Terms and Exemption Clauses (RHK)

• Clause can be exclusion and limitation under Exemption clause.

• https://www.lawteacher.net/lectures/contract-law/construction/terms/ ( class nen
RHK)
The sources of the obligations of the parties under a contract are called the terms of the
contract. When the parties are involved in a pre-contractual negotiation, several statements may
be made. The law has to be able to distinguish between pre-contractual statements that
become part of the contract called terms, and statements that calls the contract to be formed but
do not for part of the contract, called representation.

The distinction between a term and a representation is important because, if a statement is held
to be term of the contract, a failure to comply with it will be breach of contract, and entitling the
innocent party to a remedy for a breach of contract. On the other hand, if the statement is held
to be a ‘mere representation’, a misrepresentation will make the contract voidable, entitling the
innocent party to a remedy of recession or damages or both.

Terms and representation: Whether a statement is a contractual term or a ‘mere

representation’ depend ultimately on the intention which the statement was made (Heilbut
Symons & co. v buckleton) Lord Moulton stated that for the statement to be a term of contract, it
must be made with the intention that it be a term of the contracts.
There are case law principles that guide the court in deciding whether a statement is a
term or a “mere representation’: ( While writing the question of misrep, we should
distinguish the between terms and misrepresentation)
A. verification: A statement is unlikely to be the term of contract if the makes of the statement
asked the other party to verify its truth. (Ecay v Godfrey). (while consumer goes for verify, it
would be turn by misrepresentation instead of term).

Soundness: Whether the maker of the statement accepted responsibility for the soundness of
the statement – where such responsibility is assum, this indicates that the statement was
intended to be a term. Scheel v Reade. indemnity promise. shaw 1

Reliance: Where one party clearly rely upon the other, this indicative that the statement was
intended to be a term. Esso petroleum v Mardon. shaw, relience.

B. Importance: A statement is likely to be term of the contract where it is of such importance to

the person whom it is made that, had it not be made, he would not have entered into the
contract. (Couchman v Hill) (Bannerman v White). (More importance is terms and less
importance is misrepresentation) exclusivity clause is a condition, important , hobbs 3.
C. Special knowledge or skill: If the maker of the statement has special knowledge and skill
compared to the other party, the statement will be held to be a contractual term. (Dick Bentley v
Harold smith). On the other hand, if the parties agree that the knowledge is equal, or if the
person to whom the statement is made has greater knowledge the statement may be held to be
a ‘mere representation’. (Oscar chess ltd v Williams). inspector; precision tilings had special knowledge.
D. Laps of time: The longer the laps of time between the making of the statements and the
formation of the contract, the less likely it is for the statement to be a term of the contract.
shaw ke inspector agei
(Routledge v McKay). (Long time representation and less time terms) bolsi j crack ase, tokhon
to janay nai. plus
E. Must be in writing: Where the agreement has been reduced to a written document statements hobbs 4
appearing, on the written contract will normally be regarded as terms: In contrast, statements boschor
excluded from contract are likely to be ‘mere representations. (Routledge v McKay: MWB v pore
Rock advertising ltd) (Every time written statement is count as terms). hobbs- 1,2 exclusivity
er damage
• Classification of Contractual terms: chiaitese
• Terms can be classified in three ways. Not all terms in a contract are of equal importance;
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some may be major terms; some terms may be minor in importance. It is important to
distinguish between major and minor terms as the remedies arising from the breach of
such terms differ.

Traditionally, a major term of the contract is labeled as 'condition' whilst a minor term of a
contract is a 'warranty'; the terms which are not that important and can be said to have
average importance are known as 'innominate' terms.

1. Condition (Major term) - A condition is an essential term of a contract which goes to the
heart and root of the contract. A breach of a condition enables the innocent party either to
terminate performance of the contract and obtain damages for any loss suffered as a
result of the breach, or to affirm the contract and recover damages for the breach
(Poussard v Spiers). exclusivity clause is a condition. hobbs

2. Warranty (Minor term) – A warranty is a lesser, subsidiary of a contract. A breach of a

warranty enables the innocent party to claim damages: he cannot terminate the
performance of the contract. (Bettini v Gye).

