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Disclaimers may prove unconstitutional

11 October 2013 Victor de Bruyn, LindsayKeller Attorneys

One should be careful when relying on an exemption clause to escape liability as it may prove unconstitutional. Public policy, with the notions of fairness, justice and reasonableness, would preclude the enforcement of such a contractual term if this amounted to injustice or unfairness.

The matter of Naidoo v Birchwood Hotel 2012 (6) SA 170 illustrates this principle well. In this case, the plaintiff checked into a hotel and signed a registration card with a clause that said ‘the Hotel shall not be responsible for any injury … on the premises … caused or arising from the negligence (gross or otherwise) or wrongful acts of any person in the employment of the Hotel’.

 
The following morning, the plaintiff suffered serious bodily injuries when a heavy steel gate fell on top of him as he left the hotel.

The High Court found the hotel negligent but then had to determine whether the disclaimer was contractually binding on the plaintiff. Two factors had to be considered in this enquiry: whether disclaimers were displayed at the time of the incident, and whether these disclaimers exempted the hotel from liability.

The hotel relied firstly on the disclaimer notices it says were displayed in various locations on the premises, and secondly on the disclaimer printed on its hotel registration card. The plaintiff admitted to signing the registration card, but denied the existence of disclaimer notices in any of the other locations.

After examining the evidence, the court held that Birchwood Hotel had not fulfilled the onus of proving that the disclaimer signs were displayed in various locations on the hotel premises. The plaintiff testified that he entered the hotel premises for the first time at night and did not notice any disclaimers. It is also common cause (ground for legal action) that none of the disclaimers were brought to the plaintiff’s attention.

The court then considered the hotel registration card. The plaintiff’s evidence held that, because one of the guests did not arrive, there was an extra room at the hotel which was given to him for the night. When he checked in, he was given the hotel registration card to sign. The document consisted of a single sheet with print on both sides. The front page contained a list of guest names, together with their signatures and allocated room numbers. The plaintiff entered his name on the eighth line of the page and signed next to it. At the bottom of this document, in print of the same size as the names, the following phrase appeared:

"Please read terms and conditions on reverse!”

The back of the document included the heading of Registration Card and the following clause:

"The guest hereby agrees on behalf of himself and the members of his party that it is a condition of his/their occupation of the Hotel that the Hotel shall not be responsible for any injury to, or death of, any person or the loss or destruction of, or damage to any property on the premises, whether arising from fire, theft or any cause, and by whomsoever caused or arising from the negligence (gross or otherwise) or wrongful acts of any person in the employment of the Hotel.”

The plaintiff testified that he did not read the back of the registration card. He further testified that, after many years of hotel stays, he is familiar with disclaimers and agreed that he was bound by the terms of the disclaimer on the back of the card.

Generally, people who sign contracts are bound by the ordinary meaning and effect of the words. In some cases, the principle of quasi-mutual assent applies, where it is assumed that the signatory of a document is showing his intention to be bound by a document by signing it.

In order to rely on quasi-mutual consent, a party has to demonstrate that it took a reasonable number of steps to bring these terms to the attention of the other party and it was therefore entitled to assume that the other party had assented to the terms by proceeding with certain conduct. Our courts have interpreted any exemption clause contra proferens. That is to say, if there is any ambiguity, the language must be interpreted against the author of the clause.

 
However, the court found that the wording of the exemption clause on the reverse of the hotel registration form was straightforward. It absolves the defendant from liability for any injury, even death, arising out of negligence, even gross negligence, of any person in the employment of the hotel.

The court further held that the request that guests read the terms on the back of the hotel registration form was clearly visible. Even if the plaintiff did not read the disclaimer, he conceded that he ought reasonably to have expected that the form would contain such conditions.

 
The legal position

Prior to the new constitutional dispensation, clauses contracting out of liability for negligently causing bodily injury or death were permissible. This approach was affirmed by the Supreme Court of Appeal in Durban’s Water Wonderland v Botha and Another 1999 (1) SA 982 (SCA).

 
Further, in the case of Afrox Healthcare Bpk v Strydom 2002 (4) SA1 (SCA) the court held that such clauses were not contrary to public policy and that public interest dictated that contracts entered into freely and voluntarily by parties with the necessary contractual capacity should be enforced. However, it is noteworthy that the contractual relationship in the Afrox case was entered into by the parties before the Constitution came into effect. The court appreciated the impact of the Constitution but held that it had no retrospectivity with regard to direct damages.

 
On the other hand, the court was not convinced that such clauses would withstand future constitutional scrutiny.

 
It must also be mentioned that the circumstances of the Durban’s Water Wonderland and Afrox matters were very different to that of the Naidoo versus Birchwood Hotel case.

