Exemption Clauses Flashcards
(16 cards)
How can an exemption clause be validly incorporated into a contract?
A. By signature only
B. By notice only
C. By a consistent course of dealing only
D. By signature, reasonable notice, or consistent course of dealing
D. By signature, reasonable notice, or consistent course of dealing.
Explanation: Exemption clauses can be incorporated by (1) the parties signing the contract; (2) giving reasonable notice before or at contracting; or (3) a regular and consistent prior course of dealings
What does the contra proferentem rule require?
A. Exemption clauses must mention “negligence” to exclude negligence liability
B. Ambiguous exemption clauses are construed against the party relying on them
C. All exemption clauses must be in bold to be enforceable
D. Exemption clauses cannot limit liability for fundamental breach
B. Ambiguous exemption clauses are construed against the party relying on them.
Explanation: Under contra proferentem, any ambiguity in an exclusion clause is interpreted contra the drafter, protecting the reasonable expectations of the other party .
Which test must be applied before excluding liability for negligence under a standard business-to-business contract?
A. Red hand rule
B. Canada Steamship guidelines
C. Officious bystander test
D. Business efficacy test
B. Canada Steamship guidelines.
Explanation: The Canada Steamship principles require clear, unambiguous wording to exclude negligence: either expressly mention “negligence” or use language wide enough to cover it .
What is the “red hand rule”?
A. Unusually onerous clauses need especially clear notice (e.g., highlighted or bold)
B. Exclusion clauses must be printed in red ink to be valid
C. Any exclusion clause affecting personal injury must be in red capitals
D. Courts refuse to enforce any clause they consider unfair
A. Unusually onerous clauses need especially clear notice (e.g., highlighted or bold).
Explanation: The “red hand rule” (Thornton v Shoe Lane Parking) demands particularly clear, prominent notice for especially onerous or unusual terms .
A ticket on entry to a car park states in small print on the back: “No liability for damage.” The driver parks and their car is damaged. Is the clause likely incorporated?
A. Yes, because all exclusion clauses in car parks are valid
B. No, because small print on the back is insufficient notice
C. Yes, if the driver had actual knowledge of the clause
D. No, unless the driver signed to accept the terms
B. No, because small print on the back is insufficient notice.
Explanation: Reasonable notice must be given before or at the time of contracting; hiding terms in small print where it’s not obvious fails the notice requirement .
A supplier’s standard B2B terms exclude liability for “any negligence.” Goods delivered are faulty and cause personal injury. Under UCTA 1977, is that exclusion valid?
A. Yes, if the supplier can show reasonableness
B. No, because all negligence exclusions are automatically void
C. Yes, because it’s a B2B contract
D. No, exclusion of liability for personal injury or death is void
D. No, exclusion of liability for personal injury or death is void.
Explanation: UCTA s 2(1) makes void any attempt to exclude or limit liability for death or personal injury resulting from negligence .
A commercial contract term excludes liability for “any negligence” but is subject to the UCTA reasonableness test. Which of the following is not a factor under that test?
A. Whether the contracting parties knew of the term
B. The availability of alternative remedies (e.g., insurance)
C. The relative bargaining power of the parties
D. Whether legal advice was available at the time
C. The relative bargaining power of the parties.
Explanation: UCTA 1977 s 11 and Schedule 2 direct the court to consider what was known or ought to have been known about the term, whether advice was available, and the availability of alternative means (insurance), but do not allow relative bargaining strength to affect the reasonableness assessment.
A consumer buys a gadget. The written terms state “liability limited to repair only.” The gadget injures them. Under CRA 2015, is that limitation enforceable as to personal injury?
A. Yes, if the limitation was brought to their clear attention
B. No, because consumer’s right to damages for personal injury cannot be limited
C. Yes, because repair is a permitted remedy for implied terms
D. No, unless the consumer gave fresh consideration after purchase
B. No, because consumer’s right to damages for personal injury cannot be limited.
Explanation: CRA 2015 s 57 renders void any term excluding or restricting liability for death or personal injury resulting from negligence
What is the fundamental difference between an exclusion clause and a limitation clause?
