exclusion clauses Flashcards
what is an exclusion clause?
a term in a contract that prevents one party being liable for a breach of contract
what is a limitation clause?
a term in a contract that sets an upper limit on liability for breach of contract
exclusion clauses - common law controls
A clause in a contract that seeks either to limit or exclude liability for
breaches of the contract, is subject to all of the normal rules regarding terms.
The first question to be considered by the court is whether the term is part of the contract. There are three matters to consider:
- whether the agreement is signed
- whether any notice with the term in it is incorporated in the contract
- whether the term is incorporated as a result of the previous dealings of the parties
exclusion clauses - whether the agreement is signed
where a party has signed a written agreement, they are bound by that agreement - L’Estrange v Graucob (1934)
L’Estrange v Graucob (1934)
Mrs L’Estrange bought a cigarette vending machine from the defendant for use in her café. She signed a contract including a clause which excluded all implied conditions and warranties. The machine did not work properly and Mrs L’Estrange relied on the implied term that it should be fit for purpose and wasn’t.
However, she was bound by the exclusion clause in the contract, even though she had not read the contract.
exclusion clauses - exception to written agreements
However the party will not be binded by the exclusion clause if they have been orally misrepresented as to the effect of the exclusion clause.
exclusion clauses - whether any notice with the term in it is incorporated in the contract
This involves incorporating notices and forms into a contract, typically an unwritten contract. Incorporation can only happen, if at the time the contract was made, the unsigned document was brought to the attention of the person suffering the exclusion clause.
Any attempt to introduce new terms to the contract after acceptance will fail unless there is a new contract varying the original one or the original contract allows for variation of the terms.
problem arises when the terms are not made clear when contract is made
Olley v Marlborough Court Hotel (1949)
the clause was not incorporated into the contract since it was on a notice on a wall inside the Olley’s bedroom in the hotel and couldn’t have been known about when they made the contract
is any notice with the term in it incorporated in the contract?
Chapelton v Barry Urban DC (1940)
Mr Chapelton hired two deckchairs on the beach at Barry Island, and received 2 tickets from the council’s beach attendant on paying the hire charge for the chairs. Next to the deckchairs was a sign which gave the price and time limit, but did not refer to any exclusion clauses. However, on the back of the tickets, it stated, ‘the council will not be liable for any accident or damage arising from the hire of the chair’. Mr Chapelton did not read the ticket as he thought it was merely a receipt so he would not be asked to pay again later that day. The canvas on one chair was defective and the chair collapsed, injuring him. The council tried to rely on their exclusion clause as a defence
to a claim for his injuries.
Court held, BUDC had not brought Chapelton’s attention to the clause and they could not rely on it.
is any notice with the term in it incorporated in the contract?
Thompson v LMS Railway
- Mrs Thompson was illiterate and could not read. She went on a railway excursion and was given a ticket with the words “excursion: for condition see back”. On the back of the ticket was a notice referring customers to the conditions printed in the company’s timetables. These conditions excluded liability for any injury. She was injured on the journey and claimed for damages.
- Court held that Thompson was unsuccessful in her claim. It was irrelevant that she was unable to read. The company had taken sufficient steps to bring the terms to customers’ attention in clear and legible print. Accepting the ticket for travel constituted acceptance of the terms of travel, and the reference to the time tables amounted to adequate notice of the existence of the terms and of their contents.
is any notice with the term in it incorporated in the contract?
Thornton v Shoe Lane Parking Ltd (1971)
- C was injured in a car park owned by the D’s. At the entrance to the car park by the barrier where a ticket was issued by a machine, there was a notice that, as well as giving the charges, stated that parking was at the owner’s risk. On the ticket was printed the words “this ticket is issued subject to the conditions of issues as displayed on the premises”. Notices inside the car park then listed the conditions of the contract including an exclusion clause covering both damage and personal injury.
- The court held that the exclusion clause had not been successfully incorporated into the contract. SLP had not done enough to bring the existence of the terms to Thornton’s attention prior to the contract formation.
is any notice with the term in it incorporated in the contract?
exclusion clauses - whether the term is incorporated as a result of
previous dealings of the parties
if the parties have dealt on the same terms in the past, it is possible to imply knowledge of the clause from the past dealings, provided there has been a consistent course of dealing.
However, the courts are reluctant to find that to be the case
Hollier v Rambler Motors (1972)
Hollier v Rambler Motors (1972)
C used a garage for a number of years and always agreed to an exclusion clause that the garage would not be liable for any damage to the vehicle. On this occasion, the exclusion clause was not mentioned.
Court held that it was “incorporated” into the agreement because of prior dealings between the two parties.
BUT bare in mind they have to have been consistent
exclusion clauses - the effect of exclusion clauses on third parties to the contract
- the doctrine of privity usually prevents a third party from relying on the terms of a contract
- this means an exclusion clause in a contract may not offer protection to parties other than the parties to the contract.
Scruttons Ltd v Midland Silicones Ltd (1962)
C (R of T P) Act (1999) means that third parties can now rely on an exclusion clause, providing the other requirements of the Act are met, and the Act itself is not excluded.
Scruttons Ltd v Midland Silicones Ltd (1962)
Defendant was sued for damages resulting from its negligent handing of goods. The defendant could not take advantage of an exclusion clause in the contract between the owner of the goods and the owner of the ship.
