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TERMS OF THE CONTRACT: EXCLUSION CLAUSES AND UNFAIR TERMS I. INTRODUCTION Contractual dealings between business parties would be extremely difficult without exclusion and limitation clauses, because they enable one party's liability to be capped at a level that makes it viable for him to contract at all or at a realistic price, while making clear the extent of the risk that the other party is undertaking (enabling him to protect himself in other ways, such as by taking out insurance). Distinction between:
- Procedural unfairness -> unfairness in making the contract
- Substantive unfairness -> unfairness of the terms or the substance of the contract
 Lord Neuberger and Sumption in Cavendish Square Holding v Talal El Madessi SC "leaving aside challenges going to the reality of consent, such as those based on fraud, duress or undue influence, the courts do not review the fairness of men's bargains either at law or in equity" However, exclusion clauses may also be used in a manner which exploits the inferior bargaining position of the other party in a wholly unreasonable way. Such clauses may be tucked into the small print of standard form contracts and not drawn to the other party's attention. They can reduce the contractor's liability to such an extent that the consumer's contractual expectations are rendered worthless, leaving him with no meaningful redress. Before considering whether an exclusion clause is effective, we have to first consider whether the defendant would have been liable in the absence of the exclusion clause. To establish whether an exclusion clause is valid: 1

Consider whether it has been incorporated into the contract


If yes, consider whether properly construed it applies to the facts


If yes, examine whether it is invalidated by the UCTA 1977 (and/or the UTCCR 1999)

II. REGULATION OF EXCLUSION CLAUSES AT COMMON LAW Incorporation A contracting party which wishes to rely on an exclusion or limitation clause must prove that the clause has been validly incorporated into the contract. Exclusion clauses may be regarded as 'onerous' or 'unusual' and attract the more stringent

rules relating to the incorporation of terms into the contract (Interfoto v Stiletto
[1989] Transparency company with a clause of 5 pounds per transparency per day for a course of 14 days - total cost of 3.7k for 47 transparencies for a month, held the holding fee was ineffective as Dillion LJ said this was a "particularly onerous or unusual" term and must have special notice. Ultimately paid 3.5 quid per week per transparency) However, Hobhouse LJ in AEG v Logic [1996] questions whether there is still a need for a restrictive approach to 'onerous' terms given that the UCTA 1977 is in force. He argues that it is under the provisions of that Act that problems of unreasonable clauses should be addressed. This promotes consistency and certainty, as the Act provides a relatively structured manner of determining whether a term is unfair or not. In contrast, there is no clear test as to what constitutes an 'onerous' or 'unusual' term, which encourages courts to adopt a piecemeal approach that is neither consistent nor conducive to commercial certainty. Construction The party seeking to rely upon an exclusion clause must prove that the exclusion clause, as a matter of construction, is effective to exclude liability for the loss that the claimant has suffered. The courts have applied very restrictive rules to the interpretation of exclusion clauses. (a) Ambiguous clauses are interpreted contra proferentem The principle applies generally. It provides that where there is an ambiguity in a contract term, the ambiguity is to be resolved against the party relying on the term. If a party wants to exclude his liability under a contract, he must use clear and explicit words (William Hare v Shepherd [2010] exclusion of liability clause drafted based on 1986 Act, when Enterprise Act 2002 came out not updated. Therefore inconsistent drafting, read against the draftsman, ICS Chartbrook principles of interpretation would not come to the rescue, especially since the clause was drafted in a way that would work)
- Eg John Lee & Son (Grantham) Ltd v Railway Executive [1949] - where "loss, damage… however caused (whether by act or neglect of the company or their servant or not) which but for the tenancy hereby created … would not have arisen" lessor held not to be protected by the exclusion clause as "but for the tenancy" restricted clause to liabilities arising from relationship between landlord and tenant (b) Exclusion of liability for negligence Contractual liability is usually 'strict' in that the contracting party is undertaking to do something, and not just to take reasonable care in doing it. It is usually this 'strict liability' which the party relying on an exemption clause is trying to exclude.

