PRESENTATION OUTLINE
Lecture content
- What are exclusion clauses?
- common law controls on exclusion clauses
- statutory controls on exclusion clauses
Exclusion clauses totally exclude a party's liability so no damages are payable in the event of a breach
example of an exclusion clause
Why control the use of exclusion clauses?
- it might not be freely negotiated
- parties may not have equal bargaining strength
- consumer protection
Controls of exemption clauses
- Common law controls
- Statutory controls
Three stage approach to exclusion clauses
1. incorporation into the contract
2. the test of "construction"
3. statutory provisions (Unfair Contract Terms Act 1977, the Unfair Terms in Consumer Contracts Regulations 1999)
Common law controls
1. the exemption clause must be incorporated within the contract
2. construction of the clause covers both the breach and resulting damage
1. Incorporation
is the clause actually a term of the contract?
Three methods by which a clause can be incorporated;
1. Signature
2. Notice
3. Previous course of dealings
a. Signature
L'Estrange v F Graucob Ltd[1934] 2 KB 394; Curtis v Chemical Cleaning & Dyeing Co [1951] 1 KB 805
b. Notice;
Parker v South East Railway Co (1876-77)
.reasonable notice must be given; Thompson v London Midland and Scottish Railway Co [1930] 1 KB 41
.notice must be given before/at the time the contract is made; Olley v Marlborough Court Ltd [1949] 1 KB 532
c. Previous course of dealing
i. there must be sufficient notice; Spurling v Bradshaw [1956] 1 WLR 461
ii. there must be consistency in the previous dealings; McCutcheon v David MacBrayne Ltd [1964] 1 WLR 125; British Crane Hire Corp Ltd v Ipswich Plant Hire Ltd [1975] QB 303
2. Construction
does the exemption clause actually cover the loss/damage that the party is trying to exclude/limit?
Contra Proferentem Rule
Court will interpret the clause strictly against the party wishing to rely on it; Houghton v Trafalgar Insurance Co Ltd [1954] 1 QB 247
Aspects of contra proferentem rule
Negligence
a. express reference to negligence
b. no express reference to negligence; Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd (The Strathallan) [1983] 1WLR 964
c. liability other than negligence, distinguish between;
>exclusion of negligence where the only basis for liability is negligence
>where party will be liable irrespective of negligence
Fundamental breach
party guilty of a breach of his obligations in a manner that goes to the very root of the contract cannot rely on an exempting clause; Photo Production Ltd v Securicor Transport Ltd [1980] AC 827
Statutory Controls
1. Unfair Contract Terms Act (UCTA) 1977
. renders some clauses automatically void, while others must pass the reasonableness test.
. applies only to business liability (s.3) R&B Customs Brokers Co Ltd v United Dominions Trust Ltd [1988] 1 WLR 321
. distinguishes two types of liability; liability in negligence and strict liability
Negligence
s.2 applies to exclude liability for negligence
. clause excluding liability for death /personal injury resulting from negligence are automatically void
. liability for other loss/damage can be excluded as long as the clause satisfies the reasonableness test (s.11 & Sch 2)
Strict liability
. clauses to exclude/limit terms implied by ss.13-15 Sale of Goods Act 1979 are void if contracts are with consumers (s.6(2) UCTA)
. if contracts are during the course of business, such clauses are valid if reasonable (s.6(3) UCTA)
. see also s.7 which applies to contracts for the supply of goods and services
Assessing reasonableness
Section 11 UCTA;
- s.11(1)&(3); fair and reasonable in all circumstances
- s.11(5) burden of proof is on the party seeking to rely on it
Schedule 2 UCTA
- relative bargaining strength
- was an inducement given?
- did the customer know about the item?
-special order?
Unfair Terms in Consumer Contracts Regulations (UTCC) 1999;
- implements the European Directive 93/13
- they provide additional rules
- only applies to contracts between businesses and consumer
UTCC applies to terms which have not being freely negotiated (e.g mobile phone contract)
- a term is unfair if;
. it is contrary to good faith
. it causes a significant imbalance in the bargaining powers to the detriment of the consumer
Quick reminder!!!
Common law controls;
-incorporation
-construction
Statutory control
-UCTA
. are the parties acting in the course of business?
. what liability is being excluded? how does UCTA address these exclusions?
. do the exclusions pass the reasonableness test?
-UTCC Regulations
. does UTCC apply?
