Exclusion Clauses

• common law control

  ->if one party is more dominant than the other and seeks to rely on an exclusion clause to the detriment of the other party

  2 rules

  1. clause must be incorporated into the contract as part of the contract
  2. clause will not be constructed by the courts and it operates to protect the party that relies on it from damage caused, not the party relying on it for their advantage
• 1. clause must be incorporated into the contract as part of the contract


  ->must be brought to the attention of the party before/at the time the contract was formed

  ->generally included by signature/if other party had knowledge

  ->unlikely to apply to a 3rd party (privity)
• 1. incorporation of exclusion clauses (2)

  -> where parties sign the contract MAXIME CAVEAT EMPTOR applies -> if you buy something you check the quality or sustainability before purchasing

  ->general rules:

  • agree to what you sign for
  • bound by exclusion clauses regardless if fully read the contract or not -> L'estrange v Graucob

  -> introducing new terms to a contract after acceptances fails unless a new contract is signed or the original contract allows for variation
• 1. incorporation of exclusion clauses (3)

  • if the contract hasn't been signed

  ->exclusion clause is only binding if the parties had express knowledge at the time

  -> Mr Bates v the Post Office

  -> Olley v Marlborough Court Hotel -> contract made at reception so sign in bedroom was too late after contract formed

  -> Chapelton v barry UDC ->exclusion clause at back of ticket was too late and he wasnt aware
• 1. incorporation of exclusion clauses (4)

  • misrepresentation of the clause

  -> unlikely to be binding

  --> did the party have knowledge of the clause?

  --> were reasonable steps taken to bring the exclusion clause to the attention of the party?

  • if parties had previous dealings, the clause will be binding - hollier v rambler motors
  • can be incorporated through trade customs -> parties are aware terms are common in the same / similar markets
• 2. clause will not be constructed by the courts- operates to protect smaller party (1)

  -> exclusion clause must be interpreted or constructed by the courts to see if it will achieve what its meant to do without penalising the other party

  1. contra proferntem -> looks at the purpose of the contract - glynn v margaetson -> couldnt rely on exclusion clause because had not completed primary duty.
  2. any ambiguity must be interpreted against the party who drafted the clause and is wishing to rely on it - hollier v rambler motors
• statutory controls - unfair contract terms

  ->gives consumers greater protection

  ->makes certain exclusion clauses void - statutory bar

  • s2 (1) ->party cant rely on an exclusion clause that tries to exclude / restrict liability for death / personal injury resulting from negligence

  -> makes others valid if test for reasonableness is satisfied
• statutory controls - reasonable test (unfair contract terms)(1)

  • s11 (1) -> terms shall have been a fair and reasonable one to be included having regard to the circumstances which were or ought to reasonably have been known or in contemplation of the parties when the contract was made

  -> knowledge test -> what was known at the time the contract was made -> smith v eric bush
• statutory controls - reasonable test (unfair contract terms)(2)


  • s11 (2) -> strength of bargaining power on both sides -> did customer receive inducement to agree?

  -> did the consumer know of existence/extent of term? ->likelihood of compliance

  ->were goods made specially for the customer? - wateford electronices v sanderson cfc

  • s11 (4) -> limitation clauses - resources which D could expect to be available for meeting liability and how far it was open for D to cover himself - george mitchell v finney lock seeds
• statutory controls - valid if reasonable (unfair contract terms)

  • s2 (2) -> in case of loss/damage, person can't exclude or restrict liability for negligence except when term satisfies reasonable test
  • s3 -> when customer deals on a business standard form contract -> business can't exclude liability for breach or provide substantially different performance or no performance at all unless satisfies test for reasonableness
• statutory controls - consumer rights act (1)

  • s31 (9, 10, 11)-> liability can't be excluded or restricted by trader to supply goods
  • s57 -> liability can't be excluded or restricted to supply services under s49
  • s65 -> bar on exclusion / restriction of liability of negligence -> cant exclude or restrict liability for death or personal injury
• statutory controls - consumer rights act (2)

  Fairness test

  • s65 -> all consumer contract terms must be fair and not put consumers at a disadvantage

  -> courts take into account specific circumstances which contract was agreed

  -> fairness = 'grey list' of terms

  ->terms need to be transparent and prominent (brought to attention)