Contract Law Essays Help : Exclusion Clauses
Contract Law Cases referred to in this section:
Parker v South Eastern Ry (1877) 2 CPD 416
L’Estrange v F Graucob Ltd (1934) 2 KB 394
Curtis v Chemical Cleaning and Dyeing Co (1951) 1 KB 805
Thomas v LM & S Ry (1930) 1 KB 41
Richardson, Spence & Co v Rowntree (1894) AC 217
Henderson v Steven (1875) LR 2 HL (Sc) 470
Thornton v Shoe Lane Parking Ltd (1971) 2 QB 163
Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd (1989) QB 433
Chapelton v Barry UDC (1940) 1 KB 532, (1940) 1 All ER 356, CA
Jude v Edinburgh Corpn (1943) SC 399
Taylor v Glasgow Corpn (1952) SC 440
Thompson v London, Midland and Scottish Rly Co (1930) 1 KB 41, CA
Grogan v Robin Meredith Plant Hire (1996) 15 Tr LR 371, CA
Spurling (J) Ltd v Bradshaw (1956) 1 WLR 461
Hollier v Rambler Motors (AMC) Ltd (1972) 2 QB 71
Alderslade v Hendon Laundry (1945) 1 KB 189
Chanter v Hopkins (1838) 4 M & W 399
Photo Production Ltd v Securicor Transport Ltd (1980) AC 827
UGS Finance Ltd v National Mortgage Bank of Greece (1964) 1 Lloyd’s Rep 446
Director General of Fair Trading Ltd v First National Bank plc (2001) UKHL 52; (2002) 1 AC 481
Davies v Sumner [1984] 3 All ER 831, [1984] 1 WLR 1301, HL
Lease Management Services Ltd v Purnell Secretarial Services Ltd [1994] CCLR 127, 13 Tr LR 337, CA)
One or more parties to the contract will often seek to exclude or limit their liability for breach of contract or misrepresentation. A clause excluding liability is commonly called an 'exclusion', 'exemption' or 'exceptions' clause. Although the Courts will have regard to the general principles of freedom of contract, they will also seek to protect parties who are in a weaker bargaining position.
At common law, a number of restrictions are placed on the use of exclusion clauses, as follows:-
-
Signature: a party signing a contract that contains an exclusion clause will generally be bound by it, irrespective of how much notice of the clause is actually given and whether he has read it (Parker v South Eastern Ry (1877) 2 CPD 416; L’Estrange v F Graucob Ltd (1934) 2 KB 394), with the exception of course of when the signature has been obtained by fraud or misrepresentation (Curtis v Chemical Cleaning and Dyeing Co (1951) 1 KB 805).
-
Notice: generally, where the contract containing the clause is handed to one party, he must receive adequate notice of its conditions (before or at the time the contract is entered into) although this does not mean he has to have read the document in order to be bound (as per Parker, supra). Even where the party receiving the document is illiterate or blind, as in Thomas v LM & S Ry (1930) 1 KB 41), this will not be relevant. However, where the terms are obscured or unreadable (Richardson, Spence & Co v Rowntree (1894) AC 217) or the condition is printed on the reverse of the document with no notice of them on its face (Henderson v Steven (1875) LR 2 HL (Sc) 470), this may be deemed inadequate notice. Where the clause is unusually wide or onerous, it may require special explicit notice (Thornton v Shoe Lane Parking Ltd (1971) 2 QB 163; Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd (1989) QB 433).
-
Contractual Document: This must be the type of document that a reasonable man would expect to contain contract terms, and what type of document would meet this criteria is left to the wide discretion of the Courts (see Chapelton v Barry UDC (1940) 1 KB 532, (1940) 1 All ER 356, CA (customer acted reasonably in treating deckchair ticket as mere receipt, not contractual document); Jude v Edinburgh Corpn 1943 SC 399(notice in public vehicle warning passengers against descending from moving vehicle a mere warning, not a contractual term); Curtis v Chemical Cleaning and Dyeing Co (1951) 1 KB 805 at 809, (1951) 1 All ER 631 at 634, CA, obiter per Denning LJ; Taylor v Glasgow Corpn 1952 SC 440 (ticket for public baths not a contractual document); Parker v South Eastern Rly Co (1877) 2 CPD 416 at 422, CA, per Mellish LJ; Thompson v London, Midland and Scottish Rly Co (1930) 1 KB 41 at 49, CA, per Lord Hanworth MR; Grogan v Robin Meredith Plant Hire (1996) 15 Tr LR 371, CA (timesheet)).
