Exclusion Clauses

Question 1

Definition

Answer 1

An exclusion clause is a clause which seeks to exempt liability completely or to limit liability if a breach of contract occurs or a tort is committed.

Question 2

Common law rule (1/5) incorporation in the contract

Answer 2

(L’Estrange v Graucob)
Incorporated into the contract:
1. signature
2. by notice
3. consistent course of dealings

Exclusion must be legible and not misrepresented.

Question 3

Common law rule (2/5) exemption is not in a signed document

Answer 3

(Chapelton v Barry)
Document containing the clause must be contractual in nature - reasonable person might expect to contain some terms of the contract.

The innocent party must either know of the clause, or the party relying on the clause must have taken reasonable steps to bring it to the other’s notice before the contract is finalised.

Question 4

Common law rule (3/5) express knowledge of the clause

Answer 4

Exclusion clauses are only incorporated into a contract where the party subject to the clause has actual knowledge of the clause at the time the contract is made. The exclusion clause must be brought to the attention of the other party before the contract is made.
(Olley v Marlborough)

Question 5

Common law rule (4/5) onerous clauses

Answer 5

Lord Denning - ‘red hand rule’
To incorporate an onerous clause reasonable steps must be taken to draw the other parties attention to it.

Question 6

Common law rule (5/5) CONTRA PROFERENTEM RULE

Answer 6

If a party tries to rely on a clause which is ambiguous or unclear, the court will interpret the clause against him.

Applies to any clause which is unclear or ambiguous, not just to an exemption clause.

Where there is ambiguity or uncertainty in the meaning or scope of a term, it should be interpreted against the person who introduced it.

(Houghton v Trafalgar)