A term maybe classified, or held to be a condition in one of the three ways: 1. A term
maybe classified as a condition by statue: 2. A term maybe classified as a condition by the
court: 3. A term maybe be classified as a condition by the party’s own classification of the
contractual terms.

If a contract states that, a particular term is a condition, the term will be regarded as a
condition. (Lambert v North central plc v butter worth). However, such classification may
not be decisive you. (Schuler Ag v Wickman machine tools ltd). The court must be
satisfied that the parties intended to use the word the ‘condition’ in its technical sense.

3. Innominate/ intermediate- An innominate term is a term which is neither is condition nor a

warranty. It may, however, fall upon condition or warranty by the nature of its bridge. (Hongkong
far shipping company v Kawasaki). Therefore, if the consequence of the breach is serious, it
would be considered as a conditional breach. However, if the consequence of the breach is not
sufficiently serious to give rise to arrive to terminate, the claimant will only be intitled to
damages. (Cehave V Bremer HG (The Hansa Nord).

Sources of contractual terms:

There are two principal sources of contractual terms. 1. Express terms. 2. Implied terms.

Express terms: Express terms are the terms which are specifically agreed on by the
contracting parties. Express terms can be agreed on orally or in writing.

• Oral contract: In establishing the terms of an oral contracts the question is “what did the
parties agreed upon”? in other words, what did they say? “This is a question of fact and
depends upon whether it is possible to prove what has been said.

• Written contract: A term must overcome three hurdles before it can be incorporated into
a written contract: A. The first is that the notice of the terms must be given act or before
time of concluding the contracts. (Olley v Malbrough court limited) B. Secondly, the
terms must be accompanied or referred to in a document which was intended to have
contractual effect. (Chapel ton v Barry UDC). C. Reasonable steps must be taken to
bring the terms to attention of the other party. (Parker v southeastern railway company).

Terms may also be incorporated into a contract by a course of dealing. (Hollier v

Ramblers motors).

• Parol evidence rule: According to the so-called parol evidence rule, extrinsic evidence,
oral or otherwise may not be adduced, which seeks to add, vary, or contradict the terms
of a written contract. It has been stated in Jacobs v Batavia that parol evidence will not
be admitted to the same particular term which had been verbally agreed upon, and had
been omitted from a written instrument, constituting a valid and operative contract
between the parties. (Generally, you would not add any new clause although by
following exceptional rule it can be possible) written thakle, oral hobe na.

The parol evidence rule was originally apply by the court as a strict rule. However, it
become apparent over the courts of time that the rule was never intended to be applied
as a rule of law but merely as a presumption.

However, there are exceptions to the general rule of parol evidence: 1. Contract which
are not wholly written (j evens and sons v Andrea Marzari) 2. Collateral contracts (city of
west minster v Mudd) 3. Onerous or unusual terms. (Interfoto v stiletto): where a term of
contract is particularly onerous or unusual and would not generally known to the other
party seeking to enforce that term, the party has to show that, it has been fairly and
reasonably brought.

Implied terms: In addition to the terms which the parties had expressly agreed, a court maybe
prepared to hold that other terms must be implied from one of the three sources: 1. Terms
implied by customs 2. Terms implied at common law 3. Terms implied by statute.

Terms implied by custom: A contract maybe deemed to incorporate any relevant custom of the
market, trade, or locality in which the contract is made (Hutton v Warren), Unless the custom is
inconsistent with express terms of the contract or its nature. A custom will generally be implied
into a contract where it can be shown that the custom was generally excepted by those doing
business in a particular place and was such that and outsider making inquiries would not fail to
disclose it. (kum v wah tat bank ltd).

Terms implied at common law: Terms may be implied on the basis of presume intention. The
case of Shirlaw v Southern foundries company Ltd established the officious by standard test. In
other words, such need not be express because it is something so obvious that an official by
standard should readily approve it. A term may also be implied if it is necessary to give the
transaction business efficacy (certainty).

