Business Law, the Laws Applied in This Case Study

Introduction

Funster had suffered three forms of losses in this factual matrix, namely the broken ribs, the damaged iPhone and the torn T-shirt. Prima facie, Magic Studios is liable for the negligent damage caused to Funster. Therefore, whether Magic Studios should bear liability for the damage hinges upon whether they can successfully rely upon the exclusion clause set out in the ticket. The approach taken by the courts on determining the applicability of the exclusion clause is neatly set out in Press Automation Technology v Trans-Link Exhibition Forwarding [2003] 1 SLR 712.

A court will first determine whether the clause is successfully incorporated, before applying the common law principles of construction to determine if it can be enforced. Following that, it will then apply the Unfair Contract Terms Act [UCTA] to determine if the clause can indeed be struck out by statute. Each point of law will be discussed in turn.

Incorporation

Two issues regarding the incorporation of a term arise in this case.

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The first is whether the term has been incorporated before the formation of the contract, and the second is whether there has been reasonable notice on Monster Studio’s part. Both issues will be discussed consecutively.

On the first issue of incorporation before formation of the contract, the law is clear that terms should be incorporated into the contract before formation (Thornton v Shoe Lane Parking, [1971] 2 QB 163) [Thornton]. The terms and conditions of a contract should be well known to both parties before they are made to bear legal responsibilities under the contract.

Therefore, the notice of a ticket must come before its formation. Elsewise, it will not be enforceable.

In this case, it is likely that a court will decide that the term has been incorporated before offer and acceptance. This is because Magic Studios has clearly placed a sign above the ticket booth that certain terms and conditions will apply. Funster thus entered into the contract knowing that certain terms will apply to the transaction. In conclusion, the term would thus be properly incorporated into the contract.

On the second issue of reasonable notice, the applicable law is clearly set out in the landmark English case of Parker v South Eastern Railway Co (1877) 2 CPD 416 [Parker] that the recipient of a ticket is bound if “he had reasonable notice that the document contains terms”, even if he remains ignorant of the terms. This means that the term can be incorporated into the contract only if it is reasonable that an ordinary person would have noticed the existence of such a term. The law in Parker was further clarified in Thornton that where the court held that if the party seeks to enforce an onerous term, it must take additional steps to bring its presence to the other party’s notice.

In this case, it is clear that Magic Studios should be deemed as having successfully incorporated the exclusion clause. By using an obvious red font, it had clearly brought to any customer’s attention that there are underlying terms and conditions on the ticket. In any case, Funster had consulted an attendant about the exclusion clause and cannot claim that he does not know of such an underlying term.

In conclusion, by applying the clear rules set out in Parker and Thornton, the exclusion clause should be successfully incorporated.

Common law principles of construction

Following the successful incorporation of the exclusion clause, the next issue is whether the clause can be enforceable by applying the common law principles of construction.

As held clearly in Emjay Enterprises Pte Ltd v Skylift Consolidator, [2006] 2 SLR(R) 268, the rule of construction approach will be taken in Singapore where exclusion clauses are concerned. Following the landmark decision in The Suisse Atlantique, [1967] 1 AC 361, the court will determine, through a fair construction of the contract, if the parties have intended for such an exclusion clause to be enforced. Courts have traditionally taken a strict approach towards enforcing exclusion clauses purporting to exempt total negligence (Canada Steamship Lines v The King, [1952] AC 192, but following the enactment of UCTA, such a requirement has been visibly relaxed or non-existent [Jiang Ou v EFG Bank AG, [2011] SGHC 149) [Jiang Ou].

Applying the law to the relevant facts, it should be clear that the common law requirement of construction should be fulfilled. Both Funster and Monster Studios can be said to have reached an agreement as to the enforcement of this clause since Funster had only bought the ticket after seeing the large sign containing “terms and conditions apply” above the counter. Funster must thus have entered into the contract knowing that certain terms and conditions may apply. Moreever, as seen in Emjay, the court is reluctant to reject any claims at this stage of the inquiry, preferring to use UCTA to weed out unmeritorious exclusion clauses.

In conclusion, the clause can thus be successfully enforced, pending passing the requirements in UCTA.

Unfair Contract Terms Act

As mentioned earlier, Funster had suffered three types of damages - personal injury, damage to iPhone and damage to T-shirt. Each of the damage will be discussed in turn using the appropriate provision in UCTA.

