We it cover the breach? iii. Does Unfair

We shall
separate the answers to Felicity Rivers by three parts, namely, A) the legal
validity of the limitation clause, B) Whether Felicity Rivers can make the
claims, and C) options for redress available for Angela Favorleigh.

A. The legal validity of the limitation clause “Clause 18”

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Available
facts shows that NewCo Ltd has entered into a contract with CoolGreen in April
2017 that CoolGreen would install new air conditioning units in NewCo Ltd’s
newly built hotel located just opposite the Cutty Sark Station, with an amount
of consideration not disclosed in the facts provided to us. Upon your inquiry,
CoolGreen has responded that the underlying contract has included an exclusion
clause to limit their liability, i.e. Clause 18.

To
understand whether this Clause 18 is a valid exclusion clause under this
circumstance (whether or not CoolGreen can rely on the clause), the following
issues shall be considered:

i.                    
Is the clause incorporated?

ii.                  
Does it cover the breach?

iii.                 
Does Unfair Contract Terms Act 1977 (“UCTA”) apply?

iv.                
Is it a negligence case?

v.                  
Does the reasonable test apply? Is it passing the test?

A-i. Is the clause incorporated?

As per
available fact, it is clear that there is a contract signed presumably the
Clause 18 is included in the contract at the time of signing.

In L’Estrange
v F Graucob Ltd1,
the Court of Appeal held that, since the contract was signed by the plaintiff,
the exclusion clause was duly incorporated into the contract. In the absence of
fraud or misrepresentation, whether the plaintiff had actual notice of it was
irrelevant.

In Curtis
v Chemical Cleaning & Dyeing Co2,
the court struck down an exclusion clause in the receipt of a dry cleaning
company on the grounds that the staff of the company had made
misrepresentations. The Court of Appeal held that the shop assistant’s
misrepresentation as to the scope of the exclusion clause overrode the fact
that the plaintiff had signed the receipt. The defendant was not allowed to
rely on the exclusion clause. Per the above, if NewCo is able to show that
there was an element of misrepresentation of the exclusion clause, they may be
able to strike out the exclusion clause.

Or, if NewCo
can demonstrate that the exclusion was not formed as part of the contract at the
time of signing, e.g. only first provided/ presented an additional addendum/
appendix to NewCo after the signing of contract, then Court may follow Olley
v Marlborough Court3
and held the exclusion clause was not incorporated into the contract as NewCo was
not aware of its existence at the time he entered into the contract.

Otherwise,
it is likely that the court will find Clause 18 is incorporated into the
contract.

A-ii. Does it cover the breach?

If the
Clause 18 is found to be incorporated into the contract, the next question will
be whether it covers the particular breach of the contract that is at issue.

Available
facts show that the issue appears to be that the air conditioning units were
faulty and installed very badly, and as a result contributed to the explosion
of five units, which caused serious injuries to the hotel manager and the
patron, as well as property damage to the hotel.

In
deciding this, the court will usually apply a general approach with regards to
the construction of the clause, i.e. the contra proferentem rule, that any
doubt of ambiguity will be interpreted against the person trying to rely on the
clause. In Wallis, Son and Wells v Pratt and Haynes4,
the exclusion clause stating that the supplier of goods gave no “warranty” in
relation to the goods was held to have provided no protection for breach of a
“condition”. Another case which supports the contra proferentem rule is Baldry
v Marshall5,
of which although the contract excluded the defendant’s liability for any
“guarantee or warranty, statutory or otherwise”, the Court of Appeal
has interpreted the underlying circumstances as a breach of condition, and
hence the plaintiff was not bound by the exclusion.

It
appears that NewCo has good chance in arguing that the Clause 18 has not
included the element of negligence and hence the exclusion clause should not
apply, insofar they can proof that the badly done installations was a cause to
the explosions.

A-iii. Does UCTA apply?

If
CoolGreen succeeded on the previous arguments, the UCTA shall apply to it as
the circumstances fall within the scope as stated in s1(3) of the UCTA. Both
NewCo and CoolGreen are operating businesses and the scope of work of the
underlying contract showcased that this is without doubt a business contract,
and hence falling within thes1(3) of the UCTA.

A-iv. Is it a negligence case?

The term
negligence is defined under s1(1) of UCTA. If NewCo is able to proof that
CoolGreen’ badly performed installation of air conditioning units was a result
of negligence, the CoolGreen’s exclusion clause will be subjected to the
restrictions of UCTA s2, Negligence Liability.

It seems
clear that the Clause 18 shall be considered in separate parts in here. There
shall be no doubt that the last sentence of the clause, which purports to
exclude and limit the liability relating to death or personal injury, shall be
deemed valid as it contradicts with UCTA s2(1).

A-v. Does the reasonable test apply? Is it passing the test?

Whether
CoolGreen is able to rely on Clause 18 to limit or exclude other non-personal
injuries type liability will be subjected to a test of reasonableness, i.e. the
aforementioned s2(2) of UCTA. In Smith v Eric Bush6,
Lord Griffins has explained in the House of Lords decision that certain matters
should always be considered in the reasonable test, of which we can also find
within the schedule 2 of UCTA, Guidelines for Application of Reasonable Test.