The courts are traditionally hostile to attempts to go further and exclude liability for negligence, and are thus reluctant to construe exclusion clauses to cover negligence, unless very clear words have been used. (i) Canada Steamship principles In Canada Steamship v The King [1952] (where negligent fire, Clause 7 "the lessee (CSL) shall not have any claim … for… damages… to … goods… being…in the said shed" did not exclude negligence liability in clear terms and Clause 17 "the lessee shall at all times indemnify… the lessor from and against all claims… by whomsoever made … in any manner based upon, occasioned by or attributatble to the execution of these presents, or any action taken or things done … by virtue hereof, or the exercise in any manner of rights arising hereunder" as ambiguous and had to be construed against the Crown) Lord Morton laid out three guidelines as to when an exclusion clause purporting to exclude negligence liability would have that effect: 1

If the clause contains language which expressly exempts the person in whose favour it is made (hereafter called "the proferens") from the consequence of negligence, effect must be given to that provision


If there is no express reference to negligence, the court must consider whether the words used are wide enough, in their ordinary meaning, to cover negligence. If a doubt arises at this point, it must be resolved against the proferens


If the words used are wide enough for the above purpose, the court must then consider whether "the head of damage may be based on some ground other than that of negligence". If the proferens could be liable on some other basis as well as negligence (e.g. strictly liable AND in negligence), the clause will be interpreted so as not to exclude liability for negligence

If on the other hand the words could only conceivably cover negligence (because the contractor is only liable to take reasonable care), logic suggests that the clause must exclude liability for negligence (otherwise it would be meaningless). In practice, courts have tended to resist this argument and to insist that clear words must be used to exclude liability in negligence even where there is no other sort of liability potentially covered by the clause (Hollier v Rambler [1972] where C sometimes had to sign form containing exclusion clause sometimes not when repairing car. This time never signed and car was damaged. D argued that exclusion clause incorporated into oral dealings due to previous dealings where exclusion clause was signed. Held "The company is not responsible for damage caused by fire to customer's cars on the premises. Held no incorporation of the term. OBITER Customer's cars are driven by staff at owners' risk" was not so plain that it could exclude liability for negligence. Also exemption clause was not incorporated into oral dealings) (ii) Problems

Artificial constructions are sometimes imposed to prevent exclusion of liability for negligence. In Hollier v Rambler, a fire broke out in the defendant's garage where the claimant's car was being repaired, damaging the claimant's car. The contract included a clause which sought to exclude D's liability for "damage caused by fire to customers' cars on the premises." CA held that the exclusion clause did not apply as a matter of interpretation. The garage would not be liable in the first place for damaging customers' cars unless it was negligent, so logic would suggest that the clause can only have been referring to negligence liability. But the court disagreed, pointing out that a nonlawyer might think there was liability without negligence, and interpreted the clause as a mere 'statement of fact in the nature of a warning' that there was no strict liability for fire. (iii) Application of the principles today Today, attempts to exclude liability in negligence for damage to or loss of property must pass the statutory test of reasonableness under the UCTA 1977, so there is far less incentive for the courts to strain the construction of clauses and notices to prevent them covering negligence. IN HIH v Chase Manhattan [2003], HL emphasized that post UCTA, the Canada Steamship guidelines while still relevant should not be applied mechanistically. According to Lord Hoffmann, the question is whether the language used by the parties, construed in the context of the whole instrument and against the admissible background, leads to the conclusion that they must have thought it went without saying that the words, although literally wide enough to cover negligence, did not do so.
- Lord Denning MR in George Mitchell v Finney Lock Seeds [1983] CA (Dissenting) - that now with UCTA, Canada Steamship principles might not be so relevant
- Cf Geys v Societe General (2012) where Lord Hope applied Canada Steamship principles, in respect of an employer's attempt to restrict liability for wrongful termination This flexibility in interpreting clauses excluding liability for negligence is to be welcomed, since it subjects such clauses to the same contextual approach to construction used for all other contractual terms. (c) Exclusion of liability for fundamental breach In Photo Production v Securicor [1980] ("under no circumstances be responsible for any injurious act or default by any employee… unless such act or default could have been foreseen and avoided by the exercise of due diligence on the part of
[Securicor]" - no doctrine of fundamental breach and that the words of the exclusion clause were clear and on their true construction covered deliberate acts as well as negligence so as to relieve the defendants from responsibility for their breach of the implied duty to operate with due regard to the safety of the premises), HL held that there is no rule of law that liability for fundamental breach can never