-
Course of Dealing: The Court may hold that a party has sufficient notice of an exclusion from a consistent course of dealing, particularly where the parties are of equal bargaining power (see Spurling (J) Ltd v Bradshaw (1956) 1 WLR 461; Hollier v Rambler Motors (AMC) Ltd (1972) 2 QB 71).
-
Other rules: Exclusion clauses must be clear and unequivocal (Baldry v Marshall (1925) 1 KB 260 – and the Courts’ view is particularly strict where there is any attempt to exclude liability of negligence and will construe any doubt regarding the ambit of the clause against the proferens (see Alderslade v Hendon Laundry (1945) 1 KB 189).
-
Fundamental breach: Where the breach relates to a fundamental obligation, it was previously thought that failure to perform that obligation would in essence a failure to perform the contract itself and that liability for such a breach could not generally be excluded (Chanter v Hopkins (1838) 4 M & W 399). However, following a string of cases, the latest being Photo Production Ltd v Securicor Transport Ltd (1980) AC 827 (approving UGS Finance Ltd v National Mortgage Bank of Greece (1964) 1 Lloyd’s Rep 446), there is no longer a presumption that the parties do not intend an exclusion clause to apply to a fundamental breach.
-
Unfair Contract Terms Act 1977: This relates to exclusion of liability for negligence, control of exclusion clauses in general that purport to exclude or restrict liability for breach of contract, and control over contract terms that exclude or restrict liability for terms implied by statute, such as those under the Sale of Goods Act 1979. The Act, where applicable, may render a clause void or may limit the effectiveness of the clause in line with the test of reasonableness. Unfair Terms in Consumer Contracts Regulations 1999 (SI 1994, No. 3159): these work in addition to the Unfair Contract Terms Act 1977 and in effect, make any unfair term in a contract concluded between consumer and seller or supplier not binding (Regulation 8(1)). A contract term may be unfair where it is not individually negotiated (eg in pro forma contracts) and contrary to good faith causes a significant imbalance in the parties’ rights and obligations, to the detriment of the consumer (Regulation 5(1)). It may therefore be unfair where:
-
It is not individually negotiated
-
There is an absence of good faith
-
There is a significant imbalance in the parties’ rights and obligations
-
The imbalance works to the detriment of the consumer.
-
The requirement of good faith requires an examination of the strength of bargaining power of the parties, whether the consumer received an inducement to agree to the term, whether the goods or services were sold/supplied to a special order of the consumer, and the extent to which the seller/supplier has dealt fairly and equitably with the customer (Recital 16 of the Directive, and see also Director General of Fair Trading Ltd v First National Bank plc (2001) UKHL 52; (2002) 1 AC 481).
Quick check for exclusion clause questions:
-
Have the exclusion clauses been incorporated as terms of the contract? (Consider the tests at common law)
-
Which provisions of the Unfair Contract Terms Act 1977 apply? Consider whether the parties are dealing as a consumer or as a business and the distinction between the application of the Act for each.
-
Do the Unfair Terms in Consumer Contracts Regulations 1999 apply?
-
Where both apply (UCTA1977 and UTCCR1999) which provides the better remedy?
A party to a contract 'deals as consumer' if he neither makes the contract in the course of a business (see Davies v Sumner [1984] 3 All ER 831, [1984] 1 WLR 1301, HL) nor holds himself out as doing so (Unfair Contract Terms Act 1977 s 12(1)(a); see for example Lease Management Services Ltd v Purnell Secretarial Services Ltd [1994] CCLR 127, 13 Tr LR 337, CA) the other party does make the contract in the course of a business (Unfair Contract Terms Act 1977 s 12(1)(b)); and in the case of a contract governed by the law of sale of goods or hire-purchase or by the provisions relating to miscellaneous contracts under which goods pass, the goods passing under or in pursuance of the contract are of a type ordinarily supplied for private use or consumption.
In a sale by auction or by competitive tender the buyer is not in any circumstances to be regarded as dealing as consumer but, subject to this, it is for those claiming that a party does not deal as consumer to show that he does not (Unfair Contract Terms Act 1977 s 12(3)).
This study area has been created by our experts to help students with Administrative Law Essay and Problem Questions. If you require further help with your question, why not order a fully customised model answer on which to base your assignment? Use our online order form to submit your request and you could have a complete model answer written to your specification within 24 hours.
Visitors have also looked at...
1Law Essay Scams
Essay writing scams can be hard to spot.
Click here to find out how to avoid the essay scams2Essay writing in the press
Find out what the press say about essay writing in the 21st century.
3 Meet the Law Essays UK Team
Find out more about the individuals that provide this first class essay writing service.
Law Essays UK - world's only dedicated personalised law model answers service.
