The Gazette 1981

GAZETTE

JULY-AUGUST 1981

clauses in consumer contracts and in written standard form contracts. According to the House of Lords in Photo Production, in view of these provisions, the need for judicial distortion of the English language in these kinds of contracts has been banished. The straight- forward route of statutory invalidity will certainly be preferred over the more difficult route of strained inter- pretation. How far the logic of this dictum would apply in Ireland is debatable. The nearest equivalent in Ireland of the Unfair Contract Terms Act 1977 is the Sale of Go ods and Supply of Services Act 1980. Far-reaching as this Act is, it is not as wide as the English Act. There is, for instance, no provision equivalent to s.3(2) of the English Act striking down (except so far as they are shown to be reasonable) contract terms under which a party may claim to be entitled either to render no performance at all, or "to render a contractual performance substantially different from that which was reasonably expected of him." To this extent the English Act restricts both clauses which limit liability by narrowly defining the obligation of the parties as well as more traditional exemption clauses. 3. Fundamental Breach The evolution and demise of the fundamental breach rule reflects the shift in attitudes to interpretation outlined above. The earlier cases went no further than to suggest that, as a principle of construction, exception clauses are, where possible, to be construed as not exempting a party from liability for fundamental breaches or breaches of fundamental terms in a contract. Later cases, however, elevated this principle to a rule of law. In Karsales (Harrow) Ltd. v. Wallis, 20 where there was a contract for the sale of a car by hire-purchase, it was held that, despite a very wide exemption clause, the hirer could reject the car, which had been in good condition when he first inspected it, but was a complete wreck when delivered. Denning L J . put forward as a rule of law that: It it now settled that exemption clauses of this kind, no matter how widely they are expressed, only avail the party when he is carrying out his contract in its essential respects. He is not allowed to use them as a cover for misconduct or indifference or to enable him to turn a blind eye to his obligations. They do not avail him when he is guilty of a breach which goes to the root of the contract. 21 Supreme Court appeared to adopt the view that the doctrine of fundamental breach operated as a rule of law and to accept the submission that a defendant in breach of a fundamental obligation cannot avail of any exempting clause whatever. This conclusion was reached with only very brief reference to authority, and there was no examination in the reported judgments of the view of Davitt P., the trial judge, that the doctrine of fundamental breach rested on interpretation and that "there is nothing to prevent parties who wish to do so from entering into a contract containing exception clauses which will exempt one or the other or both from liability even in the case of a breach of a fundamental term. If that is done clearly and In what appears to be the only reserved Irish decision on fundamental breach, Clayton Love v. B. and I., 22 the

unequivocally I see no reason why such a provision should not be effective." 23 The Supreme Court decision in the Clayton Love case was delivered within a day of the decision of the House of Lords in the Suisse Atlantique case 24 and in ignorance of the view, unanimously reached by the House of Lords, that the rule-of-law doctrine of fundamental breach was unsound. Attempts by Lord Denning to re-establish the doctrine of fundamental breach in Harbutts Plasticine Ltd. v. Wayne Tank & Pump Co. Ltd. 25 and Photo Production Ltd. v. Securicor 26 were emphatically rejected by the House of Lords in the latter case. 27 It can scarcely be doubted that, if the facts of the Clayton Love case were to arise again, the Irish Supreme Court would not reach the same conclusion, but would prefer the view expressed in the English decisions. If the operation of the doctrine of fundamental breach as a rule of law is rejected, in the end, everything depends on the true construction of the clause in dispute. 4. Implications There can be no doubt that the application of a "literal interpretation" rule can produce harsh results — and results not always intended by the parties. Just as, on questions of statutory interpretation, the Courts will not insist on a literal interpretation where this would lead to manifest absurdity, so also is there a case for saying that even apparently clear words must yield, where this gives rise to a result which cannot have been intended. For instance, in The Chikuma, payment of the hire was to be "in cash," but the court did not consider that this required payment in dollar bills or other legal tender. That would be absurd. 28 Other arguments can be marshalled against an unyielding literal interpretation. It is clearly desirable that the interpretation of written contracts should be a matter on which a legal adviser should be able to give a clear and confident answer. But even insisting that words should bear their "natural and ordinary" meaning will not always lead to this result, for the rule does not (and cannot) apply except where the words are clear and unambiguous; and as has already been said, few words are used consistently with only a single meaning. Moreover, even if the interpretation of written terms is certain, there can often be considerable difficulty in estab- lishing if any, and if so, which, written terms are incorporated into a contract, 29 or whether their interpretation is affected by oral representations. 30 Again, an omission from a contract can be as significant as an inclusion. Some applications of an express term may be just as unforeseen and unintended as cases in which the contract makes no express provision, yet in the latter event the court will often imply a term to give the contract reasonable business efficacy or to give effect to the putative intention of the parties. Despite these reservations, it is right and desirable that, within limits, parties should be able to agree their own obligations. But it is difficult to put forward, far more to adhere to, a single principle of interpretation. In so far as the recent English cases suggest this approach, the Irish courts should be slow to follow. Undue reliance should not be placed on the use of particular words or phrases. It is the intention of the parties which should be sought through the words they have used in the context of the

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