Common Problems in Contracts and
How You Can Avoid Them
“Welcome to XTREME ADVENTURE PARK – a place where your inner child can come out and play! Please note that you must sign the disclaimer before being permitted to enter the park… Have fun!”
Helmet and harness on, your customer is ready to take on the adventure park. Disclaimer in hand, they read “XTREME ADVENTURE PARK is not liable for personal injury or death”. In all the excitement, you see them sign their life away. You take a seat and sip your warm tea reveling in the comfort that you are not liable for what happens next. You watch the customer proceed to climb the towering beam; but, unbeknownst to you, the beam is unstable. As they reach the top, the beam collapses…
Excluding Liability for Personal Injury and Death
So, can a disclaimer exclude liability for personal injury or death? The short answer: no. Many people mistakenly try to exclude liability for personal injury and death in contracts. As per the Unfair Contract Terms Act 1977, a business cannot exclude liability for death or personal injury as a result of negligence.
Neglecting Legal Advice
You finally made your dream of opening an adventure park a reality, only to face a flood of litigation claims for personal injury and negligence.You were adamant that the disclaimer covered your back. However, you wanted to cut costs and get XTREME’s doors open as soon as possible.
A common mistake made by eager, doe-eyed entrepreneurs is not engaging a lawyer to review their agreements. Contract law is a minefield, and without understanding its basic principles, you risk adding terms that courts may declare void or unenforceable. To avoid gaps in your contract, hire a commercial lawyer who can advise you properly and draft agreements that protect your business against future issues. After all, lawyers have seen it all, heard it all and fixed it all.
Forgetting the All-important Alternative Dispute Resolution (ADR) Clause
You didn’t anticipate that your child-at-heart customer would turn against you because of a mistake you deemed out of your control. Now you’re forced to defend the claims in a lengthy episode of ‘I’m taking you to court and there’s nothing you can do about it’.
Although ADR is an optional exercise, the Civil Procedure Rules encourage individuals to resolve the issue to the best of their ability prior to taking the matter to court. However, it is not a mandatory endeavor. Therefore, drafting an ADR clause in your contracts creates a mandatory requirement for individuals to participate in ADR. This allows you to potentially remedy the problem without spending extortionate amounts on litigation.
Although ADR is not necessarily binding, it does offer a form of protection in relation to securing your legal costs if your injured customer does insist on taking the matter to court. This means if your compensation offer gets rejected at ADR, but the courts award a similar amount, the customer who insisted on going to court will have to pay your legal costs.
Frustration
You have now dealt with the minor mishap – your customer is compensated and in good health. Your park is safe and ready to open its doors to the public again. Hundreds of excited customers purchase tickets in advance of the opening date. However, COVID-19 strikes and businesses are thrown into chaos. You are forced to shut down, and customers are now demanding their money back.
When you can’t provide a service after receiving payment, the contract between you and the customer becomes frustrated. Frustration happens when an unexpected event makes the contract impossible to perform. Under the Law Reform (Frustrated Contracts) Act 1943, XTREME must refund all sums paid by the customer. Failure to consider the force majeure event (the unforeseeable circumstances that prevent someone from fulfilling a contract) can result in an accumulation of administration fees and obligation to pay all monies due back to the customers.
To avoid frustration in a contract, you can:
1) implement a force majeure clause in your contract;
2) ensure there is clarity as to who takes the burden of the risk when an unexpected event transpires;
3) specify that additional costs may apply if factors such as refunds are expected.
Breaches
Your harness supplier defaults on their commitments to supply the stock you ordered. As a result, you cannot permit customers into XTREME ADVENTURE PARK. How do you address this?
Primarily, you must clearly specify in your agreement what constitutes a breach of an agreed term and how you will handle it. The most common type of breaches are:
1) defective performance: a party performs on part of their obligations.
2) delayed performance: a party does not perform their obligations in the specified time frame.
3) non-performance: a party does not perform their obligations at all.
Specifying the remedies available if a party defaults on their obligations is a prudent drafting consideration. This allows you to tailor the remedy to what is most suitable for your business. Remedies available include monetary compensation (damages), right to terminate the contract (termination) and specific performance (compelling an individual to perform their contractual obligations).
Conclusion
In conclusion, there are various ways that the simple drafting of a contract may go awry. A forgotten clause here, a frustrating event there. The safest bet is to refer to a legal professional, who is well-versed in the ways of the contract. It can make all the difference in saving you a lot of time and money in the future.
Please note the above is a simple explanation of the elements of a contract. For a comprehensive understanding of what terms and conditions your business requires please contact one of our commercial solicitors today for a consultation.
Sources:
Section 2(1), Unfair Contract Terms Act 1977
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