exclusions and limitation clause

Question 1

Before any clause (exemption or limitation) can be effective the following criteria must be satisfied:

Answer 1

1. the clause must be incorporated into the contract
2. it must be clear and unambiguous

Question 2

incorporation: the clause must be incorporated into the contract

Answer 2

• party who will be subject to the clause must have reasonable notice of its inclusion.

There are two factors to consider.

1. Timing
2. Sufficiency of notice

Question 3

Timing:

Answer 3

• Must have notice either before or at the time they enter into the contract.
• Olley v Marlborough Court Hotel (1949) : A notice on the back of Mrs Olley’s bedroom door stated the hotel would not be liable for theft of property from guests. Mrs Olley suffered when her clothes and jewellery were stolen from her room. It was held the clause excluding liability was ineffective as Mrs Olley only had notice of the clause after the contract had been made – which was at the reception desk. Had she seen the clause before she entered into the contract, e.g., if it was on a notice on the reception desk, it would have been incorporated.

Question 4

Thornton v Shoe Lane Parking (1971)

Answer 4

In a car park, a notice and ticket included a clause exempting proprietors from liability for customer injuries. However, the court decided this clause wasn’t part of the contract. They reasoned that the contract formed when the customer used the ticket machine, before seeing the clause on the ticket. As a result, the proprietors couldn’t use the clause to avoid liability for customer injuries because it wasn’t part of the agreed-upon contract at the time it was made.

Question 5

Contractual documents and timings: Chapelton v Barry UDC (1940)

Answer 5

The case involved a person wanting to hire a deckchair. They followed a notice’s instructions to pay the attendant after taking the chair and received a ticket with an exclusion clause after payment. When the deckchair collapsed, causing injury, the court determined that the ticket received after payment was merely a receipt, not a part of the contract. They identified the notice as the offer, and taking the chair as acceptance. The court emphasized that notices must be in writing, displayed at the business place, or in a contractual document to be legally binding. Since the exclusion clause was on the ticket received afterward and not part of the initial contract, it was not considered incorporated into the agreement.

Question 6

Sufficiency of notice

Answer 6

• Reasonable steps must be taken to bring any clause to the customer’s attention
• Onerous clauses should not be hidden in small type in the middle of a long contract.
• Interfoto Picture Library v Stiletto Productions (1988)

Question 7

sufficiency of notice: what happens if a party signs a document without reading it?

Answer 7

L’Estrange v Graucob (1934)
- The claimant signed an agreement for a cigarette machine for her café.

• She did not read the terms but was nonetheless bound by an exemption clause in the contract.

Question 8

The clause must be clear and unambiguous

Answer 8

If a clause is unclear or ambiguous the court may restrict the effects of the clause against the party seeking to rely on it.

This is known as the contra proferentem rule.
Contra = against
Proferentem = the party who offered it

Question 9

summary

Answer 9

For an exemption clause to be valid, whether in a signed document or not, it must be written in a clear and unambiguous manner.

If there is any doubt about the meaning or extent of the clause, the court will construe it against the party seeking to rely on it.