Rules for Liability Clauses
Note Case Notes
| -
Exclusion Clauses will NOT be enforced if the plaintiff's attention was not adequately drawn to the limitation clause before entering into the contractual relationship, or at least before a breach of contract or a negligent act or an omission occurred.
-
Adequately means they must be AWARE that there is a limitation clause… if they know that a limitation clause is included in the contract then they have been made aware enough
-
Regarding negligence being included in exclusion clauses:
-
When can negligence be interpreted as being included in the exclusion clause?
-
"If negligence can reasonably be construed as being within the contemplation of the parties in formulating their agreement, then the clause will extend to liability for negligence"
-
It is unlikely that a party would absolve the other of liability regarding negligent performance on the contract, so:
-
If an exclusion clause can reasonably contemplate any head of liability other than negligence, it is generally construed as not extending to negligence
-
Willful misconduct is separate and distinct from negligence, and does not fall under the scope of limitation clauses the limit liability relating to negligence
-
Inserting liability clauses into a contract specifically because one is operating on specific information and is trying to avoid specific liability is unconscionable conduct
-
Regarding whether a limitation clause should apply if the party didn't read the clause but signed:
-
It is only where the circumstances are such that a reasonable person should have known that the party signing was not consenting to the terms in question that an obligation exists to ensure the party signing understands the exclusion clause
-
The exclusion clause's relation to the nature of the contract is important… the exclusion clause cannot be contrary to the normal expectations of the signing party (sorta like tilden)
5.Unconscionability and Undue Influence | Post et al. v Jones et al Unequal Bargaining Power, P has no choice but to accept terrible deal
Issue
|
Ratio
|
Notes
| -
Ship runs into rocks
-
Ask other ship for help
-
They agree but only if they can purchase cargo at set (LOW) prices
|
• Where one party has absolute power, and the other has no choice but submission is a transaction which has no characteristic of a valid contract
| -
Courts of admiralty enforce contracts for salvage, but they do not like it when a party takes advantage of the situation and of other's misfortune to drive a bargain
| Marshal v Canada Permanent Trust co. Unequal bargaining: Party A purchases land from old man grossly underpriced
Issue
|
Ratio
|
Notes
| | |
Two requirements for unconscionability:
-
Gross inequality of bargaining power
-
A bad deal
| | Mundinger v Mundinger Unconscionability with a relationship where there is no typical mental weakness (abusive marriage)
Issue
|
Ratio
|
Notes
| | |
In situation with a difference of bargaining power:
Burden is on the plaintiff to prove the deal was horrible due to a difference in bargaining power
Then: burden shifts to defendant to prove that the deal was fair
| | Lloyds Bank Limited v Bundy Proving there is undue influence
Issue
|
Ratio
|
Notes
|
Proving the required relationship
|
There are two ways undue influence can be established:
-
The stronger person is guilty of fraud or wrongful act to gain advantage over the weaker.
-
The stronger is not guilty, but because of their relationship of trust and confidence, gained an advantage.
-
Prove this was a relationship of trust and confidence OR
-
Show it fits into one of the presumed categories. (listed beside).
-
NEED a transaction that is not readily explicable by the party’s relationship.
|
The other party can rebut the presumption by showing they acted with scrupulous care, honesty and in the best interest of the subordinate party.
This case was resolved to be undue influence of the second category: father implicitly trusted bank manager to act in his best interest. Bank manager knew this but yet did not tell him the son’s business was very likely to fail.
o Parent/child
o Dr/patient
o Trustee/beneficiary
o Solicitor/client
o Religious advisor/disciple
|
Facts: man mortgages farm to bank for Son’s business. New bank manager comes in, sees that son’s business is failing, goes to father and gets him to sign more interest in his property over even though bank manager knows business will likely fail and isn’t extending anymore credit in exchange for this extra interest.
| Credit Lyonnais Bank Nederland NV v Burch What Case is about Royal Bank of Scotland p.l.c. v Etridge (No.2) and Other Appeals 3rd parties to the contract and undue influence (Bank)
Issue
|
Ratio
|
Notes
|
What if the undue influence comes from a third party to the K?
(i.e. pressure on a guarantor from the person who they are helping… this person is not a party to the guarantor K it is between the guarantor and the bank)
|
Normally, undue from a relationship of trust or confidence is proved when Ptf proves (1) trust and confidence of defendant (2) transaction not readily explicable by party’s relationship. Then the onus shifts to the def to prove (1) no trust or confidence (but can’t if it is one of the automatic categories) or (2) give an explanation for the transaction.
