EXEMPTION CLAUSES

1. Name the parties to contract (if no problem with agr., int. or cons. – jus say they have contract):
Eg ‘There is a contract for xxxx between X and Z’

2. Define the cause of action:

 express term of contract – identify breach (eg goods to be ready by xxx date)
- implied (eg s13 SGSA 1982) terms of contract
 if both expr. and impl. cover the issue – ‘better to rely on expr., as strict liability’
- mention possible liability (incl. vicarious) in tort of negligence
- ‘X will try to rely on limitation (ie certain value) /exemption (certain time limit) clause’

3. Is EC incorporated into contract ?

a) If EC in a signed document, incorporated (L’Estrange v Graucob), provided:

i.EC is legible (‘even if regrettably small’ – L’Estrange)
ii.no misrepresentation of effect of EC, on which innocent party relied – Chemical Cleaning
 Irrelevant whether signee actually read
 No need for party relying on EC to sign the document – just the other party enough

b) If not a signed document (constructive notice situation), incorporated if:

1.‘X can show that reasonable steps were taken to bring EC to Y’s attention’ (Parker v SE). Factors:
i.position in document (if in the back, eg See overleaf etc)
ii.prominence on the document/legibility (buried/hidden ? or a lot of blank space on page ?)
iii. if unusual/onerous, draw particular attention to EC (Shoe Lane Parking –‘red hand or equally startling’, Stiletto)
2..Document containing EC is contractual in nature (Chapelton v Barry – deck chair ticket not – reas. person test)
3. Steps are taken before the contract is finalized (Olley v Marlborough; Shoe Lane – notice before driving up to barrier)

c) If not a signed document (previous consistent course of dealings situation), incorporated if dealings are:
1. consistent (McCutcheon v MacBrayne – dealt many times, but sometimes EC not included in document-no)
2. and amount to a ‘course’ (suff. number): Kendall v Lillico – yes, 3-4 a year; Hollier v Rambler – no , 3 times in 5 yrs
 Spurling Bradshaw (EC in receipt, ie post-contractual document, but effective as PCCD)

4.Does EC cover the breach/damage alleged ? If clearly yes – say this; if there is doubt, apply:

 Contra pref.rule: if party tries to rely on ambiguous clause, court will construe it against him (Houghton v Traf. Ins)

-Clear wording needed for excl. negligence liability (Canada Steamship), but more relaxed in comm. cases (Monarch Air)

- Clear wording (eg ‘however caused’) needed for excluding liability for very serious breach of contract (Securicor)

-Limitation clauses could be less strictly construed by courts than exemption ones, but depends on clause
On the facts could be that one loss is covered, the other not (eg car and coat), so for the one not covered by EC – say ‘X could sue for the damage to coat’

5. UCTA 1977 – depending on type of breached term, one of 4 situations below:

Vaxt olsa – Mention that EC comes under s13 – refer to rel. subsection, but remember exceptions in Sch 1- insurance,land etc

1.If negligent breach of contract (eg s13 SGSA 1982), apply s 2: death/injury – void; other loss- EC valid if reasonable s 2(2)

2.If breach of express term of contract, apply s3 (only consumer (s12) or written terms): EC valid if reasonable

3.If breach of terms implied by ss 13 (descrp.), 14 (satisfy. qual.) SGA 1979, apply s 6: consumer –void; non-cons. If reas.

4.If breach of terms implied by ss 3, 4 SGSA 1982, apply s 7: consumer transaction – void, non-cons. – valid if reas.
Careful with services - eg if paint on roof flakes could be 1)problem with paint – s 4(2),4(5) SGSA 1982, hence, s 4 UCTA applies, or could be 2)poor
workmanship of painter, and then s 13 SGSA – and, hence, s 2(2) UCTA applies – different consequences for validity of EC !!! in exam – set out both!

In express term breach cases, if a business is buyer and no info on whether on WR – set out both alternatives (ie if WR - s 3 applies, if not – no) !

