Exclusion And Limitation Clauses - Common Law Controls Flashcards
Define an exclusion clause
-A type of term in a contract which prevents one party from being liable for a breach of contract (or another area of law eg negligence)
Define a limitation clause
A term in a contract that sets an upper limit on liability for breach of contract eg £50
A03 Point for and against one party to a contract being able to exclude or limit their liabilit
For: people should be free to agree any term they want, take responsibility for own things. Freedom of contract, should not be interfered with
Against: Implied terms shouldn’t be excluded as they protect weaker parties, other party might not know about it, not choice but to accept. Not fair on person who can’t get damages and also imposed by the stronger party. Weaker party can’t negotiate.
Why is there controls placed on exclusion and limitation clauses and what 2 types of controls are they?
-Can be seen as unfair so the law places strict controls on clauses
-Common law and parliamentary controls
What are the common law controls on exclusion and limitation clauses (apply to all terms)
The incorporation rules ( is the term incorporated into the contract)
-By signature
-By notice
-By a previous course of dealings between the parties
Incorporation by signature rule
-Explanation and case name
-If you have signed the contract you have agreed to everything in it whether you have read it or not
-L’estrange v Graucob
L’estrange v Graucob
The buyer of cigarette machine signed document where seller had excluded an implied term that the goods would be satisfactory quality. (Would not be allowed now) Machine did not work.
-She had agreed to the exclusion clause by signing even tho she had not read it all
What is the 1st exception to the signature rule and the case that goes with it?
Signature doesn’t count if misled o lied to about what was in the contract
-Curtis v Chemical cleaning
Curtis v Chemical cleaning
C took wedding dress to be dry cleaned and asked to sign document and was told it was just to say they did not take liability for damage to beads and sequins on dresses. Signed it as her dress did not have beads and sequins. Actually excluded liability for all damage, dress came back badly stained.
-C had not agreed to this term as she only signed it because she was lied to
What is the second exception to the signature rule and the case name?
-Lord Denning’s red hand rule
-Where a term is particularly harsh or unusual the person seeking to rely on the term must take greater measures to bring it to the attention of the other party
-Interfoto v Stiletto
Interfoto v Stiletto
D borrowed photo equipment from C but didn’t read the contract. Term stated that if photos returned after 14 days a late return fee would be charged of £5 a day per photo. D owed £24,000
Incorporation by notice explanation and case name
-BEFORE ACCEPTANCE was the term brought to the attention of the person would would suffer from this term?
-Olley v Marlborough Court hotel
Olley v Marlborough Court Hotel
-C’s booked into hotel at reception desk, this was where contract formed. Later went out and left key at reception as required. Someone took key and stole belongings. Tried to claim not liable as there was a sign in the bedroom that the hotel wouldn’t accept liability.
-Exclusion clause not incorporated into the contract as was in the bedroom and couldn’t have been known about when made the contract at the reception.
Incorporation by notice ticket
- 3 case names
- Chapelton v Barry Urban District Council
-Thompson v LMS railway
-Thornton v Shoelane Parking
Chapelton v Barry Urban District Council
-Hired deckchairs. On back of ticket said no liability for any damage or accident from chair. No exclusion clause on sign w price on. Chair collapsed and was injured. Ticket was more of a receipt, given after paid already made contract so not incorporated, on the back not noticeable
Thompson v LMS railway
Thompson illiterate, went on train, given ticket saying for conditions see back. Simultaneous as happens at the same time. Conditions excluded liability for injury and she was injured on journey. Terms and conditions all around the station and on ticket. Was incorporated and she had agreed. Contractual document as travel ticket. Unfair as judged against reasonable person and most people wouldn’t necessarily read it.
Thornton v Shoe lane parking
-C injured in car park, notice stating that parking at owners risk.
-On ticket it said ticket is issued subject to conditions of issue as displayed on premises.
-Notices inside car park listed conditions inc exclusion clause covering damage and personal injury
-Already paid money before going in t’s and c’s inside. Machine not person so can’t argue. Injured by stacking mechanism. Not incorporation
Incorporation by previous course of dealing between parties.
Explanation and case name
-This only applies to an exclusion clause if there has been a ‘consistent course of dealing’ on the same terms (more than a few prev contracts and all included exc clause)
-McCutcheon v MacBrayne
McCutcheon v MacBrayne
-C used D’s ferries. Sometimes but not always asked to sign a document including an exclusion clause. One of his relatives took his car on ferry and given receipt which referred to notices containing conditions. Didn’t read and not asked to sign anything. Ferry sank and car destroyed.
-Court decided not consistent course of dealing to assume that he knew about exclusion
Do exclusion clauses apply to 3rd parties who are not party to the contract?
Generally no as they are 3rd party and privity. But only if one party was genuinely acting as an agent
Contra proferentem rule (common law rule) and case name
-If there is doubt about the meaning of an exclusion/limitation clause or any term of contract the court will interpret the term least favourably against the person who introduced it and seeks to rely on it (won’t work)
-Houghton v Trafalgar Insurance
Houghton v Trafalgar Insurance (positive for contra proferentum rule)
-Car insurance contract. Said wont pay out if carrying excessive load. Load is ambiguous as doesn’t specify things or people
-Had to pay out
Positive A03 for contra rule
+Makes sense and is fair that the term is only valid if clear as someone may have made it deliberately vague and unclear so someone signs a contract
Case which goes against the contra rule
-Transocean Drilling v Providence
-Rule should only be used if term of a contract is one sided and ambiguous. Can’t be used for general unclearness, only if genuinely ambiguous