be excluded. Instead, we have a common sense principle of construction that, the more serious the breach, the clearer the words needed to exclude it, but if sufficiently clear words are used, the courts will give effect to the clause (safe in the knowledge that legislation will now protect deserving parties from unreasonable exclusion clauses).
- Lord Wilberforce - "the doctrine of "fundamental breach" in spite of its imperfections and doubtful parentage has served a useful purpose", no longer needed die to UCTA 1977 (d) Construction of limitation clauses Lord Fraser in Ailsa Craig v Malvern [1983] (where limited liability to 1000 quid for "any loss or damage of whatever nature arising out of or connected with the provision of, or purported provision of, or failure in provision, held to be a valid. Seems to suggest lower standard for limitation clause than exclusion clause) held that limitation clauses are not interpreted as restrictively as exclusion clauses. Such clauses will be read contra proferentem and must be clearly expressed, but they should not be judged by the specially exacting standards which are applied to exclusion clauses.
- Lord Fraser - strict principles of exclusion clauses, "in my opinion these principles are not applicable in their full rigour when considering the effect of clauses merely limiting liability" Strict standards are imposed on exclusion clauses due to the inherent improbability that the other party to a contract including such a clause intended to release the proferens from a liability that would otherwise fall upon him. But there is no such high degree of improbability that he would agree to a limitation of the liability of the proferens. Prevention of exclusion of liability for fraud at common law The law, on public policy grounds, does not permit a contracting party to exclude liability for his own fraud in inducing the making of the contract (HIH v Chase Manhattan [2003] Lord Hobhouse, Lord Bingham where "shall have no liability of any nature to the insurers for any information provided by any other parties" held this can exclude liability for negligent misrepresentation but not fraud. Can exclude liability for another's fraud but not your own fraud)

III. THE UNFAIR CONTRACT TERMS ACTS 1977 Difference between procedural unfairness and substantive unfairness. Procedural unfairness refers to the way that the contract is formed. Substantive unfairness looks to the contents of the contract. Scope of the Act


Following the enactment of the Consumer Rights Act 2015, UCTA applies only to non-consumer contracts (and notices), i.e. it applies only to contracts (and notices) between parties acting in the course of a business.


Misleading title



UCTA does not deal with unfair contract terms in general, but only with exclusion clauses and related clauses.


UCTA is not limited to contract terms, but covers non-contractual notices which exclude liability in tort.

Certain contracts fall outside the ambit of UCTA (e.g. insurance contracts and contracts concerning the transfer of an interest in land)

Pattern of control Three broad divisions of control: (1) Control over non-consumer contract terms or notices that exclude or restrict liability for negligence. (2) Control over standard terms in non-consumer contracts that exclude or restrict liability for breach of contract. (3) Control over contract terms that exclude or restrict liability for breach of certain terms implied by statute in contracts of sale of goods and in other contracts for the supply of goods (covered in outline). If the contract term is subject to the Act's control, the control may assume one of two forms: 1

The restriction or exclusion of liability may be rendered absolutely ineffective or,


It may be effective only in so far as the term satisfies the requirement of reasonableness.

Type of Contract

Type of Liability Excluded/Restricted

Form of Control

Any non-consumer

Negligent personal




UCTA, s 2(1)

Any non-consumer

Negligent loss or




UCTA, ss 2(2) &


_____________________________________________________________________________________ Standard form

Any breach of contract


UCTA, ss 3(2) &


Sale of goods



Breach of Sale of Goods Act 1979, s 12

Unexcludable UCTA, s 6(1)

undertakings as to title

Sale of goods

Breach of Sale of Goods Act 1979, ss 13-15


UCTA, ss 6(1A),

undertakings as to description, 11(1)-(2) quality, fitness for

Schedule 2

purpose, or sample (implied terms)

"Business liability" (s1(3)) 1 Scope of Part I.

