incorporation of terms Flashcards
exclusion and limitations clauses
contract terms are considered what
to be unfair to one of the parties that the law will intervene to prevent an injustice. this often happen in relation to exemption clauses
what is the limitation clause
this is a clause which specifies that liability for breach will be limited to a certain amount in damages.
what is an exclusion clause
this is a clause which seeks to exclude all liability for certain breaches on contract.
When looking at an exemption clause you need to approach it in the following order.
1 is the clause effective at common law
if yes
2 are there statutory provisions which reduce the effectiveness of the clauses
what is the first way courts will regulate exemption clauses
1 they will ask whether the clause has been incorporated into the contract. It is up to the party relying on clauses to prove that it was.
what is the second way courts will regulate exemption clauses
2 if the clause has been incorporated, they will ask whether the words cover the breach that has been alleged
how can terms be incorporated
by signature
by reasonable notice
by course of previous dealing
third parties to the contract
statutory controls
what is meant by incorporation by signature
When a party has signed a written agreement then they are bound by that agreement even if they have not read or understood its terms.
what is the expectation of incorporation by signature
to this where the person seeking to rely on the clause, misled the other party about the meaning of the clause
case link to by signature
L’Estrange v Graucob 1934 COA
facts of L’Estrange v Graucob 1934 COA
C purchased a cig vending machine for use in her cafe. She signed an order form which stated in small print ‘any express or implied, condition, statement of warranty, statutory or other wider is expressly excluded’. The vending aching did not work and the claimant sought to reject it under the sale of goods act for not being of merchantable quality.
held for L’Estrange v Graucob 1934 COA
in signing the order form she was bound by all the terms contained in the form irrespective of whether she had read the form or not. Consequently her claim was unsuccessful
facts of Curtis v chemical cleaning 1951 COA
C took her wedding dress to the cleaners. She was asked to sign a form. She asked the assistant what she was signing and the assailant told her that it excluded liability for any damage to the beads. The form in fact contained a clause excluding all liability for any damages howsoever cause the dress was returned badly stained.
held for Curtis v chemical cleaning 1951 COA
the assistant had misrepresented the effect of the clause and therefore could not rely on the clause in the form even though the claimant had signed it.
what is meant by incorporation by reasonable notice
If separate written terms are presented at the time a contract is made then those terms only become part of the contract if the person suffering the exemption clause has reasonable expectations of them
what will courts need to look for with reasonable notice before separation
Was the notice brought to the attention of the party at the time the contract was made?
Was the notice given in the document which a reasonable erosion would expect to contain contractual?
Is the term that I particularly unusual or onerous?
case link to incorporation by reasonable notice
Olley v Marlborough court hotel 1949
facts of Olley v Marlborough court hotel 1949
C booked into a hotel. The contract was made at the reception desk where there was no mention of an exclusion clause. In the hotel room on the back of the door a notice sought to exclude liability of the hotel proprietors for any lost, stolen or damaged property. C had her fur coat stolen
held for Olley v Marlborough court hotel 1949
notice was ineffective. The contract had already been made by the time C had seen the notice. It did not therefore form the contract.
what is meant by incorporation by course of previous dealing
If the parties have previously made contracts between them and those contracts included an exemption clause, the clause may also apply to the subsequent agreement even if the usual steps to incorporate it have not been taken. MUST be consistent course
case link by course of previous dealing
Hollier v rambler motors 1972
facts of Hollier v rambler motors 1972
C had used the services of D garage on 3-4 occasions over a five year period. Each time he had been asked to sign a doc excluding liability for any damage. On this occasion the contract was made over the phone and no reference to the exclusion clause was made. The garage damaged the car during the repair work and sought to invoke the exclusion clause through previous dealings.
