Exemption Clauses Flashcards
What if there is ambiguity or uncertainty about the meaning of an exemption clause?
The courts will apply the ‘contra proferentem’ rule of construction which construes the clause against the person seeking to rely on it.
What must a party do if they wish to exclude liability for negligence or lack of care?
The language of the exemption clause must make it very clear that they are not to be liable even in the event of their negligence or carelessness.
What are the two main statutes that govern limitation and exclusion clauses?
Unfair Contract Terms Act (UCTA) 1977 for business-to-business contracts and the CRA 2015 for business-to-consumer contracts.
What are the three results of applying UCTA 1977 to an exemption clause?
It prevents the defendant from excluding or restricting their liability by reference to the
term.
It has no effect on the term.
It subjects the term to a requirement of reasonableness.
What type of exemption clause is barred by s.2 UCTA 1977?
Parties cannot exclude or restrict their liability for death or personal injury resulting from negligence.
What type of exemption clause is subjected to the requirement of reasonableness by UCTA 1977?
In the case of loss or damage as a result of negligence.
Liability for breach of the seller’s implied undertakings as to conformity of goods with description or sample, or as to their quality or fitness for a particular purpose.
Liability for breach of the seller’s implied undertakings in hire-purchase agreements as to conformity of goods with description or sample, or as to their quality or fitness for a particular purpose.
Liability in respect of the right to transfer ownership of goods or the assurance of quiet possession to a person taking goods in pursuance of a contract.
Where a contracting party deals on the other’s written standard terms and the other party is in breach of contract and attempts to restrict their liability in terms of the breach.
How is the reasonableness test for exemption clauses satisfied?
The clause must have been a fair and reasonable one to be included in the contract as judged at the time of the contract by taking into account all the circumstances including what the parties knew or ought to have known at that point in time.
When is an exemption clause less likely to be reasonable?
Where one of the parties is in a weaker bargaining position.
Where the clause is buried in the small print of the contract.
When is an exemption clause more likely to be reasonable?
The seller agreed to reduce the price of goods if the buyer was prepared to accept the exemption clause.
Where experienced businessmen representing substantial companies enter into a freely neogtiated contract including exemption clauses.
What are the factors that a court may consider when deciding the reasonableness of an exemption clause?
The relative strength and bargaining position of the parties.
Inducements to agree to the exemption clauses or opportunities to enter similar contracts elsewhere.
Whether the customer ought reasonably to have known of the existence and extent of the clause, taking into account trading customs and previous dealings.
Where the exemption clause will apply if a condition is not complied with, whether it was
reasonable at the time of the contract to expect that compliance with the condition would be practicable.
The resources that the defendant could expect to be available to them for the purpose of
meeting the liability should it arise.
How far it was open to the defendant to take out insurance cover.
When MUST the court have regard to the guidelines in Schedule 2 UCTA 1977 when deciding the reasonableness of an exemption clause?
In cases involving the sale or supply of goods.
What types of exemption clauses for goods are barred under CRA 2015?
Any clause restricting liability for breach of the (s.9-11) requirements that goods be of satisfactory quality, fit for their particular purpose and as described.
Any clause that makes the enforcement of s.9-11 remedies subject to an onerous condition or allows the trader to put a person at a disadvantage for pursuing those remedies.
What types of exemption clauses for services are barred under CRA 2015?
s.57 of the CRA 2015 effectively provides that a trader cannot exclude liability for breach of the implied term to perform a service with reasonable care and skill (s.49). This also includes preventing an obligation or duty arising in the first place.
A trader cannot restrict liability for breach of s.49 or the implied terms to complete the work at a reasonable price and within a reasonable time, if it would prevent the consumer from getting a refund.
What is the general rule for exemption clauses that protect a third party?
The general rule is that 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.
What is the exception to the rule that an exemption clause cannot be used to protect a third party?
Provided a third party is named in an exemption clause or identified as a member of a class entitled to benefit from it, the third party can rely on the exemption to the same extent as the relevant contracting party.
