Terms/exclusion Clauses Flashcards
How is an exclusion clause incorporated R7
An exclusion clause is a specific kind of term so the usual rules on incorporation apply. If the term is not included in the contract it won’t have any effect.
In Thornton V Shoe Lane Parking, the contract was made when the driver entered the car park. In the car park there was a sign with an exclusion clause, this was ineffective to protect the car park owners as it was too late to incorporate terms into the contract.
What must an exclusion clause be R7
An exclusion clause has to be relevant to the kind of loss that was suffered.
For example in Thornton the term tried to exclude liability for injury to people using the car park. If a customer complained because they had things stolen from their car the exclusion clause would have been irrelevant.
What are the 2 rules for interpretation of exclusion clauses R7
Contra Proferentem (literally means against the person offering it).
S.69 of the Consumer Rights Act says ‘if a term in a consumer contract could have different meanings, the meaning that is most favourable to the consumer is to prevail.’
Negligence
The courts take the approach that it is possible to exclude negligence liability but the wording must be clear and not so wide that the term excludes other kinds of liability as well.
Case that shows Contra Proferentem R7
Andrews Bros (Bournemouth) V Singer
A garage contracted with a car maker to buy new Singer cars.
An exclusion clause in the contract excluded ‘all implied terms, whether by statute, common law or otherwise.’ One of the cars turned out to be used and the buyer sued.
The exclusion clause didn’t help the sellers because the term ‘new singer’ was an express term and the exclusion clause didn’t cover this.
Case showing negligence R7
Shell V P&O Roadtanks
One party tried to exclude ‘All claims and demands whatsoever’ but the court said this was too vague and was not an effective exclusion clause.
In order to exclude liability for negligence they should have said ‘we exclude liability for any damages caused by the negligence of the company or its employees.’
Statutory Regulation R7
Even if an exclusion clause is incorporated into the contract and is relevant, it is still regulated by statute.
The main statute is the Consumer Rights Act 2015, this is consolidating act which bought together previous statutes which dealt with exclusion clauses.
But this only deals with consumer contracts, for non-consumer contracts the Unfair Contract Terms Act 1977 regulates exclusion clauses.
What must you do in a scenario question R7
You need to go through each stage: incorporation, interpretation and statutory regulation.
Statutory Regulation by the CRA 2015 R7
This makes some terms unenforceable - S.65 and S.31.
It also makes some terms only enforceable if they are fair S.62.
Which terms are unenforceable R7
S.65 of the CRA - A trader cannot by a term of a consumer contract exclude or restrict liability for death or personal injury resulting from negligence.
For example a fast food chain puts a sign on its coffee cups excluding liability for any injury caused to customers. A cup breaks in the consumers hand and they are scalded with very hot coffee. The exclusion clause won’t protect the fast food chain because S.65 doesn’t allow this kind of exclusion clause.
Excluding the implied terms R7
S.31 CRA A term of a contract to supply goods is not binding, if it would exclude the trader’s liability arising under any of these provisions:
Section 9 - (goods to be satisfactory quality);
Section 10 (goods to be fit for particular purpose);
Section 11 (goods to be as described);
For example a DIY shop puts up a sign that says they do not accept liability if a tool is unsuitable for a particular job the customer makes known. A customer asks a member of staff whether a saw is suitable for cutting floor boards and they that it is. When they get home they find that the saw won’t cut floor boards.
The exclusion clause won’t protect the DIY shop because S.31 doesn’t allow them to exclude the requirement that goods are fit for purpose.
Terms are only enforceable if they are fair - S.62 any term must be fair. What is fair R7
A term is unfair if:
Contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract and to the detriment of the consumer.
This test requires a judgement to be made. Any term which disadvantages the consumer must be shown to be justified in the circumstances.
For example an internet trader excludes liability for late delivery if the consumer chooses free delivery. This is probably fair because they are giving something back - the free delivery.
A car hire company imposes a £100 an hour fee for late return of hire cars. This is probably not fair because it’s an excessive amount and they are not giving anything back to the hirers.
Limitation of S.62
One big limit on this section is that it doesn’t apply to the price. Eg you can argue that any term of the contract is unfair except for the price itself.
Eg a consumer makes a contract for a new laptop, they also take out an extended guarantee from the shop for £100. They later realise that they could have got the same guarantee from the manufacturers for £40. They cannot use S.62 to argue that the price was unfair.
Case on S.62 R7
Bairstow Eves V Adrian Smith
An estate agent fee was 1.5% of the selling price if a house. The fee was doubled to 3% if they weren’t paid by the seller of the house within 10 days of the sale being complete. In this case the 10-day limit was missed because of the negligence of the seller’s solicitors.
Held the term was unfair and could not be enforced.
Contrary to the requirement of good faith - it couldn’t be justified.
It causes a significant imbalance in the parties’ rights and obligations - it penalised the sellers without imposing any obligations on the estate agents.
To the detriment of the consumer - it was unfair because it was out of the sellers control.
Case on the limitation of S.62 R7
Office of Fair Trading (OFT) V Abbey National
The case cam before the 2015 Act but was about similar rules.
The OFT sued Abbey National because they argued that bank overdraft charges were unfair.
The Supreme Court said they were unable to assess whether the charges were fair because the overdraft charges were the ‘price’ of the contract and so didn’t come under S.62 - even if the charges were unfair they couldn’t be challenged.
Exclusion clauses in non-consumer contracts R7
The Unfair Contract Terms Act 1977 applies to commercial contracts.
Terms excluding liability for death or injury are void.
Terms excluding liability for other negligence are subject to reasonableness.
Terms excluding liability for breach of contract are subject to reasonableness.
Reasonableness includes 1) was the term normal and agreed 2) who should have insurance against the loss.
