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Unfair Terms & Exemption Clauses - Coggle Diagram
Unfair Terms & Exemption Clauses
Types
exclusion clause: excludes total liability for a clause
exemption clause: limits liability under a clause
Structure
Incorporation: was the term incorporated into the contract
Construction: does the clause cover the breaches and loss
Statutory controls: effects of UCTA 1977 & CRA 2015
Construction
Have two or more of the following:
Statement of whether liability totally excluded or just limited
Statement which clarifies which type of claim/duty it relates to
Should either specific (example negligence) or be broad enough to cover
statement which types of losses exemption relates to
Contra proferentum
any ambiguity will be interpreted against the party seeking to rely on it
Ailsa Craig Fishing Co Ltd v Malvern Fishing Co- Clear words must be used to exclude liability (lesser so with limiting rather than excluding)
Victoria Street v House of Fraser- rule less likely applies to parties of equal bargaining power
Third parties
Terms would not apply to third party unless specified by Contracts (Rights of Third Parties) Act 1999
UCTA 1977/Statutory controls
S1(3) applies to business liability only: things done or to be done in the course of business or from the occupation of premises used for business purposes by the occupier
Negligence
Defined S1(1) as any obligation arising from express pr implied terms of the contract , to take reasonable care or exercise reasonable skill in performance or any common law duty to take reasonable care and skill (negligence in relation to UCTA)
S2(2) negligence generally can be excluded if the term or notice satisfies reasonableness test
S2(1) cannot exclude or limit liability for personal injury/death resulting from negligence (will be void)
Sale of Goods Act 1979
S6(1A) UCTA Implied terms under S13-15 SGA (goods) can be excluded/restricted if reasonable
Obligations under the Contract itself
S3(2)(a) cannot rely on an exclusion clause excluding/limiting liability for a breach of contract, unless it passes reasonableness test
S3(2)(b)(i) cannot claim to be entitled to give a contractual performance substantially different to what is reasonably expected (except if satisfies reasonableness)
S3(2)(b)(ii) cannot claim to be entitled to give no performance at all in respect of whole or part of contractual obligation (except if satisfies reasonableness)
Reasonableness test
S11(1) term must be fair and reasonable having regard to circumstances known or ought to have been reasonably known/in the contemplation of parties at the time the contract was made
S11(2) when deciding reasonable/fairness, have regard to matters under schedule 2
Schedule 2
strength of bargaining power, taking into account alternative ways their requirements could have been met
whether they received inducement to enter contract/had opportunity to enter similar contract but with dissimilar term to this one
whether customer knew/ought to have known of the existence/extent of the term, taking into account customs of the trade and regular course of dealing
if it restricts liability for a condition in a contract by the parties, is it reasonable to expect the condition practical to comply with when contracting
whether goods manufactured/adapted to the special order of the customer
George Mitchell Ltd v Finney lock Seeds Ltd- space for a lot of judicial creativity with deciding what is reasonable and it can be considered on a case by case basis rather than setting rigid precedent
CRA 2015/Statutory controls
Negligence
S65(1) trader cannot exclude/restrict liability for death/personal injury resulting from negligence
S65(4) defines as breach of any obligation (from express or implied terms) to take reasonable care or reasonable skill in performance, breach of any common law duty to exercise reasonable care and skill and common duty of care under Occupiers' Liability Act 1957
S31 any attempt to limit liability under implied terms under CRA S9-11 (satisfactory quality, fit for particular purpose & goods as described) will not be binding on the consumer
S47 attempts to limit liability under implied terms for digital content (S34-36) will not be binding on the consumer
S57 attempts to ENTIRELY exclude liability under S49 (services) will not be binding on the consumer. An attempt to restrict/limit liability will not be binding if it is limited to less than the price paid
S62 any term with consumer will not be binding if unfair. UNLESS relates to prices providing the terms are transparent and prominent (S64)
S62(4) unfair if contrary to good faith, it causes a significant imbalance in the parties' rights and obligations under the contract, to the detriment of the consumer (judged at time contract entered into)
Schedule 2 in part 1 contains terms which may be regarded as unfair
Anti-avoidance provisions
Creating separate contract where they agree not to pursue claims against each other are prohibited (S72)
S31(2) making liability subject to certain onerous conditions or limiting rights/remedies/court procedures etc is prohibited (S31(2))