra guidance given in Schedule 2 of the Act shows the criteria to be considered when determining the reasonableness of a clause which attempts to exempt liability for breach of the implied terms in the supply of goods contracts.
This was shown in Woodman v Photo Trade Processing and Smith v Bush. Firstly the bargaining strengths of the parties should be considered. Rocket and China are two businesses and would appear to have equality of bargaining power as opposed to a consumer and a business or a small business and a multinational. The court should also consider whether China could have used an alternative supply. In Woodman v Photo Trade Processing, the trial Judge stated that the clause would be more reasonable if the customer had a choice from a two tier service, one with low costs but a high risk, and one with more protection but at a premium.
Therefore if Rocket offers a two tier arrive, it is likely to go in his favor. Also, another consideration would be whether was said that China has used Rocket’s service on occasion for 10 years however it has never heard of Special Service. In Philips v Holland, Salad LLC stated that the application of the test of reasonableness will vary from case to case and will not be treated as binding precedent. The evidence of surrounding circumstances should be considered. Therefore, if a clause similar to Rocket’s had previously satisfied the test of reasonableness; it cannot be taken as an indication of the validity of Rocket’s clause.