Broken Ribs

Section 2(1) of the UCTA clearly states that a person cannot “exclude or restrict his liability for death or personal injury resulting from negligence”. This clearly shows that parties are not allowed, under the law, to exclude liability for personal injury or death. Such a provision was written into law in order to protect parties, especially vulnerable ones such as customers to theme parks who might not have equal bargaining power, in cases whereby one party’s negligence have caused serious injuries or even death.

Applying the s.2(1) to the facts, it is clear that Funster can claim for negligence with regards to the broken ribs he has suffered. Broken ribs belong to the category of “personal injury” in s.2(1), and a party clearly cannot exclude liability for such personal injury. As Monster Studios is already prima facie negligent, whether Funster can claim damages for his broken ribs hinges solely upon the application of s.2(1) of the UCTA. Applying the strict requirement in s.2(1), it is clear that Monster Studio cannot exempt liability for the personal injury that Funster has suffered.

In conclusion, Monster Studios cannot rely on the exemption clause to exempt liability for Funster’s broken ribs.

Damaged iPhone and Torn T-shirt

Both the damaged iPhone and torn T-shirts may be classified under other forms of damage, applicable under “other losses and damage” under s.2(2) of UCTA. It is thus important to look at the relevant provision, which states that Monster Studio’s liability cannot be excluded except where it is reasonable to do so. While s.2(2) does not state what the term “reasonable” means, this is clarified in s.11 that a reasonable term is one which is “known or in the contemplation of the parties when the contract was made”.

Typically, courts will consider several factors in determining whether a particular exclusion clause is reasonable. They include whether the relative bargaining powers of respective parties (Jiang Ou), whether there are any protests by the claimant (Kenwell & Co Pte Ltd v Southern Ocean Shipbuilding, [1998] 2 SLR(R) 583) and if there are any reasonable alternatives (Tjoa Elis v United Overseas Bank Ltd, [2003] 1 SLR(R) 747). As mentioned in Jiang Ou, the ultimate consideration by the court is whether it is against public policy to allow the enforcement of the particular exclusion clause, and such an inquiry is based on the particular facts of the case.

In this case, there are two claims which arise with regards to s.2(2) of UCTA, namely the damaged iPhone and torn T-shirt. For both items, Funster should be allowed to claim for the relevant damages. Applying the several factors set out above, it is clear that Funster had little bargaining power over the inclusion of the exclusion clause and cannot be said to have any other alternatives but to accept the clause if he wishes to take the roller coaster. As discussed in Jiang Ou, it is against public policy if amusement parks such as Monster Studios are allowed to escape with their own negligence by drafting an exclusion clause. The UCTA was specifically drafted to protect consumers such as Funster from being denied legal recourse when faced with a negligent organisation such as Monster Studios. In conclusion, a court is unlikely to deny Funster the claims for his iPhone and the T-shirt.

Conclusion

In conclusion, Funster should be allowed to claim for his personal injuries, the broken iPhone and the torn T-shirt. While the exclusion clause drafted by Magic Studios can pass the requirements of incorporation and common law construction, it is unlikely to pass the stringent standards set by UCTA.

REFERENCES

Cases

1.Canada Steamship Lines v The King, [1952] AC 192
2.Emjay Enterprises Pte Ltd v Skylift Consolidator, [2006] 2 SLR(R) 268 3.Jiang Ou v EFG Bank AG, [2011] SGHC 149
4.Kenwell & Co Pte Ltd v Southern Ocean Shipbuilding, [1998] 2 SLR(R) 583 5.Parker v South Eastern Railway Co (1877) 2 CPD 416
6.Press Automation Technology v Trans-Link Exhibition Forwarding [2003] 1 SLR 712 7.The Suisse Atlantique, [1967] 1 AC 361
8.Thornton v Shoe Lane Parking, [1971] 2 QB 163
9.Tjoa Elis v United Overseas Bank Ltd, [2003] 1 SLR(R) 747

Books

Ewan Mckendrick, Contract Law (8th Edition), Palgrave Macmillan Law Masters (2009)

Websites

Singapore Academy of Law. Singapore Contract Law (accessed on 3rd May 2012). URL: http://www.singaporelaw.sg/content/ContractLaw.html

Stamford Law Legal Updates, Jiang Ou v EFG Bank AG (accessed on 3rd May 2012) URL: http://www.stamfordlaw.com.sg/legal.php?id=241