Exclusion clauses: Flashcards
(19 cards)
What is an exclusion cause ?
A term in a contract that prevents one party being liable for a breach in the contract i.e. vehicles left at at own risk etc
Go into depth about exclusion clauses:
A company may try to limit liability by attempting to restrict the value of a claim to the purchase price of the goods OR
exclude any claim for a defect to 14 days from the date of contract
Many contracts attempt to exclude the rights of third parties act
they can seem unfair as one party is in a better position than the other
the courts therefore have to come up with ways to limit exclusion causes
e.g. insurance
The whole contract will be considered when interpreting the exclusion clause combined with the reasonable person test
Common law controls on exclusion clauses:
The court will have to consider whether the clause is a term of the contract, they do this by considering three areas.
1) Whether the agreement is signed
2) where any notice with the term in it is incorporated in the contract
3) whether the term is incorporated as a result of the previous dealings
1) Whether the agreement is signed:
If a party has signed a written agreement, it is presumed that they are bound by that agreement.
If the exclusion clause was therefore in that agreement, and you signed it, then it would be included
L’Estrange v Graucob - key case
Whether the agreement is signed
If one parties raises a query regarding the exclusion clause and in response to this, the defendants misrepresents the clause, which induces the claimant to sign the contract, then the term won;t apply.
Agreement is signed
Mrs L’Estrange bought a cigarette vending machine from the defendant for her cafe. She signed a contract including a clause which excluded all implied conditions and warranties; the machine didn’t work properly and L’Estrange relied on the implied term of fit for purpose. However, she couldn’t rely on this because she had signed the contract with the exclusion clause, even though she hadn’t read that part of the contract
Curtis v Chemical Cleaning and Dyeing Co.
Mrs Curtis took her wedding dress to be cleaned and was asking to sign a document that exempted the cleaners from liability for any damage ‘howsoever arising’. Before signing, she asked what exactly she was signing and they stated that it excluded liability just for sequins and beads. When it was returned, it had a large stain on it. They couldn’t rely on the signed exclusion clause because they had verbally misrepresented this
2) Whether any Notice with the Term in it is Incorporated in the Contract by Reasonable Notice
car park
This typically involves unwritten contracts - subjective
Incorporation of the term can only apply if it was brought to the attention before the contract was made
you cannot introduce new terms to a contract after acceptance, unless it allows for variation i.e. phone prices
Olley v Marlborough Court Hotel (1949) - no reasonable notice
Claimants booked into the hotel at reception. A contract was formed at this point. They later went out, leaving their key at reception as they were required to do. Whilst they were out, someone stole their key and stole things from their room. Hotel claimed they weren’t liable because of an exclusion clause. Clause wasn’t incorporated as the notice was inside olley’s bedroom which was AFTER they had entered into the contract downstairs therefore NO reasonable notice was given.
what happens when there has been previous dealings?
If the parties have:
Dealt consistently and
Dealt on the same terms before
Then we can imply knowledge of the past dealings to this one.
Hollier v Rambler Motors (1972)
Hollier v Rambler Motors (1972): previous dealings
Mr Hollier phoned Rambler and spoke to the manager. He told him he wanted some repair work done to his car. Manager said they couldn’t do anything about it for the moment, but if Hollier had it sent in then they could sort it. Hollier agreed and those were the only terms said over the phone. Fire broke out at the garage and his car was damaged. He tried to sue for ‘reasonable care’. Hollier however had been to the garage 3-4 times in the past 5 years and had always signed an exclusion clause for damage through fire. Court decided it was possible the terms would be implied – but not in this case.
exclusion clauses and third parties?
Third parties can’t usually rely on the terms of a contract.
E.g. in Scruttons v Midland Silicones, the claimant was the owner of goods which were shipped by a carrier. Contract limited the liability of the carrier for damage to the goods of $500. carrier then contracted with a third party, the defendant, to unload the goods and caused damage (more than $500). As the defendant wasn’t privy to the contract, the exclusion clause of $500 didn’t apply to him and the claimant could sue for more.
The Contracts (Rights of Third Parties) Act 1999 now permits the third party to enforce any terms which would exclude/limit liability.
what is the contra proferentem rule?
Contra proferentem – where there is doubt about the meaning of a term in a contract, the words will be construed against the person who put them in the contract.
Doesn’t just apply to exclusion clauses, but usually only use it in that case.
The term will be used against the person who wishes to rely on it because they are the one who have clearly broken their contract and are trying to evade liability.
It is used when there is more than one interpretation for the clause e.g. a literal meaning and the purposive approach. The person seeking to rely on it will opt for the broad meaning and the other person will rely on the narrow meaning.
Transoceaon Drilling v Providence Resources
Claim for loss of use from Providence. Normally, it’s assumed that exclusion clauses should be construed contra preferentem. However, the agreement in this case was a sophisticated arrangement drawn up for parties of equal bargaining. Therefore, the courts stated that the contra preferentem principle is to be used where the term is both one-sided and ambiguous.
contra proferentem usually will not be used as the parties are on equal bargaining terms
what is the statutory control of exclusion clauses?
If an exclusion clause is incorporated, there are statutory provisions which may make the clause invalid and of no effect.
These controls exist to deal with an imbalance between the parties to a contract.
For most business to consumer contract, there is no bargaining power for the consumer, which is why there are two principal provisions through Acts.
The Unfair Contract Terms Act 1977
The Consumer Rights Act 2015
how does the unfair contract terms act 1977 apply to exclusion clauses?
This is mainly used for protection in non-consumer contracts i.e. business to business.
Test of reasonableness to be applied to the exclusion clauses.
Certain types of exclusion clauses cannot be incorporated due to prohibition by the UCTA. E.g.
Under S2(1), a person cannot exclude liability for death/personal injury caused by negligence.
Under S6(1), the implied condition as to title cannot be excluded
what do S3 and S11 of the UCTA 1977 show?
Section 3 states that there must be a test of reasonableness to contracts where one party is subject to the other’s standard written terms of business.
S11 contains guidelines on what is reasonable. The test ultimately depends on all the circumstances of the case, and ultimately is for the judges to interpret.
S11 also requires the party who inserts the term to show that it is reasonable in all the circumstances.
Warren v Truprint (1986):
Contract contained a limitation clause where the defendants were responsible only for a replacement film in the event of failure to print and develop the photos. Truprint were unable to show that this was reasonable when it lost a couple’s silver wedding photos.
reasonableness: UCTA 1977
How does the CRA 2015 control exclusion clauses?
It includes:
A fairness test for enforceability of terms and of consumer notices.
A provision that the main subject matter of the contract or terms that set the price are only exempt from the test of fairness if they are transparent and prominent.
A ‘grey list’ of potentially unfair clauses in consumer contracts.
Three main sections of the Act which sets out the bars on exclusion clauses – 31, 57, 65.
This section prohibits a term excluding/limiting liability for the following sections:
S9 (satisfactory quality)
S10 (fit for a particular purpose)
S11 (Goods to be as described)
S14 (Goods to match a model)
S15
how does section 57 prohibit a term excluding liability for the supply of services?
This section prohibits a term excluding/limiting liability for the supply of services:
S49 (reasonable care and skill)
S50 (information about trader being binding)
S51 (Reasonable price)
S52 (Reasonable time)
S65 prohibits exclusion for death or personal injury resulting from negligence.
S62 states that all consumer contract terms and notices must be fair. The Act defines ‘unfair terms’ as those which put the consumer at a disadvantage, by limiting the consumer’s rights or disproportionately increasing their obligation compared to the trader’s obligation. This fairness test has a list of grey terms too (terms that may be considered as unfair).