(3)In the case of both contract and tort, sections 2 to 7 apply (except where the contrary is stated in section 6(4)) only to business liability, that is liability for breach of obligations or duties arising—
(a)from things done or to be done by a person in the course of a business (whether his own business or another's); or (b)from the occupation of premises used for business purposes of the occupier;

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Critically examine how the law on exclusion clauses in contract has developed and the key issues of legal policy to which the present law gives rise.ANSWERIntroduction An exclusion (or exemption) clause is a term in a contract that purports to exempt or limit the liability of a party to the contract or to restrict the rights of a party to the contract.[1] Exclusion clauses are commonplace. They may be incorporated in standard form contracts or in standard terms and conditions, they may be printed on tickets or displayed on notices. Usually exclusion clauses are imposed by the party in the strongest bargaining position with a view to protecting his or her own interests.. There are essentially three forms of exclusion clause: 1. Pure exclusion clause: This form of clause identifies a potential breach of contract (for example for the negligence of one of the parties) and purports to exclude liability for the breach, preventing the other party from suing to remedy the breach in question.. 3. Time limitation clause: This species of exclusion clause sets down the stipulation that any action to claim for breach under the contract must be commenced within a specified period of time, on the expiry of which the claim is extinguished. 2. Monetary limitation clause: This form of clause imposes a limit on the amount claimable for a particular breach of contract, regardless of the loss actually sustained. Whatever the particular origin or nature of an exclusion clause three questions will be asked before a court will be moved to enforce it. The first question is whether the exclusion clause has been effectively incorporated into the contract? The second is whether the exclusion clause should be interpreted so as to effectively cover the breach in question? Finally, whether the Unfair Contract Terms Act 1977[2] (and see also the Unfair Terms in Consumer Contracts Regulations 1999[3]) permits the exclusion of liability?[4] Traditionally the courts have proved reluctant to enforce exclusion clauses and as a matter of course such clauses are restrictively interpreted and applied. The reason for this should be obvious. The raison d’tre of an exclusion clause is to limit the scope of the law and the courts of law and to reduce legal liability. As will be discussed below the judiciary is typically predisposed to resist such self-imposed limitations on their room for legal manoeuvre and juristic power. In terms of the development of the law on exclusion clauses, while relevant case law and precedent stretches back into the nineteenth century, the bulk of the case law on the issue is of a twentieth century provenance. This paper will discuss aspects of the law on exclusion clauses and address certain important issues of legal policy to which the present law gives rise. Analysis of the Case Law on Exclusion Clauses In order for a person to rely on an exclusion clause he or she must prove that it formed part of the contract struck between the parties. Case law indicates that an exclusion clause may be incorporated in a contract by means of signature, by effective notice, or by a previous course of dealing. These are discussed in turn below. Incorporation by signature may occur if a document having contractual effect and containing an exclusion clause is signed by the parties. In these circumstances the clause may be binding on the parties regardless of whether it has been read or even fully comprehended by one of the parties. A case in point is L'Estrange v Graucob[1934][5]. Clearly there are important and pragmatic public policy reasons to justify the courts treatment of signed documents as sovereign and these can hardly be criticised in this context. That said however, where one party has made a misrepresentation concerning the nature of the document or the clause in question incorporation would not be deemed effective even if the document was signed, see: Curtis v Chemical Cleaning Co [1951][6]. In Curtis v Chemical Cleaning Co [1951] The plaintiff took a dress to the defendants to be cleaned. She signed a document entitled “Receipt” after being advised by the defendants employee that it protected the cleaners from liability for damage to beads and sequins. In fact the receipt included a clause excluding all liability: “for any damage howsoever arising”. In the event the cleaning process badly stained the dress. The court held that the cleaners could not avoid liability for the damage to the fabric of the dress by reference to the exclusion clause because its scope had been misrepresented by the defendant’s agent. In some circumstances an exclusion clause may be included in an unsigned document such notice or a ticket.. In these situations, the court will expect that reasonable and sufficient notice of the existence of the exclusion clause is offered. In order to achieve this requirement the existence of the exclusion clause must be brought to the attention of the other contracting party before or at the point in time when the contract is formed. This rule reflects the fundamental rule of contract law that a