Exemption Clauses

Question 1

define an exclusion clause

Answer 1

a clause in a contract or a term in a notice which appears to exclude or restrict a liability or a legal duty which would otherwise arise

Question 2

What is an exclusion clause?

Answer 2

Where one party seeks to exclude their liability for loss caused in a certain way

Question 3

What is a limitation clause?

Answer 3

Where a party to a contract seeks to limit the amount of compensation that they would have to pay for loss or damage caused by a breach of the contract.

Question 4

Give an example of an exclusion clause

Answer 4

Cars are parked here at the owners risk

Question 5

Give an example of a limitation clause

Answer 5

in the event of any loss or damage caused by our employees, the company shall be liable to pay no more than £100 by way of compensation

Question 6

How are exclusion clauses incorporated into a contract?

Answer 6

Just like any other terms:
course of dealings
signature
notice

Question 7

What does ‘construing terms’ mean?

Answer 7

Interpreting terms

Question 8

What are the two methods of interpreting exemption clauses created by the courts?

Answer 8

The contra proferentem rule

the canada steamship rule

Question 9

What is the main principle of the contra proferentem rule?

Answer 9

that any ambiguity in an exemption clause should be construed against the person who is seeking to rely on it.

Question 10

Give the facts of Houghton v Trafalgar insurance

Answer 10

A clause in an insurance contract ecluded liability for damage cause or arising while the car was carrying a load in excess of the load for which it was constructed. here, the car was built to carry 5 people but there were 6 in the car.

Question 11

Give the decision of the court in Houghton v Trafalgar Insurance

Answer 11

the court here said the exemption clause had no effect here because it related to the weight the car could carry not the number of passengers.

Question 12

Give the facts of Beck + Co v Syzmanowski

Answer 12

They contracted on the sale of cotton. the buyer said if the goods delivered had any defects then the buyer had to give notice within 14 days of their arrival or the goods would be deemed to be in accordance with the contract. around 18 months after buying, C discovered the length of cotton on each reel was 200 yards shorter than the length agreed.

Question 13

Give the decision in Beck v Syzmanowski

Answer 13

The court held the exemption clause was no effective because it related only to goods delivered and the claim related to goods that had not been delivered.

Question 14

What has the house of lords warned against?

Answer 14

Straining the meaning of exemption clauses

Question 15

What did the court say in Photo Production v Securicor

Answer 15

Before an exclusion clause can be defeated using the contra proferentem rule the clause must actually be capable of more than one meaning (i.e. be ambiguous)

Question 16

What is the relationship between the intention of the parties and the contra proferentem rule?

Answer 16

contra prof will not apply where you can fairly determine what the parties’ intended the clause to mean when you read the clause in the context of the whole contract.

Question 17

When is the common law not especially willing to give effect to an exemption clause?

Answer 17

When it aims to exclude a party’s liability for negligence

Question 18

What is the presumption in the canada steamship rule?

Answer 18

That parties would not generally wish to limit their right to make a claim for losses that they suffer as a result of the negligence of another party.

Question 19

what has to be very clear when a party intends to exempt themselves from liability from negligence?

Answer 19

That the parties intended that liability for negligence was also to be excluded by the exemption clause.

Question 20

Does an exemption clause have to pass all three tests set out in canada steamship?

Answer 20

No, if they fail they first one it passes to the second one and if it passes the second it passes to the third one.

Question 21

What is the first test set out by canada steamship?

Answer 21

Does the exemption clause expressly exclude liability for negligence?

Question 22

What happens if the exemption clause does expressly exclude liability for negligence?

Answer 22

it will be given effect

Question 23

Give an example of an exemption clause that would satisfy the first CS test

Answer 23

a clause that purported to exclude ‘loss caused by our negligence’

Question 24

Give an example of an exemption clause that would not satisfy the first CS test

Answer 24

a clause that purported to exclude all losses.

Question 25

What is the second test in the CS rule?

Answer 25

Is the exemption clause worded widely enough to cover negligence?

Question 26

What happens if a clause is worded widely enough to exclude negligence?

Answer 26

then that clause will take effect to exclude liability for negligence

Question 27

Give an example of a term that would be worded wide enough to exclude liability for negligence

Answer 27

any exclusion clauses relating to ‘any damage whatsoever’ or ‘any act or omission’

Question 28

What if there is doubt about whether the wording is wide enough to exclude liability for negligence?

Answer 28

The court should apply the contra proferentem rule and it should not be interpreted as excluding negligence

Question 29

If a exclusion clause passes the second test what happens?

Answer 29

It moves on to the third test

Question 30

What does the third test in the CS rule ask?

Answer 30

Could the exemption clause cover some liability other than negligence?

Question 31

Give the facts of Canada Steamship

Answer 31

the crown owned a shed canada steamship used to store boats. they burned it down negligently while carrying out maintenance. they said they weren’t liable because they excluded their liability in a very broad exemption clause.

Question 32

Give the decision of the court in canada steamship

Answer 32

the phrasing of the clause was too ambiguous so the contra prof rule was used to twist it against them

Question 33

Why have the contra proferentem and canada steamship rules become less significant in recent years?

Answer 33

Because of the control Parliament has chosen to exercise over exclusion clauses

Question 34

What are the two main Acts of Parliament we focus on?

Answer 34

Unfair Contract Terms Act (UCTA) 1977

Consumer Rights Act 2015

Question 35

Does UCTA apply to all contracts?

Answer 35

No, there are some excluded contracts

Question 36

Give two examples of contracts UCTA does not apply to

Answer 36

insurance contracts and contracts for the transfer of land.

Question 37

When does UCTA apply?

Answer 37

where there is business liability

Question 38

when does UCTA not apply in terms of parties?

Answer 38

where the contract is between two consumers.

Question 39

What does s2 of UCTA deal with?

Answer 39

exclusion of liability for negligence

Question 40

What does s3 of UCTA deal with?

Answer 40

the exclusion of liability for breach of contract

Question 41

what does s6 and 7 UCTA deal with?

Answer 41

The exclusion of liability for breaching obligations arising under a sale of goods contract.

Question 42

how does s1 UCTA define negligence?

Answer 42

the breach of 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.

Question 43

is the exemption of negligence liability for death or personal injury effective?

Answer 43

No, it will be ineffective

Question 44

is the exemption of negligence liability causing other loss or damage effective?

Answer 44

yes subject to the requirement of reasonableness