 
The activities undertaken by the plaintiffs in those cases involved inherent risk. In Durban’s Water Wonderland, the plaintiff and her daughter were injured when they were flung from a ride at an amusement park. In Afrox, the plaintiff was undergoing an operation. With regard to Afrox, although the court was of the view that the principle of contractual autonomy was paramount and the exemption clause was therefore not contrary to public interest, this finding must now be seen through the lens of the Constitution.

The court then referred to the decision of Barkhuizen v Napier 2007 (5) SA 323 (CC) (2007 (7) BCLR 691 wherein Judge Ngcobo stated that, when challenging a contractual term, the question of public policy inevitable arises:

"Public policy represents the legal convictions of the community; it represents those values that are held most dear by the society. Determining the content of public policy was once fraught with difficulties. That is no longer the case. Since the advent of our constitutional democracy, public policy is now deeply rooted in our Constitution and the values that underlie it. Indeed, the founding provisions of our Constitution make it plain: our constitutional democracy is founded on, among other values, the values of human dignity, the achievement of equality and the advancement of human rights and freedoms, and the rule of law. And the Bill of Rights, as the Constitution proclaims, is a cornerstone of that democracy; it enshrines the rights of all people in our country and affirms the democratic values of human dignity, equality and freedom…

... Thus a term in a contract that is inimical to the values enshrined in our Constitution is contrary to public policy and is, therefore, unenforceable.”

In the Barkhuizen matter, the Constitutional Court was dealing with the constitutionality of a time-limitation clause in an insurance policy. The insurer contended that it was absolved from liability because the claim had not been instituted within the requisite 90-day period. The court found that time limitations were not per se unreasonable or contrary to public policy. Whether such a clause was enforceable would depend on whether it was fair and reasonable in the circumstances of a particular case. The court’s view was that if a time limitation clause does not afford a contracting party a reasonable and fair opportunity to approach a court, it is contrary to public policy and therefore invalid.

The court went on to consider how to determine fairness in this context and said that two questions must be answered. The first was whether the clause itself was objectively unreasonable, and the second was whether it should be enforced in the circumstances if it were found to be reasonable. Because the facts placed before it were inadequate, the court was unable to conclude that the applicant was not given an adequate and fair opportunity to have the dispute resolved by a court of law. Therefore, the finding in terms of the second leg of the enquiry was that the time-limitation clause was enforceable.

The Constitutional Court indicated clearly that a contractual term that seeks to deprive a party of judicial redress is prima facie contrary to public policy and inimical to the values enshrined in our Constitution, even if consenting parties enter into it freely and voluntarily.

 
According to the two-stage enquiry referred to in the Barkhuizen case, the court may first examine whether a term in a contract is objectively reasonable. If it finds it to be so, it should then enquire whether the term should be enforced in the particular circumstances.

 
In the Birchwood Hotel case, the court was of the view that exemption clauses that exclude liability for bodily harm in hotels and other public places generally have the effect of denying a claimant judicial redress. Judge Heaton-Nicholls then proceeded to deal with the circumstances of the Birchwood Hotel case: The plaintiff was a guest in a hotel. To enter and exit was an integral component of his stay. A guest in a hotel does not take his life in his hands when he exits through the hotel gates. To deny him judicial redress for injuries he suffered in doing so and which came about as a result of the negligent conduct of the hotel, offends notions of justice and fairness.

As stated by the Constitutional Court:

”Public policy imports the notions of fairness, justice and reasonableness. Public policy would preclude the enforcement of a contractual term if its enforcement would be unjust or unfair.”

In applying the principles pronounced in Barkhuizen, a further enquiry is necessary where a contractual clause limits a person’s right to judicial remedy. It must be determined whether the enforcement of a contractual term would result in an injustice due to the circumstances of a particular case.

Judge Heaton-Nicholls came to the conclusion that, in the circumstances of this particular case, the enforcement of the exemption clause would be unfair and unjust. In the words of Judge Ngcobo:

"(A) court will bear in mind the need to recognise freedom of contract, but the court will not let blind reliance on the principle of freedom of contract override the need to ensure that contracting parties must have access to court.”

The court found that the hotel could not escape liability on the basis of either the disclaimer notices or the exemption clauses. The hotel was consequently ordered to pay the plaintiff’s damage.

Conclusion

Exemption or disclaimer clauses which exclude liability for negligently causing bodily injuries or death will not pass constitutional muster.

As long ago as 1925, the court held in Schierhout v Minister of Justice 1925 AD 417:

"If the terms of an agreement are such as to deprive a party of his legal rights generally, or to prevent him from seeking legal redress at any time in the Courts of Justice for any future injury or wrong committed against him, there would be good grounds for holding that such an undertaking is against the public law of the land.”

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