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Exclusion Clauses Notes

LPC Law Notes > International Commercial Law Notes

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A more recent version of these Exclusion Clauses notes – written by Cambridge And Oxilp And College Of Law students – is available here.

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ICL Workshop 1

EXCLUSION CLAUSES INTERNATIO NAL CONSIDERA TION P.92

STEP 1 APPLY REASONABL E TEST UNDER UCTA S.11(1) P.93

UCTA won't apply to "International Supply Contracts" i.e. when the B and S are in different jurisdictions and where one of this three additional criteria apply: a) The goods are to be carried form one state to another; or b) The offer and acceptance have been made in different territories; or c) The goods are to be delivered to a territory other than that in which the offer and acceptance took place. UCTA applies to all commercial agreements. S. 11(1) UCTA states that an agreement's exclusion clauses are subject to the reasonableness test:
? UCTA S.3 Liability arising in contract (Applies to contracts with Standard T&Cs) Apply reasonable test
? UCTA S. 6(3) Liability for breach of the terms of the contract cannot be excluded or restricted by refrence to any contract term and can only be excluded in so far as the term satisfies the reasonableness test
? UCTA S. 11(1) "the term shall have been fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.
? UCTA Sch 2 (gives the guidelines for the application of the test)
- Sch 2(a) The relative bargaining power of the parties
- Sch 2(a) whether any choice was available (could B have acquired the goods elsewhere?)
- Sch 2(b) whether B was offered any inducement to accept the clause
- Sch 2(c) The extent of the parties' knowledge of the existence and effect of the terms
- Sch 2(d) whether it was practicable to comply with any condition imposed on bringing a claim
- Sch 2(d) whether the goods were manufactured, processed, or adapted to special order of B
? It is unusual for one factor alone (of Sch 2) to be conclusive on reasonableness
? The party relying on the exclusion must prove its reasonableness.

STEP 2 EFFECTIVEN ESS OF EXCLUSION CLAUSES

Clauses excluding liability for breach of ss.13 to 15 of SGA 1979 are under UCTA s.6:
- Subject to the reasonableness test against commercial buyers
- VOID against a buyer who deals as a consumer
- However, under s. 2(2) and s. 3 a clause is subject to the reasonableness test whether the "innocent" party is a business or a consumer

STEP 3 OTHER RELEVANT FACTORS APPLIED BY THE COURT P.95

Courts will consider many factors apart from Sch 2 to determine reasonableness:?CASE LAW = authority = Watford Electronics Ltd v Sanderson CFL Ltd 2001
- how widely drafted is the clause
- does it give the innocent party alternative remedies?
- Nature of the goods?
- Availability of insurance?
BARGAINING STRENGTH and RELATIONSHIP BETWEEN the PARTIES :
- Negotiate or standard-form contract = Did P's negotiate the contract or was it imposed by one of the two parties?
- Market in which the parties operate = Are both P's familiar with the market and market conditions?
- Financial Pressure = Was one party forced to accept the Exclusion Clause because of its financial situation at the time?
- Age and experience of the buyer
- Effect of legal advice
- Drafting techniques = was it clearly drafted and it is relevant?
- Attitude of the courts = if the B is a consumer, any exclusion clause is more likely to fail the reasonableness test; if the contract is between commercial parties, it is more likely to pass. CHOICE
- Do other suppliers use the clause? = could the B have obtained the goods

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