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EXCLUSION

CLAUSES

EXCLUSION CLAUSES: THE


POSITION AT COMMON LAW

An exclusion clause is a term of the contract


which limits or excludes a liability from one
party which would otherwise be subject to.
The function of an exclusion clause is to limit
or exclude liability for breach of an
express/implied term, or even negligence in
a contract.
The courts approach to interpreting such a
clause is to interpret them narrowly.

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IS THE CLAUSE VALID?


Incorporation is the term part of the
contract?

Construction is the damage within the


boundaries of the exemption clause?

Legislation is the term allowed under


current Statute law?

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University Press, 2007.
All rights reserved.

Andy Howells

A) SIGNED DOCUMENTS

LEstrange v Graucob
Tilden Rent-A-Car Co v Clendennin
Le Mans Grand Prix Circuits Pty Ltd v Iliadis

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A) SIGNED DOCUMENTS
LEstrange v Graucob
caf proprietor purchased a cigarette machine
and signed the contract without realising an
exclusion clause, in small type, on poor quality
brown paper, was in the contract. There was
an issue with the machine, but signature mean
the clause was valid as against the proprietor

Oxford University Press, 2007. All rights reserved.

B) UNSIGNED DOCUMENTS:
TICKET CASES

With an unsigned document, an exclusion


clause will be binding only if the clause was
brought to the notice of the customer. This
notice must be reasonable notice, and is
determined objectively by the courts.

Parker v SE Railway
Thompson v LMS Railway Co.
Baltic Shipping v Dillon
Thornton v Shoe Lane Parking

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PARKER V. SOUTH EASTERN RLY


CO

Deposited a bag.
Received a ticket, stated below see back
Limit the liability for any damage to $10.
The bag was lost and the plaintiff claimed
$24 10s.

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THOMSON V. LM & RLY CO

On the face of the ticket was written words


For conditions see back
Contained a condition exempting the
company from liability for injury.
Due to the negligence of the railway co, the
ptf was injured

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C) CONTRACTUAL DOCUMENT

The document containing the exclusion


clause must be of a contractual nature
before the courts will hold the exclusion
clause to be binding. To determine whether
a clause is a contractual document the courts
employ the reasonable person test and ask:
Would a reasonable person expect such a
document to contain an exclusion clause or
would it merely represent a receipt or
voucher?

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D) TIME OF NOTICE

If notice of the exclusion clause is not given


until after the contract has been completed
the exclusion clause will not be binding:
Olley v Marlborough

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OLLEY V MARLBOROUGH COURT


LTD

The ptf & her husband booked a hotel room


and paid for a weeks lodging in advance
At the hotel, they saw a notice not
responsible for any loss
Due to the negligence of the staff, a thief
went into the room and stole some of their
properties.
Held: the notice was not part of the contract

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E) PREVIOUS COURSE OF
DEALING

If the customer has had previous dealings


with the defendant, the court will more
readily infer knowledge of the exclusion
clause. If the customer through his previous
dealings knows about the clause then he will
be bound by it:
Henry Kendall & Sons v William Lillico

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F) EFFECT OF
MISREPRESENTATION

If the effect/scope of the exclusion clause


has been misrepresented to the customer
then the exclusion clause is not binding:
Curtis v Chemical Cleaning Co

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G) CONTRA PROFERENTUM RULE

The contra proferentum rule is a rule of


interpretation used by the courts. The rule
provides that the courts will interpret the
exclusion clause against the party relying on
the clause:

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THE RULES OF CONSTRUCTION

If the words in the exclusion clause are


ambiguous and so capable of more than one
interpretation, then the courts will tend to
use the contra proferentum rule to
interpret the clause to the disadvantage of
the person wanting to rely on it. See for
example
Houghton v Trafalgar Inso Co Ltd 1954

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THE RULES OF CONSTRUCTION

The courts have also not allowed an


exclusion clause to be effective if it stands in
conflict with another term of the contract
because of the repugnancy rule.

Oxford University Press, 2007. All rights reserved.

A few points on UCTA


1977
Firstly, UCTA governs contracts made in
the business setting
Secondly, it is based on the ideas of
REASONABLENESS and FAIRNESS
Thirdly, it does not apply to ALL terms,
generally only to Exclusion Clauses

Section 1 of UCTA 1977


s 1 (1) For the purposes of this part of the Act, negligence
means
the breach(a) of any obligation, arising from the EXPRESS or IMPLIED
TERMS of a contract, to take reasonable care or
exercise reasonable skill in the performance of the
contract;
(b) of any common law duty to take reasonable care or
exercise reasonable skill
(c) of the common duty of care imposed by the Occupiers
Liability Act 1957
s 1 (3) In the case of both contract and tort, sections 2 to 7
apply
ONLY to BUSINESS LIABILITY

Section 2 of UCTA 1977


This section informs us that a person cannot
by reference to a contract term or a notice
exclude or restrict his liability for DEATH OR
PERSONAL INJURY resulting from
negligence.
However, a person may exclude or restrict his
liability for ANY OTHER TYPE OF LOSS OR
DAMAGE so long as the contract term or
notice satisfies the requirement of
REASONABLENESS.

Section 3 of UCTA 1977


This section gives protection to both
CONSUMERS and ANYONE TRADING ON
THE BASIS OF A STANDARD FORM
CONTRACT (who may also be a consumer
though it could be a businessperson).
The section concerns breach of contract and
the standard of performance of the contract
and subjects any exclusion clauses to the test
of REASONABLENESS.

THE RULES OF CONSTRUCTION

Oxford University Press, 2007. All rights reserved.

THE RULES OF CONSTRUCTION

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H) SCOPE OF THE EXCLUSION


CLAUSE

The scope of the exclusion clause is limited


to only acts performed within the scope of
the contract.
The exclusion clause will not exclude liability
for acts occurring outside the contract, AND
the scope of the exclusion clause is a matter
of construction/interpretation by the court:

Oxford University Press, 2007. All rights reserved.

Oxford University Press, 2007. All rights reserved.