Contract - Exemption Clauses

Question 1

What three ways can an exemption clause be incorporated into a contract?

Answer 1

1- Signature
2- Notice
3- Course of dealings

Question 2

What conditions must be satisfied for a clause incorporated by signature to be valid? (+ authority)

Answer 2

L’estrange v Graucob:
1- The document is a contractual document
2- Clause is legible and signed

Question 3

What conditions must be satisfied for a clause incorporated by notice to be valid?

Answer 3

1- The document is contractual in nature

2- There must be actual or constructive notice of the clause

Question 4

For notice to be constructive, the party relying on the clause must have taken ‘reasonable steps’ to draw it to the others attention

Answer 4

Parker v South Eastern Railway

Question 5

What factors will suggest reasonable steps were taken to give notice of an exemption clause?

Answer 5

Parker v South Eastern Railway:
1- Position
2- Prominence
3- type of clause (if onerous, extra attention required)

Question 6

Onerous clauses must be explicitly drawn to the attention of the other party (red hand pointing in red ink)

Answer 6

Thornton v Shoe Lane Parking

Question 7

Reasonable steps to incorporate the term must occur before the contract is finalised or at the time of finalisation

Answer 7

Olley v Marlborough Court

Question 8

Three to four times per month amounted to a course of dealings

Answer 8

Kendall v Lillico

Question 9

Three to four times in 5 years was not a course of dealings

Answer 9

Hollier v Rambler Motors

Question 10

If contracts are sometimes signed and sometimes not there isn’t sufficient consistency for there to be a course of dealings

Answer 10

McCutcheon v MacBrayne

Question 11

If the clause is ambiguous or unclear, the court will interpret it against the party relying on it. What is this doctrine known as?

Answer 11

Contra Proferentem Rule (Houghton v Trafalgar Insurance)

Question 12

The exemption clause must be clearly worded to exclude a very serious breach

Answer 12

Photo Productions v Securicor Transport

Question 13

What is the effect of UCTA if it applies to a clause?

Answer 13

Renders the clause void; or

Subjects it to the reasonableness test

Question 14

What case law should be considered when deciding if an exclusion clause is reasonable?

Answer 14

Smith v Eric Bush

Question 15

What should be considered when looking at clauses excluding liability for advice?

Answer 15

Smith v Eric Bush:
1- ADVICE could be obtained elsewhere
2- BARGAINING powers of parties equal 
3- CONSEQUESNCES?
4- DIFFICULTY of the task

Question 16

Which case should be considered when looking at the reasonableness of limitation clauses?

Answer 16

St Albans v International Computers

Question 17

What should be considered when looking at the reasonableness of limitation clauses?

Answer 17

St Albans v International Computers 
1- Resources to cover liability?
2- Insurance to liability ratio 
3- Common in industry? 
4- Experienced commercial bodies? 
5- Aware of limitation clause?

Question 18

General Rule: Exemption clauses cannot protect third parties due to privity of contract rules

Answer 18

Himalaya Case (Adler v Dickson)

Question 19

What should be considered if the clause is trying to protect a third party?

Answer 19

Contracts (Rights of Third Parties) Act 1999

Question 20

What is the effect of termination?

Answer 20

Stops obligation to perform future contractual duties
Allows for the recovery of money paid
Requires goods to be returned
Allows for the affected party to sue for damages

Question 21

What is the effect of affirmation

Answer 21

Party can keep the goods

And sue for damages

Question 22

When is the right to terminate lost under the SGA?

Answer 22

If the breach is so slight it would be unreasonable to reject the goods (s.15A)
The buyer has retained the goods ‘beyond a reasonable time’, thereby accepting them (s11(4))

Question 23

Quotations are documents of a contractual nature

Answer 23

Chapelton v Barry

Question 24

What does s6 UCTA apply to?

Answer 24

Breach of SGA

Question 25

What does s7 UCTA apply to?

Answer 25

Breach of SOGSA

Question 26

What does s3 UCTA apply to?

Answer 26

Breach of express terms

Question 27

What does s2 UCTA apply to?

Answer 27

Negligence and negligent breach of duty

Question 28

Clauses excluding liability for negligence must clearly relate to negligence, either by expressly excluding liability for negligence or being wide enough to exclude it

Answer 28

Canada Steamship Lines v The King

Question 29

What effect does UCTA have on the breach of an express term? (s.3)

Answer 29

Subject to a reasonableness test (if dealing on standard terms of business)

Question 30

What effect does UCTA have on the breach of s3 and 4 SGSA?

Answer 30

Subject to a reasonableness test

Question 31

What effect does UCTA have on the breach of s13-15 SGA?

Answer 31

Subject to a reasonableness test