contract is made at the moment that an offer is met by a valid acceptance conforming to all the other conditions necessary for contract formation. At that point in time the obligations and rights entailed in the agreement crystallise forming a binding agreement. Nothing can thereafter be unilaterally added or taken away from the contract at any time. Any attempt unilaterally to vary the contract thereafter will fail, and this includes any attempt to introduce an exclusion clause into the terms. The case Olley v Marlborough Court Ltd (1949)[7] is instructive on the point. A couple arrived at a hotel and paid for a room in advance at the reception desk. On the wall of their room a notice was displayed purporting to exclude the hotel’s liability for personal belongings stolen or lost from the room. Personal valuables were later stolen. When the matter came to court it was held that the hotel could not rely on the exclusion clause to avoid liability because the disclaimer had not been observed until after the point of contract formation. Moreover there is a general rule that an exclusion clause will only be incorporated into the contract if the party seeking to rely on it took all reasonable steps to bring it to the other parties’ attention. In Thornton v Shoe Lane Parking [1971][8], Thornton was permitted to enter a car park after taking a ticket from a machine at the gate. The ticket issued by the machine referred to the applicability of certain conditions. These conditions, one of which purported to exclude liability for damage to cars and personal injury, were displayed on a notice inside the car park. Thornton sustained injury while in the car park and sued for compensation.. The operators of the car park sought to rely on the stated exclusion clause but the court ruled that it was ineffective. The contract was formed when Thornton took the ticket at the gate (a form of acceptance by performance or conduct) before he gained access to the car park and before he had seen the notice bearing the exclusion clause. It is submitted that Thornton v Shoe Lane Parking Ltd seems to suggest that the broader the exemption clause, the more the party relying on it will have had to have done to bring it to the other parties’ attention.. That said however, the courts have confirmed that only “reasonably sufficient” notice of the exemption clause must be given. It is pertinent to note that “actual notice” is not in fact required, as the case Thompson v LMS Railway [1930][9] testifies. It is submitted by this commentator that the failure to specify that actual notice is necessary can be criticised as a weakness in the law, a potential loophole or lacuna that could allow terms that have not been fully considered into a binding agreement unfairly. It is argued that a requirement to provide actual notice would better reflect the fundamental rule of contract formation on certainty of terms. The question as to what is reasonable is one of fact which is dependent on all the circumstances of the case and the situation of the parties involved. The courts have repeatedly ruled that notice should be drawn to the existence of an exclusion clause by means of clear and categorical words on the front of any document delivered to the other party. However, it does seem that the degree of notice required by the court may increase according to the gravity or commonality of the exclusion clause at issue.. On the point as to the “unusualness” of the clause Interfoto v Stiletto Ltd [1988][10] offers good authority. In Interfoto, the defendant advertising agency, ordered 47 photo transparencies from a photo library. The transparencies were delivered with a note which included certain conditions. One term sought to impose a punitive holding fee of £5 per day for any transparency retained after 14 days. In fact the defendants failed to return the transparencies on time and the plaintiffs sued for a total sum of £3785 under the said condition. It was held that the clause had not been incorporated into the contract between the parties. Interfoto had not taken reasonable steps to bring such a draconian and unusual term to the notice of the defendant. This decision was underpinned in substance by Thornton v Shoe Lane Parking [1971]. In addition it is clear that for incorporation to be deemed effective a clause must be printed in a contractual document or one which a reasonable person would expect to include contractual terms, and not, for example, merely in a document that acknowledges payment such as receipt as in Parker v SE Railway Co (1877)[11]. See also Chappleton v Barry UDC [1940][12], in which deck chairs were stacked by a notice asking those who wished to use the deck chairs to obtain tickets and retain them for inspection. The plaintiff bought tickets for two chairs, but did not read the tickets. On the reverse of the ticket was an exclusion clause purporting to exempt the council from liability over the use of the chairs. In the event the plaintiff suffered injury when the deck chair he was sitting on collapsed. The court held that the clause was not effective. The ticket was found to be a mere receipt, the object of which was that it might be produced to prove that the hirer had paid for the chair and to indicate the duration of the hire. The court noted that an individual might sit in a chair for a considerable length of time before an attendant took his money and provided him with a receipt containing the clause. Even in circumstances where there has been insufficient