Exemption Clauses Flashcards
What is an exemption clause?
A contractual term that purports to limit or exclude a liability that would otherwise attach to one of the contracting parties
What three factors do you need to consider to judge whether an exemption clause is valid?
Incorporation: has it been incorporated into the contract e.g. reasonable notice
Construction: does it cover the alleged breaches?
Statutory controls: UCTA / CRA
What is the general rule about exemption clauses?
They are construed contra proferentem; meaning that they are construed against the party that is seeking to rely upon them.
When is the contra proferentem rule applied with less rigour?
When the party is seeking to limit, as opposed to exclude liability
or in a commercial contract between parties of equal bargaining power.
What should a party do if seeking to exclude liability from its own negligence?
Use the clearest possible words and use the word ‘negligence’.
What are the Canada Steamship rules?
The effectiveness of a negligence exclusion causes depends on whether the only basis for liability is negligence; or if a party is liable irrespective of negligence. If the only basis of liability is negligence - an exclusion clause likely to be effective.
How have the courts’ approach to exemption clauses changes?
More commercial approach; contra proferentem now has a very limited role in relation to commercial contracts negotiated between parties of equal bargaining power.
Can a third party benefit from an exemption clause?
No
What kind of contracts does UCTA govern?
Business - business “both in the course of business”
“occupation of premises used for business purposes”
What course of business does the CRA govern?
Business - consumer
What regime applies if neither party is acting in the course of business?
None
Can you exempt liability for death or personal injury resulting from negligence?
No - any attempt to do so will be void - S2(1) UCTA
Can you exempt liability for loss or damage resulting from negligence?
Yes, to the extent that it is reasonable - S2(2) UCTA
Can you exempt liability for breach of S13-15 SGSA (description or sample, quality, fitness for a particular purpose)
Yes, to the extent that it is reasonable
Is an exemption of liability in a company’s standard terms valid?
Valid if reasonable
If a term limiting liability is in a negotiated agreement, as opposed to standard terms, does UCTA apply?
No
What does UCTA prevent re contractual performance?
Any clause which renders contractual performance substantially different from what was reasonably expected
Or, to render no performance at all
How is ‘reasonableness’ considered for the purposes of UCTA?
Term must be a “fair and reasonable one to have been included regarding the circumstances which were, or ought reasonably to have been known to, or in the contemplation of the parties when the contract was made”
Judged at the time the contract is made
How does UCTA understand the ‘fair and reasonable’?
Strength of bargaining positions
Any inducements to agree to the term
Did the customer know of the existence and the extent of the term? have they had any previous course of dealings?
Is compliance practicable?
Are goods manufactured to special order of the customer?
Can a trader exclude liability for death / personal injury resulting from negligence?
No
How is negligence defined under the CRA?
Any obligation to take reasonable care / skill
Any common law duty to take reasonable care / skill
Common duty of care imposed by OLA 1957
Tort of negligence
Are attempts to exclude the implied terms that a) goods are a satisfactory quality b) goods need to be fit for purpose c) goods should be as described binding?
No
Can you exempt liability for digital content being quality, fit for purpose and as described?
No
Is any attempt to entirely exclude the requirement that a service is performed with reasonable care and skill valid?
No
To what extent can you limit liability for services being performed with reasonable care and skill?
Restricted to the point that it would prevent the consumer from recovering the price paid ; meaning that the consumer can always get back the money that they have paid.
What general rule does the CRA hold re unfair terms?
Any term in a consumer contract that is unfair will not be binding
When will the court not assess these terms?
When they are transparent and prominent
How does the CRA define an unfair term?
If, contrary to the requirement of good faith, it causes a significant imbalance in the parties rights and obligations to the detriment of the consumer.
What ‘loophole’ mechanisms does the CRA prevent?
Secondary / parallel contracts
Onerous conditions e.g. evidence / court procedures
