U4. Exemption Clauses and Unfair Terms Flashcards
What is an Unfair Term?
Are they usually enforcable.
Unfair terms are those that cause a significant imbalance in the parties rights and obligations.
They are normaly unenforceable, or only enforcable to the extened they are reasonable.
What is an exemption clause?
An exemption clause limits the amount of liability, or the time frame someone is liable for.
What are the 3 grounds that have to be met for an Unfair Term to be ENFORCEABLE?
- They have been incorporated into the contract
- The Wording In the clause covers the claim
- They are not rendered unenforceable by statute or common law.
What are the 4 ways an unfair term can be incorporated into a contract?
- Signature
- Reasonable Notice
- Consistent Course of Dealing
- Common Knowledge
What is the general rule when someone signs a contract?
What are the 3 exceptions
They are bound by the contract, even if they have not read it.
There are only three exceptions:
- Fraud/misrepresentation
- It is not my deed ‘ Non Est Factum’
- Non Contractual Docuement
Give me a case example of fraud / misrepresentation stoping a exemption clause being incorporated by signature.
Curtis v Chemical Cleaning
There was an exemption clause stating the dry cleaners are not liable for any damage.
The lady getting her dress cleaned was asked about this, and was told it only applies to beads and sequins. The lady signed the receipt.
The item was damaged - The exemption clause was not validly incorporated as she signed on the basis of a misrepresentation.
What is ‘Non Est Factum / it is not my deed? Whats its affect?
Whats the 2 conditions.
Normally, exemption clauses will be valid if they are incorporated into the contract by signature (and there is no statute / common law conflicting)
However, even if the document is signed, exemption clauses will not be valid if this principle applies.
The 2 (very stict) conditions are:
- The document signed WAS SUBSTANTIALLY DIFFRENT from what was believed
- THROUGH NO FAULT OF THEIR OWN, the person who signed didnt understand the document.
Give a case example of the Non Est Factum / it is not my deed principle
Saunders v Anglia Building Society
The lady thought she was signing her property over to her nephew Todd, but she wasn’t wearing her glasses and actually the document was transfering the property to ben
Held - Was legal, 1 - the document was not very substantially different as it was still to transfer her property.
2- It was her fault she did not get her glasses
2 VERY STRICT conditions:
- What was signed was very substantially different as compared to what they thought they was signing.
- Through no fault of his own, the person who signed the document did not understand it.
What is the concept of reasonable notice in contract law and what is its affect?
What are the 3 conditions for giving reasonable notice?
Terms not included within the contract can be incorporated if reasonable notice is given to the party.
For example, a train ticket containing terms given after purcahse.
There are 3 conditions - TRC
- Timley notice is given (before or at the time of the contract being made)
- Reasonable steps are taken to give notice
- Contractual Effect
When must notice be given by of a exemption clause not included in the contract to be incoported?
Give a case example
To form part of the contract by reasonable notice, the notice must be given within a timley manner which is BEFORE, or AT THE TIME of entering into the contract.
Olley v Marlborough Court
Facts - A couple paid for their room at reception. When they went to their room, there was an exemption clause notice sign on the back of the door, stating the hotel was not liable for any theft.
Held - This clause was not incorpoated into the contract because Reasonable notice was not given in a timley manner. It was comunicated to them after the contract had been made.
What is ‘reasonable steps’ for usual and unusual terms to be incorporated into a contract if they are not part of the contract?
Terms contained in additional documents can be incorporated into the contract if reasonable notice is given. there are 3 conditions. One is Reasonable steps are taken.
Reasonable steps would have been taken for usual terms if the term is contained on the front of the additional document, or the front of the document gives notice to where the other term is. For example, the term is on the front of a train ticket, or there is notice on the front there is a term on the back.
For unusal terms (one which impose a higher cost of burder than usual) will only have reaonable notice if ADDITIONAL MESSURES have been taken, such as using red ink, being in bold, large print, or within a box. Known as the red hand rule.
To incoporate a term not found in the contract, reasonable notice must be given.
One of the three grounds for reasonable notice is that the term is in a contractual document.
What is the contractual document rule?
Give a case example.
Chapeltown v Barry Urban
Facts - A women read a sign offering deck chairs for hire at £2, instructing the women to get a ticket from the officer and to keep the ticket avalible for inspection. She paid the £2, and kept the ticket in her pocket.
The deck chair folded while she was sitting on it, causing injury. The ticket stated ‘No liability for injury from use of deck chair.’
Held - Exemption clause was not inspirated because the ticken given was a receipt for money paid, and not a contractual document.
What is the principle allowing a term to be incorporated into a contract by course of consistent dealing?
Give a case example.
If parties CONSISTENTLY work together on specific terms, such terms may be incorporated into a contract, even if it was not within the actual contract.
The key here is that on all previous dealings, that term has applied.
McCutcheon v David MacBrayne
Facts - A customer often shipped his cars with a ferry company. Sometimes the ferry company would make him sign terms and condition stating it did not accept liability.
Once, the boat sank and the car was damaged.
Held - The exemption clause was not valid because the term was not consistent. Sometimes he signed the waiver, sometimes he did not. However, it would have been valid if he always signed the waiver apart from on that one occasiaon.
What is the principle of Common Knowledge / Awarness of Industry practice when incorporating terms into a contract?
Terms may be incoporated into a contract, even if not in the contract if:
- BOTH parties are in the EXACT same industry
- that industry ALWAYS operates on those terms
What is the Contra Proferentem Rule?
Give case example.
Exemption clauses must specifically cover the issue in dispute.
If the meaning of an exemption clause is ambiguous, the courts will interpret it in a way less favourable to the party seeking to rely on it.
Case Example - Houghton v Trafalgar
Facts - Insurance contract said not liable if vehicle damages while the car is ‘conveying a load in excess for what it was designed for’
The women crashed with 6 people in the car, not 5.
Held - It was unclear if the term referred to the overweight the car could hold, or the amount of people.
As it was ambiguous, the Contra Proferentem Rule applied, and the exemption clause was not valid.
