Exclusion Clauses EVALUATION Flashcards
Explain
Exemption clauses are terms that try to reduce a party’s liability. These must first be incorporated to be effective. The general rule about these from Thornton v shoe Lane
Parking is that more unreasonable exclusions need to be made more clear. For instance,
the exclusion was not clear in Chapelton v BUDC as it was not displayed on the sign and
the ticket looked blank. Whereas in Parker v SE railway, the exclusion was clear on the
sign and ticket. L’Estrange v Graucob shows that if written statements are signed, they are
binding even if not read or understood. Interfoto v Stiletto shows there is an exception to this for harsh or unusual statements, which need special attention drawn to them. Grogan v Robin Meredith shows this rule only applies to contractual documents. Additionally, Curtis
v CCD shows that if verbal statements are made about signed agreements (eg that the
exclusion only applied to beads), the verbal statement is the thing that is incorporated.
Exclusions may also be incorporated by a regular course of dealings (Spurling v Bradshaw), but not if there are not frequent enough contracts (Hollier v Rambler Motors).
The courts can also control exclusions via the rule of contra proferentum (as seen in Hollier), which means vague exclusions will be interpreted against those trying to use it. This does not work if the exclusion is clear and freely agreed to though, like the big businesses clearly accepting the exclusion in Transocean Drilling v UK Providence. Lastly, the Consumer Rights Act (2015) (CRA) and Unfair Contract Terms Act 1977 (UCTA) allow control over exclusions in B2C and B2B contracts respectively. The CRA has a fairness test for any contract term, which protects consumers from ‘significant imbalances’ in their rights and obligations (S62), and never allows exclusions for death or personal injury (S65) nor implied rights to goods (S31) . Whilst UCTA also does not allow death or personal injury to be excluded (S2(1)), most other things can be excluded if reasonable. This is decided using the S11(1) knowledge test, as well as the S11(2) test – which considers the Schedule 2 guidelines such as strength of bargaining power and if any conditions were put on liability
Rules on incorporation
It could be argued that the rules on incorporation do control exclusions well. The courts have shown they will not allow exclusions to be in the contract unless they are clear and should reasonably have been known to the parties, which means they will only work when it is fair. However, it may be uncertain when exactly something is ‘reasonably clear’. In O’Brien v MGN, simply saying rules applied was enough to be clear. This means it is hard to know when courts will allow exclusions to operate, which is especially bad in B2C cases like MGN where there is weaker bargaining power. Therefore more thorough control may be desirable for consumers
Courts protect weaker parties
However, the courts seem to protect weaker parties well via the contra proferentum rule.
Like in Hollier, the courts have generally shown reluctance to enforce vague exclusions
against consumers, and will tend to favour them if possible. However, this can lead to
injustice in cases where there is a vague exclusion, but the parties freely chose to enter the contract anyway. This potentially damages freedom of contract and is not fair on the party
who happens to have an exclusion clause in the contract. Therefore such tight controls may
not always be effective
CRA’s stance on death/personal injury and implied rights
The CRA’s absolute stance on death/personal injury and implied rights creates a great deal
of certainty and protection for consumers. A business can never exclude liability for
dangerous products, for example, which means both parties know for certain their rights and remedies here, which may encourage businesses to offer better service in the first place. However, the general fairness test may not be so certain, as it is unclear what constitutes a ‘significant imbalance’ in rights and obligations. This means that exclusions to things like breach of contract or property damage are not so clear in how they are controlled, which could be problematic for the consumer and business, who do not know what they are allowed to do
UCTA allows for many exclusions
Comparatively, UCTA is very flexible in the sense that it allows far more things to be
excluded if reasonable. This potentially allows for more justice in individual cases, and can
be justified as B2B contracts have more equal bargaining power. However, UCTA can be
criticised because the various tests and guidelines can be very confusing and hard to
understand, making the law uncertain. It is thus very hard for businesses to know if their
exclusion clauses are likely to work or not. Therefore it may be better to have slightly more control over exclusions in such contracts