Terms implied by statue: Some of the terms are implied into the contract by statute: A.
sell of good act 1979 section 12 to 15. B. supply of goods act 1982 section 2 to 5 C.
supply of service Service – 13 to 15). consumer rights act 2015 section 9 to 17. D. Unrfair
contract terms at 1977 (8 1977).

Implied terms in a B2B contracts: According to s2 (1) of the sale of goods in 1979:

Note: (Sell of goods) Soga 1979 deal with – section 12 to 15

A contract for the sale of goods “means a contract whereby a seller transferred or agrees to
transfer the property in goods to buyer, for money consideration called the price”.

Section 12 imposes and implied obligation as to “title”- According to s12 (1), in a contract of sale
of goods, there is an implied condition on the part of the seller that he has the right to sell the
goods.

According to section 12 (2), there is an implied warranty that the goods are free from charges or
encumbrances in a favor of third parties.

Section 13 imposes and implied obligation as to sell by the description: section 13 (1) of the sell
of good act 1979 states that, where there is a contract for sell by description, there is an implied
condition on the seller that the goods sold must be corresponding with the description. This
section applies if the buyer himself/ herself selected the item. Any deviation from the description
may lead to breach of section 13. (Arcos limited v Ronaasen). If the buyer sees the actual good
before the sell, then section cannot be relied upon. Harlington and Leinster v Christopher hull
fine Art, the claimant purchase a painting from the defendant for 6000 pounds as an auction
catalogue describe it to be painted by a famous German artist. Before the transition, the
claimant sent their expert to inspect the painting. After the sell it was discover that the painting
was famous and worth less than 100 pounds. So, the claimant sued under section 13. The court
held that by sending their experts to inspect the painting the sell was no longer disment by
description. Section 13 only applies to goods sold by description and therefore the claimant had
no protection.

However, if a purchaser purchases the products by simply relying on the description, then an
action can arise in Beale v Taylor. The defendant advertised a car describing is as white 1961,
“Heraled convertible” and claimant came to see the car relying on that description. He bought
the car believing it to be the 1961 model but later found that only the rear half was of the 1961
model and the other half was form an earlier model. EWCA held that there was sell by
description even though the buyer saw the car before purchasing it. A thing is sold by
description as long as it is not sold merely as a specific thing but as something corresponding to
a particular description. The buyer relied in part on that particular description in buying the car.

Section 14 imposes and obligation as to satisfactory quality and fitness for a particuler purpose:
Section 14 only applies to sellers who are selling in the course of business. It does not cover
private sales in Stevenson v Rogers. It was stated that an act can be properly said to have been
done in the course of business only if the act- transaction is an essential an integral (Deep) part
of the business. Some degree of regularity need to be proved.

According section14 (2) Soga sale of goods act 1979 where the seller sells goods in the course
of a business, there is an implied condition that the good supply under the contract are of
satisfactory goods. tilings er materail was unsatisfactory,
Satisfactory is define in section 14 (2 A), which states that the goods are of satisfactory quality is
a reasonable a person would regard them so talking account of any description of the goods the
price, and all other relevant circumstances.

Section 14 (2B) states that, the quality of goods includes there state a condition along with
relevant factors such as.

a. Fitness for all the purses for which goods of the kind in question are commonly supplied.
b. Apearance and finish:
c. Freedom from minor defects,
d. safety.
e. Durablity.

In rogers v Parrish it was held that, even a minor defect in the appearance of a new car may
render it to be of unsatisfactory quality. In Aswan engineering v Lupdine the court had applied
usability test “as it was business to business contract” this test asked if a reasonable user could
have used the goods for the purpose for which they are commonly supply.

Section 14 (2C) state some situations where defects will not render the goods to be
unsatisfactory -
Section 12 (2CA) where the defects of the products are specially drawn to the buyer’s attention
but the buyer ignores it Barlett v Sydney Marcus ltd.
Section 14 (2CB) where the buyer examined the products and has failed to detect the defects
which ought to be have been revealed by that type of examination. shaw inspected.
Section 14 (2C) C where the sell is a sell by sample and the buyer examines the sample and
has failed to identify the defects which ought to have been revealed by that type of examination.
Bramhill v Edwards.