notice an exemption clause may be deemed incorporated into a contract where there is evidence of a previous course of dealings between the parties on terms that include the exclusion clause. It is submitted that the law in this field has developed along similar lines to that of the general law of contract. In order to qualify as substantial enough to introduce an inference that an exclusion clause should be included in a contract the previous course of dealings must be regular and consistent over a reasonable period of time and transactions.. In Spurling v Bradshaw [1956][13] the defendant delivered barrels of orange juice to the plaintiffs. Several days later the defendant received a document from the plaintiff acknowledging receipt of the barrels. The document contained a clause excluding the plaintiffs from liability for damage or losses "occasioned by the negligence, wrongful act or default" caused by the plaintiffs, their agents or employees. Later, when the defendant collected the barrels some were empty, and some contained dirty water. Accordingly, the defendant refused to pay the storage charges and the plaintiffs sued. The court held that, despite the fact that the defendants did not receive the document containing the exemption clause until a point in time after the conclusion of the contract, the clause in question had in fact been incorporated into the contract as a result of a regular course of dealings between the parties over the years. It was proved that the defendant had received similar documents on the occasion of previous dealings and that he was now bound by the terms they contained. Spurling can be contrasted with McCutcheon v MacBrayne [1964][14]. In McCutcheon exclusion clauses were included in 27 paragraphs of small print on notices displayed both outside and inside a ferry booking office and in a “risk note” which was occasionally signed by passengers. Here the exclusion clauses were held not to have been incorporated in the contract because there was no course of conduct substantial or consistent enough to infer a consistency of dealing. It is submitted that where a party seeks to enforce an exclusion contract against a private consumer it will normally be necessary to point to a greater number of past transactions than where the clause is enforced against a trading partner or commercial undertaking. This point is illustrated by Hollier v Rambler Motors [1972][15]. In Hollier the plaintiff had used the defendant garage on approximately four occasions over a period of five years and had sometimes signed a contract which included a term excluding the defendants from liability for damage by fire.. On the relevant occasion no contract was signed and the plaintiff's car was seriously damaged by a fire at the premises. The court held that there was no regular course of dealing, and that the exclusion clause could not be deemed incorporated. This case can be contrasted with Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association (1969)[16] in which in excess of 100 contractual notices including an exclusion clause had been given over a period of three years. Unsurprisingly this was found to amount to a course of dealing. It is argued that this rule of policy is both well founded and pragmatic, given that private individuals cannot be expected to behave with the same legal and commercial uniformity as companies. Furthermore the courts have, rightly it is submitted, ruled that the disparity in bargaining power between the parties is a factor that may be taken into account. Finally, where there is no course of dealing or other form of direct incorporation it is possible to infer the existence of an exclusion clause by means of cogent evidence of trade usage or custom. In the case British Crane Hire v Ipswich Plant Hire [1974][17] both parties were undertakings in the business of hiring out earth-moving equipment.. The plaintiffs supplied equipment to the defendants on the basis of a telephone contract made without reference to any of the conditions of the hire. Later, the plaintiffs dispatched a copy of their conditions to the defendants but before the defendants had signed them, the crane sank into weak ground. The unsigned conditions included a clause in standard use by all firms in the business, namely that the hirer should indemnify the owner for all expenses in connection with the use of the equipment. It was held that the terms should be deemed included in the contract, not on the strength of a course of dealing, but because it was fair to assume that there was a mutual understanding between the parties, who were after all in the same line of business, that any contract for hire would be concluded on these standard terms. On its facts British Crane Hire v Ipswich Plant Hire was clearly fairly decided, but it is submitted that exclusion clauses incorporated merely on the strength of trade usage or custom will be rarities and that this method of incorporation would not and should not be employed in the typical context of the private consumer. Exclusion Clauses: Scope of Interpretation In common with the development of the normal principles of general contract law, the meaning of an exclusion clause is interpreted and construed along the lines of its ordinary and natural meaning and in the context of the contract in question. That said however, if after construing the contract in this manner, ambiguity still remains in relation to the exemption clause, the contra proferentem rule will be applied. This has the