Please enable JavaScript.

Coggle requires JavaScript to display documents.

Exclusion Clauses part 2 - Coggle Diagram

- - - - General Rule: A person is bound by the document which he signs whether he reads it or not - L'Estrange v Graucob (1934)
        
        L'Estrange v Graucob (1934):
        
        Facts: Claimant bought cigarette machine from defendant and signed a sales agreement in very small print without reading it. Agreement provided that "any express or implied condition, statement or warranty... is hereby excluded". The machine failed to work properly.
        
        Held: In an action for breach of warranty the defendants held to be protected by the clause = not liable
      - The Luna - This rule applies even if the party is a foreigner and cannot read English
      - In situations of electronic communications, signature includes an electronic signature - s7 Electronic Communications Act 2000
        
        Document must be contractual in nature. If document signed has no contractual effect, signature of the party alleged to be bound is likely to have effect. He will not be entrapped by his signature
        
        The GR won't apply when signature has been procured by fraud / misrepresentation
        
        If there is misrepresentation as to the nature of the document - Curtis v Chemical Cleaning (1951)
    - - When documents are not signed, Exclusion Clause can still be part of contract / incorporated through Notice . Hurdles to overcome before terms can be incorporated:
        
        Time of Notice:
        
        Notice of Exclusion Clause / terms must be given at / before the time of the concluding of contract
        
        Olley v Marlborough Court Hotel (1949):
        
        Facts: Claimant had her mink coat stolen in the defendant's hotel. There was notice at the back of the bathroom door that said "the proprietors will not hold themselves responsible for articles lost/stolen unless handed to hotel manager for safe custody
        
        Held: CA held that notice was not incorporated in the contract between proprietors and the guest. The contract was made at the hall of the hotel before claimant entered her room and before she had the chance to see the notice
        
        Thornton v Shoe Lane Parking (1971):
        
        Facts: Claimant was given ticket when he parked his car after he put his money in machine. Ticket stated that contract for parking was subjected to terms and conditions displayed on inside of car park
        
        Held per Lord Denning: Machine was making Offer. Acceptance happened when he put money in machine. Ticket was given after acceptance took place = clause NOT incorporated
        
        Nature of Document:
        
        Term must be contained / referred in a document that was intended to have contractual effect
        
        It is unclear whether decision based on current communication / consumer practices.
        
        Chapelton v Barry UDC 1940:
        
        Exclusion clauses contained in a receipt / vouchers will not be valid as it was not intended to have contractual effect
        
        Steps taken:
        
        Reasonable steps must be taken to bring terms to the attention of other party, not making the other party actually reading it
        
        Onus is on the Defendant (person relying on the clause) to bring exclusion clause noticeable to other party
        
        What would amount to reasonable steps is a question of fact to be looked in the light of all facts and circumstance of case - Parker v South Eastern Railway (1877)
        
        Parker v South Eastern Railway (1877):
        
        Facts: Claimant deposited bag in cloak-room at defendant's railway station. he received paper ticket that said "See back". On the other side were printed several clauses including "The company won't be responsible for nay package exceeding value of $10". Claimant presented ticket on the same day but his bag could not be found
        
        Held: He claimed $24.10s as the value of his bag. Company also pleaded limitation clause in defence
    - - Per HL in McCutcheon v David MacBrayne Ltd - Regular and consistent course of dealings. This would depend on the facts of the case
        
        Once Clause is incorporated in contract, courts must construe the clause using the Contra Proferentum Rule
        Contra Proferentum Rule:
        
        The courts will interpret any ambiguity against the person relying on it - Andrews v Singer
        
        Courts will only use the Rule when there is genuine ambiguity. They must give Exclusion Clause a more natural construction - Photo Production Ltd v Securicor Transport Ltd (1980)
        
        Houghton v Trafalgar Insurance (1953):
        
        Facts: Claimant's motor insurance policy provided that defendant's insurers would not be liable if claimant carried an "excess load". Claimant had an accident carrying 6 people in a 5-seater car.
        
        Held: CA held "excess load" can mean either too many people or too much weight. It was given the other meaning (too much weight) where defendants are liable
        
        Wallis Son & Wells v Pratt & Haynes (1911)
        
        Facts:
        
        Held:
- - - - General:
        
        Applies to Exclusion and Limitation Clauses only
        
        DOES NOT apply to unfair terms
        
        Applies to liability arising "in the course of business"
      - When will UCTA 1977 apply?
        