In these situations, the buyer will not be able to claim the defects has rendered the product
unsatisfactory.
Hand note: Section 14 (2C) C buyer could claim as it is happen by the buyer failure.

Section 14(3) deals with fitness for a particular purpose: Section 14 (3) of the sale of goods act
1979 states that where the seller sell goods in the course of business, and the buyer makes
known to the seller any particular purpose for which the goods are being bought, there is an
implied condition that the goods supplied under the contract are reasonably feet for the purpose.
(Hand note: None fulfillment of buyer requirement although buyer has ensured the purpose of
towards seller and seller has breach the buyer purpose of under Section 14 (3)

In BSS group plc v maker UK limited, the seller, BSS, has supplied particular types of adapters
and valve to makers in connection with a plumbing project for a renovation work. The adapter
and valve turned out to be incompatible and withing ours of activation, the valve blew of causing
a damaging flood in the public house. The issue in the case was whether BSS was in breach of
the implied terms as to fitness for purpose imposed by section 14(3). The EWCA held that
makes had made it known to BSS the particular purpose for which the valve were intended to
be used.

Section 15 imposes an obligation as to sell by sample-

Section 15 (2) implies conditions that the bulk of the goods will correspond with the sample in
quality. That the buyer has reasonable opportunity to compare the bulk with the sample and the
goods will be free from any defects making their quality unsatisfactory, which will not be
apparent on reasonable examination of the sample.
The implied terms expressly stated to be breach of conditional terms. Therefore, any breach will
be a repudiatory breach entitling the buyer to reject the goods, repudiate the contract and claim
damages.
Section 11 of the sell of goods act 1979 provided that the right to repudiate is lost where the
buyer accepted the goods.

Supply of goods contract (Sogsa 1982- 2 to 5)

Terms are implied In a supply of goods/ transfer of goods by the supply of goods and services
act (Sogsa) 1982. The same types of conditions is implied as for sell of goods.

Section 2 imposes and obligation as to the right to transfer “title” in the goods.
Section 3 states that where the transfer or transfers of agrees to transfer the property in the
goods by description, there is an implied condition that the goods will correspond with the
description.
Section 4 states that the goods are of satisfactory quality and feet for any particular purpose.
Section 5 states the goods to match with any sample.

Supply of service contract (Sogsa 1982 – 13 to 15)

Section 13 to section 15 supply of goods and services act 1982 imposes implied terms in a
contract for services.

The implied terms are: Section 13 states where the supplier is acting on the course of a
business, the services will be carries out with “reasonable care and skill”. The supplier must be
competent and professional. In lawson v supasink ltd the defendant was contracted to design,
supply and install a kitchen. Plans were drown but did not follow them properly. The claimant
sued under section 13 and was awarded damages.

Section 14 states where the supplier is acting in the course of a business, the supplier must
carry out the service within a "reasonable time". Charnock v Liverpool corporation.

S15 implies unless otherwise provided for in the contract, the person with the supplier will pay a
“reasonable price” for the service.
Note: 2nd hand products must be expected to have some defects. Therefore, a minor defect in
a 2nd hand product would not render it of unsatisfactory quality.
However, if the quality of the product is below the quality that is reasonably expected there
maybe a breach of S14s2 and S14s3 of SOGA 1979.

Business to consumer (B2C)

