Common Law Regulation of Exclusion Clauses

Nature of Exlcusion & Limitation Clauses

Definition (AO1)

Exclusion Clauses - seek to exclude CP’s liability for breach of contract.

Limitation Clauses - seek to limit CP’s liability for breach of contract

Common Law Regulation of Exclusion Clauses

Definition (AO1)

Courts seek to control / Regulate exclusion clauses:

1. By requiring exclusion clause to be incorporated into contract

2. By interpreting exclussion clauses narrowly

Incorporation of Exclusion Clauses

Considerations (AO2)

1. Nature of Contractual Document

2. Previous Course of Dealing

3. Timing

4. Notice

5. Signature

Incorporation of Exclusion Clauses - Nature of Contractual Document

Definition (AO1)

Exclusion clauses MUST be within a contractual document:

• Something that is contractual in nature - that you’d expect to keep or read.

• The exclusion clause must be an ‘integral part of the contract’

Example includes a train ticket

Incorporation of Exclusion Clauses - Nature of Contractual Document

Case (AO3)

(Chapleton v Barry)

Exclusion clause printed on the deckchair ticket.

Held that EC was not valid since stated after contractual agreement.

Incorporation of Exclusion Clauses - Previous Course of Dealing

Definition (AO1)

When dealt with a number of times, CP is aware of the term (contained within a contractual document).

An exclusion clause may be incorporated on basis of consistent previous course of dealing between the parties.

Incorporation of Exclusion Clauses - Previous Course of Dealing

Case (AO3)

(Spurling v Bradshaw)

Exclusion clause always contained in receipt document

Incorporation of Exclusion Clauses - Timing

Definition (AO1)

An exclusion MUST be incorporated into the contract before or at the time of the contract - i.e. at point of offer and acceptance.

If it is aftern then EC is not incorporated as part of the contract and cannot be relied upon.

Incorporation of Exclusion Clauses - Timing

Case (AO3)

(Thornton v Shoe Lane Parking)

EC displayed inside car park which had an automatic barrier to gain entry.

Seen as not incorporated and so could not be relied upon.

Incorporation of Exclusion Clauses - Notice

Definition (AO1)

Party relying on an EC must give reasonable notice of the cluese.

Incorporation of Exclusion Clauses - Notice

Case (AO3)

(Parker v South East Railway)

Cloakroom ticket contained EC and advised to keep ticket to reclaim items left at cloakroom.

Seen as incorporated so EC could be relied upon.

Incorporation of Exclusion Clauses - Signature

Definition (AO1)

Where the EC is contained in a signed document / contract:

Party who signs is bound by all terms in document

UNLESS an unfair term or fraud / misrepresentation. i.e. an overriding oral statement

Incorporation of Exclusion Clauses - Signature

Case (AO3)

(L’Estrange v Graucob)

Buyer signed ‘Sales Agreement’ containing EC when they hired a vending machine for their café.

Contained an EC that any damage costs had to be covered by the CP hiring the equipment. Buyer did not read the clause.

Still seen as incorporated and so EC could be relied upon.

Interpretation of Exclusion Clauses

Principle (AO1)

Clear words are needed to exclude / limit liability for breach of contract:

Therefore - ECs must identify (the specify type of) liability excluded.

Interpretation of Exclusion Clauses

Case (AO3)

(White v John Warwick & Co Ltd)

Clease excluded ‘liability for any personal injury’

EC was not allowed as too broad and doen’t specify the exclusion (risk)

Main Purpose Rule

Definition (AO1)

An EC cannot be permitted if it defeats the purpose of the contract

Main Purpose Rule

Case (AO3)

(Glynn v Margetson)

A clause allowed a ship to stop anywhere in Europe or North Africa.

Whilst under a contract to carry oranges from Malaga to Liverpool, the captain relied on the clause to give him freedom to go into the Mediterranean to pick up extra cargo.

As a result, his cargo of oranges deteriorated and were therefore not in good condition as contract required

Held that Captain could not rely on clause as it defeated whole purpose of contract.

Contra Proferentem (Contradict Performance) rule

Definition (AO1)

Where there is doubt about an EC, the courts will interpret it against the person that is trying to rely on it - this means the CP seeking to rely on teh EC must prove and establish that it is clear.

Contra Proferentem (Contradict Performance) rule

Case (AO3)

(Transocean Drilling v Providence Resources)

During drilling a fault developed in rig resulting in 4 week suspension of operations.

Under hire agreement, liability was apportioned between CPs by a complex and wide-ranging set of indemnities and ECs.

One EC excluded recoverability of “consequential loss”.

Both CPs were of equal bargening power and EC was clear and specific so the EC could be relied upon.

Interpretation of Limitation Clauses

Rule (AO1)

Less strictly interpreted than exclusion clauses

Interpretation of Limitation Clauses

Case (AO3)

(Alisa Crag Fishing v Malvern Fishing)

D limited liability exceeding £1,000 and £10,000 in a 12 month period.

Clause was given its natural meaning and was not met with the same hostility as an exclusion clause.

Judges were not as eager to find ambiguity