        Section 2:
        
        excluding liability for Negligence that leads to Death or Personal Injury - Section 2(1) = EC IS VOID (CAN CLAIM)
        
        Section 3:
        
        Exclusion of contractual liability other than through negligence is a "written standard term of businesses"
        
        EC is valid if satisfies the test for reasonableness
        
        Section 6 & 7:
        
        Exclusion of liability arising from the implied terms (possible), EC is valid if satisfies the test for reasonableness
      - Test for Reasonableness
        
        Section 11:
        
        Fair and reasonable one to be included (courts will check whether EC is unfair or not)
        
        Having regard to the circumstances (courts will check the contract as a whole)
        
        which were, or ought to have been in the contemplation of the parties / known to... the parties when the contract was made (whether the parties had knowledge of the EC)
        
        Schedule 2:
        Strength of bargaining position of the parties (courts will favour weaker parties who is the purchaser)
        
        Whether the customer received inducement to agree to term and had the chance to enter into a similar contract with others without the similar term (receive an inducement to agree with the term)
        
        Customer knew/ought to have known known the term and the extent where extent (did he know the EC was there or not)
        
        When exclusion relates to non-performance of a condition, whether it was reasonable to expect the compliance of that condition (is the seller trying to exclude a condition?)
        
        Whether goods manufactured / ordered to the special order of the customer (if yes the EC may not be reasonable)
        
        3 preliminary points:
        
        Time: reasonableness of the term will be judged by reference to the time of entering the contract, without benefit of hindsight - Stewart Gill Ltd v Horatio Myer & Co Ltd (1992)
        
        Burden of proving that the exclusion clause is reasonable is borne by the party relying upon it (the seller) (Section 11(5))
        
        Each case depends on its own facts. Cannot generalise what is reasonable and what's not. The CA is reluctant to interfere with the trial courts findings
        
        Section 11(4):
        
        Take into account resources of the person who may be subjected to liability as well as extent to which liability may have been covered by insurance. Availability and cost of insurance - Smith v Eric S Bush (courts will consider party's bargaining positions)
        
        Overseas Medical Supplies Ltd v Orient Transport Services Ltd (1999) - Key factor is the relative bargaining positions of the parties (courts will consider party's bargaining positions)
        
        Axa Sun Life Services v Campbell Martin (2011) - Bargaining positions is said to be a "starting point" for any enquiry into the reasonableness of a contractual exclusion
        
        Watford Electronics v Sanderson (2011):
        
        Chadwick LJ - Court must only interfere when satisfied that "one party has taken advantage of the other" or where "the term is so unreasonable that it cannot properly have been understood or considered"
        
        Courts will generally not interfere if Parties are:
        
        Commercial parties
        Roughly of equal bargaining position
  - - - A) What is a Consumer Contract - Section 61(1) - Section 2(1), (3) and (7)
      - B) Terms automatically unenforceable:
        
        Section 65 - Death or PI due to Negligence (cannot exclude liability)
        
        Section 31 - implied terms for goods (sec 9,10,13 and 15 CRA 2015) (cannot exclude liability)
        
        Section 57 - implied terms for services (section 49 CRA 2015) (cannot exclude liability)
      - Section 31 - Liability that cannot be excluded or restricted:
        
        A term of a contract to supply goods is not binding on the consumer to the extent that it would exclude or restrict the trader's liability arising under any of these provisions:
        
        a) section 9 (goods to be of satisfactory quality)
        
        b) section 10 (goods to be fit for particular purpose)
        
        c) section 11 (goods to be as described)
        
        d) section 12 (other pre-contract information included in contract)
        
        e) section 13 (goods to match a sample)
        
        f) section 14 (goods to match a model seen or examined); and
        
        i) section 17 (trader to have right to supply goods etc)
      - Section 62(4) - Test for Unfairness:
        The requirement of good faith "bona fide" itself has 2 parts - bargaining positions:
        
        Procedure and substantive
        - Always support party with weaker bargaining power RAHHH!!!
        
        Procedural aspect
        
        When a terms existence came as a surprise to the party subject to it
        
        (if buyer was surprised BY THE EC, seller acted in bad faith, EC will be unfair)
        
        West v Ian Finlay and Associates (2014)
        
        CA held that term in a contract for architectural services was not unfair, bearing in mind the savvy nature of the West..." who were a professional couple comprising of a banker and a neuroscientist. They should understand that exclusion clause has a substantial business experience
        
        Substantive aspect of the requirement of 'good faith'
        
        There will be some terms that will always be regarded as unfair, whether steps are taken to publicise them
        
        (despite the EC being brought to the buyer's attention, an EC can still be regarded as unfair)
        
        Director General of Fair v First National Bank Plc (2002):
        
        Both elements mentioned must be satisfied - absence of good faith and significant imbalance. But there would appear to be a considerable overlap between 2 requirements
        
        Office of Fair Trading v Ashbourne Management Services Ltd (2011):
        
        Court emphasised the requirement that the imbalance of the parties' rights must be a significant one
        
        Per Lord Bingham in Director General of Fair Trading v First National Bank Plc (2002):
        
        "If a term is so weighted in favor of the supplier as to tilt the parties rights and obligations under the contract significantly in his favor".
      - Section 62(5) that requires the court to:
        
        Take 'into account the nature of the subject matter of the contract and
        
        all the circumstances existing when the term was agreed and...
        
        all the other terms of the contract..."
        
        Consequence of unfairness
        
        Section 67:
        
        Where a term is found to be unfair, the rest of the contract '...continues so far as practicable, to have effect in every other respect' but the unfair term is 'not binding on the consumer'