Exemption clauses Flashcards
What are the 2 types of exemption clause?
Exclusion clause
= completely excludes a party from all liability for breach of contract
Limitation clause
= limits a party’s liability for breach of contract
Give the general case law example for exemption clauses
Give a brief overview
L’Estrange v Graucob [1934]
L’Estrange hired cigarette machine. When it arrived it was faulty.
Graucob relied on an exclusion clause re the condition of the machine.
L’Estrange claimed not to have read the contract.
Held:
If you sign a contract, you are bound by all terms, regardless as to whether you have read them or not
What does L’Estrange v Graucob [1934] tell us about exemption clauses?
“Signing a contract containing an exemption clause means it will form part of a contract and this you are bound by the terms”
What is the purpose of exemption clauses?
To encourage entrepreneurship
-> reduces the risk for smaller businesses that are making contracts with bigger, more experienced companies
What view did the courts previously have on exemption clauses?
What is the reality of the situation?
So what have the courts done?
Parties have the freedom to contract
- > so parties have agreed to an exemption clause freely
- > so the courts should not interfere with that agreement
The party with the greater bargaining power normally inserts the exemption clause.
Upon realising the potential unfairness of exemption clauses, they now try to limit the effect of them.
How was an exclusion cause used unfairly in L’Estrange v Gruacob [1934]?
L”Estrange had little choice but to agree to the exemption clause
-> if she had refused to sign the contract, then she couldn’t have the vending machine
How can the courts render an exemption clause invalid?
- Hold that the clause was never incorporated into the contract
- Find that the clause did not exclude liability for the breach that occurred
- If it is prevented under the CRA 2015
What are the case law examples for holding that an exemption clause was never incorporated into the contract?
Olley v Marlborough Court Hotel Ltd. [1949]
Thornton v Shoe Lan Parking Ltd. [1971]
Briefly explain Olley v Marlborough Court Hotel Ltd. [1949]
Couple booked hotel and paid in advance.
Furs belonging to the wife were stolen from the hotel room.
Defendants relied upon notice in the bedroom stating ‘the proprietors will not hold themselves responsible for articles lost or stolen, unless handed to the manageress for safe custody”.
Held:
The notice was too late to be made effective.
The contract was made before the couple could see the notice.
Briefly explain Thornton v Shoe Lane Parking Ltd [1971]
Claimant was badly injured in the car park, partly caused by defendant’s negligence.
Claimant paid for a ticket at the barrier to the car park.
On the ticket, it stated that the ticket was issued subject to conditions displayed inside the premises.
These conditions excluded liability for injuries to customers.
But these conditions could only been seen once you’d driven into the car park and walked around.
Held:
Exclusion clause was presented too late as the contract had been concluded when the customer received the ticket.
When must an exemption clause be presented?
Before or at the time of agreement
What did Lord Denning say about exemption clauses?
“The more onerous an exemption clause is, the more warning that must be given to the other party”
Which Act has been designed to regulate exclusion clauses?
Unfair Contract Terms Act 1977
How did the courts interpret exclusion clauses before the Unfair Contract Terms Act 1977?
Contra preferendum
= strictly against the wishes of the arty trying to rely on them
What does the Unfair Contract Terms Act 1977 not apply to?
Consumer contracts
- CRA 2015 will apply