-If applicable, state reasonableness test: ’fair and reas. having regard to circumstances’ (s11) and apply it:

 Say: ‘Burden of proof of reasonableness on the party relying on EC’ – s 11(5)

 Use add. guidelines for limitation (ie limiting liability to certain amount) clauses – in s 11(4)
 Sch 2 guidelines: (a) not just the fact of bargaining power, but whether was in fact intimated by bargaining power (b)
inducement (if customer offered lower price – more likely to ber reas.); (c) – if tried to alter, clearly knew; d) – short time to
inspect ? –Businesses expected to read documents carefully !
o -NB Sch 2 formally applies only to s 6 and 7 UCTA, but court can apply to other situations (Stewart Gill v Horatio Mayer)
 -Smith v Eric Bush factors: 1) difficulty of task (lower/higher end?) 2) pract. consequences for parties (insurance etc)
 St Albans: consequences borne by local population; D a large multinational with ample resource to meet liability- unreas.
 In comm. cases, where equal bargaining positions – courts tend to hold EC reasonable – Watford Electronics v Sanders
 If specific EC is part of larger EC: Stewart Gill – not severable, whole EC must be reas.; Watford – severable (more recent)

For distinction on reasonableness, pick 2/3 factors, balance them (more/less likely), then tally it eg 2 pro vs 3 contra !

Third parties (usually employees) can benefit from EC, only if Contracts (third Parties Act) 1999 applies, otherwise – privity.

6.If consumer case – mention Unfair Terms in Consumer Contracts Regulations 1999 (based on EC Dir.) - applies to all
contr. terms, not just ECs; but does not apply o individually negotiated’ ones; test: ‘signif. imbalance of rights detrim. to consumer’

7. Remedies

 If LC reasonable, ‘X will have to accept xxx amount’, if not – ‘can claim for full amount of damage’
 If EC reasonable – “X cannot claim damages’, if not – ‘can claim damages’
 If term is condition – can end contract (but Schuler v Wickman – not in legal sense)

-Airline’s right to change destination at their discretion – also an EC !!! (re-routing is breach of an express term)

- SGSA situation: Garage repairs brakes in consumer’s car – breaks fail- damage to car:

o if brakes defective – s 4(2), 4(5) SGSA, and hence, s 7 UCTA- EC void (because consumer)
o if brakes fine, but defectively installed – s 13 SGSA, and hence, s 2(2) UCTA – EC valid if reasonable !

-Interpretation of EC: does word ‘loss’ in EC include damage ? if unclear, apply contra preferentem rule !!!

- Wording ‘any damage’, ‘however cause’ tends to cover !

- Identify Written Terms in exam exhibits: eg small print on corporate blank with company name (standard form) !

- Quotation is a contractual document (and is usually received before contract) – so OK !

- Advice for effective constr. notice – in a gym place EC on wall before entrance/reception area (Olley v Marl)

If exam question advice client before finalization of conract – say ‘draft ECs in severable parts’

Even if any previous stage not satisfied, set out alternative and go on to the end of structure !!!

-When EC gives short time period – say “fault may not manifest itself within such a short period’ !
 ISSUES INVOLVING FRUSTRATION
- Draw timeline to indicate frustration cut-off point (credited)

1. Identify the contracting parties.

2. State the general rule (Paradine v Jane) – contractual obligations are absolute. As exception, contract can
be discharged by frustration (Taylor v Caldwell – music hall burnt)

3. Identify any party who might try and claim that the contract has been frustrated in order to
avoid liability for breach.

4. Define frustration:‘Contract is frustrated if some supervening event not covered by contract makes the
performance of contract impossible or radically different. The event must be beyond the control of the parties’ (Davis v
Fareham)

5. Go through each part of the definition. Does it apply to the facts? Give authority for what you
say.

i.Event must occur after contract has been formed (ie supervening)- apply

ii.Makes impossible or radically different:

1.Unavailability of person vital for performance (identity of person must be essential, also length of absence):

o Morgan v Manser (musician called to mil. Services-frustr.); Condor v Barron Knights (ill drummer could work only 3
nights a week – group needed 7 – frustr.)

