NANYANG TECHNOLOGICAL UNIVERSITY

NANYANG BUSINESS SCHOOL

AB1301 - BUSINESS LAW

SEMESTER 1 2021/2022

Worksheet 5: Contents of Contract (Terms) II - Incorporation of Terms & Exclusion Clauses

Discussion Question

Question 1
Cheng, needed to dry clean two of her silk evening dresses. She was in a hurry, so instead of her usual
dry cleaners in the city, she brought her dresses to Spotless Laundry, a newly opened laundry business,
just a stone’s throw from her house.

The friendly laundry shop assistant told her that they had a special introductory offer of “2 for 1” and
pointed to an A4-sized poster displayed on the countertop next to the cashier’s machine. The poster
advertised their special introductory offer to clean two clothing items for the price of one. Cheng was
long sighted and suffered from hyperopia* but had forgotten to wear her spectacles that day, so she was
not able to read the smaller print at the bottom of the poster. Cheng paid the dry cleaning fee in advance
and the shop assistant handed her a receipt, which Cheng put into her handbag without looking at it.

When Cheng collected the dresses a week later, one of them was stained. She complained immediately,
but was told by the shop assistant that Spotless was not liable due to the exemption clause in both the
poster as well as the invoice/receipt. Cheng brought the stained dress back to her usual dry cleaners in
the city but they could not remove the stain. Cheng was upset because her expensive silk designer dress
was ruined.
Cheng wore the other laundered dress to her friend’s wedding dinner and developed severe rashes all
over her body within half an hour. The rashes broke out into weeping blisters that required medical
attention. When she consulted her dermatologist, she was told that she had contracted allergic contact
dermatitis, caused by the chemicals used by Spotless for dry cleaning. She had to incur the cost of
expensive treatment and medication to cure her dermatitis.
* Long sightedness or hyperopia is a condition in which a person is able to see things far away but near
vision, for example, reading, is poor.

Required
Cheng wants to claim the cost of the ruined dress and her medical expenses from Spotless Laundry.
Assuming that there was breach of contract as well as negligence on the part of Spotless, advise Cheng
on the following questions:

1. Has the purported exclusion clause become part of the contract between Cheng and Spotless
Laundry? Explain how?

Exception clause must be incorporated into contract based on the threshold requirement, as follows:
1. Signed the contract which contain exception clause, even if he or she had not read or was
unaware of the clause
2. Unsigned contract, the party seeking to rely on the clause took reasonably sufficient steps to
draw the other party’s attention to the existence of the clause
 3. There has been a consistent and regular course of dealing between the parties on terms that
incorporate the exception clause

In the case of Causer v Brown [1952] VLR 1

FACTS
 The Plaintiff dropped off their clothing at a drycleaner
 They received a ticket to pick up the items
 The drycleaner damaged the clothing
 The Plaintiff tried to sue the drycleaner, but they relied on the fact that the ticket stated that
they accepted no liability, quoted that “no responsibility is accepted for loss or injury to
articles through any cause whatsoever.”

The court held that a reasonable person would have thought that the ticket was just a receipt, not a
contract with conditions. There had been no notice of the fact that the drycleaner would not accept
liability for negligence, and therefore it was not enforceable. Therefore the drycleaner was liable for
negligence.
Therefore, the exclusion clause shall not constitute as a part of a contract between Cheng and
Spotless Laundry. The Spotless Laundry failed to give Cheng notice on the exclusion clause and Cheng
suffered from hyperopia in which she was not able to read the smaller print at the bottom. She also
thought that the receipt for collecting the dresses and not notice of the exclusion clause.

2. Assuming that the exclusion clause is a term of the contract,

2.1 As a matter of construction, does the clause cover the damage or loss suffered by Cheng?
In a business context, a defendant who seeks to exclude liability for negligence by an express
agreement or by notice is subject to the provisions of the Unfair Contract Terms Act. Under
section 2(1) it is impossible to exclude liability for death or personal injury attributable to
negligence. For instance, an amusement park operator is unable to rely on a signboard
disclaiming liability for rollercoaster failure leading to personal harm to the visitor.

2.2 Are there any factors that would limit or make the exclusion clause ineffective?
For an exclusion clause to be effective, it must pass at least these tests:
1. it must have been incorporated into the agreement;
2. its wording must cover the liability in question;
3. it must not be prohibited by statute or other law

2.3 Is the exclusion clause reasonable under the Unfair Contract Terms Act?
In the case of other loss or damage resulting from negligence (e.g. financial loss or property
damage), liability can be restricted, unless the term or notice satisfy the requirement of
reasonableness.

The reasonableness test considers whether the clauses are fair and reasonable when considering
the circumstances, which were or ought reasonably to have been in the thoughts of the parties
when the contract was formed. When contemplating this, the courts take into account the
following factors:
 Bargaining positions of the parties
In Air Transworld Ltd v. Bombardier Inc, the court enforced the exclusion of liability where
the parties were of equal bargaining power, the terms were set out in capital letters, and the
terms of the warranty were specifically drawn to the purchaser’s lawyer’s attention.
 Was agreement to the exemption clause as a result of inducement
 Could any condition for the enforcement of liability be complied with?
  Were the goods made specifically at the request of the buyer?
 Was the contracting party actually aware of the existence and extent of the term,
irrespective of any rules of incorporation such as notice or signature
In Stag Line Ltd v. Tyne Ship Repair Group Ltd (The Zinnia), Staughton J said that he was
inclined to find the exemption clause unreasonable because the print was so small as to be
barely legible.

In the context of consumer contracts, the decisions will mostly be based on the equality of the
bargaining positions between the parties. As often is the case, the consumer will be in a weak
position and it is likely that the exclusion clause would not apply.

Copies of the invoice/receipt and poster are attached for your reference in Appendices A and B
respectively.

© Associate Professor Erin Goh (Aug, 2018)

Adapted by Assoc Prof Dennis Ong (July, 2021)
 APPENDIX A
REGISTRATION NO: BR 996616

SPOTLESS LAUNDRY COMPANY

NO 684 LEYGANG ROAD, SINGAPORE 143355
TEL: 67745678, FAX: 67458765

Customer Name: CHENG Receipt No: 23-121/1/21

Address: 123 Greenacres

TEL NO: 987654321

Date: _23 JAN 2021______________________

DESCRIPTION QTY UNIT PRICE AMOUNT

SHIRT/BLOUSE
PANT/TROUSER
SKIRT
JACKET/SUIT
SWEATER/CARDIGAN
DRESS 2 $12/= $12/=
BEDSHEEET
PILLOWCASE
BLANKET
COMFORTER/QUILT
CURTAIN

TOTAL $12/=
$12/=
DEPOSIT
AMOUNT DUE Paid

REMARKS: _____NIL_______________________________
_____________________________________________
_____________________________________________

Clothing and other items are deposited with the company at the customer’s own risk. The company will
not assume responsibility for any damage or loss to the customer’s property.
 APPENDIX B

SPOTLESS LAUNDRY
INTRODUCTORY OFFER
2 FOR 1

NOTE: Clothing and other items are deposited with the company at the customer’s own risk. The
company will not assume responsibility for any damage or loss to the customer’s property
or to any personal injury or death caused by negligence or otherwise howsoever arising.