exemption clauses

Question 1

the parol evidence rule

Answer 1

the rule that where a written contract document purports to record all the terms of the parties agreement, no evidence can be adduced to vary / contradict it

Question 2

parol evidence rule applied

Answer 2

henderson v aruthur
-> a tenant could not adduce evidence of an alleged prior agreement to accept IOU’s for rent when the deed of lease required rent to be paid in cash

Question 3

exceptions to the rule

Answer 3

• the contract is partly in writing and partly oral
• the oral promise can be treated as giving a rise to a collateral contract

Question 4

tensions underpinning rule + exceptions

Answer 4

• law is not very coherent here

Question 5

What is the Heilbut case’s significance for the parol evidence rule and collateral contracts?

Answer 5

Parol Evidence Rule: Written contracts can’t usually be altered by external evidence

Collateral Contracts: Separate oral agreements alongside a main contract.
Rare and viewed skeptically by courts.
Must be proven with clear, strict evidence.
Key Quotes:

Viscount Haldane: Courts won’t assume collateral contracts without clear language.
Lord Moulton: Collateral contracts must be strictly proven and are rare, as modifying the main contract directly is more usual.

Question 6

effect of entire agreement clauses

Answer 6

• will prevent collateral agreements arising out of oral pre-contractual assurances
  -> however, they do not prevent adducing extrinsic evidence going to interpretation
  -> neither does it prevent claims in misrepresentation unless the wording excludes this in clear terms

Question 7

“no oral modification” clauses

Answer 7

• traditional view is that parties cannot give up normal power that everyone has to enter into an oral contract by agreeing that no amendment can be made to the written contract unless it is made in writing

Question 8

advantages of NOM clauses

Answer 8

Certainty: Ensures all parties agree formally to changes, avoiding misunderstandings

Protection: Prevents one party from unilaterally claiming a change was agreed orally

Business Efficiency: Encourages professionalism and proper documentation in contractual relationships

Question 9

MWB Business Exchange v Rock Advertising (2018):

Answer 9

The UK Supreme Court upheld the NOM clause, emphasizing its purpose to promote certainty and avoid informal variations that could lead to disputes.
However, the court noted that NOM clauses can still be overridden by express agreement or clear conduct, but this requires strong evidence.

Question 10

exemption clause

Answer 10

an exemption clause is a contract term that relieves a party of some/all of their liability, in the event of their breach of contract, committing a tort or breaching some other duty

Question 11

controversiality around exemption clauses

Answer 11

• they can defeat the parties expectations; if you pay money for an item you pay expect to be compensated if the product is not up to standard
• they can disincentivise taking care, “moral hazard”
• in extreme, can empty a party’s duties of all content
• unfair surprise, the existence of exemption clauses is often unlikely to be appreciated by consumers and small businesses

Question 12

in defence of exemption clauses

Answer 12

• help define the parties duties to one another
• valuable way of allocating risk between the parties, often linked to insurance considerations
• exclusion and limitation-of-liability clauses are common in properly negotiated contracts between well advised commercial entities of equal bargaining power
• not all unfair terms are exemption clauses

Question 13

common-law control of exemption clauses

Answer 13

• rules on incorporation of unsigned notices
• contra preferentem
• strict interpretation of exemption clauses

Question 14

problems with common-law control mechanisms

Answer 14

• applied ‘one-size-fits-all’ manner; judge made law should be of universal application
• did not prevent determined parties from introducing and relying on unfair terms and making sure exemption clauses were drafted to meet the restrictive rules of interpretation developed in case law
• some of the rules were limited to targeting exemption clauses

Question 15

contra preferentem

Answer 15

any ambiguity is to be resolved against the party who introduced the clause

Question 16

limits to CP

Answer 16

• rarely decisive as to the meaning of any provisions of a commercial contract -> the words used in a commercial sense + should be enough to determine meaning
• identifying the proferens can be hard in commercial contracts because; often there are mutual exclusions in construction of contracts, such clauses often go through an intensive process of b-f-negotiations

Question 17

What is the presumption for interpreting ambiguous exemption clauses?

Answer 17

If an exemption clause is unclear, it is interpreted narrowly (giving it less effect). This is because it’s unlikely parties would limit remedies for major contract breaches without clear wording (The Hut Group Ltd, 2016).

This applies even for mutual liability exemptions.
But it doesn’t allow giving a “strained” or unnatural meaning to the clause.

Question 19

applying Canada steamship:

Answer 19

In EE Caledonia (1994), a clause requiring parties to indemnify each other against “any claim… or liability… arising by reason of death” of their employees was held not to cover negligence liability.

