10 Exclusion clauses

1 Definition

1.1 Attempt to exclude liability in whole or in part for negligence or contractual liability.

2 Case law rules

2.1 The exclusion clause must be communicated to the offeree before he accepts the contract: Olley v. Marlborough Court Ltd.

2.1.1 If a term is included in a document notice of the term must be given before completion and the document must be one which could be expected to contain terms: Chapleton v Barry UD.C.

2.2 Must be clearly incorporated into contract:

(a) Generally, if a person signs a contract he will be bound (L'Estrange v. Graucob) unless there was a mistake or misrepresentation.

(b) Oral assertions can override exclusion clauses making them ineffective: Curtis v. Chemical Cleaning Co.

(c) A clause may be incorporated by a course of dealings: Hollier v Rambler Motors.

2.3 Where a term is particularly unusual and onerous it should be highlighted. Failure to do so may mean that the clause is not incorporated.

2.4 Wording must be sufficient to exclude the liability in question:

(a) Ambiguities will be construed against the party relying on them ‘contra proferentum rule’.

(i) Court presumes a clause is not intended to defeat main purpose of contract.

(ii) However a clause can be drafted specifically to exclude liability for a fundamental breach: Photo Productions v Securior Transport ltd.

NB: Would now be subject to ‘reasonableness’ test.

3 Unfair contract terms act 1977

3.1 (a) The Act applies to exclusion clauses used in a business (including a profession) and says:?

(b) Business liability is that arising from:

from occupation of premises for business purposes.

3.2 Act applies to contracts with businesses and contracts with consumers.

3.3 “Consumer” defined in Act as:

(a) Person not making contract in course of business.

(b) For SOGA contracts goods will be for private use.

(c) Other party does act in course of business.

Clauses prohibited

3.4 Provisions relating to all business contracts:

(i) Cannot exclude liability for death and personal injury arising from negligence.

(ii) Cannot exclude liability for title provisions of SOGA.

3.5 Provisions relating to consumer contracts:

– Cannot exclude any of the implied terms of SOGA 1979.

Clauses permitted

3.6 (a) Other clauses in contracts will only be upheld if they are 'reasonable'.

(b) Examples include exclusion of SOGA terms in contracts with businesses or in consumer contracts clauses entitling one party to render a substantially different contract performance.

(c) ‘Reasonableness’ (s.11 and Schedule 2)

Consider:

(i) bargaining position;

(ii) inducements to accept limitation of rights;

(iii) knowledge of existence of clause;

(iv) practicability of complying with procedural requirements (which limit customers' rights if not followed) eg. a time limit for claims;

(v) goods produced to special order.

(d) Where the clause is seeking to limit as opposed to exclude liability the Courts must have regard to the resource available to the party to meet the liability and the availability of insurance. St Albans City and District Council-v-International Computers Ltd.

4 The unfair terms in consumer contracts regulations 1999

4.1 Apply to consumer contracts in standard form supplied by business. Also apply to insurance contracts. Contracts covered by the regulations must be expressed in plain language. These regulations work alongside and in conjunction with UCTA 77.

4.2 Consumer defined as natural person (not Co.) acting outside course of business.

4.3 Unfair term defined as: – a term causing significant imbalance in position between the parties

– is contrary to requirement of good faith

– is to the detriment of consumer

4.4 Good faith defined on same basis as UCTA’s reasonableness.