Chapter 11: Exclusion Clauses Flashcards

Question

What is excluding liability for negligence? ## Footnote Construction

Answer 1

1. The courts don't like parties that exclude negligence 2. They think it is inherently **unlikely** that the other party would **allow the other to exclude liability for negligence**

Answer 2

**Canada Steamship Lines Ltd v The King [1952] Lord Morton**

Answer 3

Introduction * Breaches of obligations which is **central/core** to the contract * Consequence of breach was exceptionally serious General rule * There is a **ROL** that prevents reliance on an EC for a fundamental breach

Answer 4

* **Karsales (Harrow) Ltd v Wallis (1956)** * **Harbutt Plasticine Ltd v Wayne Tank & Pump Co. Ltd. (1970)**

Answer 5

Facts 1. Plaintiff had factory, hired Defendant to put in pippings 2. D had EC in his contract 3. Pipes overheated and court fire 4. Factory burnt down Held 1. **Can’t rely on EC** 2. It was a **fundamental breach**

Answer 6

**Photo Production Ltd v Securicor Transport Ltd [1980] HL**

Answer 7

Issue 1. Rejected the FB rule Held 1. FB rule is no longer automatic 2. It is a **question of construction** * Whether the clause covered the beach which occurred (look at the facts & circumstances) | Fundamental breach is now a question of contruction

Answer 8

* Business to Business * Business to Consumer

Answer 9

Statute * **Unfair Contract Terms Act 1977** General Rule 1. Applies to **EC** and **LC** only 2. Does not apply to unfair terms 3. Applies to liability arising ‘**in the course of business**’ 4. Some contracts which fall outside UCTA 1977 (note section 5) 5. **Section 75** & **Schedule 4** Consumer Rights Act 2015 – UCTA 1977 now only applies to **Business to Business Contracts** (does NOT apply to consumer contracts)

Answer 10

**Section 2** - Excludes liability for **negligence** that leads to 1. **Section 2(1)** * Death or personal injury > EC is **void** 1. **Section 2(2)** * Damage to property > EC **valid** if satisfies reasonableness test **Section 3** * Exclusion of liability, **other than negligence** in a ‘written standard terms of business’ * EC valid if satisfies **reasonableness test** **Section 6 & 7** * Exclusion of liability from **implied terms** * EC vaid if satisfies reasonableness test

Answer 11

**Section 11** 1. **Fair and reasonable** one to be included 2. Having regarded the **circumstances** 3. Which were, or ought reasonably to have been in the contemplation of the parties/known to…the parties when the contract was made **Schedule 2** 1. The strength of the **bargaining position** of the parties 2. Whether the customer received an **inducement** to agree to the term and had the opportunity to enter similar contract with others without the similar term 3. Customer **knew or ought to have reasonably known** of the term and the extent 4. Where the exclusion relates to a **non-performance** of a condition, whether it was reasonable to expect the **compliance** with that condition 5. Whether goods were manufactured/ordered/processed to the **special order** of the customer 6. Was the EC **freely negotiated** 7. The extent to which the parties were **legally advised** 8. The availability of an **alternate source of supply** to the innocent party 9. The extent to which the party seeking to rely on the Exclusion clause sought to explain the clause to the other party **Section 11(4)** 1. Take account **resources** of the person who may be subject to liability as well as the extent to which liability might have been covered by insurance * Availability and cost of insurance (**Smith v Eric S Bush (1989)**)

Answer 12

1) Time * Reasonableness judges by the **time of entering** the contract, without benefit of hindsight (**Stewart Gill Ltd v Horatio Myer & Co Ltd [1992]**) 2) Burden of proof * Burden to prove that the EC is reasonable is born by the party relying on it (**section 11(5)**) 3) Question of fact * General Rule - **Can’t generalize** what is reasonable * Exception - COA reluctant to interfere with trial court's findings, unless satisfied that they had used a stupid principle or was plainly and obviously wrong (**George Mitchell Ltd v Finney Lock Seeds [1983]**)

Answer 13

1. **Overseas Medical Supplies Ltd v Orient Transport Services Ltd [1999]** 2. **Watford Electronics v Sanderson [2001]** 3. Sterling Hydraulics Ltd v Dichtomatik [2006] 4. Regus (UK) v Epcot Solutions [2008] 5. George Mitchell v Finney Lock Seeds (1983) HL 6. Smith v Eric Bush (1990)

Answer 14

Held 1. Key factor is **bargaining power** of parties 2. Bargaining position is the ‘starting point’ for the test of reasonableness - **Axa Sun Life Services v Campbell Martin (2011)**

Answer 15

Held - **Chadwick LJ** 1. Court should only interfere when satisfied that ‘one party has, in effect, **taken advantage of the other**’ or where ‘the **term is so unreasonable** that it cannot properly have been understood or considered’. 2. Courts **will not generally interfere** - * Commercial parties * About equal bargaining power/position