Reason: The clause could also apply to liability for breach of a no-fault statutory duty (e.g., strict liability).
Key Point: If an alternative basis for liability (other than negligence) is realistic, the clause will not exclude negligence.
This decision acknowledged that in contexts like oil fields with strict statutory regimes, non-negligence liability is a real and foreseeable concern (per Hobhouse J).

Question 20

UCTA 1977

Answer 20

• national origin
• unfair terms in consumer contracts regulations

Question 21

CRA 2015

Answer 21

The Consumer Rights Act
- a codification of EU Law

Question 22

rationalising the legislation

Answer 22

prior to 2015, UCTA and UTCCR overlapped: the same term could be subject to review under both pieces of legislation applying different standards:
2015 REFROM ->
- repealed + replaced the UTCCR with CRA
- translated over the the CRA certain provisions of UCTA that were more favourable to consumer than UTCCR
- amended UCTA so that is no longer applies to consumer contracts

Question 23

similarities of UCTA + CRA

Answer 23

• both invalidate certain terms outright
• both subject certain terms to review
• both apply to an open-ended class of contract

Question 24

differences between UCTA and CRA

Answer 24

• UCTA only applies to business to business contracts; CRA to business to consumer
• UCTA applies only to exemption clauses and others that cut down parties duties; CRA makes any clause reviewable
• both have different origins
• CRA allows for pre-emptive enforcement

Question 25

What does Section 2 of the UCTA say about liability for negligence?

Answer 25

Section 2 of UCTA:

A person cannot exclude liability for death or personal injury caused by negligence.
For other loss or damage, exclusion is allowed only if the clause passes the reasonableness test.
This ensures fairness and limits how much parties can exclude liability in negligence cases.

Question 26

UCTA s6 + 7

Answer 26

• absolutely invalidate any term which exempts liability for implied terms as to title
• make exclusions/restrictions of liability for breach of other implied terms in sales/supplies of goods

Question 27

UCTA s 13

Answer 27

Section 13(1) of UCTA ensures that parties cannot avoid liability by redefining exemptions as “duty-defining provisions.”

It states:
Sections 2, 6, and 7 also prevent excluding or restricting liability through terms or notices that exclude or restrict the relevant obligation or duty.

This stops parties from sidestepping UCTA’s rules by rewriting the scope of their responsibilities.

Question 28

How does UCTA make liability harder to enforce?

Answer 28

Under UCTA, liability cannot be excluded or restricted by:

Restrictive or onerous conditions on enforcing liability.
Excluding or restricting rights/remedies related to the liability or penalizing someone for pursuing them.
Excluding or restricting rules of evidence or procedure.
Sections 2, 6, and 7 ensure that terms or notices attempting these restrictions are also invalid if they limit the relevant obligation or duty.

Question 29

UCTA S11What is the “requirement of reasonableness” under UCTA, Section 11?

Answer 29

A term must be fair and reasonable to include, considering the circumstances that were (or should have been) known or contemplated by the parties when the contract was made.
Key Point:
Most UCTA provisions (e.g., s3(2)) do not outright invalidate terms but instead subject them to this test of reasonableness. (Exception: s2(1) prohibits exclusion of liability for personal injury or death outright.)

Question 29

How is the “requirement of reasonableness” applied under UCTA?

Answer 29

Burden of Proof: The party relying on the term must prove it is reasonable (s11(5)).
Guidelines: Schedule 2 provides non-exhaustive criteria, but courts may consider other relevant factors.
Fact-Specific Analysis: Courts assess reasonableness based on the specific circumstances of each case (e.g., Bates v Post Office

Question 29

How is the “requirement of reasonableness” applied under UCTA?

Answer 29

Burden of Proof: The party relying on the term must prove it is reasonable (s11(5)).
Guidelines: Schedule 2 provides non-exhaustive criteria, but courts may consider other relevant factors.
Fact-Specific Analysis: Courts assess reasonableness based on the specific circumstances of each case (e.g., Bates v Post Office).

Question 30

What are the Schedule 2 factors for assessing reasonableness under UCTA?

Answer 30

Bargaining Power: Relative strength of the parties and availability of alternatives.
Inducement: Whether the customer was incentivized to agree or could have contracted elsewhere without the term.
Awareness: If the customer knew or should have known about the term (e.g., trade custom or prior dealings).
Practicability: If compliance with any conditions was reasonable at the time of the contract.
Customization: Whether the goods were specially made for the customer.
These factors guide courts but are non-exhaustive