Exemption Clauses Flashcards
chapter 7
What are the two common law tests relating to exemption clauses?
Incorporation and construction. Incorporation determines if the clause is part of the contract, and construction relates to the meaning of the clause.
What are the three main ways a clause may be incorporated into a contract?
○ Signature, provided it is legible, not particularly onerous, not misrepresented, and reasonably drawn to the other party’s attention.
○ Reasonable notice, before or at the time of the contract, considering the contractual nature of the document, how onerous the term is, legibility, position of the clause, and timing.
○ Previous consistent course of dealing, meaning a lot of dealings on exactly the same terms
What is the ‘contra proferentem’ rule?
If there is ambiguity or uncertainty about the meaning of a clause, the courts will construe the clause against the person seeking to rely on it. The idea is that the defendant should be liable for performance unless the contract clearly states otherwise.
What are the two main statutes that govern limitation and exclusion clauses?
The Unfair Contract Terms Act (UCTA) 1977 and the Consumer Rights Act (CRA) 2015. UCTA 1977 governs business-to-business contracts, and CRA 2015 governs business-to-consumer contracts.
What are the three potential results of applying UCTA 1977 to an exemption clause?
○ It prevents the defendant from excluding or restricting their liability.
○ It has no effect on the term, and the defendant can rely on the term.
○ It subjects the term to a ‘requirement of reasonableness’, meaning the defendant can only rely on the term if it is reasonable.
In what situations does the ‘reasonableness test’ apply under UCTA 1977?
○ Loss or damage caused by negligence (excluding death/personal injury).
○ Breach of statutory implied terms relating to goods (description, quality, and fitness for purpose).
○ Breach of an express term in standard written terms.
What are some factors a court considers when assessing reasonableness under UCTA 1977?
The relative strength of bargaining positions, any inducement to agree to the clause, whether the customer knew about the clause, and whether compliance with a condition was practicable. The court should consider all relevant factors.
What does the CRA 2015 say about excluding liability for breaches of implied terms?
In business-to-consumer contracts, a trader cannot exclude or restrict liability for breaches of the key terms implied into contracts for the sale and supply of goods and services. These implied terms are effectively ‘consumer rights’. For example, liability for goods not being of satisfactory quality, fit for purpose, or as described cannot be excluded. Similarly, liability for not performing services with reasonable care and skill cannot be excluded.
Can an exemption clause protect a third party?
Generally, no, due to the privity rule, but a major exception is the Contracts (Rights of Third Parties) Act 1999 (C(RTP)A 1999). If a third party is named or identified as a member of a class in an exemption clause, they can rely on it.