held for Hollier v rambler motors 1972
there was not a sufficient number or regularity of transaction to amount to a previous course of dealings capable of incorporating the exclusion clause. It was not reasonable to accept the claimant to remember the clause from one transaction to the next. Consequently the garage was liable to pay for the damage
what is third parties of the contract
The doctrine of privity of contract means that a third party may not be able to rely on an exclusion
case link for third parties to the contract
Scruttons v midland silicones 1962
facts of Scruttons v midland silicones 1962
Rs were consignees of a bill of lading. The cargo was a drum of chemicals. The contract limited the carrier’s liability to £179 per package in the event of loss, damage or delay. The appellants were the stevedores responsible for unloading the cargo from the vessel. Their contract with the carrier specified that they should have ‘such protection as is afforded by the terms, conditions and exceptions of the bills of lading’. During the unloading process, they negligently dropped and damaged her drum, losing £593 worth of chemicals. Rs sued the appellants in tort for the loss. Appellants accepted liability for negligence
held for Scruttons v midland silicones 1962
HOL held in favour of the Rs. on facts the carrier has not acted as the appellants’ agents when making the carriage contract. Therefore, there was no privity between the appellants and respondents
what happens if the clauses are ambiguous
they will be interpreted in a way less favourable to the party relying on them (contra proferentem). This approach was taken in Hollier v Rambler motors
where is statutory controls applied
This applied to most non-consumer contracts, DOES NOT apply to consumer contracts as they are covered by CRA 2015.
what act links to statutory controls
the unfair contract terms act 1977
what clauses which are effective in non-consumer contracts
s2(1) a person cannot exclude liability for death or personal injury caused by negligence
s6(1) a person cannot exclude liability for breach of implied condition as to title in s12 SOGA 1977
in s2(2)/ A clause what is stated with subject to a requirement of reasonableness in non-consumer contracts
a person cannot exclude or restrict their liability for negligence which does not cause death or resonance injury unless it is reasonable
what is stated the B clause -subject to a requirement of reasonableness in non-consumer contracts
a person cannot liability for breach of s13, 14 or 15 of SOGA 1979 unless it is reasonable
what is stated the C clause -subject to a requirement of reasonableness in non-consumer contracts
where one party is dealing on the other parties standard terms of business then any clause which tries to exclude or restrict liability for non-performance which is substantially different to what was agreed, will not be valid unless reasonable
what is stated in s.11(5)
The party who relies on the clause must prove that it is reasonable
case link to The party who relies on the clause must prove that it is reasonable-s.11(5)
warren v truprint 1986
what is the clause warren v truprint 1986
a clause saying that photographic company only had to give a replacement film if it failed to develop and print photos was unreasonable when it lost a couple’s wedding photographs
what are the three reasonableness tests
knowledge test
exclusion clauses which involve breach of implied conditions.
where the clause is a limitation clause the court will consider
what the knowledge test
is the term reasonable in the light of what the parties knew when the contract was made
case link to knowledge test
smith v Eric S bush 1980
facts of smith v Eric S bush 1980
C obtained a mortgage with a bank for the purpose of purchasing a property
The bank commissioned a report from D surveyor, C paid the bank for the cost of the report
The report led to C purchasing a house which was later found to need expensive repair owing to subsidence.
held smith v Eric S bush 1980.
D was liable to C in negligence
The exclusion of liability clause was found to be void for unreasonableness pursuant to s11 Unfair Contract Terms Act 1977
what will courts look at for exclusion clauses which involve breaches of implied conditions of sale of goods act 1979 and supply of goods and service
relative bargaining
did the customer receive an inducement to agree to the term.
did customer know the term existed and excluded.
were the goods a special order for the customer.
was it reasonable to expect that the conditions that the exemption clause relates to could be complied
facts and clauses of Watford electronics v Sandersons CFL Ltd 2001
two businesses contracted on the D’s standard terms. a negotiated by experienced businessmen of equal bargaining power
case link to exclusion clauses which involve breaches of implied conditions of sale of goods act 1979 and supply of goods and service
Watford electronics v Sandersons CFL Ltd 2001
what are the two parts to CRA 2015 and exclusion clauses
A). The resource which the D could expect to be available for meeting his liability if it should arise
B) How fair it was practicable to take out insurance against the liability
what section in under bars on exclusion clauses
s.31
what is sated in s.31 - bars on exclusion clauses
provides that some exclusion clauses are barred altogether in consumer contracts for the sale of goods. If these terms are present in a contract then they will not be effective.
