Exemption Clauses 1 Notes

• Exemption clauses are contractual terms that purport to limit or exclude a liability that would otherwise attach itself to one of the contracting parties (obligations affected may be contractual or tortious)

• Lord Diplock in Photo Productions v Securior Transport: a clause ‘which excludes or modifies an obligation, whether primary, general secondary or anticipatory secondary’

  • Primary: from the contract

  • Secondary: to compensate if there is a breach

• Definitional view: Laissez Faire/Freedom of contract

• Exclusory approach: Modern approach – paternalistic/interventionist

Enforceability:

1. Incorporation: is the EC part of the contract

2. Construction: is it effective in excluding or limiting liability

3. Statutory Controls: UCTA/Regulations

Incorporation

1. Signature

2. Notice, or

3. A course of dealing

• Incorporation must occur: (a) at or before the time of contracting and (b) the clause must appear on a contractual document

1. Incorporation through signature

   • When a document containing contractual terms is signed without there being misrepresentation, the signing party is bound (whether or not they have read it

     • L’Estrange v Graucob: Since E had signed the contract it was irrelevant that she had not read it, even though the sales agreement was in ‘regrettably small print’

   • Exceptions:

1. Overriding oral assurance: if the meaning of the clause has been orally misrepresented to the other party it will not be incorporated (Curtis v Chemical Cleaning) – here the sales person said the EC related to damage ‘to beads and sequins’ but it was actually for everything

2. Nature of document: signature will not incorporate an EC if the document signed does not have contractual effect (Grogan v Robin Meredith – EC written on a timesheet)

3. Non est factum: where a person signs a document under a fundamental mistake, through no fault of his own, as to the character or effect, then this common law remedy may make the contract void (“this is not my deed”)

   • Ie fraud: blind/senile

   • Saunders v Anglia Building Society: here the contract was not void (party who signed contract claimed her glasses were broken)

2. Incorporation through notice

   • Party relying on EC must show that he took reasonable steps to bring it to the attention of the other party

   • Incorporation by reference:

     • Parker v South Eastern Railway: ticket which said ‘see back’ with the printed notice on the back: was held that the notice was clear and the ticket was a common form of contractual document – the company had taken reasonable steps

     • Thompson v London, Midland & Scottish Railway: ticket said ‘see back’, and the back directed C to the standard conditions set out in a railway timetable. The C was bound even though he could not read (decision would have been different if the company had been aware of the C’s inability)

       • Harvey v Ventilatorenfabrik: party relying on the clause knew that the other could not read the language in which the clause was expressed so it was not incorporated

     • O’Brien v MGN: T&Cs were in a different edition of the Daily Mail to the scratch card - this was sufficient for incorporation by reference

     • When a document does not have clear words on the face of it, directing attention to an EC on the reverse – it is unlikely that the clause will be incorporated: Henderson v Stevenson

     • Similarly – if there are clauses that have been rendered illegib le then they are unlikely to be deemed incorporated: Sugar v London, Midland & Scottish Railway

   • The nature of the clause:

     • Where the clause is unusual or onerous, a higher degree of notice will be required: Thornton v Shoe Lane Parking (Lord Denning) – clause attempting to exclude liability for personal injury - ‘it would need to be printed in red ink with a red hand pointing to it’

     • Interfoto v Stiletto Visual: an onerous term will NOT be incorporated into a contract merely by inclusion in a standard printed contract (here it was a general contractual term)

     • Onerous terms must therefore be specifically drawn to the attention of the other party, either by special note or as Denning suggested in Spurling v Bradshaw, by printing them in red ink

     • Note: signature will incorporate even onerous clauses except in extreme circumstances (duress): Chemical Transport Inc v Exnor

3. Incorporation by a course of dealing

   • Where a clause has been brought to the notice of the other party during previous dealings, it may be implied into the current transaction

   • Need to show that course of dealing has been consistent over a period of time: McCutcheon v David MacBrayne – here it was not consistent as ‘sometimes’ customers had to sign risk...

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