Exclusion clauses

• Part 3 = Exclusion clauses

  Limiting liability and it can be a term
• Exclusion clauses

  It has to be put into the contract at the agreement. Communicated and accepted at the time of the contract
• Exclusion clauses = Aims to completely exclude liability for certain types of breaches of the contract

  EG A clause stating that the party is not liable for any damages caused by a specific scenario

  Limitation clauses = Imposes an upper limit on the amount of liability or damages that can be claimed

  EG A clause capping compensation for a breach at a specified monetary value
• How to prove whether an exclusion clause is valid

  Part 1: Is the clause effective at common law:

  1. Was the clause properly incorporated?
  2. Is the clause clear and ambigious?


  Part 2: Are there any statutory limitations on the clauses

  1. Unfair contract terms Act 1977 - Reasonable - Business to business
  2. Consumer Rights Act 2015 - Fairness - Business to consumer
• Part 1A: Has the exclusion clause been incorporated?

  Agreement signed? (L'Estrange v Graucob) - Term effective and couldn't make a claim

  Reasonable notice? (Olley v Marlbourough court hotel) - Exclusion clauses not communicated when contract made good faith
• Part 1A: Has the exclusion clause been incorporated?

  Prior dealing? (Hollier v Rambler Motors) - 3 - 4 prior dealings insufficient to establish consistent terms
• Stage 1B: Assessing clarity and ambiguity of the exclusion clauses

  Importance of clear terms

  • Clarity is crucial when applying an exclusion clause. It must be precise and understandable to all parties
• Stage 1B: Assessing clarity and ambiguity of exclusion clauses

  Dealing with ambiguity

  • Contra proferentum Rule: This principle is applied when an exclusion clause is ambigious
  • Application: Unclear terms - interpreted against the party who included them
• Part 2A: Exclusion clauses and the Unfair Contract Terms Act 1977

  • Applicability : The Act primarily governs exclusion clauses in Business - to - Business (B2B) contracts
  • Coverage: Focuses on how exclusion clauses are used within both tort and contract law, emphasising fair contractual practices
• Part 2A: Assessing reasonableness in Exclusion Clauses: Unfair Contract Terms Act 1977 - (Warren v Trueprint)

  • Reasonableness under UCTA 1977:
  • S11: The party who includes an exclusion clause is responsible for proving its reasonableness
• Part 2A: Assessing reasonableness in exclusion clauses: Unfair Contract Terms Act 1977

  Knowledge test (Smith v Eric)

  This test checks if it was fair to include a certain clause in a contract based on what both parties knew or should have known when they signed the contract
• Part 2A: Assessing reasonableness in exclusion clauses: Unfair Contract Terms Act 1977

  Circumstances Test (Watford electronic)

  This test looks the whole situation around the contract, such as whether one party had more power in negotiation, any special deals made to agree to the contract, and how likely it was that the terms would be met
• Part 2A: Assessing Reasonableness in exclusion clauses: Unfair Contract Terms Act 1977

  Resources Test (George Mitchell v Finney)

  This test looks at whether the party being asked to take on a responsibility in the contract can realistically do so based on their resources. It considers if the party including the clause could instead get insurance to help with these costs
• Part 2B: Consumer Rights Act 2015: Assessing fairness in Consumer Contracts

  Fairness of Terms (S62)

  • Definition of unfairness - A term is considered unfair if it:
  • Contravenes the principle of good faith
  • Causes a significant imbalance in the rights and obligations of the parties, to the
  • detriment of the consumer
• Part 2B: Consumer Rights Act 2015: Assessing fairness in Consumer Contracts

  • Governs Business Consumer (B2C) contracts
  • Introduces a fairness test to ensure balance and fairness in in consumer contracts
• Part 2B: Consumer Rights Act 2015 - Applies to contracts between traders and consumers

  S65 - Cannot exclude liability in consumer contracts for death or personal injury caused by negligence
• Part 2B: Consumer Rights Act 2015 - Applies to contracts between traders and consumers

  S62 - Terms and notices in consumer contracts must be fair
• Part 2B: Consumer Rights Act 2015 - Applies to contracts between traders and consumers

  S64 - Terms about the main subject matter of the contract or price are not subject to fairness test if they are transparent and prominent
• Part 2A: Unfair Contracts Terms Act 1977

  S2 - Cannot exclude liability for loss or damage of property caused by negligence unless the term or notice is reasonable
• Part 2B: Consumer Rights Act 2015: Assessing fairness in Consumer Contracts

  S62 - Fairness of terms

  • Definition of fairness: A term is considered unfair for it:
  • Contravenes the principle of good faith
  • Causes a significant imbalance in the rights and obligations of the parties, to the
  • detriment of the consumer
• Part 2B: Consumer Rights Act 2015: Assessing fairness in Consumer contracts

  • Governs business to consumer (B2C) contracts
  • Introduces a fairness test to ensure balance and fairness in consumer contracts