2.Unavailability of specific thing vital for performance: Taylor v Caldwell – music hall burned down

3.Non-occurence of fundamental event: Krell v Henry – rooms hired spec. for parade= basis of contract - no other use

o Compare Herne Bay v Hutton: 1)cruise round fleet still possible; 2)Hutton was eng. in business venture (Henry – not)

4.Government intervention: Metrropolitan Water Board v Dick Kerr – stop works to use equipment in war effort- yes

5.Delay: consider length, whether provided for in contract, effects of resumption (Dick Kerr - indefinite –yes)

More expensive: Davis v Fareham – shortage of men/materials – no; Tsakiroglou – Suez canal closure – had to use alt. route
– no; Hardship in itself not frustration, only if makes perf. fund.different (also, shortage foreseeable).

6.Illegality – Fibrosa (war-time ban on trade with enemy)

iii.Event is outside control of the parties:

If party’s ‘own act or election gave rise to event’ - ‘self-induced frustration’ – no discharge:

o ‘Self-induced frustration’: Maritime Fish v Ocean Trawlers – could use extra license for trawl, decided not to – no F
o Super Servant 2 – D chose to use SS2 (which sank), and SS1 was engaged – party’s own choice – no F
o Burden of proving SIF on the party alleging it

iv.Event must not be foreseen:

-Express provision in contract covering event (‘force-majeure’) –contract applies, no F, unless illegality (Fibrosa situation)

-No expr. provision, but event is foreseen, no F (Davis), but Eugenia (could be F even if foreseen, so long as no expr. prov.)

Lease of land: Generally not applicable to leases of land,but could be if event occurs during the currency of lease term
  Panalpina: still would have 3 years of lease – no F (factors: length of lease vs. for how long C deprived of use)

6. If contract is frustrated state the effects:

1) contract automatically comes to an end at the time of frustrating event (FE)

2) neither party is in breach in respect of FE

3) both parties are discharged from future obligations.

7. Does the Law Reform (FC) Act 1943 apply? Applies, unless excluded by contract – s 2(3)

If applies, explain the provisions and apply to the facts:

● s. 1(2) – total loss consideration irrelevant for purposes of this section

1.Money already paid can be recovered + Money due and payable before FE no more payable

2.Payee may retain or recover (as case may be) expenses incurred out of money paid/payable before FE, if just to
do so, having regard to all circumstances:

o No obligation on court to award total retention or equal division. Broad discretion to do justice/mitigate
harshness of loss:
 eg, in Gamerco venue- unsafe: promoter recovered all sums already paid, but D not allowed to rec. expense
o Burden of proof on payee to show that it is just in all circum. to allow him to retain expense (Gamerco/Fair
Warning)
o Insurance sums not taken into account - s1(5)

● s1(3) – if ‘valuable benefit’ – court may order benefiting party to pay just sum, not exceeding value of benefit:

-Court will first determine value, considering all circumstances, incl. money paid under s 1(2)- this will be upper lim.

-Court will assess just sum (may use consideration in contract as level of remuner.- eg 25 % of price for ¼ of use)

- Under 1(3)(b) FE may completely wipe out the benefit (obiter BP Exploration– ‘fire destroys building in progress’ – award nil)

-If asked to advise parties: because of limitations and difficulty of predictions due to absence of clear guidelines for
courts how to use their broad discretionary powers under LR(FC) 1943 better to include express force majeure clause.

8. If contract may not be frustrated then (if relevant) discuss innocent party’s remedies for breach
of contract. – do not forget this as alternative (even if briefly !!!!)

