Chapter 31- Control of exemption clauses

Question 1

What are exemption clauses

Answer 1

• When one party avoids liability for certain breaches of the contract

Question 2

Exemption clauses can be controlled through

Answer 2

• Common Law
• Statutory

Question 3

Common law controls have 2 ways to regulate the exemption clauses

Answer 3

• By investigating whether the clause has actually been incorporated in the contract
• Whether the words used to make the clause are constructed in a way to cover the alleged breach

Question 4

there are 3 ways in which an exemption clause can be included in a contract (RULES OF INCORPORATION)

Answer 4

• By signature
• By reasonable notice
• By previous course of action

Question 5

By signature:

Answer 5

• once a contract has been signed, that means that its terms must now be applied, despite whether they were read or not.
• someone cannot avoid consequences by claiming ignorance if they did not read the contract

Question 6

By reasonable notice:

Answer 6

• Separate written terms of the contract can be part of the contract ONLY IF the other party has had reasonable notice of them
• They need to reasonable in terms of:
  >Time of notice
  >Form of notice
• The more ambiguous or onerous a term is, the more notice is needed.
• Most times these terms need to be at the front of the contract

Question 7

By previous action:

Answer 7

• When two parties have previously contracted before and it had an exemption clause, now have made another contract, that same clause will be incorporated even without the previous steps taken.

Question 8

Define the contra proferentem rule

Answer 8

• this rule ensures that ambiguous words in the exemption clause are interpreted least favourable to the party relying on that clause
• It is applied less harshly to those that are limiting liability compared to those that are avoiding clock

Question 9

How does negligence affect an exemption clause

Answer 9

• the courts require clear language in negligence clauses to be effective.
• An exemption clause can be gotten away with if they do not mention liability as a result of negligence

Question 10

How does seriousness of the breach affect an exemption clause

Answer 10

• if the breach has been seen to be fundamentally serious and defeated the intentions of the contract, then the courts will determine if the exemption clause is sufficient enough to limit or exclude liability

Question 11

what are the other 3 common law controls used

Answer 11

• Misrepresentation: When the party making the exemption clause misrepresents its effect
• Inconsistent oral promise: An exemption clause can be made partly ineffective when made orally
• Third party: A third party cannot be protected by an exemption clause in a contract even if it is stated that it applies to them

Question 12

What are the 2 statutory controls for exemption clauses

Answer 12

• Unfair contract Terms Act (1977)
• The Consumer Right Act (2015)

Question 13

Which type of contracts does the UCTA deal with and not deal with

Answer 13

Applies:
- Business to business contracts
Not applies:
- Insurance contracts
- Contracts for transfer of land
- International commercial contracts

Question 14

what are the 2 ways the UCTA controls exemption clauses

Answer 14

• Declaring them ineffective
• subjecting them to a reasonableness test

Question 15

Describe the provision of negligence liability in the UCTA

Answer 15

• Negligence is defined as a breach of contractual obligations
• An exemption clause cannot exclude any liability for death or personal injury
• Negligence for bodily harm can only be limited if reasonable

Question 16

Describe the provision of liability arising in contracts in the UCTA

Answer 16

• The act regulates clauses that seek to restrict liability for breach of contract
• This section deals with business-to-business contracts

Question 17

Describe the provisions of a reasonableness test in the UCTA

Answer 17

• This places the burden of proving that a clause is reasonable on the party seeking to rely on the clause
• The courts will determine the reasonableness of a term by questioning:
• Whether the customer knew the term
• whether the exemption clause was reasonable at the time of contracting
• whether the customer received an inducement to agree

Question 18

what is the Consumer Rights Act

Answer 18

This act updates the law on unfair contract terms in contracts between a trader and a consumer

Question 19

Describe the provision of exclusion of liability in goods contracts in the CRA

Answer 19

• Unfair terms excluding liability for faulty, unsatisfactory, not fit for purpose or does not match the description, are not binding on consumers

Question 20

Describe the provision of exclusion of liability service contract in the CRA

Answer 20

• Unfair terms excluding liability for faulty services are not binding on consumers