Exclusion Clauses - 2 Flashcards
What are the 2 ways to control of Exemption Clauses
Common Law
Statutory Control
What are the 2 ways to control exclusion clauses through Statutory Control?
1) The Unfair Contract Terms ACT 1977 (UCTA)
2) The Consumer Rights Act 2015
UCTA - the scope?
The Act only applies to exemption clauses
Sections 2; 3, 6 and 7 only apply where there is “business liability”– s1(3)’
UCTA - ‘Business Liability’
The UCTA only applies if the person who is incurring liability does so in the course of a business (subject to s6(4)).
The Act may apply where two businesses are contracting with one another.
UCTA - Sections, 2, 3, 6 and 7
Section 2: deals with the exclusion of liability for negligence
Section 3: deals with exclusion of liability for breach of contract
Sections 6 and 7 – deals with exclusion of liability for breaching obligations arising under a sale of goods contract (section 6) or supply of goods (section 7)
Section 2 - Exemption of liability for negligence
Business Liability –> negligence liability causing death or personal injury –> exemption clause is ineffective
Business Liability –> negligence liability causing loss/damage e.g. to property –> exemption clause is subject to requirement of reasonableness
Section 3 - Exclusion liability for breach of contract
Business Liability –> exemption of liability for breach of contract –> deals on others written standard terms of business –> exemption clauses subject to requirement of reasonableness
Section 3 - when does it apply
‘This section applies as between contracting parties where one of them deals on the other’s written standard terms of business” – s.3(1)
This means that it applies where the exemption clause is contained in “written standard terms of business” which were prepared by the party who seeks to rely on the exemption clause.
S.3(1) - meaning of words - ‘Deals’
It means “makes a deal” on the standard terms. Even if there were negotiations about those standard terms, a deal will still be made on the basis of them if the parties eventually entered into those terms – St Albans City and DC v International Computers Ltd [1996] 4 All ER 481.
However, if any of those standard terms were significantly changed as a result of those negotiations then UCTA will not apply - Yuanda (UK) Co Ltd v. WW Gear Construction Ltd [2010] EWCA 720
S.3(1) - meanings of words - ‘other’s standards’ written terms and conditions
A party’s terms are its “standard” written terms if these are the terms that it normally uses when entering into contracts.
It need not be the case that it enters into every contract on such terms, but the greater the range of terms that a party uses for entering contracts, the less likely it will be that any of those terms will be treated as standard terms – Chester Grosvenor Hotel Co Ltd v. Alfred McAlpine Management (1991) 56 BLR 115
Requirement of Reasonableness
The reasonableness of an exemption clause must be judged at the time of the formation of the contract, given what was known or ought to have been in the parties’ contemplation at that time.
So requirement of reasonableness is looking at the time of when the contract was made and not when the loss arises
Requirement of reasonablness - burden of proof
The burden of proving that an exemption clause satisfies the requirement of reasonableness lies with the party who argues that it is reasonable – s11(5) UCTA
E.G. if it was X’s standard written terms and conditions in a contract with Y and X breached the contract and is now trying to rely upon an exclusion clause within his contract to protect himself from being sued by Y for the loss he caused Y –> AND Y is trying to prove that X exclusion clause isn’t reasonable THEN X has the burden of proof when arguing it is reasonable
Determining Reasonableness
1) strength of barganing positions of the parties relative to eachother
2) whether the customer recieved an inducement to agree to the term
3) whether the customer knew about the existence and extent of the term
4) where the term excludes / restricts any liability is some condition is not complied with
5) whether goods were manufactured, processed or adapted to the order of the customer
EXAMPLE - Philips Products Ltd v Hyland and Hamstead Plant Hire Co Ltd
Hamstead (a plant hire company), hired an excavator to Phillips along with Mr Hyland, who was to drive the excavator. The machine was needed by Phillips to assist with building work that they were having done at their factory.
In the hire contract, clause 8 provided that even tho Mr Hyland was Hamstead’s employee, while he was engaged in working at Phillips’ premises, he was (essentially) to be treated as Phillips’ employee and therefore they would be unable to sue Hamstead for any damage that Mr Hyland did while at work.
Whilst working, Mr Hyland negligently drove the excavator into collision with Phillips’ factory, causing damage –> SO Phillips sought to sue both Mr Hyland and his employer (Hamstead) for the cost of repairing the damage.
AND Hamstead sought to rely on the exemption clause – clause 8.
Philip v Hyland - did clause 8 satisfy requirement of reasonableness
The Court found that the exemption clause did not satisfy the requirement of reasonableness.
This was because:
1) Hamstead were in the business of hiring out plant; Phillips had very little experience of doing so e.g. didn’t have specialist knowledge required to enable them to direct or control the way in which Hyland went about his work on the excavator;
2) Clause 8 was part of Hamstead’s written terms and conditions; it was not the product of any discussion or agreement between the parties;
3) Phillips played no part in selecting Hyland as the driver; that was decided by Hamstead alone;