the statutory provision of the Consumer Rights Act 2015 is applicable to determine any issues
related to business to consumer contracts.
The CRA 2015 came into force in October 2015. Its aim is to consolidate and clarify consumer
rights. It does not affect business to business contracts for which the provision of SOGA 1979,
SOGSA 1982 and the UCTA 1977.
However, if the contract is made between a business (A trader) and a consumer the CRA 2015
is applicable. The law in relation to implied terms and exclusion clauses will undergo
fundamental changes to existing legislation, including Unfair Terms in Consumer Contract
Regulations 1999 (UTCCR) and the consumer protection (DISTANCE selling) regulation 2000.
In part 1 the Act covers goods ( chapter 2), Digital goods (Chapter 3), and supply of goods
(Chapter 4). In a sell of goods contract, where the nature of the contract is one of business to
consumer, the applicable statutory provision is the consumer rights act.
As ever the corner stone rights in a consumer sell of goods are that the goods should be off
satisfactory quality as stated in section 9 of the CRA and that they should be reasonably feet for
the their particular purpose as stated in section 10. This provisions are supplemented by the
requirement that where goods are sold by description, it must correspond with the description
and section 11 is applicable and, by reference to a sample, as listed in section 13. It is also of
course, a requirement that the trader has the right to supply the goods, as mention in section
17. Section 31 of the CRA 2015 states that, attempt to exclude or limit implied terms are not
enforceable against the consumer. They are banned outright and there is no test of
reasonableness.
The question of remedies, where the goods are none confirming, is, “ what remedies does the
consumer have?” for the most part, that is where the conformity relates to the requirements in
section 9 , 10 to 11, 13 and 17.
There are 3 remedial options available to the consumer, namely:
1. section 20 of the consumer rights act 2015 states short term right to reject.
2. section 23 states the right to repair or replacement. shaw has the right to repair , or replace.
3. section 24 states the right to price reduction or final right to reject.

Broadly speaking, the short term right to reject is available to the consumer for 30 days, running
from the time :
i. That ownership has been past.
ii. The goods have been delivered.
iii. In cases where the trader is required to install the goods or to take other actions to enable
the consumer to use the goods.

The right to repair or replacement is available unless repair or replacement is either impossible
or disproportionate. The consumer is not entitled to both price reduction and final rejection or, on
either case the remedy only be exercised where:
a. After one repair or one replacement to goods do not conform to the contract.
b. The consumer can require neither repair or replacement of the goods.
c. The consumer has require the trader to repair or replace the goods, but the trader is in breach
of the requirement to do so within a reasonable time and without significant inconvenience to
the consumer.
Supply of service contract Under the CRA 2015- What are the statutory rights of a consumer
under a service contract.
Most importantly, the consumer has a right that the service is perform with reasonable care and
skill, as mention in section 49 of the CRA 2015: Where a price has not been agreed upon, a
reasonable price is to be paid, as stated in section 51: and where a time has not been fixed the
service is provided in a reasonable time, as specified in section 52.
Remedies under a service contract: Section 54 provides that, where the services are non-
conforming there are 2 remedial options available to the consumer, namely:
a. the right to require repeat performance.
b. the right to a price reduction. hobbs, damage dibo na, at best right to repair, or price reduction pabe

Exclusion clause
There are 2 types of clauses: Limitation clause- where parties seek to limit their liability.
Secondly, exclusion clause- where parties seek to exclude their liability.
An Exclusion clause may be defined as a clause in a contract, or a term in a notice, which
appears to exclude or restrict a liability or a legal duty which would otherwise arise. An
unfair contract terms can operate oppressively, the law restrict the use of such terms. The
protection comes from the common law, the unfair contract terms Act 1977 , the unfair
consumer contract Regulations 1999, and the consumer rights act 2015.

The courts have traditionally held that exclusion clauses are only valid if they are actually part of
the contract. Protection at common law comes into 2 forms. Firstly, the courts will consider if the
terms have been incorporated into the contract. Secondly, the courts will consider if the
clause covers the law in question.
According to section 55(1) of the sale of goods Act 1979, a party is allowed to exclude or restrict
his liability under a contract. For an exclusion clause an effective/ valid, it must overcome three
hardell.
1. Incorporation
2. Interpretation/ Construction
3. Statutory control/ control by legislation

Incorporation
Firstly, the exclusion clause must be incorporated into the contract. An exclusion clause can be
incorporated into the contract in three ways.
a. Incorporation by signature.
b, Incorporation by notice and
c. Incorporation in the cours of dealings.

