Exemption clauses
-generally clauses that limit (limitation clause) or take away all liability on a party(exclusion
clause) Examples include, providing that enforcing remedies must be done in certain ways or
within certain time frames, the remedies that can be used, and to limit responsibility for losses
such as loss of profits etc.
-useful so that contracting parties are not taking on an unlimited amount of risk, but they can be
dangerous and unfair to consumers if tucked away in small print, hence the law surrounding
them.
-Insurance is often used to cover them for risk that the business they are contracting with has
excluded.
-Three hurdles in order to rely on an exemption clause
-Incorporation: The clause must be incorporated into the contract
-Construction/Meaning of the clause
-Has to be valid after considering the UCTA
-When looking at these types of clauses the courts apply the common law rules first then the
legislation.
-Don't forget that a major thing to note is that you must consider first whether the defendant
would have been liable in the absence of the exclusion clause.
In common law and construction
Ambiguous clauses are construed ‘contra proferentem’ (Houghton v trafalgar)
-Does this clause actually exempt the liability in question in terms of its meaning, is it clear and
obvious - The court is generally quite strict about this.
-Applies to all sorts of terms not just exemption clauses
-generally any ambiguity in the meaning of the clause will be construed against the interests of
the person seeking to rely on it, therefore any resolved ambiguity goes against the party that
introduced, or is trying to enforce the clause (normally the defendant to the claim). Webster v
Higgin(1948)(Hollier v rambler motors)
-Lord Bingham in Dairy Containers Ltd v Tasman Orient Line CV(2004) that ‘if a party
otherwise liable is to exclude or limit his liability ... he must do so in clear words; unclear
words do not suffice; any ambiguity or lack of clarity must be resolved against that party’.
-HoL in Photo Production Ltd v Securicor Transport Ltd(1980), said that whilst there is no rule of
law that liability for a fundamental breach (one that may be exceptionally serious) can never be
excluded instead there is a common sense principle of construction that the more serious the
breach, the clearer the words need to exclude it, but if sufficiently clear the court will give effect
to them.
-Lord Toulson said in Impact Funding Solutions Ltd v AIG Europe Insurance Ltd(2016),Photo
Production ‘is authority that business people capable of looking after their own affairs should be
free between themselves to apportion risks as they choose’. - implying that sometimes there is
need to determine things party based on the bargaining power of each party.
-Photo production case Facts - case where a security guard was hired to patrol a premises at
certain times, one night the security guard deliberately started a fire and ended up burning down
the premises which were used as a factory, this broke the statutory implied term to carry out the
, service with reasonable care and skill. The company had an exemption clause that said that
they were not responsible for an injurious act by an employee unless it could have been
foreseen and avoided by the employer exercising due diligence. HoL said it was clear enough to
be valid and due diligence had been followed.
Attempts to exclude liability for negligence
-Courts are traditionally reluctant to allow attempts to exclude liability for negligence, unless very
clear words are used. In Canada steamship lines ltd v the king 1952) the privy council set out
three guidelines for determining if a clause can exclude negligence
-if the clause expressly refers to negligence or a synonym, then the court will give effect
to the clause - applied in Monarch Airlines v London Luton Airport Ltd(1998)
-if negligence is not expressly referred to the court considers whether the ordinary
meaning of the words is wide enough to cover negligence, and if the contractor could be
liable on some other basis as well as negligence the clause will be interpreted so as not
to exclude liability for negligence.
-Later cases have said these are more of a starting point and the commercial context
and intentions of the parties need to be considered
-Now attempts to exclude liability for negligence for damage or loss of property is covered by
the UCTA tests of reasonableness (for non consumer) and fairness (for consumer), so courts do
not need to try and prevent clauses from covering negligence as much.
Legislative controls on unfair terms
-Unfair contract terms act 1977 gave judges the power to interfere with certain terms because
they are unreasonable. Different provisions did protect both consumers and business
transactions until the enactment of the CRA.
-Due to an overlapping eu directive, new laws had to be enacted. To simplify things the
consumer rights act 2015 was created. The CRA deals exclusively with consumer contracts,
whereas the UCTA now only covers non-consumer contracts.
-A consumer contract is defined as a ‘contract between a trader and a consumer’ with a trader
meaning a person acting for purposes relating to that person's trade, business or profession.
And consumer means an individual acting for purposes that are wholly or mainly outside their
trade, business or profession.
Non-consumer contracts: The unfair contract terms act 1977
Introduction to what it does and does not apply to
-A clause in a negotiated contract (not standard terms) which excludes liability (as long as it is
not exempting liability for negligence causing loss/damage) for breach of an express term (not
statutory implied terms like quality of goods) will not be subject to UCTA
-Only deals with terms which exclude or limit liability in non-consumer contracts.