what does s.65 of CRA 2015
provides that liability for death or PI resulting from negligence cannot be excluded in consumer contracts
what section links to fairness of terms
s.65
what is s.65 fairness of terms
provides that terms and notices in consumer contracts must be fair. If they are unfair then they are not binding on the consumer
what happens if a term is unfair
if ‘contrary to the requirement of good faith, it causes a significant imbalance in the parties’ right and obligation to the detriment of the consumer’
what does good faith mean with fairness of terms
means ‘fair and open dealing’ so that the trader should express terms clearly and legibly so that there are no unexpected traps. The trader should also not seek to take advantage of the consumer’s lower bargaining power or their inexperience or lack of knowledge
what is meant by regulation CRA
There are various statutory provisions which prevent the effect of certain exclusion clauses. This section will examine and analyse two of the most relevant pieces of legislation.
the consumer rights act 2015
what is the unfair contract terms act 1977
UCTA is a piece of legislation which prevents the exclusion of liability in certain circumstances. It applies both to exclusions of contractual and tortious liability in contracts relating to (mostly) things done or to be done in the context of business liability.
under s.1 UCTA how is business liability defined
as arising in things done or to be done in the ‘course of business’. Business is defined loosely in section 14 of include the normal meaning of commercial activity, but also that it includes professions, governments and local/public authorities
what is dealing as a consumer if laibility will arise towards other business
Parties who deal as a consumer will not be subject to some the restrictions in UCTA
facts of R&B custom brokers Co ltd v United Dominions trust ltd 1998
a shipping company purchased a car for the company’s director use. When the car developed some issues, the shipping company sued for breach of contract. The question was asked of whether the shipping company was dealing in the course of business, or as a consumer when they purchased the car. As the car purchase was not an integral part of the shipping business, the court held they were acting as a consumer.
held for R&B custom brokers Co ltd v United Dominions trust ltd 1998
Therefore, the test to apply is whether or not the contract forms an integral part if the business; if not, they will be dealing as a consumer
what in s.2 what impacts the validity of exclusion clauses
negligence liability -under s2(1) cannot exclude liability fir death or personal injury caused by negligence
what in s.3 what impacts the validity of exclusion clauses
contractual liability- this section imposes a reasonableness test where one party is bound by the others standard written terms of business.
what the outcome of smith v eric S bush 1990
the court held that the exemption clause was unreasonable for the purpose of the unfair contract terms act 1977. It was of particular note that this was a low value property to be used as dwelling that it was common practice for purchasers to rely on valuations in making such decisions
what is s.6 with implied terms
implied terms in contracts for the sale of goods and hire purchase.
-the implied condition as to title and the description etc.. under sale of goods act 1979 and the supply of goods and services act 1982- cannot be excluded
what is the s.11 the reasonable test
as whether or not the term is a fair and reconcile one to have included in the contract, in light of all circumstances known at the time of contracting. Therefore, any info that was discovered following the making of the contract would be irrelevant.
what is stated under s.11(5)
rules that the burden of proving this reasonableness relies on the party attempting to use the excluding clause.
what factors to assess reasonableness are as follows
Factors identified by legislation
Factors identified by courts
what does s.11(2) direct
s to schedule 2 of UCTA some guidelines which will be considered when assessing what is reasonable
what are the guidelines for s.11(2) of UCTA
1)barraging positions of the parties
2)was agreement to the exemption clause as a result of inducement
3)could any condition for the enforcement of liability be complied with?
4)Were the goods made specifically at the request of the buyer?
5)Was the contracting party actually aware of the existence and extent of the term, irrespective of any rules of incorporation such as notice or signature
what are the criteria s.11(4)- limitation clauses
1)The resources the defendant could expect to be available for meeting their liability
2) How far it was open to the defendant to cover themselves by insurance against any successful claim
held for George mitchell Ltd v Finney lock seeds Ltd 1983
held that the exclusion did extend to the seeds sold to and used by C and that to claim other wide would tortoise the language of the contract. However, it was also observed that on the facts this was an unfair term which could be struck down by the UCTA.
what was the issues for the case George mitchell Ltd v Finney lock seeds Ltd 1983
whether the excluding clause could extend to the seeds used by the C, bearing in mind that they were unfit to do the job they were sold to do and secondly, whether extending the effect of the exclusion clause in this way would be reasonable under s.2(2) of UCTA 1977.
