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Exemption Clauses Notes

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CONTRACT LAW EXEMPTION CLAUSES??Type of contract Term Breach Categorisation/classification Exemption clause




Regulations (UTCCR)An exemption clause is a term 'which excludes or modifies an obligation, whether primary or general secondary, that would otherwise arise under the contract by gen implication of law'
-Per Lord Diplock in Photo Productions v Securior

An exemption clause is used as a defence for breach of contract - D will rely on it.

??????The exemption clause must be incorporated into the contract. There are three ways to incorporate the term: o Reasonable notice o Signature o Course of dealing

?????? GR: in order for an exemption clause to be incorporated, it needs to be made at before or at the time the contract is formed. o

Olley v Marlborough: notice given after contract was made - no incorporation.


Thornton v Shoe Lane Parking: contract made when he took the ticket and entered the car park - since the terms and conditions were written inside the car p they had not been incorporated.

o Reasonable noticeD need not prove that he actually brought the clause to C's attention, but he must show that he has taken reasonable steps to draw the term to C's attention. o

Parker v South Eastern Railways: C's bag was lost in D's cloakroom. When C had paid to leave his bag there, he was handed a ticket which said 'see back' - o back there was an exclusion clause renouncing D of liability for loss of items worth more than PS10. C's bag was worth more than PS10. HELD: D had provided clear notice of the exclusion clause - the ticket was a common form of contractual document.


Thompson v London, Midland & Scottish Railway: ticket said see back - on the back it said the ticket was subject to the standard conditions which could be fo on the railway timetable. Problem = C couldn't read. HELD: the exclusion clause had been incorporated by reference. C was still bound by the terms.Key point: in this case D did not know that C couldn't read.?

If the document does not contain clear words directing the party to an exemption clause which is on the back, the exemption clause is unlikely to be incorporated. oHenderson v Stevenson: there were no words on the front of the ticket to draw C's attention to the reverse where the exemption clause was located - no incorporation.

If exemption clause is deemed illegible, it is unlikely to be incorporated. oContrast with Harvey v Ventilatorenfabrik Oelde GmbH, where the exclusion clause was not valid because it had been written in a language th knew C could not read.

Sugar v London, Midland & Scottish Railway - date stamp rendered exemption clause illegible, no incorporation)

Onerous clauses: require a higher degree of notice o

Denning's big red hand rule'I quite agree that the more unreasonable a clause is, the greater the notice which must be given of it. Some clauses which I have seen would need to

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. (Spurling v Bradshaw)o

'It is so wide and so destructive of rights that the court should not rule any man bound unless it is drawn to his attention in the most explicit way.' (Pa Shoe Lane Parking)

Interfoto v Stilleto - D had not taken reasonable steps to bring an onerous term to the attention of C - printing the term on a standard contract was not enoug had not been incorporated.

SignatureGR: signing a document containing contractual terms = binding. o

It does not matter if the party who signed the document had not read it.L'Estrange v Graucob: sale of a vending machine. The document excluded the implied condition under s14(1) SGA 1983 - C had signed the document without reading it. Vending machine turned out to be unfit for purpose. HELD: C had signed the document so the exemption clause was binding - it did not matter that C had not read the document, or that the exemption was in 'regrettably small print'.Exception 1: overriding oral assurance o

Curtis v Chemical Cleaning: C signed a form and the assistant told her it was just to exclude liability for damage to beads. It was in fact to exclude any liability howsoever caused. Dress was stained and D tried to rely on exclusion clause. HELD: although C had signed the form, D had made a misrepresentation to C so the exemption clause could not be relied on.Exception 2: nature of document does not have contractual effect (Grogan v Robin Meredith Plant)Exception 3: non est factum - 'this is not my deed'.Signature will not be binding where C was unaware of the nature of the document they were signing as he had been defrauded. C must be unable to see the documen himself because he is blind, illiterate or has another disability. (Saunders v Anglia Building Society)

Course of dealingMust be regular and consistent. o

McCutcheon v MacBrayne: regular but not consistent.


Hollier v Rambler: 3-4 transactions over 5 years = not regular.

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