Exclusion Clauses Flashcards
exclusion clause
a term in a contract that excludes or limits liability for a breach of the contract
also found in standard form contracts and on notices
may attempt to restrict the value of any claim to the purchase price of the goods
my try to exclude any claim for a defect to 14 days of the contract
exclusion clauses: theory of CL
Under the principle of freedom of contract, the courts generally accept that the parties to a contract can agree any terms they like.
However, this view is balanced by the idea that often, during negotiations, one
party is in a much stronger position than another.
exclusion clauses can be powerful weapons in the hands of those with a strong bargaining position.
The courts and Parliament have tried to find ways of limiting the effectiveness of an exclusion clause.
controls against exclusion clauses
(1) Rules relating to incorporation of the clause (common law)
(2) Rules relating to the construction of the clause (common law)
(3) Unfair Contract Terms Act 1977 (Parliament)
(4) Consumer Rights Act 2015 (Parliament)
(1) common law - incorporation of the clause
To be valid, an exclusion clause should be properly incorporated into the contract.
To decide whether the term is part of the contract the court considers 3 matters:
a) signature,
b) reasonable notice,
c) previous dealings between the parties.
a) incorporation by signature
Where the parties sign the contract, then caveat emptor (Let the buyer beware) applies.
If they sign the contract they are bound by them (whether or not they read them or understood them).
(L’estrange v Graucob)
EXCEPTION:
where the person seeking to insert the exclusion clause makes a verbal statement as to the content of the exclusion clause that differs from the written version.
the verbal version prevails (Curtis v Chemical Cleaning Company)
b) Incorporation by reasonable notice
In the absence of a signature, an exclusion clause is only valid if reasonable notice of its terms has been given to the other party before they enter into the contract.
(1) time of notice (Olley v MCH)
(2) form of notice
- exclusion clause must be contained in a document in which a party would expect to find such a clause (Chappelton v Barry UCD)
(3) effect of the clause
- The more complex an exclusion clause, the greater the effort should be to bring it to the attention of the other side before the contract is made (Thornton v Shoe Lane Parking)
c) Incorporation by a previous course of dealing
A course of dealing exists when the two parties regularly make the same contract and the terms of that contract are consistent (McCutcheon v McBrayne)
(Hollier v Rambler Motors)
- common law - construction of the clause
(a) Contra proferentum
(b) The privity rule
(a) Contra proferentum
The contra proferentum rule is a principle designed to assist in the interpretation of the meaning of the terms in a contract.
The effect of the contra proferentum rule as applied to exclusion clauses is that, if there is any ambiguity in the contract, this works against the party seeking to rely on the exclusion clause: they have broken the contract in some way and are now trying to avoid some or all of the liability for doing so.
That party cannot rely upon it unless it is clear (Hollier v Rambler Motors)
The privity rule
related to the effect of ECs on third parties to the contract
The privity rule means that the terms of a contract are only binding on the parties to the contract themselves.
In the same way, an exclusion clause in a contract may not offer protection to parties other than the parties to the contract. (Cosgrove v Horsefell) (Scruttons v Midland Silicones)
much of the difficulty in such cases may be removed by the Contracts (Rights of Third Parties) Act 1999
- statute - The Unfair Contract Terms Act 1977
Parliament recognised that the common law can only offer limited protection to a party who has a weak bargaining position
UCTA 1977 is the original Act by which Parliament attempted to protect those affected by an exclusion clause.
It concentrates on clauses excluding and limiting liability in an attempt to protect consumers.
exclusions and limitations made void by the UCTA
(1) Some exemption clauses are invalidated by the act and so are unenforceable
(2) Some exemption clauses are valid only if they are reasonable
(1) Some exemption clauses are invalidated by the act and so are unenforceable
s2(1) a person cannot exclude liability for death or personal injury caused by his/her negligence
(2) Some exemption clauses are valid only if they are reasonable
s2(2) clause seeking to exclude liability for loss, OTHER than death or personal injury, caused by the negligence of the party inserting the clause, can only stand if it satisfies the test of REASONABLENESS in the Act.
s3 imposes a REASONABLENESS TEST to contracts where one party is subject to the other’s standard written terms of business
The definition of “REASONABLE”
The test for reasonableness is not specifically defined in the Act, but certain sections provide help.
S11(1) “the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been known to or in the contemplation of the parties when the contract was made”
- ‘the knowledge test’
“Reasonableness” must be proved by the person relying on the clause.
Warren v Trueprint
- statute - The Consumer Rights Act 2015
In the context of trader/consumer contracts, EXCLUSION clauses are now controlled by CRA 2015.
s31 Prohibits a term excluding or limiting liability for the following in respects to the Sale of Goods:
- Goods to be of satisfactory quality
- Fir for purpose
- As described
- Match a model seen
- Installation as part of conformity of the goods with the contract
s57 Prohibits a term excluding or limiting liability for the supply of services:
- Service to be performed with reasonable care & skill
- Information about serve to be binding
- Reasonable price
- Reasonable time
s65 Prohibits exclusion or restriction of liability for death or personal injury resulting from negligence