‘As the event is not a frustrating event, .... (apply usual remedies structure)

For essay: weakness in LR(FC) Act 1943 - payee not adequately protected – eg if building under constr. burns
down- under s 1(2) contractor can only recover expense up to amount paid/payable before FE - and cannot claim
any award for ‘valuable benefit’ to customer (as wiped out under s1(3)/BP Exploration)
 FALSE PRELIMINARY STATEMENTS
1. Identify the parties and the contract. Is there even a valid contract ?

2. Identify relevant statements (could be also omission to state)

-Distinguish from mere sales puff (obviously extravagant claim, advertisement gimmick)

3. Are the statements terms or representations ? (if unclear, set out both options: ‘alternatively, if not a term..’)

‘T forms part of the contract’| ‘R – stat. used by one party to induce other to enter into the contract but does not form part of it’

Court will look at intention of the parties (‘intelligent bystander’-obj. test), if unclear look at following ‘term’ factors:

1.Party making S have special/greater skill or knowledge (Dick Bentley v Harold Smith)

2. Party making S about smth. which is/should be under its control (Paramount Estates-‘house as good as show-house’)

-If makes clear that has no knowledge of his own but just passes on information from smb. else – more likely R

- Oscar Chess – seller private individual, no knowledge, relying on log-book, while buyer – motor-dealer – representation
- Dick Bentley – S made by car-dealer who was in a position to know/find out about car’s history – term

3.If prelim. oral S is repeated in written contract – evidence of it being a T (Routledge).But this is not conclusive:

-In Paramount – oral S was not repeated in written contract, but still considered as T – ie contract was partly written, partly oral

4. Recipient of S makes it clear that S is of vital importance (Bannerman v White – buyer said he ‘would not even
ask price if hops treated with sulphur’- seller said yes - T)

5. Whether maker of S asks recipient to verify it: Ecay v Godfrey – seller asked buyer if he was going to have it surveyed –
indicaes that he did not intend his previous S about boat’s condition to be a T. Contrast Schawel v Reade – seller told buyer not to bother
with survey – points to S about quality of goods being a T

6. Lapse of time between making S and contract – longer, more likely to be S (Routledge v McKay)

Remedies of breach of term (even if you think not a term or not breached!): express term, likely to be a
condition....
-if S is misdescription of goods – consider s13 SGA/s3 SGSA and add. remedies – rejection of goods, etc.

4. If a representation, is it a misrepresentation ? If not misrep, no remedy available.

Define :’false statement of fact made by one contracting party to the other 1.before the contract was made and
which was one of the factors which induced the other party to enter into the contract’

-2.Of fact: distinguish from statement of honest, reasonably held opinion

 Smith v Land & House Corp.: ‘most desirable tenant’ – SoF, because knew tenant was in arrears
 Contrast Bisset v Wilkinson – both sides knew seller had not sheep-farmed, just pers. judgment
 Statement of intention not, unless intention never held (Edgington – directors never intended to use loan for bus. devt.)

-3.False statement: may be oral, written or by conduct (Spice Girls v Aprilia – particip. in filming implied that no one leaves)

 Silence (failure to correct) – not normally a misrep.- Hamilton v Allied Domecq . Exceptions:
i. fiduciary relationship – solicitor/client, trustee/beneficiary etc
ii. contract of ‘utmost good faith’ – eg insurance
iii. Distinguish silence from telling half-truth (give half the story)- Curtis v Chemical Dyeing
iv. Failure to disclose change in circumstances after the statement may amount to misrep– With v O’Flanagan
 -4.By one party to a contract to the other- if not a party, not misrep, but could be claim in tort for negl. misstatement

-5.Statement must be one of factors which induced the other party to enter the contract

 Need not be the sole inducement (Edgington v Fitzmaurice)

 Not induced, if relied solely on his own expert (Attwod v Small), but could be – if also relied partly on seller’s statement
 Even if given chance to verify facts for yourself, still could be inducement (Redgrave v Hunt). Exception:
o True position is set out in contract (Peekay v Austr./NZ Banking Group- full terms (different) in contract –no inducement)
 Contrast Curtis – consumer (in Peekay – experienced businessman) relied on explanation of exemption – inducement)

