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Contract Law - Terms 5 (3/4) Exclusion Clauses Common Law - Coggle Diagram
Contract Law - Terms 5 (3/4)
Exclusion Clauses Common Law
I. Introduction
1. Procedural and Substantive Unfairness
Procedural: process of making the contract
Substantive: substance of the contract
2. Standard Form Contracts
Aimed for several contract, public at large
(a) Advantages
(1) Allocation of risk
(2) Saving time and costs
(3) Benefits to consumers?
(b) Disadvantages
(1) Inequality of bargaining power -> take it or leave it
(2) Unfair surprise -> small print, not read/understand them
3. Exclusion Clauses
(a) Defence or definition?
Defence: Exclusion clauses typically operate defensively to exclude liability, as a defence after establishing liability
Definition: B Coote 1964 :closed_book: -> define parties obligation, liability by considering whole contract
Depends: Impact Funding Solutions Ltd v AIG Europe Insurance Ltd [2016] ?
(b) Advantages
(1) Regulate the risk under the contract
(2) Reduce litigations costs
(c) Disadvantages
Essence: they cut down from the ambit of important contractual obligations or remedies provided by the general law
(1) Often used by stronger parties to deprive weaker parties of redress, even when their contractual expectations are defeated.
(2) Frequently found in standard-form contracts, potentially giving rise to the problem of unfair surprise (see above).
(d) How to establish whether an exclusion clause is valid
(1) Consider whether it has been incorporated into the contract
(2) If yes, consider whether, properly interpreted, it applies to the facts
(3) If yes, examine whether it is invalidated by UCTA 1977 or CRA 2015
II. Regulation of Exclusion Clauses at Common Law
The courts do not have power at common law to strike down exclusion clauses on the ground that they are unfair or unreasonable. But several techniques to tackle the problem.
1. Incorporation
see lecture
2. Interpretation
Trad = restrictive rules to the interpret of exclusion clauses. Recent years = change in the courts approach for ccial contracts
(a) Exclusion of liability for fundamental breach/term
Rule: substantive rule of law:
Pb of analytical precision, too broad
Rejection: Photo Production Ltd v Securicor Transport Ltd [1980] :red_flag:
(b) Contra proferentem rule
Description: ambiguity in a contract term, the ambiguity is resolved against the party relying on the term / narrow interpretation against person seeking to rely
Rationale: (Gilbert-Ash), need to have sufficiently clear intention to give up rights
Current status: need for clear words to exclude her liability. Following ICS/Arnold/Wood, contra... last resort
Nobahar-Cookson v The Hut Group Ltd [2016] :warning:, unclear words, ambiguous
(c) Exclusion of liability for negligence
(i) Canada Steamship principles
Canada Steamship Lines Ltd v R (1952) :red_flag:
Rationale: Inherent improbability that one party would intend to absolve the other from negligence liability.
Pb: May result in artificial constructions, which go contrary to the natural inference to be drawn from words such as ‘loss however caused’
Hollier v Rambler Motors (AMC) Ltd [1972] not clear enough, a non lawyer = not including negligence :warning:
Current status: merely as guidelines, no automatic solution
HIH Casualty and General Insurance Ltd v Chase Manhattan Bank [2003] :warning: -> stick with what parties intended
(d) Modern approach to interpretation of exclusion clauses
the approach to the interpretation of exclusion clauses in commercial contracts has become less strict.
Reasons for change:
Effect of legislation
George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] UCTA :warning:
Effect of modern approach of interpration of ct : Back of Credit and Commerce International SA v Ali [2002] :warning: Lord Hoffmann obiter: reasonable speaker of the language in the interpretation of any serious utterance in ordinary life
Current approach
Triple Point Technology v PTT Public Company Ltd [2021] :red_flag: 2pts -> clear points
Following Triple point: S Tofaris 2019 :closed_book:
(1) Contra proferentem rule: Ought to be used as guide to construction, after normal interpretative process for ambiguity
(2) Canada Steamship principles: Ought to be abolished.
(e) Limitation Clauses
General proposition: not interpreted as restrictively as exclusion
Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd [1983] :warning:, no full rigour of exclusion clauses (Lord Fraser) (did not try to escape)
Pb: Practical difference between limitation and exclusion clauses can often be small (£1)
3. Common law rule preventing exclusion of liability for fraud
HIH Casualty and General Insurance Ltd v Chase Manhattan Bank [2003] :warning: