exclusion clauses

• Exclusion clause


  A term in a contract that excludes or limits liability for a breach of the contract
• What is the assumption when constructing and interpreting contracts?


  That both parties have understood accurately the terms within a contract
• When does a dispute arise?


  When there is a term argued to have different meanings from the different parties
• What do exclusion clauses do?


  These will usually put someone in the contract into a stronger bargaining position.
• Pink Floyd Music v EMI Records


  Use of Language

  
  

  The ordinary English words mean what they say. If the words of a contract are clear, this shows intention of the parties.
• Investors Compensation Scheme v West Bromwich Building Society


  Objective Test

  
  

  How would a reasonable man interpret the meaning of the contract?
• M T Hojggard v E.ON Climate and Renewables


  Context of the contract

  
  

  Background and contextual information helps to establish the intentions of the parties at the time the contract was made.
• Common law controls


  - Whether the agreement is signed

  - Whether there is any notice incorporate into the contract

  - Whether a term is incorporated as part of previous dealings

  - Contra Proferentem Rule
• L'Estrange v Graucob (signed agreement)


  If you sign an agreement, then you are bound by that agreement.
• Curtis v Chemical Cleaning and Dyeing (signed agreement)


  If a term in a contract has been misrepresented, then the term will be interpreted in accordance with the misrepresentation, not what is written.
• Thompson v LMS Railway (reasonable notice)


  Any attempt to introduce new terms to the contract after acceptance will fail, unless there is a new contract to vary the original contract. This means that problems to do with incorporation arise when a term has not been made clear.
• Chapelton v Barry Urban District Council (reasonable notice)


  The contractual document must reference a distinction between a contract and a receipt.
• Parker v South Eastern Railway (reasonable notice)


  There must be reasonable steps to draw the exclusion clause to the other party's attention.
• Thornton v Shoe Lane Parking (reasonable notice)


  The reasonable notice must be given before the conclusion of the contract by acceptance of an offer.
• Hollier v Rambler Motors (previous dealings)


  If the parties have dealt on the same terms in the past, it is possible to imply knowledge of the clause from past dealings, providing that these dealings have been consistent.
• Scruttons v Midland Silicones (third parties to a contract)


  The doctrine of privity usually prevents third parties from being able to rely on terms of a contract. This doctrine also applies to exclusion clauses.
• New Zealand Shipping v Satterthwaite


  The doctrine of privity can be overruled where there is an expressed term that allows for third parties to be included (Contracts (Rights of Third Parties) Act 1999).
• Transocean Drilling v Providence Resources (contra proferentem rule)


  Where there is doubt about the meaning of a term in a contract, the words will be construed against the person who put them in the contract.
• Statute law controls


  - Unfair Contract Terms Act 1977

  - Consumer Rights Act 2015
• Unfair Contract Terms Act 1977


  Provides protection in business-to-business contracts
• Consumer Rights Act 2015


  Provides protection in consumer-to-trade contracts
• S.2(1) of the Unfair Contract Terms Act 1977


  A person cannot exclude liability for death or personal injury caused by negligence.
• S.6(1) of the Unfair Contract Terms Act 1977


  An implied condition from the Sales of Goods Act 1979 and Supply of Goods and Services Act 1982 cannot be excluded.
• S.3 of the Unfair Contract Terms Act 1977


  This imposes a reasonableness test to contracts where one party is subjected to the other's standard written terms of business.
• S.11(1) of the Unfair Contract Terms Act 1977

  Is the exclusion clause reasonable considering what the parties knew at the time of when the contract was made?

  
  

  Smith v Eric S Bush
• S.11(2) of the Unfair Contract Terms Act 1977


  Exclusion clauses that involve breaches of implied conditions (Sales of Goods Act 1979 and Supply of Goods and Services Act 1982) must consider criteria set out in Schedule 2 of the act:

  1. Bargaining powers of the parties

  2. Bribes or persuasions to include a term

  3. Knowledge of the extent of the term

  4. Likelihood of compliance with the term

  5. If goods were specially ordered

  
  

  Watford Electronics v Sanderson
• S.11(4) of the Unfair Contract Terms Act 1977


  Specifically for limitation clauses, the defendant could protect themselves against any liability (e.g. insurance).

  
  

  George Mitchell v Finney Lock Seeds
• S.11(5) of the Unfair Contract Terms Act 1977


  This requires the party who inserts the clause in the contract to show that it is reasonable in all circumstances to include it.

  
  

  Warren v Truprint
• S.31 of the Consumer Rights Act 2015


  Prohibits a term excluding or limiting liability in supply of goods contracts

  
  

  This is prohibited in the following sections:

  - Section 9: Goods to be of a satisfactory quality.

  - Section 10: Goods to be fit for particular purpose.

  - Section 11: Goods to be as described.

  - Section 14: Goods to match a model seen or examined.

  - Section 15: Installation as part of conformity of the goods with the contract.
• S.57 of the Consumer Rights Act 2015


  Prohibits a term excluding or limiting liability in supply of services contracts.

  
  

  This is prohibited in the following sections:

  - Section 49: Service to be performed with reasonable care and skill.

  - Section 50: Information about trader or service to be binding.

  - Section 51: Reasonable price.

  - Section 52: Reasonable time.
• S.62 of the Consumer Rights Act 2015


  Requires that all consumer contract terms and notices are to be fair
• Unfair' (S.62 of the Consumer Rights Act 2015)

  Terms which put the consumer at a disadvantage, through limiting the consumer's rights or disproportionately increasing their obligations ('fairness test').

  
  

  Terms relating to the main subject matter of the contract will not be subject to the 'fairness' test if they are transparent.
• S.65 of the Consumer Rights Act 2015


  Prohibits the exclusion or restriction of liability for death or personal injury resulting from negligence