TAYLOR
Foundation In Business
Integrated Project
BUSINESS SCHOOL
Article 1
THE TRUTH ABOUT THE EXEMPTION CLAUSE!
BY : Jusniza Abdul Jamal
“Park at your own risk!”. “The management of this hotel
is not responsible for any loss of or damage done to any
vehicles parked here.” Looks familiar? These are just
some of the examples of exemption clauses that we often
encountered when we enter a parking space at the hotels
or shopping malls. How effective are these clauses and do
you feel that they are unfair to us? Is it true that we are
not entitled to claim any compensation for any loss of or
damage done to our vehicles?
First of all, let us look at the definition of the word
‘exemption clause’ offered by the Oxford Concise Dictionary
of Law. ‘An exemption clause’ is defined as a term in a
contract purporting to exclude or restrict liability of one of
the parties in specified circumstances. Sadly, the Malaysian
Contracts Act 1950 contains no provision dealing with
exemption clauses yet. Therefore, the Malaysian courts still
rely heavily on the English common law in this particular
aspect. Basically, there are two types of exemption clause.
It is a term of a contract that attempts either to modify
the obligations under the contract or to limit or exclude
liability of a party which would otherwise arise as a result of
a breach of that party of his primary obligation.
The most frequently encountered exemption clauses
are in the second category. They generally operate to
exclude liability for breach of contract or for negligence
or sometimes even to limit liability to a specified sum. An
example of this can be seen in the wordings of section 4
of the Innkeepers Act 1952 which limit the hotels’ liability
for loss or injury up to RM500, excluding animals (pets) and
vehicles belonging to their guests. This means that a guest is
unable to claim any compensation more than RM500 for any
missing property while staying at the hotel unless the loss
or damage was due to the default or neglect of the hotel or
its employees.
In some cases, the exemption clause is not even stated
in a formal contract but is specified or referred to in an
informal tickets or a notice displayed at certain parts of
a building (as mentioned earlier). Normally, the courts are
reluctant to treat such terms as part of a contract unless
reasonable steps were taken to bring it to the notice of
the parties affected. In the case of Thornton v. Shoe Lane
Parking Ltd., the plaintiff’s car was damaged whilst being
parked in defendant’s premises. The plaintiff received a
ticket containing an exemption clause from an automated
machine at the entrance of the garage. The court held that
the plaintiff was not bound by the exemption clause printed
on the ticket as the contract was concluded when the car
was driven to the entrance of the garage. The ticket was
issued after the conclusion of the contract. In other words,
the ticket was not part of the contract between the plaintiff
and the defendant.
The decision of the above case was certainly favourable to
the customers generally. However, the rule regarding ‘tickets’
is completely different when it comes to ‘airline tickets’.
In Malaysian Airlines System Bhd. v. Malini Nathan & Anor, a
passenger tried to sue the airline for overbooking. The court
held that MAS was not in breach of contract for failing to
accommodate the passenger on the said flight. They were
entitled to rely on the clause printed on the ticket which
stated that the times shown in the timetables or elsewhere
are not guaranteed and form no part of the contract. It
seems here that airline ticket is treated as a contract and the
parties are bound by the conditions printed on it. This may
due to the fact that their services are rendered sometime in
the future and the flight schedules could often change due to
unforeseen circumstances.
In cases where there are no formal contracts, ‘tickets’ are
normally intended as a mere acknowledgement of payment.
This has been seen in the case of Chapelton v. Barry UDC
where the plaintiff was given a ticket after hiring a deck
chair from the defendant. The plaintiff was unaware of
the fact that the ticket contained an exemption clause.
Nevertheless, the court allowed him to sue the defendant for
injury when the deck chair gave way beneath him because
the ticket was a mere receipt issued as proof of payment
and not intended to have any contractual effect. However, if
the court is satisfied that a notice is reasonably sufficient to
bring the customers’ attention to the exemption clause, then
the defendant might be able to exclude any liability for loss
or injury caused to their customers.
Even though parties to a contract are able to impose unfair
terms excluding them from liability, the courts are very
strict in interpreting exemption clauses. The wordings must
be very clear and unambiguous in a way that the parties
affected would understand the scope of the liability it sought
to exclude especially where negligence is involved. In any
event of doubt or ambiguity as to the meaning and the scope
of the exemption clause, the courts would apply the contra
proferentum rule. This means that the courts will construe
forcibly the words against the party putting forward the
document. In Hollier v. Rambler Motors Ltd., the court held
that the words “the garage is not responsible for damage
caused by fire to customers’ cars” did not exclude liability
for damage to a customer’s car caused by fire due to the
garage’s negligence. This case shows that it is not easy to
exclude liability for negligence especially where there is a
duty of care involved.
In light of the above discussion, it appears that generally
an exemption clause is only effective when it is properly
incorporated into the contract and the parties affected are
aware of it and understand the scope it covers. However,
there is still hope for the victims in cases involving gross
negligence where the courts will definitely strive to uphold
justice in any way they can.
Reflective Journal
Exemption clauses is defined as a term in a contract purporting to exclude or restrict liability of one of the parties in specified circumstances. Exemption clauses is related to the Contract Law. Sadly, the Malaysian Contracts Act 1950 does not contains the provision dealing with exemption clauses yet. This causes that the Malaysian courts still rely on the English common law in this particular aspect since Malaysia was ruled and governed by the English in the past. Therefore, most of the Malaysian courts are still relying on the English common law. The courts in Malaysia nowadays are reluctant to treat such terms as part of a contract unless reasonable steps are taken to bring it to the notice of the parties affected. There were basically two types of exemption clauses. One of the type is modifying obligation under contracts while the other type is by limiting or excluding the liability of a party.
The type of exemption clauses happens in Malaysia is the second category which is limiting the liability to a specified sum. An example of this category can be seen in the wordings of section 4 of the Innkeeepers Acts 1952 which limit the hotels’ liability for loss or injury up to RM500, excluding animals (pets) and vehicles which are belongs to their guests. This means that the guests is unable to claim any compensation more than RM500 from the company for any missing property while staying in the hotel unless the loss and damages was due to the default or neglect of the hotel or its employees.
“Park at your own risks”, “The management of this company is not responsible for any losses or damages done to any vehicles parked here”. These signs often been seen when we entered any parking spaces at the hotels or shopping malls in Malaysia or even other country. But do the residents that uses the parking slots in a certain shopping malls or complex know the signs that written on the boards is considered as exemption clauses? This causes unfair to the residents because the exemption clauses that have been made is too effective to some of us.
My group’s members and I have done some of the researches on the cases about exemption clauses of parking slots. In one of the article of cases happens in Malaysia not long ago which related to the exemption clauses of the parking spaces. The exemption clauses is not even stated in a formal contract but it is specified or referred to in an informal tickets or a notice displayed at a certain parts of a building. As mentioned earlier, the courts are reluctant to treat such terms as part of a contract unless reasonable steps were taken to bring it to the notice of the parties affected. In the case of Thornton v. Shoe Lane Parking Ltd., the plaintiff’s car was damaged whilst being parked in defendant’s premises. The plaintiff received a ticket containing of exemption clause from an automated machine at the entrance of the garage. The court held that the plaintiff was not bound by the exemption clause printed on the ticket as the contract was concluded when the car was driven to the entrance of the garage. The ticket was issued after the conclusion of the contract. In other words, the ticket was not part of the contract between the plaintiff and the defendant. The other similar example cases of exemption clauses can be seen in the cases like Hollier v. Rambler Motors Ltd., Chapelton v. Barry UDC and Malaysian Airlines System Bhd. v. Malini Nathan &Anor.