A. Exclusion clauses eliminate liability; limitation clauses cap liability at a set level
B. Exclusion clauses require no incorporation; limitation clauses do
C. Exclusion clauses only apply to negligence; limitation clauses apply to all breaches
D. Exclusion clauses are governed by CRA; limitation clauses are not
A. Exclusion clauses eliminate liability; limitation clauses cap liability at a set level.
Explanation: Exclusion clauses attempt to entirely absolve a party of certain liabilities, whereas limitation clauses permit liability but restrict its quantum to a maximum sum or specified type of loss
A clause purports to exclude liability for “any indirect loss.” A dispute arises whether this covers loss of profit. How will the court resolve this ambiguity?
A. It will exclude loss of profit if the drafter shows clear intent
B. It will sever the words “indirect loss” and enforce the rest
C. It will not exclude loss of profit—ambiguity is construed against the drafter
D. It will treat the entire clause as void for uncertainty
C. It will not exclude loss of profit—ambiguity is construed against the drafter.
Explanation: Under contra proferentem, any ambiguity is read contra the party relying on the clause, so “indirect loss” will not be interpreted to include loss of profit absent clear wording
Which scenario shows a term not purporting to confer a benefit on a third party?
A. “Party A shall pay £1,000 to Party B”
B. “Party A shall indemnify the assignee of Party B”
C. “Party A shall perform services for any nominee of Party B”
D. “Party A shall observe confidentiality towards Page C”
A. “Party A shall pay £1,000 to Party B.”
Explanation: That term directly benefits Party B (a party), not a third party; options B–D all envisage conferring benefits or duties concerning a third party
How do UCTA 1977 and CRA 2015 differ regarding exemption clauses?
A. UCTA applies only to B2B contracts; CRA applies to consumer contracts
B. UCTA requires all exemption clauses to be in writing; CRA does not
C. UCTA permits personal injury exclusions if reasonable; CRA never does
D. UCTA covers all unfair terms; CRA covers only exclusion clauses
A. UCTA applies only to B2B contracts; CRA applies to consumer contracts.
Explanation: UCTA 1977 governs standard business-to-business exemption clauses, imposing reasonableness tests, while CRA 2015 regulates unfair terms and exclusions in consumer contracts specifically
What is the key difference between an “exclusion” clause and a “limitation” clause?
A. Exclusion clauses negate liability entirely; limitation clauses cap it at a set amount
B. Exclusion clauses always require clear wording; limitation clauses never do
C. Exclusion clauses apply only to negligence; limitation clauses apply to all breaches
D. Exclusion clauses are subject to UCTA; limitation clauses are not
A. Exclusion clauses negate liability entirely; limitation clauses cap it at a set amount.
Explanation: Exclusion clauses seek to eliminate a party’s liability for certain breaches, whereas limitation clauses allow liability but restrict it to a maximum sum or type of loss.
Which of the following is not a factor in the UCTA “reasonableness” test (s.11 & Sch.2)?
A. Whether the party knew or ought to have known of the term
B. The resources and insurance available to the parties
C. The parties’ relative bargaining power
D. The extent to which advice was available at the time
B. The resources and insurance available to the parties.
Explanation: UCTA focuses on what was known, transparency of the term, and availability of advice, but not on each party’s wealth or insurance coverage.
A manufacturer’s standard terms limit liability for product defects to repair or replacement only. A consumer buys the product without noticing the clause. The product injures them. Under CRA 2015, is this limitation enforceable?
A. Yes—repair or replacement is a permitted remedy for implied terms under s.23
B. No—consumer rights to damages for personal injury cannot be limited
C. Yes—if the clause was prominently displayed before purchase
D. No—limitation clauses are void in all consumer contracts
C. Yes—if the clause was prominently displayed before purchase.
Explanation: CRA 2015 allows consumer terms to limit remedies for implied terms (e.g. repair/replacement) provided they are fair and transparent; prominence before contracting is key.
A clause tries to exclude liability for delay in delivery “in no circumstances shall we be liable for any loss, direct or indirect.” A court finds it validly incorporated but ambiguous as to whether “indirect loss” includes loss of profit. How will the court resolve scope?
A. It will not exclude loss of profit—ambiguity is construed against the drafter
B. It will exclude loss of profit if the drafter can show parties intended it
C. It will sever the ambiguous words and enforce the rest
D. It will treat the entire clause as void for uncertainty
A. It will not exclude loss of profit—ambiguity is construed against the drafter.
Explanation: Under contra proferentem, any ambiguity in scope is read restrictively, so “indirect loss” will not be taken to include profit unless clearly stated.
