Exclusion clauses Flashcards
What is an exclusion clause
Something inserted into a contract in order to reduce or eliminate the liability of either party where certain events may occur. They can operate perfectly legitimately where both parties are of equal bargaining power but its common for unequal power especially when consumer is involved
Common law control of exclusion clauses
Where one party seeks to rely on an exclusion clause to the detriment of the other courts have devised 2 rules to indicate whether to accept or deny the clauses operation
1. Clause must be incorporated into contract as part of contract
2. Clause will be constructed (interpreted) by courts and must protect party from damage caused and not seek to gain an undue advantage from it
Incorporation of the clause
For an exclusion clause to be valid it must be incorporated into the contract through signature, reasonable notice or previous dealings
By signature - Under the rule in L’estrange a person is bound by a contract they sign even if the don’t read it or understand it.
By reasonable notice - If separate written terms are presented those terms only become part of the contract if it can be said that the recipient had reasonable notice of them - Olley v Marlborough court
Previous course of dealing - if 2 parties have previously made series of contracts and they contained exclusion clause that clause may apply to subsequent transaction even if usual steps to incorporate were not taken
Exception if clause is unusual or onerous as in Interfoto v Stiletto
Construction (interpretation) of the clause
Must be constructed or interpreted by courts to see if it will achieve what it is meant to do without unduly penalising other party
Main rule of construction here is the proferentem rule: any ambiguity with regard to clause must be interpreted against the party proposing or having drafted the clause and wishing to rely upon it
Hollier v Rambler motors, similar wording was found insufficient to exclude negligence unless expressly stated
Hollier v Rambler motors
Similar wording was found insufficient to exclude negligence unless expressly stated
L’estrange v Graucob
A person is bound by a contract they sign even if the don’t read it.
Interfoto v Stiletto
Particularly onerous or unusual contract terms require special notice to be incorporated into the contract
Olley v Malborough court
Since the contract was made at the reception desk, the notice in the bedroom was too late to become a term of the contract
Chapelton v Barry UDC
The court held that the clause was not incorporated into the contract since it was a mere receipt given after the contract was made
Impact of statute law on clauses
There was very little statutory regulation before the unfair contract terms act 1977 which was introduced to increase consumer protection and distinguishes between consumer and business contracts
Section 12(1) UCTA 1977
Defines ‘dealing as a consumer’ where
(A) - He neither makes the contract in the course of a business nor holds himself out as doing so and
(B) other party does make the contract in the course of business and (C) The goods are of a type ordinarily supplied of private use or consumption
The act makes certain exclusion clauses void and makes others only valid if they satisfy the test for reasonableness
Section 2(1) UCTA
Cannot exclude or restrict liability for death or personal injury resulting from negligence by referring to any contract term
Section 2(2) UCTA
Cant exclude or restrict liability for negligence resulting in loss or damage other than death or personal injury unless term satisfies test for reasonableness
Section 3 UCTA
Applies when dealing on one parties written standard terms of business
Party cant exclude or restrict liability for their own breach of contract
Cant claim to render performance substantially different from what was reasonably expected
Any exclusion or restriction must satisfy test for reasonableness
Section 11 UCTA
Reasonableness test for exclusion clauses
States a term is reasonable if it is fair and reasonable to be included having regard to the circumstances which were or ought reasonably to have been, known to or in contemplation of the parties when contract was made.
Section 31 CRA
Liability cannot be excluded or restricted (goods)
A term of a contract under ss9,10 and 11 to supply goods cannot be excluded or restricted by a trader
Section 57 CRA
Liability that cannot be excluded or restricted
A term of a contract under s49 to supply services cannot be excluded or restricted by a trader
Section 65 CRA
The bar on exclusion or restriction of negligence liability
Traders cannot rely on a term inserted into a consumer contract or notice which excludes or restricts liability for death or personal injury resulting from negligence.
Where a term of a consumer contract, or notice, intends to exclude or restrict a trader’s liability for negligence, a person is not to be taken to have voluntarily accepted any risk merely because the person agreed to or knew about the term or notice.
