Exemption Clauses Flashcards
What is an exemption clause?
An exemption clause is a contractual term that purports to limit or exclude a liability that would otherwise be attached to one of the contracting parties
What obligations can be affected by an exemption clause?
Contractual, tortious or both
What three points must you consider when considering whether a party can rely on an exemption clause?
1) Incorporation - is the exemption clause validly part of the contract
2) Construction - does the allege clause as drafted cover the alleged breaches and resulting loss?
3) Statutory controls - what is the effect on the clause of Unfair Contract Terms Act 1977 and the Consumer Rights Act 2015?
What is meant by contra proferentem and exemption clauses?
What is meant is that the general rule is that any doubt as to the meaning and scope of any exemption clause will be interpreted against the party seeking to rely on it
How is contra proferentem in relation to exemption clauses effected where the parties are commercial parties?
The court is less likely to read a clause contra-proferentum in a contract between commercial parties of equal bargaining power
If a party wishes to have an exemption clause which excludes negligence what language should they use?
Clause should clearly exclude negligence.
The word negligence should preferably be used.
If negligence is not used, words should be wide enough to cover negligence.
Are third parties who are not a party to the contract protected by an exemption clause?
No - doctrine of privity of contract - no party outside the contract can benefit from its terms
Are consumer contracts covered by the Unfair Contract Terms Act 1977?
No - they are specifically excluded
What liability does UCTA cover?
Business liability
What is business liability under UCTA?
Liability arising from things done in the course of business or from occupation of premises used for business purposes
What is negligence under UCTA?
Any obligation, arising from the express or implied terms of a contract, to take reasonable care or exercisable skill in the performance of the contract
Any common law duty to take reasonable care or exercise reasonable skill
Can liability for death or personal injury be exempted under UCTA?
No - any attempt to exclude or restrict liability here will be void
Can liability for other loss resulting from negligence be exempted under UCTA?
It can be excluded so far as the term or notice is reasonable
Can liability for breach of statutory implied terms about quality of goods be exempted under UCTA?
Yes if reasonable
Can liability arising under contract (ie breach of an express term) be exempted under UCTA?
Yes if reasonable
What is the test of reasonableness under UCTA?
Term must be ‘ a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contact was made
At what time is the reasonable test to be judged?
At the time the contract was made
What guideline factors for reasonableness are in sch 2 of UCTA?
- strength of bargaining positions of the parties relative to each other
- whether the customer received an inducement to agree to the term or in accepting it had the opportunity of entering into a similar contract with other persons, but without having a similar term
- whether the customer knew or ought reasonably to have known of the existence and the extent of the term (having regard, among other things, to any custom of the trade and any previous course of dealings between the parties)
- where the term excludes of restricts any relevant liability if some condition was not complied with, whether it was reasonable at the time of contract to expect that compliance with that condition would be practicable
- whether the goods were manufactured, processed or adapted to the special order of the customer
What contracts are covered by the CRA 2015?
Business to consumer contracts
Can a trader exempt liability for death or personal injury resulting from negligence under CRA 2015?
No - any attempt will be void
What is negligence under CRA 2015?
- any obligation, arising from the express or implied terms of a contract, to take reasonable care or exercise reasonable skill in the performance of the contract
- any common law duty to take reasonable care or exercise reasonable skill
- common duty of care imposed by the Occupiers’ Liability Act 1957
Can a trader exempt liability of statutory implied terms about goods under CRA 2015?
No. Any attempt to restrict:
- goods to be of satisfactory quality
- goods to be fit for purpose
- goods to be as described
will not be binding
Can a trader exempt liability for breach of statutory implied terms about digital content under CRA?
No any attempt to restrict:
- content to be of satisfactory quality
- content to be fit for purpose
- content to be as described
will not be binding
Can a trader exempt liability for breach of statutory implied terms about services?
An exclusion of service to be performed with reasonable care and skill will not be binding
A restriction/limitation of liability for reasonable care and skill will be binding if it does not prevent recovery of price paid by customer
What other conditions of a consumer contract will not be binding if they are unfair?
Terms other than main subject matter of contract, nor the price of the goods, digital content or services provided the terms are transparent and prominent
When is a term unfair?
A term is unfair if it is contrary to the requirement of good faith, it causes significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer
What terms cannot be deemed unfair?
Terms specifying the main subject matter of the contract nor terms specifying the price of goods, digital content or services concerned provided they are transparent and prominent
When is a term to be assessed as unfair?
At the time of contracting