A bank is fixed with constructive knowledge of undue influence anytime a guarantee is given in a non-commercial relationship. If undue influence is then proven, the bank will not be able to enforce the contract UNLESS the bank…
-
Made sure spouse knows the risk—explain carefully and thoroughly
-
In a private meeting—decides in a private meeting.
-
Urged spouse to get independent legal advice
-
Exceptionally must insist on independent advice and receive letter from solicitor saying they have advised the spouse.
If the bank knows the spouse has not received good advice, they run the risk. Otherwise can usually rely on the solicitor saying the spouse was advised to make the surety K enforceable. Usually the first two points are done by a solicitor.
|
What must a solicitor do when advising someone whether to enter a surety K for a spouse or similar relational person?
-
Explain nature of documents and their consequences.
-
Seriousness of the risk
-
Ensure spouse knows that they have a choice, individual decision.
-
Check whether the spouse wishes to proceed.
-
Must say they think it is a bad idea if that’s what they think.
-
The meeting should be face to face.
-
Can act for both spouses as long as giving advice to each individual’s best interest.
Usually a spouse or other person seeking to avoid a guarantee in a non-commercial context will claim:
-
Non est factum
-
Unconscionability
-
Undue influence
|
Facts: wife signed her interest in the matrimonial home to bank for husband’s indebtedness. Claims she did it under undue influence of husband and that bank was aware of this. She also sues solicitor who advised her before entering these guarantee obligations.
|
Canadian Interpretation:
-
SCC adopted this case in Gold v Rosenburg
-
But in Van Der Ross the court held that failure to satisfy the O’brien requirements does not automatically vitiate a surety K.
-
In BMO v Courtney the wife was held liable b/c she had knowledge and experience in financial matters notwithstanding the failure to get independent legal advice.
-
Therefore, generally in Canada while the Bank will be stuck with constructive notice of undue influence in non-commercial relationships, they can avoid liability when undue influence is actually proven IF they ensure the guarantor understands the risks and nature of the transaction and is advised in a reasonable way, but not necessarily by independent legal counsel (although that would obviously help).
| Mccaulay v A. Schroeder Music Publishing What Case is about
Presumption of fairness in established commercial forms (with equal bargaining power); no presumption of fairness in ‘consumer’ standard forms, especially when inequalities in bargaining power
π musician entered into standard form agreement, committed to hand over © for 5 years, had no right to terminate agreement but ∆ did have right to terminate
Was agreement unconscionable?
Because ∆’s bargaining power was so strong, they could offer goods on a ‘take it or leave it’ basis; unlike presumption of fairness in commercial standard forms, the court must decide in private standard forms whether an unconscionable bargain took place
Pridmore v Calvert What Case is about
In Canada if you do engage in improvident settlement with an ignorant person, unless you get them to seek legal advice, onus to prove that K was reasonable and fair (generally by looking at $ given)
π signed release; injured in motor vehicle accident by ∆’s negligence
-
Within 48 hours insurance adjuster appropriated π’s signature
Was π’s signature acquired in an unfair manner?
People in π’s position often think release is a receipt to get $ without realizing impact of signature
Figure granted was low; no lawyer would advise π to accept settlement, no Dr opinion on state
What Case is about
Facts: P injured in work accident; D’s insurer negotiated settlement K with unrepresented P.
Issue: Is the settlement K void on basis of undue influence?
Held: YES – confidence (and trust) existed btw P and insurers beyond the standard for business affairs (= fiduciary duty to Horry) could likely have been discharged by advising him to seek independent advice); insurers should have offered higher figure based on severity of injury; should have indicated their total estimate for claim and shown the reduction for contributory negligence; should have given P a copy of his medical records; should have made sure P understood the implications of settlement (no further action could be taken, recurrence rate for injury); should have advised P to think it over and see how he was returning to work before settling.
Notes: compelled to advise him to seek independent advice b/c of the unique conflict of interest position of insurer; cases where future aggravation of injury was probable
Woods v Hubley 3 criteria allowing unconscionable transactions to be voided
Was there unconscionability involved in procuring π’s signature?
3 criteria allowing unconscionable transactions to be voided:
i) inequality of bargaining power based on ignorance, need or distress
ii) stronger party used power position to achieve advantage
iii) agreement reached is substantially unfair to weaker party or divergence from accepted standards of commercial morality
Burden on ∆ to show that bargaining power wasn’t misused.
Share with your friends: |
