SQE2 Contract Exclusion Clauses

Question 1

What are the requirements for exclusion clauses to be valid?

Answer 1

1. Must be incorporated
   - signature
   - notice
   - custom/previous dealing
2. Must be construed
   - wording must cover loss suffered
3. Must not be prohibited
   - death or PI caused by negligence
   - title to goods sold
   - some may be subject to UCTA

Question 2

When is an exclusion clause incorporated by signature and when not?

Answer 2

1. Typically conclusive

Defences

2. Misrepresentation
   - induced by other party stating there is no exclusion clause
3. Non Est Factum
   - party has no understanding of document they have signed
   - there is fundamental difference between what they signed and what they thought they had signed
   - had special difficulty understanding and
   - it was not properly explained
   - burdon on party seeking to rely on defence

Question 3

How is an exclusion clause incorporated by notice?

Answer 3

1. Reasonable steps to bring it to attention
   - more onerous more notice is required
2. Before/Whilst contract was being formed
3. Included in documents intended to have contractual effect
   - eg. ticket but NOT receipt

Question 4

How can an exclusion clause be incorporated by custom or previous dealing?

Answer 4

1. Industry custom may be enough to incorporate term
2. Party attempting to rely on previous dealing must show regular and consistent course of dealing
   - at least more than 4 deals over 5 year period

Question 5

How must an exclusion clause be constructed?

Answer 5

• Wording must be clear and unambiguous and cover the loss suffered
• Any ambiguity will be interpreted against the party seeking to rely on exclusion clause (Contra Proferentem Rule)

Question 6

What exclusion clauses are prohibited by UCTA?

Answer 6

Unfair Contracts Terms Act 1977

Prohibited
1. Exclusion or Limitation for death or personal injury caused by negligence

2. Exclusion or Limitation for breach of implied condition as to title under Sale of Goods Act 1979

Subject to Reasonable Test
- most others
- including one parties standard terms to restrict liability for breach, render contractual performance completely or substantially different

Question 7

What exclusion clauses are prohibited or restricted for consumer contracts?

Answer 7

Consumer Rights Act 2015

Excluded
1. limiting or excluding any CRA implied term

Void if found unfair
- term not transparent (plain, intelligible and legible); or
- contrary to good faith and creates significant implant against consumer
- NOT price or main subject matter unless not transparent and prominent

Question 8

Reasonable test under UCTA

Answer 8

Unfair Contracts Terms Act 1977

term is:
- fair and reasonable one to be included
- having regard to the circumstances which were, or ought reasonably to have been, known to or in contemplation of the parties
- when the contract was made

Question 9

What might courts consider if deciding if term is reasonable under UCTA?

Answer 9

• the strength of bargaining position of parties
• if there was any inducement received by customer to agree to term in question, or if customer has the opportunity to enter into similar contract but without having to accept similar term
• if customer knew or ought to have reasonably known about the existence and extent of their term in question (custom, course of dealing etc.)
• (if term excludes or restricts liability if condition was not complied with) was it reasonable that compliance with such a condition was practicable
• If goods were manufactured or adapted to the special order of the customer (more reasonable)