Exclusion Clauses

Question 1

What are exclusion clauses?

Answer 1

Terms that remove liability from a party.

Question 2

What must be proven for an exclusion clause to be effective?

Answer 2

1. The clause must be incorporated into the contract
2. The term must be effective under the common law of contra proferentem
3. The term must be effective under the CRA 2015 and Unfair Contract Terms Act (UCTA) 1977

Question 3

Discuss the clause being incorporated.

Answer 3

Use the same rules as incorporation

Question 4

Discuss the term being effective under the common law of contra proferentem.

Answer 4

The courts can control the use of exclusion clauses using this rule, as seen in Hollier. This means that vague exclusions will be used against those trying to use it. This does not work if the exclusion is clear and freely agreed to though, like the big businesses clearly accepting the exclusion in Transocean Drilling v UK Providence.

Question 5

Discuss the term being effective under the CRA 2015 and UCTA 1977.

Answer 5

CRA applies to B2C scenarios.
UCTA applies to B2B scenarios.

CRA:
S62 shows a term is unfair if it is causes a ‘significant imbalance in the parties’ rights and obligations’.
There are 3 things that can never be excluded against:
1. Death or injury caused by negligence (S65)
2. Implied rights to goods (S31)
3. Implied rights to services (S57)

UCTA:
Will only apply to certain exclusion clauses:
-S2(1) shows death or personal injury caused by negligence cannot be excluded against
-S2(2) shows property damage caused by negligence can be excluded against
-S3 shows liability can be excluded for breach if the term is reasonable.
-S6 shows implied terms of goods can be excluded if the clause is reasonable.
-S7 shows excluding services is the same as excluding terms.
S11(1) shows that the exclusion clause must be reasonable based on what the parties knew at the time
S11(2) shows that what is reasonable when excluding the implied rights must consider the guidelines under schedule 2. Such guidelines include: equality of bargaining power, if C received any inducement to accept the term, if the buyer should have reasonably known of the term, if the goods were made to the special order of C, or if liability is only accepted under conditions.

See photo for summary

Question 6

What is the essay structure for exclusion clauses?

Answer 6

• Identify
• Define
• Is the clause incorporated?
• What type of contract is there and if the exclusion allowed?