ABC v Hotel

HotelThis is question 4 that I needed to attempt. The story for this question is that three people – A, B, and C – booked into the hotel using different means. The hotel had an exemption clause for damage or losses and these people had their rooms broken into and items stolen.

The first issue that needs to be established is if and when a contract is in place. The next issue would be whether the exemption clause was incorporated into the contract. The third issue is whether they can take action, and what remedial action.

Formation of Contract
It was established in Thornton v Shoe Lane Parking that the T&C must be made know at the point of contract formation. Clauses cannot be added into the contract after formation, without sufficient notice. Terms were printed on the pillars of a car-park only readable after the person has entered the car-park were held to be invalid as the contract was formed at the entrance.

The first case – A – is a classic case of a click-wrap contract and the receipt rule applies. The contract is formed by the acceptance of the room and by payment of the 10% deposit with credit card, which was received by the hotel.

The second case – B – is a classic case of a telephone contract and the same rule applies. The contract was formed at the point where B agreed to book the room and was heard over the phone by the hotel operator.

The third case – C – is a classic case of a normal store counter contract. The contract was formed when C walked in over the counter to rent a room for the night and the hotel accepted the offer by giving C the keys to the room.

Incorporation of Exclusion Clause
The general rule is that any incorporation of exclusion clauses must be brought to the notice of the adhering party up clearly and before or during the formation of contract.

For A, the signature rule applies. It was established in L’Estrange v F Graucob Ltd that having signed the document, the excuse of not reading it cannot be heard, as long as there was no fraud or misrepresentation. The clause was communicated multiple times up-front and it was possible for A to know of it with usual diligence. A’s tardiness does not excuse the fact that the exemption clause now forms part of the contract.

For B, internet access may not have been available and is the reason why B was booking through the phone. In Parker v South Easter Railway it was held that presuming knowledge of the exclusion is incorrect. When enquired, the T&C given orally were different and did not include the exemption clause. This is a clear case of misrepresentation as in Curtis v Chemical Dyeing Co. Therefore, the exemption clause does not form part of the contract with B.

For C, the clause was given by notice as it was displayed on the back wall of the registration desk. However, the writing was blur and the staff did not clarify this matter to C at any point in the course of dealing. In Sanggaralingam v Wong Kook Wah the court held that there was no evidence that the appellant knew of the notice nor had his attention brought to it, therefore the clause was not incorporated. Therefore, the exemption clause does not form part of the contract with C.

In all three cases, the exemption clause printed behind the doors of each hotel room does not matter at all as the contract was formed before entering the room. This was clearly established in Olley v Marlborough Court Ltd where the court held that the contract was formed before entering the hotel room and the exclusion clause was not incorporated into the contract.

Based on this, I will advise B and C that the exemption clause was not incorporated into their contracts and they are definitely capable of action against the hotel for losses. However, the case for A requires further analysis.

Interpretation of Exclusion Clause
I’m not quite sure about this part yet.

Effect of Negligence
If the thief had managed to enter their hotel rooms due to the cleaning crew negligently leaving the doors unlocked, then things may change. In Canada Steamship Lines Ld v The King it was established that the exclusion clause must express clearly the exclusion of liability for negligence. Since the hotel’s disclaimer does not mention negligence expressly, it means that negligence is not part of the exclusion clause. Therefore, if the loss is due to the cleaning crew negligence, action can be taken by all of them.

New law.

Pinnel’s Case

As part of my ongoing studies of Contract, I have to do a couple of past year questions and this is question 2b.

Pinnel’s Case, is a landmark case that decided on the issue of part performance – whether part performance of a contract can constitute full satisfaction. In it, a rule was established – Pinnel’s Rule – that essentially states that part performance cannot constitute full satisfaction unless there is additional consideration in place.

Essentially, what Pinnel’s Rule does with the additional consideration is to put a new contract in place of the old contract. The offer to settle in full by making part payment must be accepted by the other party with new consideration.

For example, a person may make part payment to settle a debt in full if they paid it early as an early payment would constitute additional consideration.

However, the situation in S.64 of the Malaysian Contract Act is a little different on this. It allows for full satisfaction with only part payment as established in the case of Kerpa Singh v Bariam Singh. Not only does it not require any additional consideration to be made, it does not even require an agreement of part-payment to be made between the parties.

Yow! Our law has many peculiarities and this is one of it.

Formation Q1

It seems that the formation of a contract is critical in understanding contractual issues. This makes perfect sense since it is important to first determine whether a contract exists or not. If there isn’t a contract, the issue is no longer a contractual one. As part of my learning, I was asked to do some past year questions.

This is question 1.

Invitation to Treat
The first issue is that of C, who picked up an item off the display window and goes to pay for it. However, H told C that the item is not for sale as it is reserved for N. C gets angry and insist that he has the right to the item (reminds me of a situation that I was once in).

This is a clear case of an ITT as determined in the case Fisher v Bell. This case clearly established that goods on display in a shop are not an offer to sell but an ITT. The offer to buy comes from C and a contract is only present when the cashier takes payment for the item.

Therefore, in this situation, C has no right to the item as there was no contract and C has no right to initiate action against H.

Request for Information, Revocation, Communication
The next issue is that of N. H sent a letter to N offering to sell him the item for RM4000 and the offer would remain open until 6pm on a certain date. N called up to enquire if it was possible to make payment in RM500 monthly instalments. H was not agreeable but before he could answer, the line went dead. The next day, H sold the item off to M who bought it at the store. Then, at 5.30pm of the last day, N calls up to accept H’s offer. H informs N that the item is no longer available as it has been sold off.

In this case, there is a case for contract. The offer from H was clear and ‘came to the knowledge’ of N. N called to enquire for more information but failed to get it. Then, N accepted the contract by action using a phone call – calling up before the deadline to accept it. This is a clear illustration of Stevenson v McLean. This case established the rules for acceptance by phone, which is when H hears the acceptance.

Now the trouble is that H had already sold off the item to M, in clear breach of the contract with N. What H should have done was to hold onto the item until after the deadline before selling it off to M.

In this scenario, N has a contract in place. The request for information does not constitute a counter offer and the original offer is still in place. H could have revoked the offer at any time after selling it to M but failed to do this. H could have done this up until just before N called up to accept the offer.

Past Consideration
However, this question has one niggling problem with it – the dates. According to the question, the offer from H to N was made on the 20th via post and it only reached N on the 22nd. However, N called H up on the 20th to enquire about the payment terms. It makes no sense that N could have called up regarding the terms before even receiving the offer. The item was sold off on the 21st, before the letter reached N.

This may be designed to confuse us with the issue of past-consideration, which is sufficient under S.2(d) of our Contract Act. However, regardless of this complication, there is still a valid contract between H and N because there was no revocation of the original offer at any time.

Therefore, N has cause to initiate action against H.

Postal Rule
If the letter had reached N only after the deadline had expired, is there still an offer and acceptance? The question is a clear Yes and No. In Gibbons v Proctor, the court allowed the claimant to claim a reward even though the claimant was not aware of the reward i.e. there was acceptance without knowledge of the offer – still forming a contract.

But in the case of Fitch v Snedaker the court decided in the opposite – as the action was not an assent to the offer but done with other intentions in mind. Therefore, there was no contract even though the offer arrived after the action of acceptance was performed.

But in our case of H and N, there would still be a contract because the act of N accepting the offer as a clear assent is similar to that of Gibbons v Proctor even if the offer was only communicated after the deadline.

The question of how N even knew enough about the offer to call H up to accept it, is the only niggling problem.