Could be two factors simultaneously: eg seller says nothing wrong with drainage, you rely on expert report – both opinion and Attwood

Burden of proof - on party alleging misrep. to show that def. of misrep satisfied

1. If misrepresentation, state remedies (misrep makes contract voidable , only if then rescinded – void!)
 RESCISSION (equitable; available for both fraudulent and non-fraudulent misrep unless barred)

Procedure:Rescission is a right of innocent party, so he may chose to affirm instead

 Must be notified to other party (if party not available – report to police – to revert ownership – Caldwell)
 Can also apply to court for formal rescission order (eg if other party does not cooperate)

Effect of rescission:1.each party returns money/property transferred; 2.no need to perf. any future obligations

Bars to rescission (because equitable remedy):

1. Innocent purchaser acquires interest before rescission

2. Affirmation (express or implied- by conduct) by misled party
3. Undue delay : Leaf v International Galleries- 5 yrs later discov. that fake painting – had chance to examine sooner
4. Impossible to substantially restore goods or property to other (if completely destroyed, but not if simply damaged)
 Restoration need not be exact (Erlanger v New Sombrero-mine returned allowing for deterioration& profit made)
o Contracts of sale of business rarely rescinded – business likely to have changed its position (vis-a-vis third parties etc)
 Crystal Palace v Ian Dowie – manager moved to another club and CP had new manager – not practical

If contract is rescinded, innocent party can claim INDEMNITY:

-for expenses ‘necessarily incurred as a result of entering into contract’:
-Whittington v Seale-Hayne –leased premises to breed chicken, as unsanitary condition - chicken died:
- Indemnified as to rent, repair costs, but not veterinary bills, chicken food (as not told purpose of lease)

 DAMAGES in lieu of rescission

Damages may be awarded by court instead of rescission if non-fraudulent (s 2(2) Misrep Act 1967)
 No damages, if no right to rescind (ie when one of 4 bars applies)
 Damages more likely when misrep. is about a minor matter and it is unjust to allow rescission

A. Damages for fraudulent misrepresentation – in TORT OF DECEIT -: NB - after Roscoe, no point in trying
to est. that misrep. was fraudulent as damages (and BoP) for non-fraudulent same under s 2(1)

Def.:‘made knowingly or without belief in its truth or recklessly, careless whether it is true or false’ (Derry v Peek)

-Damages ass. on tort principles: put in a position he would be if misrep (and contract) had not been made
- Contrast – contractual (expectation loss) would be: ‘position if rep was true’ (this would be more generous!)
 East v Maurer: position C would be if he bought another hairdresser in area for similar sum (profit from it)
 If false statement in East was a term, damages would be assessed on contractual (expectation) basis:
ie profits he would make if D would not be competing with him by working in his second salon in the area
 Remoteness rule of tort does not apply here (so damages may be more extensive than in ‘pure’ tort)- Roscoe

B. Damages for non-fraudulent misrepresentation – under S 2(1) MISREPRESENTATION ACT 1967:

- Is misrep. made by contracting party ? if yes, C can claim damages under s2(1). If no – only tort of negl. mis./deceit
- If C shows that i. there was misrep and ii. it caused loss, D is liable, unless D can prove that honestly believed... s 2(1):
- Under Howard Marine v Ogden high threshold: honest belief not enough, must also be reasonable (Lloyds Register not enough, should check docs)
- Mention poss. of suing in Tort of Negligent Misstatement under Hedley v Byrne (no need for contract, no need to prove
misrep., covers even statement of opinion), but BoP on C & remoteness rule applies (so damages better under MA 1967) !

ECONOMIC DURESS
-In exam ED could be connected to Williams Roffey final point, so first set out consideration.
-In duress questions issue often not with original contract, but its variation – so deal only with latter !!!

