Exclusion of liability Flashcards
Common law rules on exclusion clauses
Must satisfy 3 tests:
- Must be a term of the contract
- Must cover damage caused
- Must be reasonable
What is an exclusion/limitation clause
Terms within a contract which seek to restrict or exclude liabilities of the parties, particularly for non-performance of the contract.
Incorporation of exclusion clauses - Notice - General rule
Must be sufficient notice of the existence of the clause
Incorporation of exclusion clauses - Incorporation by signature - General rule
Even if a party is unaware of or does not understand an exclusion clause it will form part of the contract if the document has been signed.
Incorporation of exclusion clauses - Incorporation by signature - Exceptions
2 situations where an exemption clause will not be incorporated even if it is signed:
- Exemption clause isn’t legible
- If the effect of the clause has been described inaccurately and the innocent party has reasonably relied on the inaccurate description
Incorporation of exclusion clause - incorporation by reference to another document
Where reference is made to an exemption clause in a document given prior to the formation of the contract the claimant’s attention must still be drawn to the clause itself and if not the clause is invalid
Incorporation of exclusion clauses - incorporation where the clause is not in a signed document
Document must be contractual in nature and must be introduced before the time of the contract. The innocent party must know of the clause or reasonable steps must have been taken to bring it to the other’s notice.
Incorporation of exclusion clauses - Incorporation where the clause is not in a signed document - Factors
Court will take into account factors:
- Position of clause on document
- Prominence of clause
- Type and nature of the clause - onerous/unusual
- Attention should be drawn to the exclusion clause by clear words
- Very high degree of notice is required
- Go to great lengths to ensure attention is brought to it
What is an onerous clause?
Make the liability or its enforcement subject to restrictive or onerous conditions e.g restricting a person from pursuing a right or remedy
Incorporation of exclusion clauses - Incorporation where the clause is not in a signed document - Thornton v Shoe Lane
clause regarded as onerous as it excluded damage to vehicle and also personal injury - court felt that reference to personal injury was unusual for a notice in a car park
Key point - on how to determine if an exclusion clause is valid
In order to determine whether or not a clause is valid must consider common law position first and the apply each statutory control in turn
Construction of exclusion clauses - key point
Even if an exemption clause is incorporated the party in breach will not be able to rely on it unless the clause covers the breach and loss or damage which has occurred
Construction of exclusion clauses - contra proferentem rule
If a party tries to rely on a clause which is ambiguous or unclear the court will interpret the clause against him. It will not result in the clause being struck out
If an exemption clause is intended to cover liability for negligence clause must be carefully worded
Exemption clauses and 3rd parties - General rule
An exemption clause in a contract cannot protect a third party as the privity rule provides that only a party can rely on a clause in a contract
Exemption clause and 3rd parties - Exception
Contract (rights of 3rd parties) act - act extends to the benefit of an exemption clause S. 1(6) but only to the extent that the clause is valid
Which act applies?
Consumer contract - consumer rights act
Not a consumer contract - unfair contract terms act (UCTA)
What breaches cannot be excluded? CRA
Cannot exclude/restrict satisfactory quality, fit for purpose and description. Cannot exclude personal injury or death resulting from NEGLIGENCE. Cannot exclude reasonable care and skill. They also cannot exclude provision to provide service within a reasonable time and price if it would prevent the consumer from getting a refund.
CRA - Ambiguity of exclusion notices
In the event of ambiguity terms and notices are given the meaning that is most favourable to the consumer
CRA - Where the term is unfair
It is not binding as a result of unfairness the rest of the contract continues to have effect. Won’t be fair:
- If it causes significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer
UCTA - Key point
Either renders exemption clause void or subjects it to a reasonableness test
UCTA - What can’t be excluded
Cannot exclude/restrict liability for negligence where it causes death/personal injury.
UCTA - All other terms
Whatever the breach the exemption clause is subject to the reasonableness test.
UCTA - Test for reasonableness
The term shall be a fair and reasonable one to be included having regard to the circumstances which were or ought to reasonably been known to or in the contemplation of the parties when the contract was made.
UCTA - Guidelines for reasonableness test
- Strength of the bargaining positions of the parties
- An inducement to agree to the term
- Knew or ought reasonably to have known of the existence and the extent of the term.
- Availability of insurance
Previous course of dealing
Exclusion clause can be incorporated due to previous course of dealing
Clause as a whole
When considering reasonableness clause has to be considered as a whole
Excluding negligence
Can exclude negligence if it caused damages, if clear words are used e.g ‘howsoever caused’, and ‘neglect’. However CANNOT exclude personal death or injury caused by negligence.