It
appears that NewCo stands good chance in proving that Clause 18 limit some
relevant liability if some condition was not complied with, of which it was
reasonable at the time of the contract to expect that compliance with that
condition would be practicable and important to the contract. For a newly built
hotel to operate, air conditioning units which are a fully functional, properly
installed and not-to-explode under normal use seem to be reasonable, and would
generally be admitted as an important condition to any electric appliances
which require installation from trained technicians. As per the facts show, the
explosions of air conditioning units were likely to be the result of poor
installation, of which falls within the meaning of negligence as defined under
s1(1) of UCTA, i.e. to exercise reasonable skill in the performance of
contract. If the court accept this point, it is likely that the Clause 18 will
be held unreasonable. It is also likely that the court may find support from
s21(3)(a) of UCTA, and as a result find Clause 18 unfair and disapprove the reliance
to such clause.

A-Summary

As per
discussed above and the available facts, I am of the view that NewCo have good
chance at trial that the court may find Clause 18 to be invalid and not relied
upon.

 

B. Whether Felicity Rivers can make the claims

B-i. £200,000 as costs of replacing the air conditioning units paid to
Antarctica Ltd and £20,000 representing costs of redecorating the reception
hall

CoolGreen
is in breach of contract due to the negligence in installation of air
conditioning units, and NewCo is seeking damages. Applying the principle of Robinson
v Harman7,
the courts will try to put the innocent party into the position that the party
would have been had the contract been performed properly. The £200,000 costs
were paid to Antarctica Ltd to address the issue by replacing air conditioning
units in the hotel in order to prevent further explosion and allow the hotel
operation to be resumed. Also, it is also important for a hotel business to
have presentable reception hall, as the overall representation of a hotel is an
important condition of a hotel business. It is the duty of a plaintiff, i.e.
NewCo, to take all reasonable steps to mitigate the loss consequent on the
breach – British Westinghouse v Underground Electric Railways8.
If NewCo can proof that the arrangement made with Antarctica was the best
option available, and the cost of $200,000 and action of replacing the air
conditioning units, as well as the £20,000 representing costs of redecorating
the reception hall were reasonable to the circumstances, then it is likely that
the court will find CoolGreen to be liable to pay this amount.

B-ii. £200,000 representing our loss of business/profits and goodwill as
a result of temporarily shutting the hotel and

To
consider this question, the principle derived from Hadley v Baxendale9
shall be considered, of which it concluded that the defendant was liable for
all losses that resulted from the breach in the course of events and those that
may reasonably be expected to happen at the time of the contract as the likely
consequence of breach of contract. Also, in Victoria Laundry v Newman10¸the
court showed that consideration should be taken to the question of the parties
knowledge at the time of the contract that whether the loss could reasonably
have been within their contemplation as a consequence of the type of breach
that has occurred. Parsons V Uttley11
also confirmed this principle, and held that where the type of damage is
reasonably foreseeable at the time of contract formation, then damages will be
recoverable for losses consequent on breach, even if the specific consequence
could not have been foreseen.

Applying
these to this case, the air conditioning units’ explosions would result in some
loss to NewCo’s business, profits and goodwill/ public recognition were within
reasonable contemplation to both NewCo and CoolGreen at the time of the
contract. Insofar NewCo can demonstrate to the court that £200,000 is a
reasonable figure concluding the elements of business, profits, and loss of
goodwill, it is likely that CoolGreen will be liable to this damages.

B-iii. £50,000 representing what we would like to call extra damages as
we believe we should be compensated generally for our troubles

It is
unlikely that NewCo can succeed in claiming this damage in full. Farley v
Skinner12
confirmed there were two types of situation in which non-pecuniary losses can
be recovered, i.e. 1) where the object of the contract is to provide pleasure
or enjoyment to the other party, and 2) where physical inconvenience causes
discomfort or distress. It is possible that NewCo can rely on the second
situation, that the explosion has caused discomfort or distress to the
management. Nonetheless, in both Farley v Skinner and Ruxley
Electrics v Forsyth13,
The House of Lords have taken a view that such award of non-pecuniary losses
would be modest.

C. Options for redress available for Angela Favorleigh

It is
likely that Angela Favorleigh, a patron to the hotel under the management of
NewCo, can sought tort of negligence against NewCo, on the basis that:

i. a duty of care in law is owed by the NewCo to the Angela;

ii. there has been a breach of that duty by the NewCo; and

iii. the Angela has suffered loss, injury or damage as a result of the
breach.

It is
straightforward that a hotel operation owe a duty of care to its patron’s
safety. It may also be straightforward for Angela to establish that NewCo’s
failure to supervise on the installation of air conditioning units have to
large extent contributed to the explosion, which caused her injury. But was the
damage foreseeable? The court may take different views on this point. In Hughes
v Lord Advocate14,
the judgement of Lord Guest said:

“…in order to
establish a coherent chain of causation it is not necessary that the precise
details leading up to the accident should have been reasonably foreseeable: it
is sufficient if the accident which occurred is of a type which should have
been foreseeable by a reasonably careful person”. That fact that a passer-by
might have been burned by the flames from the paraffin lamp or the liquid
paraffin was reasonably foreseeable. Therefore the ultimate injury to the
plaintiff – which were burns – was reasonably foreseeable.”

Whether
this is reasonable for a hotel operation manager to foresee the badly installed
air conditioning units would lead to explosions is questionable.

Angela would not be able to claim tort of
negligence against CoolGreen, as they have no contractual relationship and
therefore CoolGreen did not owe Angela a duty of care.