1.Name the parties to contract (variation).

2.Define and go through factors in Carillion v Felix and apply to the facts :

1. Pressure whose practical effect is that there is compulsion on, or lack of practical choice for, victim
2. ...which is illegitimate (distinguish from ‘rough and tumble of normal commercial bargaining’- Carillion v Felix)
i. Actual or threatened breach of contract ?
ii. Has person allegedly exerting pressure acted in good or bad (eg knows that no altern. realistic suppliers) faith ?
iii. Did victim have any realistic alternative (eg cheaper suppliers) other than to submit to pressure
iv. Whether victim protested at the time
v. Whether he affirmed and sought to rely on the contract
Decide on balance of factors – good idea to tally up !
3. ...which is a significant cause inducing C to enter into the contract
- Atlas v Kafco facts: C refused to make deliveries unless minimum pay of 400 for load, D – small company, could lose large customer – ED as defence

Conclude: legitimate commercial pressure or ED

2.State the effect of duress and explain available remedy:

‘ED makes the contract voidable, victim has a right to rescind (and if chooses to rescind – makes c. void)

- No remedy of damages under ED !!!

- Very often issue will be not with orig. contract, but subsequent variation – so rescind only variation !!!

i.If money already paid - V can claim rescission and recover money paid under contract/variation;

ii.If other party brings claim to enforce contr./variation or claims damages for breach - V can use ED as defence.

Bars to rescission – see under Misrepresentation

The Atlantic Baron: shipbuilder threatened to stop work – C agreed to extra money – paid 8 months later – rescission barred as: 1)payment
was affirmation (by the time of payment market cond.changed and there was no more danger that D would not deliver the ship) and 2) delay

If asked to advise client: ‘postpone payment and use ED as defence to avoid affirmation bar’(The Atlantic Baron)

Physical threats – Barton v Armstrong (threat to kill – duress, even though ‘satisfactory business arrangement’)

UNDUE INFLUENCE
Actual UI - difficult to prove. Aboody, also Daniel v Drew (old aunt afraid of nephew going to court signed – UI; threat may even be ‘legal’!)
Presumed UI (rebutted if shown that V actually was free of infl. and exercised independent will!), if:
1. Rel. of trust and confidence – irreb. presumed in solic./client (, child (under18)/parent, relig. adviser/follower.
-Not presumed in husb./wife – but may be proven by innoc. party (eg wife shows that she trusted husband in fin. maters)
 Tate v Williamson – fin. adviser bought client’s house cheaply himself – client did no question advice – T&C established
 O’Sullivan v Management Agency Ltd – young/unknown songwriter/manager – T&C established
2. Transaction calls for explanation (ie not readily explicable by relationship between the parties) – RBS v Etridge (No2)

Remedy: UI makes contract voidable. Rescission (as under ED). Security set aside, so bank can’t enf. mort. No damages !!!

-Position of third parties: if creditor(bank) had actual or constructive notice of debtor’s impropriety (towards
surety), he would be ‘tainted’ with it and security contract (for loan) will be voidable (Barclays v O’Brien)

There is constructive notice (guidance in RBS v Etrdige), if third party (creditor):

1) put on inquiry (automatic whenever non-comm. rel. between surety and debtor, unless loan advanced to both spouse – CIBC v Pitt)
2) failed to take reasonable steps to ensure surety understood the implications of the transaction, steps being:
-private meeting with surety to explain extent of liability, warn of risks and urge to take indep. legal advice (but see Burch), or

-written confirmation from solicitor that risks have been explained to surety
Above principles also apply to other relationships: eg in Credit Lionnaise v Burch – employer/employee – PUI- unlimited security for
employer’s debts - ‘so disadvantageous’ that even urging to take indep. legal not enough, bank must insist that surety does so or otherwise
not take the proposed security. Prima facie – a guarantee by wife of her husband’s debts is not for her benefit (CIBC)