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Lecture 7BLecture 7B
EXCLUSION CLAUSESEXCLUSION CLAUSESEXCLUSION CLAUSESEXCLUSION CLAUSESEXCLUSION CLAUSESEXCLUSION CLAUSESEXCLUSION CLAUSESEXCLUSION CLAUSES
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Exclusion and Limiting Clauses
A clause may be inserted into a contract which aims to
excludeexclude or limitlimit one party's liability for breach of contract ornegligence. However, the party may only rely on such a
clause if :
(a) it has been incorporatedincorporated into the contract
(b) as a matter ofinterpretationinterpretation, it extends to the loss
in question. Its validity will then be tested under(c) the Unfair Contract Terms Act 1977Unfair Contract Terms Act 1977 and
(d) the Unfair Terms in Consumer ContractsUnfair Terms in Consumer Contracts
Regulations 1999Regulations 1999.2
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The person wishing to rely on the exclusion
clause must show that it formed partpart of thecontract. An exclusion clause can be
A. INCORPORATION
(1) Signature
(2) Notice
(3) a course of dealing.
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A. INCORPORATION
1. SIGNED DOCUMENTSIf the plaintiff signs a document having contractual
effect containing an exclusion clause, it will
,
bound by its terms. This is so even if he has not read
the document and regardless of whether he
understands it or not.
Case example :
L'Estrange v Graucob [1934] 2 KB 394.4
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However, even a signed document
can be rendered wholly or partly
ineffective if the other party has
A. INCORPORATION
made a misrepresentationmisrepresentation as to its
effect.
Case example:
Curtis v Chemical Cleaning Co [1951] 1 KB 805.
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2. UNSIGNED DOCUMENTS
The exclusion clause may be containedcontained in
an unsigned document such as a ticket orticket or
A. INCORPORATION
a noticea notice. In such a case, reasonable andsufficient notice of the existence of the
exclusion clause should be given. For thisrequirement to be satisfied:
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2. UNSIGNED DOCUMENTS Contd
(i) The clause must be contained in acontractual documentcontractual document, i.e. one which the
A. INCORPORATION
contractual terms, and not in a documentwhich merely acknowledges payment such as areceipt.
Case examples :
Parker v SE Railway Co (1877)
Chappleton v Barry UDC [1940]7
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2. UNSIGNED DOCUMENTS Contd
(ii) The existence of the exclusion clausemust be brought to the noticenotice of the
A. INCORPORATION
o er par y e ore or a e me ee ore or a e me econtract is entered into.contract is entered into.
Case example:
Olley v Marlborough Court [1949]
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2. UNSIGNED DOCUMENTS Contd
(iii) Reasonably sufficient noticesufficient notice of the
clause must be given. It should be
A. INCORPORATION
noted that reasonable, not actualnot actualnoticenotice is required.
Case example:Thompson v LMS Railway [1930]
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2. UNSIGNED DOCUMENTS Contd
What is reasonable is a question of fact depending on all thecircumstances and the situation of the parties. The courts have
repeatedly held that attention should be drawn to the
A. INCORPORATION
any document delivered to the plaintiff, eg "For conditions, see
back". It seems that the degree of notice required may increase
according to the gravity or unusualness of the clause in
question.Case examples:
Thornton v Shoe Lane Parking [1971]
Interfoto v Stiletto Ltd [1988]10
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3. PREVIOUS DEALINGS
Even where there has been insufficient notice,
an exclusion clause may nevertheless be
A. INCORPORATION
incorporated where there has been a previousconsistent course of dealing between the
parties on the same terms.
Contrast:
Spurling v Bradshaw [1956]
McCutcheon v MacBrayne [1964]
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3. PREVIOUS DEALINGS contd
As against a private consumer, aaconsiderable number of past transactionsconsiderable number of past transactions
A. INCORPORATION
may e requ re .may e requ re .
Case example:Hollier v Rambler Motors [1972]
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3. PREVIOUS DEALINGS contd
Even if there is no course of dealing, anexclusion clause may still become part of
A. INCORPORATION
e con rac roug ra e usage orroug ra e usage orcustom.custom.
Case example:
British Crane Hire v Ipswich Plant Hire [1974]
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4. PRIVITY OF CONTRACTAs a result of the doctrine of privity of contract, thecourts held that a person who is not a party to thecontract (a third party) was not protected by an
A. INCORPORATION
exclusion clause in that contract, even if the clausepurported to extend to him. Employees are regardedin this context as third parties.
Case example:
Adler v Dickinson [1954]
Scruttons v Midland Silicones [1962]
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5. COLLATERAL CONTRACTS
Even where an exclusion clause has been
incorporated into a contract, it may notit may not
A. INCORPORATION
have been incorporated in a collateralhave been incorporated in a collateralcontract.contract.
Case example:
Andrews v Hopkinson [1957]
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6. THE BATTLE OF THE FORMSA problem arises if one party sends a form saying that
the contract is made on those terms but the secondsecond
A. INCORPORATION
on and stating that the contract is on the second
party's terms. The "rule of thumb" here is that thethe
contract will be made on the last set of terms sencontract will be made on the last set of terms sent.
Case example:
British Road Services v Arthur Crutchley Ltd [1968]16
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Once it is established that an exclusion
clause is incorporated, the whole contractthe whole contract
will be construed (will be construed (ieie, interpreted) to see, interpreted) to see
B. INTERPRETATION
w et er t e c ause covers t e reac t atw et er t e c ause covers t e reac t athas occurredhas occurred. The basic approach is that
liability can only be excluded by clear
words. The main rules of construction are
as follows:
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(1) CONTRA PROFERENTEM
If there is any ambiguity or uncertainty as toany ambiguity or uncertainty as to
the meaning of an exclusion clause the courtthe meaning of an exclusion clause the court
B.INTERPRETATION
w cons rue con raw cons rue con ra pro eren empro eren em, .e. aga nsthe party who inserted it in the contract.
Case examples:
Baldry v Marshall [1925]
Houghton v Trafalgar Insurance Co (1954)
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CONTRA PROFERENTEM contd
Very clear wordsVery clear words are needed in
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for negligence.
Case example:
White v John Warwick [1953]
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2. THE MAIN PURPOSE RULEUnder this rule, a court can strike outcan strike out an
B. INTERPRETATION
with or repugnant (objectionable) to the
main purpose of the contract.
Case examples:
Glynn v Margetson [1893]
Evans Ltd v Andrea Merzario Ltd [1976]20
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3. THE DOCTRINE OF FUNDAMENTAL BREACH
There used to be some doubt on how far an exclusion clause could
exclude liability in a case where the breach of contract was
aa failure to perform the contract altogetherfailure to perform the contract altogether ( a fundamental( a fundamental
B. INTERPRETATION
breach).breach). In the case given below the House of Lords overruledsome earlier decisions of the Court of appeal and so the legal
position is now reasonable clear.
Case example:
Photo Productions v Securicor Transport 1980
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