A. Signature Rule: if the exclusion clauses are included in a document which has been signed
by a claimant, then the clauses will be deemed to be incorporated into the contract [ L’ Estrange
v F Graucob Ltd] In this case, a woman signed a hire purchase agreement without reading it
which contained a very small print, excepting liability for the product. When the good proved to
be defective, she used the seller Maugham LJ held that singing the contract meant that the
woman was bound by the exclusion clause , and therefore had no remedy.

The claimant’s signing will be bound by the clause even if it has not been read or understood,
provided the defendant has not made any fraud or misrepresentation to its effect ( Curtis v
Chemical cleaning and Dying co) In this case, the claimant took her weeding dress to the
cleaner and was asked to sign a form which the assistant claimed to excluded liability for any
damages to the beads. The form in fact contained a clause excluding all liability for any damage
howsoever caused, the dress was returned badly stained and the EWCA held that assistant had
misrepresented the effect of the clause. Therefore, the clause could not be relied upon even
though the claimant had signed it.

B. By notice: Moreover, to be incorporated, reasonable and sufficient notice of the existence of

the exclusion clause should be given, if not cited. The notice of the exclusion clause has to be
given at or before the time of concluding the contract. If it is introduced later, it cannot be part of
the contract [Olley v Marlborough Court Ltd]. In Thornton v Shoe Lane Parking, the claimant
was given a ticket on entering a car park after putting money into a machine and later got
injured there. The ticket stated the contracts terms and conditions were displayed inside the car
park and so, the issue was whether a term excluding liability for personal injuries was
incorporated into the contract as it depended on where the offer and acceptance took place in
relation to the ticket machine. Lord Denning MR held that, the machine itself constituted the
offer and acceptance took place by putting the money into the machine. The ticket was
dispensed after the acceptance took place and therefore the clause was not incorporated into
the contract.

Notice on the invoice of the terms and conditions is sufficient to incorporate them into the
contract, provided the claimant new about it (Gow v Tui UK Ltd). Generally, notice often
exemption clause will only be considered reasonable if it is given in a document which are
reasonable person would expect to contain contractual terms Chapelton v Barry Urban district
council. If separate written terms are presented at the time contract is made: By handing over a
tickets, or listing them on a sign, those terms only become part of contract if it can be said that
reasonable notice of them had been given. These mostly arise in “ticket cases”. The guiding
principle was late down in parker v southeastern railway, where the claimant had left his bag in
the defendant’s clock room which had a notice stating that they would not be responsible for any
deposit exceeding 10 pounds in values and same was also printed on the tickets given to
customers. The claimant’s bag had been worth more and got lost Lord justice Mellish LJ held
that, the claimant was bound by terms, even though he had failed to read the terms.
Where a terms is particularly onerous the person seeking to rely on the term must take
measures to bring it to the attention to the other party. ( Interfoto v Stiletto, O’Brien v MGN Ltd).

Incorporation in the course of dealings: some guidelines were given by the house of lords
mac cutucheon v David Mac Bryne Ltd where it was said that the course of dealing must be
regular and consistent.
If two parties have previously made a series of contracts between them and those contract
contained and exemption clause, that clause may also apply to a subsequent transaction, even
if the unusual steps to incorporate the clause have not been taken. In Spurling v Bradshop, the
defendant regularly use a wear house for storage and signed and invoice containing and
exclusion clause each time. When goods were damaged, the wear house owner rely on the
clause to avoid liability. The defendant argued that since signed the invoice after the contract
was made, the clause was not incorporated into the contract. Lord Denning, Morsi and parker
LJ held that the clause was incorporated through previous dealings since the defendant would
have been aware of the term from the previous dealings and therefore it formed part of the
contract. In Henry Kendall Ltd v William Lillico Ltd the house of lords held that over a hundred
similar contract over a period of 3 years constituted course of dealings. In contrast, in Hollier v
Rambler motors, three or four contract over a period of 5 years where held not to be a course of
dealings. Transformers and Rectifiers Ltd v Needs Ltd.