-Does not apply to:(Sch 1)
-generally clauses that limit (limitation clause) or take away all liability on a party(exclusion
clause) Examples include, providing that enforcing remedies must be done in certain ways or
within certain time frames, the remedies that can be used, and to limit responsibility for losses
such as loss of profits etc.
-useful so that contracting parties are not taking on an unlimited amount of risk, but they can be
dangerous and unfair to consumers if tucked away in small print, hence the law surrounding
them.
-Insurance is often used to cover them for risk that the business they are contracting with has
excluded.
-Three hurdles in order to rely on an exemption clause
-Incorporation: The clause must be incorporated into the contract
-Construction/Meaning of the clause
-Has to be valid after considering the UCTA
-When looking at these types of clauses the courts apply the common law rules first then the
legislation.
-Don't forget that a major thing to note is that you must consider first whether the defendant
would have been liable in the absence of the exclusion clause.
In common law and construction
Ambiguous clauses are construed ‘contra proferentem’ (Houghton v trafalgar)
-Does this clause actually exempt the liability in question in terms of its meaning, is it clear and
obvious - The court is generally quite strict about this.
-Applies to all sorts of terms not just exemption clauses
-generally any ambiguity in the meaning of the clause will be construed against the interests of
the person seeking to rely on it, therefore any resolved ambiguity goes against the party that
introduced, or is trying to enforce the clause (normally the defendant to the claim). Webster v
Higgin(1948)(Hollier v rambler motors)
-Lord Bingham in Dairy Containers Ltd v Tasman Orient Line CV(2004) that ‘if a party
otherwise liable is to exclude or limit his liability ... he must do so in clear words; unclear
words do not suffice; any ambiguity or lack of clarity must be resolved against that party’.
-HoL in Photo Production Ltd v Securicor Transport Ltd(1980), said that whilst there is no rule of
law that liability for a fundamental breach (one that may be exceptionally serious) can never be
excluded instead there is a common sense principle of construction that the more serious the
breach, the clearer the words need to exclude it, but if sufficiently clear the court will give effect
to them.
-Lord Toulson said in Impact Funding Solutions Ltd v AIG Europe Insurance Ltd(2016),Photo
Production ‘is authority that business people capable of looking after their own affairs should be
free between themselves to apportion risks as they choose’. - implying that sometimes there is
need to determine things party based on the bargaining power of each party.
-Photo production case Facts - case where a security guard was hired to patrol a premises at
certain times, one night the security guard deliberately started a fire and ended up burning down
the premises which were used as a factory, this broke the statutory implied term to carry out the
, service with reasonable care and skill. The company had an exemption clause that said that
they were not responsible for an injurious act by an employee unless it could have been
foreseen and avoided by the employer exercising due diligence. HoL said it was clear enough to
be valid and due diligence had been followed.
Attempts to exclude liability for negligence
-Courts are traditionally reluctant to allow attempts to exclude liability for negligence, unless very
clear words are used. In Canada steamship lines ltd v the king 1952) the privy council set out
three guidelines for determining if a clause can exclude negligence
-if the clause expressly refers to negligence or a synonym, then the court will give effect
to the clause - applied in Monarch Airlines v London Luton Airport Ltd(1998)
-if negligence is not expressly referred to the court considers whether the ordinary
meaning of the words is wide enough to cover negligence, and if the contractor could be
liable on some other basis as well as negligence the clause will be interpreted so as not
to exclude liability for negligence.
-Later cases have said these are more of a starting point and the commercial context
and intentions of the parties need to be considered
-Now attempts to exclude liability for negligence for damage or loss of property is covered by
the UCTA tests of reasonableness (for non consumer) and fairness (for consumer), so courts do
not need to try and prevent clauses from covering negligence as much.
Legislative controls on unfair terms
-Unfair contract terms act 1977 gave judges the power to interfere with certain terms because
they are unreasonable. Different provisions did protect both consumers and business
transactions until the enactment of the CRA.
-Due to an overlapping eu directive, new laws had to be enacted. To simplify things the
consumer rights act 2015 was created. The CRA deals exclusively with consumer contracts,
whereas the UCTA now only covers non-consumer contracts.
-A consumer contract is defined as a ‘contract between a trader and a consumer’ with a trader
meaning a person acting for purposes relating to that person's trade, business or profession.
And consumer means an individual acting for purposes that are wholly or mainly outside their
trade, business or profession.
Non-consumer contracts: The unfair contract terms act 1977
Introduction to what it does and does not apply to
-A clause in a negotiated contract (not standard terms) which excludes liability (as long as it is
not exempting liability for negligence causing loss/damage) for breach of an express term (not
statutory implied terms like quality of goods) will not be subject to UCTA
-Only deals with terms which exclude or limit liability in non-consumer contracts.
-Does not apply to:(Sch 1)
