Contract Lecture Exclusion Clauses I Content · Meaning of exclusion clauses o Define it o How and why they are treated as a separate principle of law · Common law principles o Incorporation (test) o Interpretation/construction · Statutory position Definition 'Any term in a contract restricting, excluding or modifying a remedy or a liability arising out of a breach of a contractual obligation.' Exclusion terms v terms defining obligations · Clause defining obligation of parties is different from exclusion clauses · Clauses defining obligations set out what each part should do in a contract · When parties enter into contracts, there is usually a term/clause that one party relies on when the other claims liability . They may be clause that limit liability or excludes liability, but the aim is the same - reduce the extent of liability Examples . 'The company shall not be liable for any loss or damage, how so ever caused.' · 'The company will be liable up to a maximum of £500 in relation to this claim' . 'All claims for breach of contract must be notified to the company within seven days of the alleged breach occurring' Rationale for control · 'Freedom of contract' versus 'protecting the weaker party' . Courts acknowledge the necessity to preserve the sanctity of freedom to contract . But also acknowledges that there may be weaker parties in a contract · Not all contracts are products of good bargaining/bargaining on equal terms
. To protect the weaker parties (ensure fairness), and as well as preserve the sanctity of freedom to contract, courts develop separate rules to deal with exclusion clauses · Exclusion clauses are seen as a distinct clause from the clause defining parties obligation . Since it is seen as distinct, separate rules were designed to deal with situations that arise from exclusion clauses Development of control · 19th/20th century - common law techniques o 'incorporation' o 'interpretation/construction' o 'fundamental breach' · 1970s onwards - statutory control o Unfair contract terms (UCTA) 1977 o Consumer rights act 2015 Common law - incorporation . The question is (as is applicable to all 'terms' generally) 'was the cause part of the contract?' Cf Interfoto Picture Library v Stiletto programmes (1988) . a clause cannot be effective to exclude liability if it is not part of the contract . The rules are based on the principle that a party must have had reasonable notice of an exclusion clause at the time of the contract for it to be effective Tests for incorporation 1) Signature . Generally conclusive - L'Estrange v Graucob (1934) · Unless induced by false statement - Curtis v Chemical Cleaning and Dyeing Co (1951) Plaintiff took her dress for cleaning and signed a document that had a vaguely worded exclusion clause. She queried it but the assistant said the exclusion clause was with regards to beads or sequins on the dress Dress came back stained and she sued. Held: there was misrepresentation. Document was signed on the basis