Exemption Clauses 1
Teresa Clyne
Lecturer in law and forensic psychology
Civil Law
Course notes
Exemption Clauses
There are two distinct types of clauses which can be inserted in a contract; the scope of the clauses depends whether or not it is validity incorporated. The clauses may be exclusion or limitation clause. The courts view limitation clauses with less suspicion than an exclusion clause as in Alisa Craig Fishing v Malvern Fishing [1983] a ship sank at a dock due to the defendants' negligence. HELD: There was a clause in the contract which limited Securicor's liability to £1,000. The validity of the clause was upheld by the House of Lords who stated that the contra proferentem rule did not apply as rigorously to such clauses.
The legal effects of exemption/limitation clauses
The following issues must be dealt with in the context of exemption clauses:
(1) incorporation into the contract;
(2) interpretation; and
(3) enforceability.
In order to be enforceable, an exclusion clause must satisfy four tests:
(1) If you rely on the exclusion clause as the plaintiff or the defendant, it must have been validity incorporated into the contract.
(2) Has the clause been legally construction t cover the specific exemptions?

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(3) Does Consumer Protection legislation cover or negate the clause?
(4) The exclusion clause must deal with the events that have taken place.
Limitation Clause
Limitation clauses are more specific in that they aim to restrict the remedies available to one of the parties in the event of breach. These commonly appear in the form of a cap on the amount of damages that may be claimed, or alternatively may require a party to act within a specific time limit before he or she may claim a remedy.
Exemption Clauses
An exclusion clause will only be effective to limit the liability of the party seeking to rely upon it if two matters are satisfied:
•
• the exclusion clause must form part of the contract; and if it does the exclusion clause must be wide enough to cover the breach or the even that has occurred.
Valid Incorporation can be in any of the following ways:
Incorporated by Signature
L’Estrange v Graucob: Where the plaintiff signed an agreement that concerned the purchase of a cigarette vending machine. There was an exclusion clause in the agreement excluding all liability in respect of express or Implied warranties.
The machine subsequently turned out to be unfit for its purpose. HELD: the plaintiff was bound by the terms included in the document Irrespective of whether she read them or not. ,
O’Connor v First National Building Society In this case of a mortgage application excluded the Building Society from liability should the property be defective. HELD: O'Connor signed the form which had the exclusion clause in large lettering, he was held to be bound by the exclusion clause.

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Electronic Signature
According to the terms of the Electronic Commerce Act, electronic and. paper signatures are sufficient in this context.
Reasonable Steps
Johnson v Great Southern & Western Railway [1874] - If not signed (no ticket clause), but reasonable steps have been taken to bring clause to attention of other party, then the court may deem that the clause is incorporated validity. The plaintiff purchased a railway ticket, was held by an exemption clause that limited the liability of the company should any passengers be injured. HELD: Even though he had not read the terms of the clause. The court held he had the opportunity to make himself aware of the clause, this was constructive notice of the relevant term
Reasonable Notice
Olley v Marlborough Court Ltd [1949] In order to be enforceable, notice of the exclusion clause must be given at the time of the contract and not after. HELD: The court held that the exclusion clause to limit the liability of the hotel came after the contract was formed.
Thornton v Shoelane Parking [1971], Plaintiff purchased a ticket to a carpark, after entering the carpark his attention was brought to an exclusion clause, HELD: The court held that it was incorporated validity as it was brought to his attention after entering the contract.
Incorporation by Course of Dealings
Spurling v Bradshaw [1956] . If there has been a pre-existing, regular and consistent contractual relationship between the parties and one party had always included an exclusion clause that the other party never read, the party may be able to claim that the exclusion clause is enforceable. Barrels of orange juice let in a warehouse for bailment, juice destroyed, HELD: the courts held that even though there was no contract or express exclusion clause pervious dealings had made them aware of the exclusion clause.

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Main purpose rule
Clayton Love v B & I Transport (1970) . This rule essentially requires that an exclusion clause be restricted by looking to the main purpose for which it was created. The clause should be interpreted in such a way that it does not defeat the main purpose of the contract. This case involved a ship carrying frozen scampi from Ireland to the UK, The scampi defrosted and the shipping company tried to rely on an exclusion clause. HELD: it was held that the main purpose of the contract was the transport of frozen scampi, which was not done and therefore a fundamental part of the contract and liability cannot be excluded, however, Photo
Production Ltd v Securicor Transport Ltd [1980] , in the UK the H of L held that it was possible to exclude liability for fundamental breach provided clear enough words were used.
Bars to exclusion/limitation clauses
Misrepresentation
An exemption clause will not operate where its terms are misrepresented by the proposer or by his/her agent. Also, s 46 of the Sale of Goods and Supply of Services Act 1980 provides that clauses excluding liability to which a party may be subject as a result of a misrepresentation will not be enforceable.
Collateral Undertakings
Evans v Merzario [1976] . If an oral undertaking is given by the proposer, the courts will regard the oral undertaking as taking priority over the printed terms in a standard form agreement. In the plaintiffs arranged the carriage of goods with the defendants. The defendants gave an oral assurance that the goods would be shipped under the deck of the ship. This oral assurance was held to override an exclusion clause in the written contract.
Unconscionable Bargain
This doctrine may be used to avoid an exemption clause that would produce an unfair contract.

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Contra Proferentem
The clause is read contra proferentem if there is an ambiguity. This means that where there is an ambiguity, the clause will be read strictly against the party trying to rely upon it (Akerib v Booth). The exclusion clause will only provide protection if it clearly and unambiguously states the situations in which it will operate. This rule is also reflected under the EC (Unfair terms in Consumer Contracts) Regulations 1995 , which requires that " ... where there is doubt about the meaning of a term, the interpretation most favourable to the consumer shall prevail". White v Warwick (1953), even if the exclusion clause is available in contract it may be used in tort, in this case the plaintiff ’s wife was injured when the bike she hire was faulty,
HELD : The claim in tort was independent of the contract and could be established without relying on the contract at all.