Exemption Clauses - Contract Law

Where a party limits liability in a contract.

Where a party tries to avoid any liability at all in a contract

The term in the contract.

Can the damage which has occurred be interpreted as falling within the boundaries of the exemption clause?

Is the term allowed within current statute Law?

-Conditions were on the back of the door of the hotel room were not incorporated as the contract had already been concluded at the front desk.

Terms found on back of ticket were not incorporated into a contract as they came often contract was completed.

Court held that an individual cannot escape a contractual term by failing to read the contract.

Must not come too late

The term must be brought to attention of the other party in a reasonable way.

A term included in a receipt cannot incorporate terms into a contract if the contract has already been completed.

If the document is regarded in a contractual manor then it is usually deemed to be incorporated into the contract - ticket cases for example are not of contractual type.

It was held that 4 transactions over 5 years is not sufficient to establish a course of dealing and therefore the exemption clause was not incorporated to cover damage for a car.

A term is not incorporated when there is an inconsistent course of meaning.

A ferry sank with the claimants car and they didn’t sign a disclaimer.

Any doubt or ambiguity in an exemption clause will be interpreted against the person seeking to rely on it (or proffering it)

The court also held that a customer could understand the clause to mean that the defendants were not liable for a fire caused without their negligence.

Facts - customer was told there was cover for beads and sequins on a dress. When actually contract stated not.

Ratio - contradictory oral statement will invalidate the exemption clause from in the formal statement.

Facts - a garage attendant advised a customer to leave a car unlocked but items were later stolen from the car. Was an disclaimer for liability still. Oral statement overruled this disclaimer.

- overriding oral statement may contradict exemption clause.

Is there any legislation which effects this clause?

UCTA - The Unfair Contract terms Act 1977

UTCCR - The Unfair Terms in Customer Contract Regulations 1999

The Unfair Contract terms Act 1977

The Unfair Terms in Customer Contract Regulations 1999

- UCTA only conforms to exclusion clauses/ limitation clauses -> UCTA applies to all contract terms.

- UCTA protects both customer and commercial contractor (but mostly customer when d is acting in course of a business) -> UCTA only protects customer.

Mostly applies to customer.

A contract term cannot exclude or restrict liability for death or personal injury resulting from negligence.

A contract term can only exclude or restrict other liability resulting from negligence if it is reasonable to do so.

Thompson v Lohan 1987

- A term in contract tried to exclude liability.

It was held: Excluding liability for death and injury not allowed under UCTA 1977.

When dealing on one party’s standard business terms, a contract term cannot exclude or restrict liability for non-performance or for performance which is substantially different unless it is reasonable to do so.

Linked to section 3. It defines reasonableness as a fair and reasonable term having regard to the circumstances which were, or least to have reasonably been known when the contract was made.

- the bargaining strength of parties.

- any inducement to contract.

- special requirements of the customer

- whether the supplier has acted equitably.

- the term tries to limit or exclude liability on goods - e.g. goods to be of satisfactory quality, fit for a particular purpose, as described —- section 31.

- liability cannot be excluded on services e.g. service to be performed with reasonable price and within a reasonable time —- section 57

- a term cannot exclude personal injury or death —- section 65

Facts known at the term of contract.

Limitation clause needs to consider D’s resources and insurance availability.

Look at the strength of bargaining power, inducements trade custom to decide reasonableness.

Onus on maker to prove exclusion clause is reasonable.

Facts - sellers sold potato seeds which were infected with a virus. This seller has stipulated that complaints were required within 3 days of delivery. - how would you tell in only 3 days?

Held - decided that the buyers could not have known the presence of the virus in the seeds within 3 days of it being delivered. So exemption clause not reasonable.

Facts - cabbage seed was purchased however the cabbage crop failed. The contract contained a clause which was limited liability to the price of the seeds (£192). C had lost £60,000 on the defected seeds.

Held - the Court of Appeal held that the clause was unreasonable.

A survey report of c’s house carried out by the d failed to correctly value the house and detect issues. The survey lees company contained a clause exempting the surveyor from liability. The court held this was unreasonable under UCTA 1977.

Facts - the Mirror Group newspaper our scratch cards with its newspapers. Mr O’Brien and 1471 other people won. MGN has distributed too many by mistake. “Rule 5” was found in newspapers: in such situation winnings would be shared.

Held - Rule 5 was incorporated as it had resonantly been brought to readers attention.

A term will be unfair and so not binding is it is in ‘contrary to the requirements of good faith causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the customer’.

Linked to section 3. It defines reasonableness as a fair and reasonable term having regard to the circumstances which were, or least to have reasonably been known when the contract was made.

- the bargaining strength of parties.

- any inducement to contract.

- special requirements of the customer

- whether the supplier has acted equitably.

- the term tries to limit or exclude liability on goods - e.g. goods to be of satisfactory quality, fit for a particular purpose, as described —- section 31.

- liability cannot be excluded on services e.g. service to be performed with reasonable price and within a reasonable time —- section 57

- a term cannot exclude personal injury or death —- section 65

Facts known at the term of contract.

Limitation clause needs to consider D’s resources and insurance availability.

Look at the strength of bargaining power, inducements trade custom to decide reasonableness.

Onus on maker to prove exclusion clause is reasonable.

Facts - sellers sold potato seeds which were infected with a virus. This seller has stipulated that complaints were required within 3 days of delivery. - how would you tell in only 3 days?

Held - decided that the buyers could not have known the presence of the virus in the seeds within 3 days of it being delivered. So exemption clause not reasonable.

Facts - cabbage seed was purchased however the cabbage crop failed. The contract contained a clause which was limited liability to the price of the seeds (£192). C had lost £60,000 on the defected seeds.

Held - the Court of Appeal held that the clause was unreasonable.

A survey report of c’s house carried out by the d failed to correctly value the house and detect issues. The survey lees company contained a clause exempting the surveyor from liability. The court held this was unreasonable under UCTA 1977.

Facts - the Mirror Group newspaper our scratch cards with its newspapers. Mr O’Brien and 1471 other people won. MGN has distributed too many by mistake. “Rule 5” was found in newspapers: in such situation winnings would be shared.

Held - Rule 5 was incorporated as it had resonantly been brought to readers attention.

A term will be unfair and so not binding is it is in ‘contrary to the requirements of good faith causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the customer’.

Consumer Rights Act 2015