Answer 16

**Consumer Rights Act 2015** 1) Definition - what is a consumer contract 1. **Section 6(1)** 2. **Section 2(1), (3), (7)** 2) Trader - **Section 2(1)** * A trader is defined as a ‘person acting for purposes relating to that person’s **trade, business, craft or profession**…’ 3) Consumer - **Section 2(3)** * An individual acting for purposes that are **wholly or mainly outside the individuals**' trade, business, craft or profession’

Answer 17

**Section 65** * **Death** or **personal injury** due to negligence **Section 31** (Blacklist) * Implied terms for **goods** (section 9,10, 11, 13, & 15) **Section 57** (Blacklist) * Implied terms for **services** (section 49)

Answer 18

**Section 31(1)** - A term of a contract to supply goods is not binding on the consumer to the extent that it would exclude or restrict the trader’s liability arising under any of these provisions - 1. **Section 9** - (goods to be of satisfactory quality); 2. **Section 10** - (goods to be fit for particular purpose); 3. **Section 11** - (goods to be as described); 4. **Section 12** - (other pre-contract information included in contract); 5. **Section 13** - (goods to match a sample); 6. **Section 14** - (goods to match a model seen or examined); and 7. **Section 17** - (trader to have right to supply the goods etc). **Section 57(1)** * A term of a contract to supply services is **not binding** on the consumer to the extent that it would **exclude the trader’s liability** arising under **section 49** (service to be performed with reasonable care and skill).

Answer 19

**Section 64** 1. Subject matter of the contract 2. Price **Exceptions** - provided the terms (subject matter/price) are (**section 64(2), (3), (4)**) 1. Transparent: legible, plain, & intelligible - **Section 64(3)** 2. Prominent: brought to attention of the consumer - **Section 64(4)**

Answer 20

**Section 62** 1) Term is **fair** * Binding (valid) 2) Term is **unfair** * Not binding (void) **section 67**

Answer 21

**Section 62(4)** 1) Contrary to requirement of Good Faith (**Director General of Fair Dealings v FNB**) * **Procedural** or **substantive** 1. To **prevent** unfair surprise - West v Ian Finlay & Associates 2. Take into account the substantial **business experiences** of the parties 3. There must be **open and fair equitable dealings** - Aziz v Caixa (2013) 2) Causes **significant imbalance to the rights** of the parties to the **detriment** of the consumer 1. Imbalance must be significant (**Office of Fair Trading v Ashbourne Management Services Ltd**) 2. Term must be so weighted in **favour of trader**

Answer 22

1. Procedural 2. Substantive

Answer 23

Introduction * When term’s **existence** came as **surprise** to the party subject to it * CJEU - Advised the national court applying this requirement had to assess whether the seller or supplier could **reasonably assume** that the consumer would have **agreed** to such a term in individual contract negotiations - **Aziz v Caixa d’Estalvis de Catalunya, Tarragona i Manresa (Catalunyacaixa)** * The trader must draw the existence of the term and its effect to the **claimant** and prevent any **unfair** surprise 1. **Aziz v Caixa** 2. **West v Ian Finlay and Associates (2014)**

Answer 24

* **West v Ian Finlay and Associates (2014)** * **Office of Fair Trading v Ashbourne Management Services Ltd (2011) HC**

Answer 25

Held 1. COA held that a term in a contract for architectural services was **not unfair** 2. “...bearing in mind the savvy nature of the Wests…” who were a professional couple (banker & neuroscientist) 3. They should have been able to understand the EC as they had **good business experience**

Answer 26

Held 1. **Unfair** 2. Court held that defendants business model **took advantage** of the **inexperience** of the average customer

Answer 27

1) Terms that will **always** be regarded as **unfair**, whatever the steps are taken to publicise them 2) Likely to offend the 2nd element of ‘unfairness’ * **Both elements** have to be satisfied 3) But there might be overlap with the 2 requirements according to **Lord Steyn** & **Lord Bingham**

Answer 28

* **Office of Fair Trading v Ashbourne Management Services Ltd (2011)** * **Director General of Fair Trading v First National Bank Plc (2002) HL**

Answer 29

Imbalance of the parties’ rights must be **significant**

Answer 30

Held - **Lord Bingham** * “if a term is so weighted in favor of the supplier as to tilt the parties rights and obligations under the contract **significantly** in his favor”.

Answer 31

**Section 67** * Where a term is found to be unfair, the rest of the contract ‘…continues, so far as practicable, to have effect in every other respect’ but the unfair term is ‘…**not binding on the consumer**’. Case * **Unicaja Banco SA v Hidalgo Rueda** * **Kasler v OTP Jelzalogbank Zrt (2014)**