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Exemption Clauses I (Definition - a term "which excludes or modifies…

- - - - Read contract in its entirety to establish extent of the contractual obligation - exclusion clauses simply define the nature of the obligations created by the contract
      - Laissez faire view - freedom of contract
        
        Jackson LJ - "Exemption clauses are part of the contractual apparatus for distributing risk. There is no need to approach such clauses with horror or with a mind set determined to cut them down."
    - - Paternalistic view - interventionist - this approach has taken precedence for some time but we are now seeing a return of the definitional view
      - Exclusion clauses seen as abuses of power to detriment of consumers and small businesses
- - - - Signature
        
        L'Estrange v Graucob (1934) - general rule is that signature binds
        
        "When a document containing a contractual term is signed, then, in the absence of fraud, or I will add, misrepresentation, the party signing it is bound and it is immaterial whether he read the document or not" - per Scrutton LJ
        
        Unless exceptions apply
        
        Curtis v Chemical Cleaning (1951) - if there has been fraud or misrepresentation - here claimant signed document on basis that there would be no liability regarding damage to the beads and sequins on her dress - dress came back from drycleaner with stain
        
        Grogan v Robin Meredith Plant Hire (1996) - if the document signed has no contractual effect - here the claimant signed a timesheet recording how long he had rented machinery for - exemption clause was on the back - no contractual effect because wouldn't expect such a document to contain terms - also contract was made at the beginning of the day and timesheet was signed at the end - too late
        
        Saunders v Anglia Building Society (1971) - if the defence of non est factum applies - here old lady signed over house to an acquaintance of her nephew, thinking it was to him - claimed non est factum but held not allowed because needs to be demonstrably different - knew what the document was and should have found her glasses and read it more carefully
      - Reasonable notice
        
        Proferens must take reasonable steps to bring the term to the other party's notice
        
        Parker v South Eastern Railways (1877) - left luggage in storage - back of ticket said liability limited to £10 - court found had taken reasonable steps - in giving claimant a document with writing on it, was reasonable to assume he would read it
        
        Incorporation by reference?
        
        Thompson v London, Midland & Scottish Railways (1930) - don't always need full terms in document itself - here claimant bought rail tickets saying please refer to T&Cs, which stated there was no liability for injury
        
        O'Brien v MGN Ltd (2001) - Daily Mirror competition - advert said subject to T&Cs which weren't published in paper but were made available
        
        Timing - notice must be given before or at time of contracting
        
        Olley v Marlborough Court Hotel (1949) - luggage stolen from hotel - T&Cs were on back of room door, but contract was made at the desk
        
        Thornton v Shoe Lane Parking (1971) - time of contracting during automated transaction - ticket said subject to T&Cs displayed in car park - but contract held to be formed when button pressed on machine and T&Cs must be available to read beforehand
        
        With railway cases, contract held to be made when customer takes ticket away and makes journey - however Denning referred to this as a "fiction" # #
        
        Onerous clauses - greater notice required
        
        Thornton v Shoe Lane Parking (1971)
        
        Interfoto Picture Library v Stilletto Visual Programming (1988) - restating Spurling v Bradshaw - large late payment charge when renting negatives - T&Cs were in packet but amount so excessive court held they should have done more
        
        Signature will incorporate onerous clause except in extreme circumstances (never really established what these would be)
        
        Chemical Transport Inc v Exnor Craggs Ltd (2000) - obiter comments
        
        Contractual document - a written document or notice which includes the clause must be one which has contractual effect
        
        Chapelton v Barry UDC (1940) - rented deck chair on beach which broke and caused him injury - exemption clause referred to on ticket when operator came round - too late at this point because contract was formed when claimant sat on the chair - operator only gave a receipt, which are typically given after contracting
        
        Grogan v Meredith
      - Regular and consistent course of dealings
        
        To incorporate an exemption clause, the course of dealings must be both
        
        i) Consistent
        
        ii) Regular
        
        McCutcheon v David MacBrayne (1964) - regular, but not consistent = not incorporated - ferry car transportation service - had signed conditions in past, but not always of the same sort - therefore not incorporated through previous use
        
