Exclusion clauses 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 clause verses 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 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 ÂŁ500 in relation to any claim? - 'All claims for breach of contract must be notified to the company within seven days of the alleged breach occurring' Rational 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 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 with exclusion causes. Development of control. 19th-20th century - common law techniques ('incorporation', 'interpretation/construction', 'fundamental breach') 1970's onwards - statutory control (unfair contract terms act (UCTA) 1977, consumer rights act 2015) Common law - incorporation · The question is (as is applicable to all 'terms' generally) 'was the clause part of the contract'? Cf Interfoto Picture Library v Stiletto Visual 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 of 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 sequin on her dress. Dress came back stained and she sued. Held: there was misrepresentation. Document was signed on the basis of a fundamental mistake. Statement had qualified the exclusion clause. 2) Timing At what time was the clause brought to your attention? All contract terms must be settled at the time of acceptance. -Olley v Marlborough Court Hotel (1949)
Hotel guest was not bound by a notice placed on the wall of the