Exclusion clauses Flashcards
Common law rules:
- Incorporation
- Construction
Legislative responses:
- Unfair contracts Act [1977]
- Consumer Rights Act [2015]
Exclusion clauses as a whole are:
A clause which seeks to exclude or restrict liability a party who is in breach of a contract.
Exclusion clauses: sub-divided into two categories:
- Exclusion clause
- Limitation clause
Exclusion clause:
Total exception of liability.
Limitation clause:
Liability is limited to a specified amount.
Common law rules: In order for the clause to bind the parties:
- The clause must be incorporated into the contract.
AND - As a matter of construction it extends to the loss in question.
Incorporation: Three branches:
- Signature
- Notice
- Previous Dealings.
Signature: L’Estrange v Graucob [1934]
Sales agreement contained a clause excluding liability for a defective vending machine (in very small print).
Held: Signature = evidence of consent to terms, even if they haven’t been read.
Signature: Curtis v Chemical Cleaning and Dyeing co [1951]
The claimant signed a ticketed headed “receipt”.
Held:
As the assistant had misrepresented the nature of the document, the defendants could not rely on the clause.
Notice
Reasonable notice.
This is required as to the existence of the clauses
The notice must be contained in a “contractual document”.
A document which a reasonable person would expect to contain terms and conditions.
Notice: Parker v South Eastern Railways [1877]
Reasonable steps must be taken to draw the existence of the clause to the attention of the other party.
Notice: Chapleton v Barry UDC [1940]
The clause had not been incorporated into the contract.
The document (ticket) was not such that a reasonable person would expect it to contain contractual terms.
Reasonable notice
Reasonable notice must be given before or at the time the contract is formed .
Olley v Marlborough Court [1949]
Articles stolen from hotel room
The clause excluding liability came too late, the contract had already been formed at the reception desk.
Notice: Prominent
The notice must be sufficiently prominent.
McCutcheon v Macbrayne [1964]
Lengthy notices, or those which do not draw attention to unusual clauses are unlikely to incorporate terms into a contract.
Previous course of dealings (Case)
Spurling v Bradshaw [1956]
Written document contained exclusion. Challenged on the basis that it came too late.
Held that sufficient notice had been given in previous transactions between the parties, so the clause was incorporated on this occasion.
Previous dealings must be consistent (Case)
McCutcheon v David Macbrayne Ltd [1964]
Some occasions the document needed to be signed, some it did not. The clause was not incorporated due to the lack of consistency.
Consistent and frequent dealings required (Case)
Hollier v Rambler Motors [1972]
3 or 4 transactions over a period of 5 years deemed insufficient.
However… in (Case) (Consistent and frequent dealings required, case of Hollier v Rambler)
Petrotrade Inc v Texaco Ltd [2000]
5 previous transactions in the previous 12 months on the same terms was sufficient to incorporate the clauses.
Construction
If the clause has been incorporated then the courts will construe the wording of the clause. Matter of legal interpretation.
Construction: Case
Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd [1983]
The courts adopt a very strict interpretation of the words used. However, more lenient approach in relation to limitation clauses.
Rules of construction: Contra Proferentem rule.
Any ambiguity or uncertainty will be construed harshly against the party purporting to rely on the clause.
Contra Proferentum: Case
Houghton v Trafalgar Insurance [1954]
Insurance policy excludes the insurers liability where an excessive load was being carried.
What was held in Houghton v Trafalgar Insurance [1954]
The phrase ‘excessive load’ did not apply yo the passengers in the car. (They should have used precise wording to exclude liability for ‘excessive passengers’.)
Liability in negligence: Negligence
A party must establish fault (Duty of care, breach, causation)
Liability in negligence: Strict Liability
Contractual liability, no evidence of fault required.
Canada Steamship v R [1952]
Three stage test approach as to whether the clause will cover negligence.
Three stages to the Canada Steamship v R test:
a) The clause makes expresss reference to negligence.
b) No express reference to negligence, but are the words wide enough to cover negligence, construed Contra Proferentum.
c) Can the party I breach be liable on some grounds other than negligence? If yes, it is likely that the words will be taken to refer to the non-negligent liability only. If no the clause may cover the negligent liability.
White v John Warwick Ltd [1953] Example of … liability?
Defendants would not be liable ‘for personal injury’.
Example of concurrent liability.
Liability in tort - Negligence
Liability in contract - Cycle was defective.
What was held in White v John Warwick Ltd [1953]
The Court of Appeal held that the clause only extended to the strict (non-negligent) liability. This would therefore allow action in tort for negligence.
Alderslade v Hendon Laundry Ltd [1945]
No express reference to negligence. Negligence was the only basis of liability (if lost by accident, for example, would not have been liable). The clause was therefore construed as covering negligence.
Defining a consumer contract: Section 61 Consumer rights Act 2015:
The provisions of the Consumer rights Act 2015 will apply to contracts between a ‘trader’ and a ‘consumer’.
Non-consumer contracts
(those not between a “trader” and a “consumer”) will continue to be regulated by the Unfair Contract Terms Act 1977 (as amended)
Section 2 Consumer Rights Act 2015:
2) “Trader” means a person acting for purposes relating to that person’s trade, business, craft or profession, whether acting personally or through another person acting in the trader’s name or on the trader’s behalf.
(3)“Consumer” means an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession.
UCTA [1977]
Applies only to the use of exclusion / limitation clause.
UCTA [1977] under the act:
Some clauses are automatically invalid
Other are subject to the test of ‘reasonableness’.
Section 1(1) UCTA
defines negligence.
Can a party exclude or limit their liability in negligence.
Section 2 UCTA:
1) Death or personal injury
2) Other loss or damage.
Section 2(1) UCTA
Liability for death or personal injury cannot be excluded or restricted by any contract term or notice. Such clauses are automatically invalid under the act.
Section 2(2) UCTA
In the case of other loss or damages liability for negligence can be excluded but only so far as the term or notice satisfies the test of reasonableness.