        Hollier v Rambler Motors - not regular, and possibly not consistent = not incorporated - used 3 or 4 times in 5 years
        
        Regular and consistent = incorporated
        
        Harry Kendall & Sons v William Lillico - 3-4 times a month for 3 years - stopped using for a while, but still regular and consistent
        
        Petrotrade Inc v Texaco (2000) - 5 times over 13 months - forgot to use T&Cs that time but still applied
    - - Construction = interpretation
        
        "On its natural and ordinary meaning does the clause cover the breach, whether fundamental or otherwise? - per Lord Bridge, George Mitchell v Finney Lock Seeds (1983)
        
        "Exemption clauses are part of the contractual apparatus for distributing risk. There is no need to approach such clauses with horror or with a mindset determined to cut them down" - Persimmon Homes Ltd & Ors v Ove Arup & Partners Ltd & Anr (2017)
        
        Used to be more aggressive in attacking on behalf of consumers or small business - now just about ordinary meaning because now better protected by statute
      - The Contra Proferentem Rule
        
        General rule - any ambiguity in the clause will be construed against proferens
        
        Andrews Brothers v Singer & Co (1954)
        
        Houghton v Trafalgar Insurance Co Ltd (1954)
        
        Now courts less likely to use in commercial contracts
        
        "...'rules' of interpretation such as contra proferentem are rarely decisive as to the meaning of any provisions of a commercial contract. The words used, commercial sense, and the documentary and factual context, are and should be, normally enough to determine the meaning of a contractual provision" - per Lord Neuberger, K/S Victoria Street v House of Fraser (2011)
      - Exempting liability for negligence
        
        Courts unwilling to allow wide-ranging exemption clauses which try to exclude liability for contractual breaches and breaches of a duty of care - negligence here is...
        
        i) Breach of duty of care in tort
        
        ii) Breach of contractual duty of care i.e...
        
        B2B - s13 SGSA 1982 #
        
        B2C - s49(1) CRA 2015 - "to exercise reasonable care and skill"
        
        Canada Steamship Test - if clause is being used to exclude liability for negligence - Canada Steamship Lines Ltd v The King (1952)
        
        Approach with caution - unlikely to be used in commercial contracts - now secondary rule for exceptional circumstances
        
        Recent cases
        
        HIH Casualty & General Ins v Chase Manhattan Bank (2003) - "broad guidelines not prescribing rigid rules"
        
        Persimmon Homes v Ove Arup (2017) per Jackson LJ - "In recent years, and especially since the enactment of the UCTA, the courts have softened their approach to both indemnity clauses and exemption clauses... my impression is that, at any rate in commercial contracts, the Canada Steamships guidelines (in so far as they survive) are now more relevant to indemnity clauses than to exemption clauses"
        
        Three stage test
        
        Does clause specifically refer to negligence OR synonym of negligence?
        
        Monarch Airlines Ltd v London Luton Airport (1997) - e.g. "any act or omission, neglect or default"
        
        2) If no, is clause wide enough to cover negligence?
        
        E.g. "any liability/any loss caused whatsoever"
        
        3) If yes, is clause too wide?
        
        E.g. is clause being used by defendant to exclude other type of liability (breach of SGA/breach of express term) as well as negligence? - if more than one type of liability being excluded, clause only excludes non-negligence liability
        
        Where negligence is the only liability being excluded the clause will pass the test
        
        White v Warwick (1953) - claimant bought a bike - contract said company not liable under any circumstances, but had been negligent in how they supplied the bike - court said that the contract did not mention negligence and referring to any liability was too wide - presumption against exclusion of liability
        
        Alderslade v Hendon Laundry (1945)
        
        E.E. Caledonia Ltd v orbit Valve Co (1994)
        
        Persimmon Homes v Ove Arup (2017)
        
        Limitation clauses - limit rather than exclude liability - looked upon more favourably by courts - Asia Craig v Malvern Shipping (1983)
- - - - s1(6) - can exempt third parties
      - s6(5) - can exempt third parties in contracts for carriage by sea
- - - - Now parties are free to include a clause exempting liability for a "fundamental" breach as long as clause can be construed as covering the breach and it complies with statutory regulation