exemption clauses

Question 1

what is an exemption clause?

Answer 1

contractual term that purports to limits or exclude a liability that would otherwise attach to one of the contracting parties

Question 2

what is the difference between an exclusion clause and an exemption clause?

Answer 2

an exclusion clause = excludes liability
exemption clause = limits liability

Question 3

what three things must be considered when deciding whether a party can rely on an exemption clause?

Answer 3

1. incorporation = is the exemption clause part of the contract?
2. construction = does the clause cover the alleged breaches and resulting loss?
3. statutory controls = what is the effect on the clause of the unfair contract terms act 1977 and the consumer rights act 2015?

Question 4

how are exemption clauses usually constructed? (usually have 2 or more of the 3 elements)

Answer 4

1. if liability is excluded or only limited
2. which types of claim/duties the exemption relates to
3. which types of loss the exemption relates to

Question 5

what does it mean that ‘the general rule is that exemption clauses will be construed contra proferentem’?

Answer 5

if there is any doubt as to the meaning and scope of the exemption clause, the ambiguity will be resolved against the party seeking to rely upon it.

Question 6

does the contra proferentem rule apply to commercial contracts?

Answer 6

it is less likely to apply when the commercial parties have equal bargaining power

Question 7

what is the doctrine of privity in a contract?

Answer 7

the idea that a party outside the contract cannot benefit from its terms nor can it have an obligation imposed upon it by the contract

Question 8

what is the Canada steamship rules for exemption clauses?

Answer 8

clear words must be used, however if general words are used - their effectiveness may depend on:
a) cases where the only basis for the liability is negligence
b) cases where the party will be liable, irrespective of negligence

Question 9

If a party wants to exclude their liability in negligence, the most certain way to achieve this is by?

Answer 9

using the word negligence or a close synonym for negligence

Question 10

What is the purpose and scope of the Unfair Contract Terms Act 1977?

Answer 10

The Act regulates exemption clauses that seek to exclude or restrict liability where both parties are acting in the course of a business

Question 11

According to the Unfair Contract Terms Act 1977, when is the requirement of reasonableness judged?

Answer 11

At the time the contract was made

Question 12

what is the reasonableness test in unfair contract terms act 1977?

Answer 12

‘fair and reasonable’

Question 13

what things should be considered for the reasonableness test in unfair contract terms act 1977?

Answer 13

consider:
a) strength of bargaining power
b) whether customer received an inducement to agree to the term
c) whether customer knew or ought reasonably to have known of the existence of the term
d) reasonable at the time of contract to expect compliance with that condition would be practicable
e) whether goods were manufactured, processed or adapted to the special order of the customer

Question 14

what type of exemption clause for type of liability will always be void in the unfair contract terms act 1977?

Answer 14

death or personal injury resulting from negligence

Question 15

what types of contracts does the consumer rights act 2915 regulate?

Answer 15

business to consumer contracts

• contract for supply of service to a consumer
• contract for supply of goods to a consumer
• contract for supply of digital content to a consumer

Question 16

The Consumer Rights Act 2015 regulates unfair terms in consumer contracts. How is unfairness assessed?

Answer 16

A term is unfair if it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer

Question 17

can a term limit or exclude personal injury liability or death?

Answer 17

no it cannot - consumer rights act 2015

Question 18

can a business to consumer contract exclude or limit reasonable care and skill?

Answer 18

potentially - it depends on the price paid by the consumer. (any attempt to entirely exclude is not binding) (but limitation will be binding to the extent that it would prevent the consumer from recovering the price paid)
consumer rights act 2015

Question 19

What approach does UCTA take to a clause excluding liability for breach of the implied term that goods will be satisfactory quality?

Answer 19

UCTA excludes this term unless it passes the test of reasonableness