Exclusion Clauses

Question 1

Introduce exclusion clauses.

Answer 1

• Terms that exclude / limit liability for breach of contract.
• Courts accept that parties can agree any terms they like under principle of freedom of contract - if you agree to exclusion clauses you’re generally bound to them.
• Assumption is that each party understands terms agreed accurately recorded contract.
• Dispute arises when 1 party argues term has 1 particular meaning + other party disagrees.
• Glynn v Margetson: Lord Hapsburg stated that Whole contract needs to be considered, rather than individual terms in isolation.
• Courts use purposive approach - look at spirit of law, rather than strict letter of law - allows flexibility.

Question 2

Explain the first element of exclusion clauses, use of language in contract.

Answer 2

• Pink Floyd: if words of contract are clear + unambiguous - assumed it’s what parties intended.
• Compensation Scheme: Lord Hoffman set out objective test: what would a reasonable man interpret to be meaning of contract?

Question 3

Explain the second element of exclusion clauses, common law controls of exclusion clauses.

Answer 3

Courts consider whether term (exclusion clause) is part of contract - 3 points to consider.
1) Whether Agreement’s Signed:
* L’Estrange: where party has signed written agreement, bound to agreement, even if they don’t read it.
* Curtis v Chemical Cleaning: communication in response to query is what stands, even if diff to what’s stated in written contract.
2) Whether Any Notice Within Term Is Incorporated In Contract:
* At time contract was made, clause must be brought to attention of person suffering exclusion clause.
* Any attempt to introduce new terms after acceptance will fail, unless there’s new contract.
* Olley: problem of incorporation arises when terms aren’t made clear when contracts made.
* Thornton v Shoe Lane Parking: Lord Denning stated exclusion clause will only be incorporated when on objective analysis its contained in document that has contractual significance - must be drawn to other parties attention in most explicit way.
* Durber v PPB Entertainment (2025): recent case confirming what Lord Denning said in Thornton.
3) Whether Term’s Incorporated As Result Of Previous Dealings With Parties:
* Rambler Motors: if parties have dealt on same terms in past - possible to imply knowledge of exclusion clause from past dealings, provided there’d been consistent course of dealing.

Question 4

Explain the third element of exclusion clauses, effect of exclusion clauses on 3rd parties to contract* (privity of contract rule).

Answer 4

• Scruttons v Midland Silicones: doctrine of privity means therefore exclusion clause may not offer protection to parties other than parties to contract.
• S.1 (6) Contract (Rights Of Third Parties) Act 1999: permits 3rd party to enforce any terms which would exclude / limit liability.

Question 5

Explain the fourth element of exclusion clauses*, contra proferentum rule.

Answer 5

• Where there’s ambiguity / uncertainty in meaning / scope of term, should be interpreted against person who introduced it.
• Places fault on party who included it in contract
• Transocean Drilling: if term isn’t one-sided / ambiguous then rule isn’t used.

Question 6

Explain the fifth element of exclusion clauses, statutory control of exclusion clauses.

Answer 6

• Exist to deal with imbalance between parties - may make clause invalid - no legal effect.
  Unfair Contract Terms Act 1977:
  Business to business contracts.
  Exclusions Depending For Validity On Test Of Reasonableness:
• S.3: imposes reasonableness test to contracts where 1 party is subject to others standard written terms of business.
• S.11 (2): covers exclusion clauses involving breaches of implied conditions. Judges consider:
• S.11 (2) (a): strength of bargaining position of parties
• S.11 (2) (b): whether customer received requirements to agree to term, or had opportunity of entering similar contract with other persons, but without having to accept exclusion clause.
• S.11 (2) (c): whether customer knew of existence + extent of term.
  Consumer Rights Act 2015:
  Trader to consumer contracts.
• S.31: prohibit term excluding / limiting liability for supply of goods for:
• S.9: quality
• S.10: fitness for purpose
• S.11: description
• S.57: prohibits term excluding / limiting liability for supply of services for:
• S.49: reasonable care + skill
• S.52: performance within reasonable time
• S.65: prohibits exclusion / restriction of liability for death / personal injury.
• S.62: requirement for all terms + notices to be fair. Defines ‘unfair’ terms as those: putting consumer at disadvantage, limiting consumer rights, disproportionately increasing obligations. * Court should consider specific circumstances existing when term was agreed.