Contract 4: Exclusion Clauses Flashcards
What are the requirements for an exclusion clause to be effective?
- Must be incorporated
- signature
- notice
- custom/previous dealing - Must be construed
- wording must cover loss suffered - Must not be prohibited
- death or PI caused by negligence
- title to goods sold
- some may be subject to UCTA
How can an exclusion clause be incorporated (general)?
- by signature
- by notice
- through custom or previous dealing
When is an exclusion clause incorporated by signature and when not?
- Party that signs a contract is bound by it
- Does not matter if they did not read or undersant it
Defences
- Misrepresentation
- Party is induced by oral misrepresentation that overrides the written contractual term - eg says there is no exclusion clause when he knows there is
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
How is an exclusion clause incorporated by notice?
Notice before contract was concluded
- Party seeking to relay on it must have taken reasonable steps to bring it to the attention of the other party
- The more onerous the clause the more notice is required
Document Requirement
- Clause must have been incorporated or referred to in document intended to have contractual effect (ticket not receipt)
- so doc should be before or when contract is made
- if on back likely has to be given notice to read back (on front or by person)
How can an exclusion clause be incorporated by custom or previous dealing?
- Industry custom may be enough to incorporate term
- 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)
How must an exclusion clause be constructed?
- 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)
What exclusion clauses are automatically void under UCTA?
Applies only to b2b contracts
- For death or personal injury caused by negligence
- For breach of implied condition as to title under Sale of Goods Act
What exclusion clauses are subject to UCTA reasonable test?
Only b2b contracts
Any clause that excludes liability:
- For loss (other than death) caused by negligence
- For breach of obligations as to compliance with description, quality or fitness for purpose
If one party contracts on its standard form terms and conditions, any clause:
- That excludes or restricts liability for breach of contract
- reserves the right to renter contractual performance substantially different from what was expected
- to render no contractual performance at all
What is the difference if a party tries to limit liability rather than exclude it?
More likely to be found reasonable
What is the reasonableness test under UCTA?
Requires that 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
What might courts consider if deciding if term is reasonable under UCTA?
- 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)
Who has the burden of proof in regard to the reasonableness of a term under UCTA?
- Party seeking to rely on clause must prove that it is reasonable
Remember test is if it was reasonable to include clauses in contract
What does UCTA and CRA govern in relation to exclusion clauses?
UCTA
- b2b contracts
CRA
- contracts between traders (business) and consumers
What are prohibited exclusions clauses under CRA?
Cannot exclude or limit implied term
- to title of goods
- compliance with description
- quality or fitness for purpose
- that services are carried out with reasonable care and skill
- services are carried out are carried out in reasonable time (if not agreed)
Cannot exclude
- liability for death or personal injury due to negligence
When is a term ‘unfair’ under CRA?
- is not related to main subject matter or price of contract
- is not transparent (eg in plain and intelligible language and legible)
- if it is contrary to good faith or causes significant imbalance in parties rights and obligations to detriment of consumer
