Contract Law - Part 3 - Exclusion and Limitation causes

Question 1

What are exclusion and limitation clauses ?

Answer 1

Exclusion clauses are terms in a contract that exclude or limit liability for a breach in contract
May also try to exclude liability in other areas of law e.g. under tort or negligence

Question 2

Where can they usually be found ?

Answer 2

Usually found in standard form contracts and on notices

Question 3

What are the 3 common law controls ?

Answer 3

1) Whether the agreement is signed
2) Whether any notice with the term is incorporated in contract
3) Whether the term is incorporated as a result of previous dealing of parties

Question 4

1 ) What was the POL in the case of L’Estrange v Graucob

Answer 4

POL - She was bound by the exclusion clause in the contract even though she had not read the contract

Question 5

What was the POL in the case of Curtis v Chemical Cleaning Co Ltd ?

Answer 5

Assistant misrepresented the effect of the clause so couldn’t rely on it even though claimant signed it

Question 6

What was the POL in the case of Grogan v Robin ?

Answer 6

If a party signs a document that would not normally be considered to be a contract then it will not be effective

Question 7

2) What was the POL in the case of Olley v Marlborough Court Hotel ?

Answer 7

POL - Clause was not incorporated in contract it was in a notice in guests bedroom.

The notice must be made before or at the time of the contract (not after)

Question 8

What was the POL in Thornton v Shoe Lane ?

Answer 8

The ticket was dispensed after acceptance therefore clause was not incorporated in contract

Question 9

With unusual terms what was the POL from the case of Spurling v Bradshaw ?

Answer 9

‘The more unreasonable a clause is, the greater the notice which must be given to it’
Harsh terms must be brought to attention to the other party.

Question 10

3) What was the POL in the case of McCutcheon ?

Answer 10

POL - The courts decided that there was no consistent course of action that allowed them to assume that the claimant knew the exclusion clause was always present so it wasn’t incorporated

Question 11

What is the contra proferentem rule ?

Answer 11

When there is a doubt about the meaning of a term in a contract, the word will be construed against the person who put it in the contract

under this principle an exclusion clause will only apply if words are clear

Question 12

What was the POL in the case of Houghton v Trafalgar Insurance Co

Answer 12

POL - The term in the clause was not clear enough to exclude a liability, load was narrowly interpreted as goods not people

Question 13

(Fundamental breach) What was the principle in the case of Photo Production ?

Answer 13

Principle - HOL held that although it was a fundamental breach on part of the D’s, they had to rely on the exclusion as it is clear and ambiguously covered the breach in question

Question 14

What Act provides the main protection against exclusion clauses in business to business contracts ?

Answer 14

The Unfair Contract Terms Act 1977

Question 15

What type of exclusion clauses are invalidated by the act

Answer 15

Under s.2(1) A person cannot exclude liability for death or personal injury caused by negligence

Under s.2(2) in the case of loss or damage, a person cannot exclude or restrict his liability for other types of loss except in so far as it is reasonable to do so

Question 16

What is the reasonableness test ?

Answer 16

Section 11(1) states that the test is whether the insertion of the term in the contract was reasonable in the light of what was known to the parties at the time contract was made.

Question 17

What was held in the case of George Mitchell ?

Answer 17

COA held that clause was unreasonable as buyer would not be aware of the fault whereas seller would

Question 18

What was held in the case of Watford Electronics ?

Answer 18

Clause was reasonable since parties were of equal bargaining power and limitation clause was subject to negotiation when contract was made

Question 19

What does the Consumer Rights Act 2015 cover and include

Answer 19

This Act covers contracts between trader and consumers

and it includes a ‘fairness’ test for enforceability of terms and consumer notices

Question 20

What does Section 62 cover ?

Answer 20

Section 62 requires that all consumer contract terms and notices are fair, this section defines unfair terms as those which put the consumer at disadvantage or limit their rights.

Question 21

What are unfair terms ?

Answer 21

S.31 - Prohibits use of exclusion relating to sale/supply of goods (quality, fit for purpose)

s. 57 - relating to supply of services (reasonable care and skill)
s. 65 - prohibits use of exclusion/limitation clauses that try to limit liability for negligence that causes death or personal injury