Contracts - 1.8 - Exemption Clauses Flashcards
Exemption clause:
A contractual term that purports to limit or exclude a liability that would otherwise attach to one of the contracting parties.
The obligations affected by an exemption clause may be…
- Contractual
- Tortious
- Both
Limitation of liability
Will usually cap liability in relation to a particular event at a particular sum
Exclusion Clause
Suggests type of exemption clause that excludes rather than limits liability
What are the three points to consider when looking at exemption clauses
1) Incorporation - is the exemption clause part of the contract
2) Construction - Does the clause as drafted cover
3) Statutory Controls
General elements of an exemption clause
Two or more steatments of:
* whether liability is entirely excluded or only limited to a stated amount.
* which types of claim/duties the exemption relates to.
* statement of which types of loss the exemption relates to.
Contra Proferentum
If there is any doubt as to the meaning and scope of the exemption clause, the ambiguity will be resolved against the party (proferens) seeking to rely upon it.
Clear words must be used if they are to excuse one party from liability
Ailsa Craig Fishing Co Ltd v Malvern Fishing Co [1983] 1 WLR 964.
Application of contra proferentem when clause limits rather than excludes liability
Rule is applied with less rigour when a clause merely limits rather than excludes liability
Houghton v Trafalgar Insurance [1954]
- ‘for damage caused or arising whilst the car is conveying any load in excess of that for
which it was constructed’. - Insurance company: “ 6 people = excess load”
- Lord Somervell concluded that carried people did not include load
Court is less likely to read a clause contra proferentum in a contract between…..
Commercial parties of equal bargaining power
Victoria Street v House of Fraser, 2011
Victoria Street v House of Fraser, 2011
“The words used, commercial sense, and the documentary and factual context are, and should
be, normally enough to determine the meaning of a contractual provision.”
Clarity and negligence
Clear words used to exclude liability for negligence
Explicit use of word “negligence” preferred.
Wide enough
Exclusion of negligence can be satisfied if the words used are wide enough - “all liability howsoever cause”
Distinction for general words
Effectiveness of general negligence words depends on :
(a) Cases where the only basis for liability is negligence
(b) Cases where the party will be liable irrespective of negligence
