Exclusion clauses

Question 1

Common law rules:

Answer 1

1. Incorporation
2. Construction

Question 2

Legislative responses:

Answer 2

1. Unfair contracts Act [1977]
2. Consumer Rights Act [2015]

Question 3

Exclusion clauses as a whole are:

Answer 3

A clause which seeks to exclude or restrict liability a party who is in breach of a contract.

Question 4

Exclusion clauses: sub-divided into two categories:

Answer 4

1. Exclusion clause
2. Limitation clause

Question 5

Exclusion clause:

Answer 5

Total exception of liability.

Question 6

Limitation clause:

Answer 6

Liability is limited to a specified amount.

Question 7

Common law rules: In order for the clause to bind the parties:

Answer 7

1. The clause must be incorporated into the contract.
   AND
2. As a matter of construction it extends to the loss in question.

Question 8

Incorporation: Three branches:

Answer 8

1. Signature
2. Notice
3. Previous Dealings.

Question 9

Signature: L’Estrange v Graucob [1934]

Answer 9

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.

Question 10

Signature: Curtis v Chemical Cleaning and Dyeing co [1951]

Answer 10

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.

Question 10

Notice

Answer 10

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.

Question 11

Notice: Parker v South Eastern Railways [1877]

Answer 11

Reasonable steps must be taken to draw the existence of the clause to the attention of the other party.

Question 12

Notice: Chapleton v Barry UDC [1940]

Answer 12

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.

Question 13

Reasonable notice

Answer 13

Reasonable notice must be given before or at the time the contract is formed .

Question 14

Olley v Marlborough Court [1949]

Answer 14

Articles stolen from hotel room

The clause excluding liability came too late, the contract had already been formed at the reception desk.

Question 15

Notice: Prominent

Answer 15

The notice must be sufficiently prominent.

Question 16

McCutcheon v Macbrayne [1964]

Answer 16

Lengthy notices, or those which do not draw attention to unusual clauses are unlikely to incorporate terms into a contract.

Question 17

Previous course of dealings (Case)

Answer 17

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.

Question 18

Previous dealings must be consistent (Case)

Answer 18

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.

Question 19

Consistent and frequent dealings required (Case)

Answer 19

Hollier v Rambler Motors [1972]
3 or 4 transactions over a period of 5 years deemed insufficient.

Question 20

However… in (Case) (Consistent and frequent dealings required, case of Hollier v Rambler)

Answer 20

Petrotrade Inc v Texaco Ltd [2000]
5 previous transactions in the previous 12 months on the same terms was sufficient to incorporate the clauses.

Question 21

Construction

Answer 21

If the clause has been incorporated then the courts will construe the wording of the clause. Matter of legal interpretation.

Question 22

Construction: Case

Answer 22

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.

Question 23

Rules of construction: Contra Proferentem rule.

Answer 23

Any ambiguity or uncertainty will be construed harshly against the party purporting to rely on the clause.

Question 24

Contra Proferentum: Case

Answer 24

Houghton v Trafalgar Insurance [1954]
Insurance policy excludes the insurers liability where an excessive load was being carried.

Question 25

What was held in Houghton v Trafalgar Insurance [1954]

Answer 25

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’.)

Question 26

Liability in negligence: Negligence

Answer 26

A party must establish fault (Duty of care, breach, causation)

Question 27

Liability in negligence: Strict Liability

Answer 27

Contractual liability, no evidence of fault required.

Question 28

Canada Steamship v R [1952]

Answer 28

Three stage test approach as to whether the clause will cover negligence.

Question 29

Three stages to the Canada Steamship v R test:

Answer 29

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.

Question 30

White v John Warwick Ltd [1953] Example of … liability?

Answer 30

Defendants would not be liable ‘for personal injury’.
Example of concurrent liability.
Liability in tort - Negligence
Liability in contract - Cycle was defective.

Question 31

What was held in White v John Warwick Ltd [1953]

Answer 31

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.

Question 32

Alderslade v Hendon Laundry Ltd [1945]

Answer 32

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.

Question 32

Defining a consumer contract: Section 61 Consumer rights Act 2015:

Answer 32

The provisions of the Consumer rights Act 2015 will apply to contracts between a ‘trader’ and a ‘consumer’.

Question 33

Non-consumer contracts

Answer 33

(those not between a “trader” and a “consumer”) will continue to be regulated by the Unfair Contract Terms Act 1977 (as amended)

Question 33

Section 2 Consumer Rights Act 2015:

Answer 33

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.

Question 34

UCTA [1977]

Answer 34

Applies only to the use of exclusion / limitation clause.

Question 35

UCTA [1977] under the act:

Answer 35

Some clauses are automatically invalid
Other are subject to the test of ‘reasonableness’.

Question 36

Section 1(1) UCTA

Answer 36

defines negligence.
Can a party exclude or limit their liability in negligence.

Question 37

Section 2 UCTA:

Answer 37

1) Death or personal injury
2) Other loss or damage.

Question 38

Section 2(1) UCTA

Answer 38

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.

Question 39

Section 2(2) UCTA

Answer 39

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.