Gives history of exemption clauses: notes that the focus now will be on who can better bear the risk
Ratio
Court attitude towards exemption clauses changed in 1978: “the court will not allow a party to rely on an exemption or limitation clause in circumstances in which it would not be fair or reasonable to allow reliance on it: and, in considering whether it is fair and reasonable, the court will consider whether it was in a standard form, whether there was equality of bargaining power, the nature of the breach, and so forth."
Photo Production Ltd. v Securicor Transport Ltd. ????
Fundamental Breach? Allowing for freedom of contract when terms are explicit
Issue
Ratio
Notes
•If the terms of the contract are explicitly clear fundamental breach should not be applied.
•Reasonableness is a factor in determining whether
Hunter Engineering Co. Inc. Et al. v Syncrude et al
Respondent purchased gear boxes that had limited liability of 24 months and clause stating no other warranty/conditions apply
Gearboxes failed after just over 24 months
Fundamental breach?
•If the court, after assessing the contract, determine that it excludes liability for the kind for the kind of breach that occurred, the party in breach will generally be saved from liability. Only where the contract is unconscionable, as might arise from situations of unequal bargaining power between the parties, should the courts interfere with agreements the parties concluded
Fraser Jewellers (1982) Ltd. v Dominion Electric Protection
• In assessing unconscionability it isn't about whether there is merely an inequality in bargaining power, but if there is an abuse of the bargaining power -> would enforcement of limitation clause constitute “unacceptable commercial practice?”
• Is the limitation clause one that makes sense economically for the defendant?
Limitation clause wasn’t obscure/unreasonable
Made sense to have limitation clause –> contract explicitly stated D was not insurer
Davidson v Three Spruces Realty
Extreme abuse of freedom to contract constituting unconscionability
D told P that they would not need insurance and everything was fine
There was a theft
Was the contract a standard form contract drawn up by the Bailee
Were there any negotiations as to the terms of the contract or was it a commercial form which may be described as a "sign here" contract?
Was the attention of the plaintiffs drawn to the limitation clause?
Was the exemption clause unusual in character?
Were representation made which would lead an ordinary person to believe that the limitation clause did not apply?
Was the language of the contract when read in conjunction with the limitation clause such to render the implied covenant made by the Bailee to use reasonable care to protect the plaintiffs' property meaningless?
Having regard to all the facts including the representation made by the Bailee and the circumstances leading up the execution of the contract would not the enforcement of the limitation clause be a tacit approval by the Courts of unacceptable commercial practices?
Delany v Cascade River Holidays Ltd.
Will liability clause be enforced(party died, death wasn’t mentioned in liability clause)
The court will look at the context of the contract and relationship within a parties to determine if a reasonable person would assume the general liability clause included certain specific considerations. Such as if liability from damage includes liability from personal injury or death in the context of a contract for a rafting trip
Dissent is key part for this case the dissent raised issues from the Tilden. Its clear the liability clause wasn’t understood so how can it be applied?
P sues for lost profits (would have gotten the bid)
•The doctrine of fundamental breach is laid to rest and the Court determined that freedom of contract would prevail unless the exclusion clause was unconscionable at the time the contract was made or there is some overriding public policy concern to defeat what would otherwise be the contractual right of parties to draft their own agreements
As a matter of interpretation does the exclusion clause even apply to the circumstances established in evidence
Depends on Court's assessment of the intention of the parties as expressed in the contract (read in light of commercial context and purpose)
And 2.
Was the exclusion clause unconscionable at the time the contract was made, "as might arise from situation of unequal bargaining power between the parties"
Has to do with contract formation, not breach (unconscionability in Hunter???)
Then 3.
Should the court nevertheless refuse to enforce the valid exclusion clause because of the existence of an overriding public policy
Burden lies on the party seeking to avoid the enforcement of the clause to show that the public policy overrides the public's interest in the enforcement of contracts.