effect that the clause is construed in favour of the party whose rights are being restricted and against the party attempting to take advantage of the rule. The case of Canada SS Lines Ltd v. The King [1952][18] offers authority on this point. In Baldry v Marshall [1925][19] a clause excluded the defendant's liability for any “guarantee or warranty, statutory or otherwise”. However the Court of Appeal found that the breach in question involved a condition of the contract. In light of the fact that the clause failed to exclude liability for breach of a condition expressly, the defendant could not rely on it. Exclusion Clauses: Compatibility with Statute and Regulation Overlaying the common law rules restricting the operation of exclusion clauses, the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999 also limit their application. Whereas the Unfair Contract Terms Act 1977 is (generally) applicable to all contracts, although private consumers are offered more protection, the Unfair Terms in Consumer Contracts Regulations 1999, are concerned only with private consumer contracts and with the protection of the private consumer.. This reflects the case law on exclusion clauses that offers private parties a higher degree of protection, such as: Hollier v Rambler Motors [1972]. Under section 2(1) of the 1977 Act no one “acting in the course of a business can exclude or restrict their liability in negligence for death or personal injury by means of a term in a contract or by way of notice”. Section 2(2) provides that “liability for negligence for any other kind of loss or damage can be excluded provided the term or notice satisfies the requirement of reasonableness”. This is clearly important given that the law of negligence offers a different and complimentary liability stream to that of contract law. It is submitted that it is entirely appropriate for the law to draw this distinction and prevent contracting parties from unduly insulating themselves against liability that would ordinarily apply universally to all individuals in society outwith the contractual context. In addition, the Unfair Terms in Consumer Contracts Regulations 1999[20] apply, with certain exceptions, to unfair terms in contracts between a private consumer and a seller or supplier and stipulate that unfair terms not individually negotiated and which, cause a significant disparity in the balance between the respective parties’ rights and obligations under the contract to the disadvantage of the consumer will not be deemed binding. These may often include exclusion clauses deemed to wide or unfair in the context of the transaction. Commentary The title to this paper asks for an examination of how the law on exclusion clauses in contract has developed and the key issues of legal policy to which the present law gives rise. It is clear that the judiciary do not welcome exclusion clauses with open arms and this is understandable, given that the raison d’tre of exclusion clauses is to exclude normal legal liability and thus to fetter both the reach and scope of the law and the ability of the courts to intervene between the parties properly to resolve a case. It is clear that the law on exclusion clauses is wedded closely to the ordinary and natural rules of contract formation. Examples of this include the insistence that notice of the exclusion clause must be communicated to the other party prior to contract formation and that adequate notice is provided. However, there is also some jurisprudential dislocation between the streams of law and an example being that “reasonably sufficient” notice rather than “actual notice” of an exemption clause must be given as found in Thompson v LMS Railway [1930]. In terms of current legal policy a delicate balance has been struck between the interests of those seeking to enforce exclusion clauses and those whose right to sue may be excluded by them. Generally speaking the current stance of relevant legal principle favours the latter interest because that line enhances the scope efficacy and utility of the general law. THE ENDGLOBAL DOCUMENT WORD COUNT : 3473BIBLIOGRAPHYExclusion Clauses and Unfair Contract Terms, Lawson R., (2005) Sweet and Maxwell Smith and Keenans Advanced Business Law, Keenan D, (2000) Longman Contract Law, McKendrick E., (2003) Palgrave Macmillan Unfair Contract Terms Act 1977: http://www..netlawman.co.uk/acts/unfair-contract-terms-act-1977.phpUnfair Terms in Consumer Contracts Regulations 1999: http://www..netlawman.co.uk/acts/the-unfair-terms-in-contracts-regulations-1999.phpBusiness Law, Keenan, D. and Riches S., Seventh Ed, (2001) Longman Principles of Business Law, Kelly A., and Holmes D., (1997) Cavendish Publishing Outline of the Law of Contract, Treitel G.H., (2004) Lexis Law Cases drawn from original law reports as footnoted. 1


[1]Exclusion Clauses and Unfair Contract Terms, Lawson R., (2005) Sweet and Maxwell, Chapter 1. [2] See: http://www.netlawman.co.uk/acts/unfair-contract-terms-act-1977.php. [3] As amended, see: http://www.netlawman.co.uk/acts/the-unfair-terms-in-contracts-regulations-1999.php. [4]Contract Law, McKendrick E., (2003) Palgrave Macmillan. [5] 2 KB 394. [6] 1 KB 805. [7] 1 All ER 127. [8] 2 QB 163. [9] 1 KB 41. [10] 1 All ER 348. [11] 2 CPD 416. [12] 1 KB 531. [13] 2 All ER 121. [14] 1 WLR 125. [15] 2 AB 71. [16] 2 AC 31. [17] QB 303. [18] AC 192.. [19] 1 KB 260. [20] Which replaced the Unfair Terms in Consumer Contracts Regulations 1994.

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