Exclusion Clauses: Revision Short Questions

1. Define an Exclusion Clause.

An Exclusion Clause (also called and Exemption Clause) is a term of the
contract intended to include/exclude liabilities of one of the parties.

2. What are the two requirements of an Exclusion Clause

Incorporation
Validity under statute

3. What is a contractual document? Explain using two case examples (give
names and facts)

A document is held as contractual, if a reasonable person in the position of
the prospective party would expect the document to contain terms affecting
his rights and liabilities. Documents delivered after the contract is made will
not be considered a contractual document.
Kendall Vs. Lillico: A sold note attached to the goods purchased was
held not to be a contractual document.
Chapelton Vs. Barry: A receipt for payment of cash was held not to be
a contractual document.

4. Explain the four different methods of incorporation. Use case names and
facts in your explanation.

Name: Alanna Gunasekera
Marks:
Where it is written in a contractual document: An EC can be written
in a contractual document that forms a part of a contract and the
affected party must sign the document. It is then considered to be a
valid incorporation, whether the EC was read by the affected or not.
Lestrange Vs. Groucob.
Bringing it to the notice of the parties: As above, an EC must be
written into the contract and brought to the notice of the parties
before the contract is made either by expressly drawing the attention
of the party to it (eg. Pointing it out) or by having the EC printed in
bold lettering so that their attention is automatically drawn to it.
Parker Vs. South Eastern Railway : A ticket issued by the railway
authority had an EC regarding left luggage printed in bold lettering
on the back. Court held that the ticket formed part of the contract as
it was given at the time of the contract being made and because the
EC had been properly incorporated because it had been printed in
bold lettering so as to draw attention to it.

Displayed at the place where the contract was made: An EC can be
incorporated by displaying it at the place where the contract was
made, and at the time the contract was made. Furthermore the
attention of the party should be drawn towards it.

Olley Vs. Marborough Court: An EC was fixed on the inside of a hotel
room door, attempting to exclude liability for lost property. Court
held it was not an EC as the guest would see it only AFTER the
contract was made.

By a previous course of dealings: Where the parties have, in the past,
regularly made contracts with one another upon the same terms
[including ECs], then those same terms will be incorporated into later
contracts between them by a previous course of dealings.
Three requirements are considered:
i. The transactions between parties must be sufficiently
numerous.
Hollier Vs. Rambler Motors: Court held that 3-4 dealings in a
span of 5 years was not sufficient to be considered a previous
course of dealings.
ii. The course of dealings should be consistent
iii. The course of dealings should not have deviated from the
occasion in question.
McCutchen Vs. McBrayan: The EC of a ferry boat company
contained a risk note that passengers occasionally signed.
Court held that it was not incorporated by a previous course of
dealings as it was not consistent.

5. Prior to the enactment of relevant Statutes, how was the validity of an EC
determined?

The judge would adopt the Contra Proferentum Rule of Construction, which
was used to construe the EC strictly against the party relying on it. If the EC
was ambiguous or too wide , it is NOT valid. If the EC covered a specific
situation, it IS valid.

6. Explain the validity of Exclusion Clauses under UCTA [1977].

Unfair Contract Terms Act.

ECs excluding liability for negligence:
Section 2[1] of UCTA: If a party attempts to exclude liability for
death or personal injury, the EC is Void.
Section 2[2] of UCTA: If a party to a contract attempts to exclude
liability for damage of property due to negligence , the validity of
the EC depends on the Test of Reasonableness [TOR].

ECs excluding liability for breach of contract
Section 3[1] of UCTA: If a party attempts to exclude liability for a
breach of contract, the validity of the EC depends on the TOR.
ECs attempting to exclude liability for a breach of implied terms in the
Sale of Goods Act [1979].
Section 6 of UCTA: If a buyer is a consumer any EC attempting to
exclude liability for a breach of implied terms under the Sale of
Goods Act, will be VOID.
Section 12 of UCTA: If the buyer is NOT a consumer, an EC excluding
liability for a breach of implied terms under the Sale of Goods Act,
will depend on the TOR.

A consumer has been defined in Section 12 as : A person who neither makes a contract in
the course of business nor holds himself as doing so, while the other party makes the
contract in the course of business.


7. What is the Test of Reasonableness under UCTA?
UCTA makes the validity of certain ECs dependant on whether it satisfies the
requirement of reasonableness.
Section 11[1] of UCTA: A clause must be a fair and reasonable one to be
included into the contract, having regard to the circumstances which
should have been in contemplation of the parties at the time the contract
was made.
Schedule Two: Factors that reasonable person would consider when
examining the validity of an exclusion clause:
Whether the goods were prepared according to the buyer
specifications.
Whether a price inducement was given to the buyer.
The knowledge that the buyer had about the exclusion clause at the
time the contract was made.


8. Explain the validity of ECs under UTCCR [1999].

Unfair Terms in Consumer Contracts Regulations

These regulations apply to consumer contracts [unlike UCTA: applies to any
contract]. These regulations provide that an unfair term will not be binding
on a consumer as explained in the case of Office for Fair Trading Vs. Abbey
National PLC [2009].
The test to determine if an EC is unfair under UTCCR is:
If it is contrary to good faith?
If it is disadvantageous to the customer?

9. Short Problem Question
Hotel California puts a notice on the hotel lift saying the hotel excludes
liability for all personal injury and loss of property to the guest. The Eagles
[the band] are staying at the hotel and one of them [A] suffers a head injury
from a part of the bedroom ceiling falling on his head and another member
[B] loses his valuable guitar .Briefly discuss whether the Hotel could rely on
the Exclusion Clause?

The legal issue at hand is whether the Hotel California can rely on the
exclusion clause they have presented.

An exclusion clause is a term of a contract intended to include/exclude
liabilities of one party.

The exclusion clause stated is that the the hotel excludes liability for all
personal injury and loss of property to the guest.

For the hotel to rely on this EC two requirements must be fulfilled.

The first being incorporation which can be done in a number of ways [4
to be precise]. Firstly, the exclusion clause must be incorporated into the
contract through writing at the time the contract was made. The EC in this
case was posted on the hotel lifts. As one would go to the lifts only after a
room has been arranged this indicates that a contract has already been
made and that point and as the EC is seen only after the contract is made
the EC has not been successfully incorporated into the contract.

The second requirement is validity under statute.

Prior to the enactment of relevant statutes the courts adopted the Contra
Proferentum Rule of Construction where courts construed the clause strictly
against the party relying on it. The rule was if the EC was too wide or
ambiguous it was void. Today however, the validity of the clause must be
determined by reference to the relevant statutes, UCTA [1977] and UTCCR
[1999].

Section 2[1] of UCTA states clearly, that a party cannot exclude liability
for death or personal injury and that such an EC clause is not valid.
Therefore, in the case of band member A who suffers a head injury due
to a part of the bedroom ceiling falling on his head, the hotel cannot rely
on the exclusion clause [if it had been properly incorporated].

Section 2[2] of UCTA focuses on damage to property and the validity of the
clause attempting to exclude such liability will depend on the Test of
Reasonableness [UCTA section 11(1) a clause must be fair and reasonable
one if included in a contract having regard to the circumstances which
ought to have reasonably been in the contemplation of parties at the time
the contract was made]. Therefore in the case of B the hotel may be able
to rely on the EC if the TOR deems it valid.