Lecture 12-Exclusion Clauses Flashcards
Exclusion Clauses
Exclusion (or exemption) clauses are those clauses in which one of the parties to a contract attempts to exclude liability for breach of contract (or perhaps for the breach of a tortious obligation)
Limitation Clauses
A ‘limitation’ clause is when one party to a contract merely places a limit on her legal liability:
for example a limitation clause could state that in the event of an injury, the company will pay up to £500 in damages.
Dealing with clauses
(i) is there a clause that purports to restrict/exclude liability for the loss suffered?
(ii) has the clause been properly incorporated into the contract? i.e. is the clause actually part of the contract
(iii) what are the relevant common law rules of construction to determine its effect?
(iv) does statute have any impact on the clause’s effectiveness?
Common law rules of construction
What does the clause mean?
Interpretation of contractual terms applies and also
1.The contra proferentem rule
2.The rules in Canada Steamships
Contra Proferetem Rule
Wallis & Wells v Pratt & Haynes [1911]
Construing exclusion clauses narrowly
The clause will be interpreted against the person relying on it (in favour of the C)
Contra Proferetem Case Authority
Hollier v Rambler Motors [1972]
Focus on ambiguity and broadness
Modern Approach
More recent cases would indicate a more liberal approach to the interpretation of exclusion clauses
The Investors principles give the courts flexibility in interpretation
There is already a lot of legislation that protects the consumer-there is a minimal requirement for the courts to protect weaker parties to such an extent.
Contra Proferetem Requirement
It is only where the parties’ objective intention cannot be ascertained from the clause’s words read in the context of the document as a whole, and the surrounding matrix of fact, that the contra proferentem rule will apply. In all other cases, the courts should read the exclusion clause like any other clause.18
Excluding Liability for Negligence
Particular rules of construction are applied to exclusion clauses which purport to exclude liability for negligence (failing to exercise duty of care). These rules originate from the case of:
Canada Steamship Lines Ltd v R [1952]
Rule 1
Express reference
Is there express reference to negligence?
If YES, effect must be given to the exclusion of liability arising out of negligence.
Contracts can be drafted using a synonym of negligence e.g. “any act, omission, neglect or default” – but safest to use the word negligence)
If this first rule is not satisfied, the courts will proceed to the second and third rules – the second and third rules constitute a double hurdle – both must be overcome in order for a term to be construed as excluding liability for negligence
Rule 2
Wide enough
If there is not express reference to negligence, are the words wide enough to cover liability for negligence in their ordinary meaning?
If not, or if there is any doubt, the clause must be construed in favour of the party not in breach.
Examples of clauses that are wide enough to cover negligence include “any act or omission” or “any damage whatsoever”
Rule 3
If the words are wide enough to cover negligence (as per rule 2 above), could the words also be interpreted to cover loss arising from some other form of liability?
If they can, and that other interpretation is not too fanciful or remote, the words should be taken to refer only to the non-negligent cause of loss.
Legislative Framework
1.Unfair Contract Terms Act 1977- applies to contracts concluded by parties acting in the course of a business (i.e. business liability)
2.Consumer Rights Act 2015 – applies to contracts between a ‘trader’ and a ‘consumer’
UCTA and Business Liability
Business Liability, under s 1(3), is liability arising from the breach of a duty that arises from either:
(i) things done or to be done by a person in the course of a business, OR
(ii) the occupation of premises used for the business purposes of the occupier
S1UCTA
Defining Negligence
For the purposes of the Act, section 1 defines negligence as the breach:
“of any obligation, arising from express or implied terms of a contract, to take reasonable care or exercise reasonable skill in the performance of the contract”,
OR
“of any common law duty to take reasonable care or exercise reasonable skill (but not any stricter duty)”.