Exclusion Clauses 1 • Definition 'Any term in a contract restricting, excluding or modifying a remedy or a liability arising out of a breach of a contractual obligation' R. Stone, The Modern Law of Contract • 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 any 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" • "Risk planning" versus "standard form contracts" • Development of Control • 19th/20th Century - Common Law rules - "incorporation" and "construction" • 1970s onwards - statutory control - – Unfair Contract Terms Act 1977 - Unfair Terms in Consumer Contracts Regulations 1999 • Common Law - Incorporation • The question is 'was the clause part of the contract'? Cf Interfoto v Stiletto • 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 (1951) 2) Timing -Olley v Marlborough Court Hotel (1949) -Thornton v Shoe Lane Parking (1971) • Tests Contd. 3) Nature of the document -Chapelton v Barry UDC (1940)
4) Reasonable notice-steps to draw to attention of the other party - Parker v South Eastern Railway (1877) -Thompson v LMS Railway (1930) • Tests Contd. 5) Nature of clause -Spurling v Bradshaw (1956) - "red hand" test- Per Lord Denning- 'Some exclusion clauses I have seen would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient - Thornton v Shoe Lane Parking (1971) • Common Law- Construction . When it is determined that a clause has been incorporated into a contract, the next issue is whether the clause covers the breach that has occurred • The wording of the clause must be examined to determine if it applies to the particular situation in question • Construction Contd. • 'Contra proferentem' rule - The clause will be interpreted against the party seeking to rely on it. If there is ambiguity, it will be construed in favour of the claimant: – Andrews v Singer (1934) - Wallis v Pratt (1910) • Construction Contd. • Negligence - very specific language needed – Canada Steamship Lines v The King (1952) - Reasonable expectation of other party – Hollier v Rambler Motors (1972) • Modern Approach to Construction (post-UCTA 1977) • Photo Production v Securicor (1980) – Return to freedom of contract approach as between business contractors •