Chapter 40: Exclusion and Limitation clauses - Coggle Diagram
Chapter 40: Exclusion and Limitation clauses
- a term in a contract which prevents one party being liable of a breach of contract
an exemption clause in a contract is a term which either limits or excludes a party's liability for breach of contract. in order for an exclusion clause to be binding and operable upon the parties, the clause must:
the clause must be incorporated into the contract as a term
the clause must pass the test of construction
the clause must not be rendered unenforceable by the statutory provisions in the
Unfair Contract Terms Act 1977
Consumer Rights Act 2015
(enacting the Consumer Rights Bill 2013-14)
courts and parliament have tried to find ways of limiting effectiveness of an exclusion clause
a clause in a contract which seeks to either limit or exclude liability for breaches of the contract is subject to all of the normal rules regarding terms. such terms are likely to seriously limit a party's rights under the contract. the first question to be considered by the court is whether the term is part of the contract.
there's 3 matters which must be considered:
1) whether the agreement is signed;
L'Estrange v E. Graucob Ltd  2 KB 394)
Mrs L'Estrange bought a cigarette vending machine from D for use in her café. she signed the contract without reading it properly. the contract contained a clause which excluded all implied conditions and warranties. the machine did not work properly
Mrs L'Estrange wanted to rely on the implied term that the machine was fit for purpose
however, she was bound by the exclusion clause in the contract, even though she had not read the contract
always read before you sign
2) whether any notice with the term in it is incorporated in the contract
3) whether the term is incorporated as a result of previous dealings of the parties
- a term in a contract which sets an upper limit on a liability for breach of contract
Exclusion clauses and the freedom of contract
common law provides no rule whereby and exclusion clause would be declared unenforceable on the grounds that it is unfair or unreasonable -
Photo Production Ltd v Securicor Transport Ltd (1980) AC 827
the courts generally accept that the parties to a contract can agree any terms they like under the principle of freedom of contract
however, this view is balanced by the idea that very often, during negotiations one party is in a much stronger position than another. for example as an individual or even as a business.
when you entered your mobile contract who was in the stronger position?
however, where the meaning of the clause or its consequences have been queried before the document is signed, the exclusion clause may be constructed as the oral statement suggesting rather than as it is actually written
Curtis v Chemical cleaning and Dyeing Co Ltd
Mrs Curtis took her wedding dress to be cleaned and was asked to sign a document that exempted the cleaners from liability for any damages
before signing the document Mrs Curtis asked what she was signing
she was told that it referred to the fact that the cleaner would not accept liability for any beads or sequins attached to the dress.
when dress was returned, it had a large stain on it
cleaners could not rely on the exclusion clause because of the oral assurances made by Mrs Curtis that they were only excluding liability for damage to beads and sequins
is any notice with the term in it incorporated in the contract
this involves incorporating notice and forms into a contract, typically an unwritten contract
incorporation can only happen if, at the time, the contract was made, the unsigned doc was brought to the attention of the person suffering the exclusion clause
any attempt to introduce new terms to the contract after acceptance will fail unless, there is a new contract varying the original contract or the original contract allows for variation of the terms
example of price variation can be seen in most mobile phone contracts
problem of incorporation arises when the terms are not made clear when the contract is made.
Olly v Marlborough Court Hotel (1949)
claimants booked into a hotel at the reception desk.
at this point a contract was formed. later that evening they went out, leaving the rook key at reception as required
whilst out someone took their key, entered their hotel room and stole some of their belongings
hotel claimed that it was not liable because of the exclusion clause. however, the exclusion was not incorporated into the contract because it was written on a notice inside the Olley's bedroom in the hotel and could not have been known about when they made the contract
key point her is whether the term was brought to the attention of the other party before the contract was made. in
Olly v Marlborough Court Hotel
it was not
the combination notices, ticks and other doc may make it difficult for someone trying to rely on the exclusion clause to prove it was brought to the attention of the other party
Chapelton v Barry Urban District Council (1940)
Chapelton wished to hire a deck chair and approached a pile of chairs owned by Barry Urban District Council (BUDC).
A notice adjacent to the chairs detailed the cost of hire and advised customers to obtain tickets and retain them for inspection.
Chapelton purchased tickets and placed them in his pocket.
On one side of the tickets, the council purported to exclude liability for any accidents caused by hiring the chairs.
Chapelton sat down and the canvas gave way. He sought damages from BUDC and it was held they had effectively excluded liability.
Chapelton argued he had not been given sufficient notice of the clauses printed on the ticket and, therefore, he should not be bound by them.
There was nothing on the notice adjacent to the chairs, or on the face of the ticket to alert customers’ attention to the clauses on the back.
The ticket should be regarded as a receipt provided after the formation of the contract.
BUDC contended Chapelton did have notice of the terms because the exclusion clause was clearly printed on the ticket.
The notice adjacent to the deck chairs was merely an invitation to treat.
The ticket was not merely a receipt but it amounted to a written contract detailing the terms by which the parties agreed to be bound.
Chapelton’s appeal was successful. The ticket was held to be a receipt and the conditions by which BUDC were held to have offered the chairs for hire were those contained in the notice, and the notice did not contain any exclusion clause. BUDC had not, therefore, brought Chapelton’s attention to the clause and they could not rely on it.
Thompson v LMS Railway (1930)
The claimant was injured whilst stepping off a train.
The railway company displayed prominent notices on the platforms excluding liability personal injury and damage to property due to negligence.
The tickets also stated they were subject to terms and conditions displayed on the platform.
The claimant was illiterate and could not read the signs.
She argued that the exclusion clause was not incorporated into the contract as the railway company had not brought the clause to her attention at the time the contract was made.
Held: The clause was incorporated. There is only a requirement to take reasonable steps to bring the clause to the attention of a reasonable person. There was no duty to ensure that every traveller was aware of the clause. The claimant was therefore unsuccessful in her claim for damages.
Thornton v Shoe Lane Parking Ltd (1971)
The claimant was injured in a car park partly due to the defendant's negligence.
The claimant was given a ticket on entering the car park after putting money into a machine.
The ticket stated the contract of parking was subject to terms and conditions which were displayed on the inside of the car park.
One of the terms excluded liability for personal injuries arising through negligence.
The question for the court was whether the term was incorporated into the contract i.e. had the defendant brought it to the attention of the claimant before or at the time the contract was made.
This question depended upon where the offer and acceptance took place in relation to the machine.
Held: The machine itself constituted the offer. The acceptance was by putting the money into the machine. The ticket was dispensed after the acceptance took place and therefore the clause was not incorporated into the contract.