Interpretation/ Construction
An exclusion clause must be properly interpreted or constructed to cover the bridge which
has been caused. Even where the exemption clauses appear to have been successfully into the
contract, it still does not mean that it will avoid liability in all cases . The clause could still fail in
the construction of the contract as a wholeand there are a number of reasons for these such as:
contra proferentem rule, Negligence, fundamental breach.

contra proferentem rule: Once an exemption clause has been incorporated into a contract the
court will the check to see whether the clause actually covered the breach that has occurred. In
doing so, they apply what is called the contra proferentum rule which states that, “ any doubt or
ambiguity in an exclusion clause will be interpreted against the person seeking to rely on
it”. As per lord justice Somervell in Houghton v Trafalgar Insurance. This means that where
there is any ambiguity (vagueness) in wording of the clause the courts will interpret the clause
against the party to seeking to rely on it. In Andrews bros limited v Singer cars, the claimants
contracted to purchase some new singer cars from the defendant, which included a term
excluding implied conditions, warranties and liabilities. However, one of the cars delivered was
not new but used on the road. The claimant wanted to reject the car, but the defendant argued
that the exclusion clause prevented them from doing so, as it excluded the term requiring goods
to be as describe under section 13 of Soga 1979. The court held that, the cause was not
effective since it did not cover the loss in question and requirement of the cars being new was
an express term. Whilst Soga implies a term that good must be as described, any ambiguity in
the effect of the clause would be interpreted against the party seeking to rely upon it under the
contra proferentum rule.

In Alisa craig Fishing co v Malvern fishing limited, the UKHL held that where the clause limit
liability rather than excludes liability all together, the courts should apply the natural meaning of
the clause and not be to eager to find ambiguity.

Negligence: White v John Warwick, the claimant had hired a bicycle form defendant with a
Written agreement stating no liability for personal injury. while riding, the saddle tilted and
caused injury to the claimant, potentially holding defandance liable in both tort and contract. The
EWCA held that the ambiguous wording out of exclusion clause would effectively protect the
defandance from their strict contractual liability, but it would exempt them from liability in
negligence.

Fundamental Breach: If the court decides that there had been a fundamental breach, it must
then decide whether any exemption clause is sufficient to limit or exclude a parties liability for
that breach. Swiss Atlantique SA v Rotterdamsche kolen central NV. However, this
particular area is now very much governed by the unfair contract terms act 1977.

Statutory control or control by legislation

The final hardel is one of statutory control or control by legislation. The statutory controls
examined in this section only become relevant if it is fast established that the exclusion clause is
a term of the contract (by signature, incorporation, or course of dealing) and properly
construed. It would otherwise operate to protect the party in breach from liability. In a business-
to-Business contract the exclusion clause would be regulated by the unfair terms UCCTA 1977,
whereas business to consumer act it will be regulated by the CRA 2015.

Unfair contract terms ACT 1977: The basic purpose of the UCCTA 1977 is to restrict the
extend to which liability in a contract can be excluded for breach of contract largely by reference
to reasonableness but, in some cases, by a specific provision.

The scope of UCTTA 1977: the act does not apply in insurance contract “ sale of land”
contracts relating to companies “ the sale of shares and the carriage of goods by sea or to
international supply contracts.

Business liability and business as a consumer: Most of provision of the Act apply only to what is
termed as “business liability”. This is define by section 1 (3) of the UCTTA 1977 as liability
arising form things done by a person in the course of business or form the occupation of the
business premises. In Stevenson v Rogers, the defendant was fisher man who sold his fishing
boat to the claimant who letter brought an action based on breach of section 14 SOGA 1979, as
the boat was satisfactory quality. Section 14 only applies to sell of goods sold in the course of a
business. So the defendant argued that the sale of the boat was not in course office business.
Since, his business was catching fish and selling them. The EWCA held that, the sell was
course of the business and therefore, the defendant had to ensure the boats the boat was at
satisfactory quality. The exceptions are section 6 and 7, (UCTTA) where the Acts also apply to
private contracts.
The acts give the greatest protection to the consumers under section 12(1). A person deals as a
consumer if it does not contract in the course of business, while the other does contract in the
course of business. R and B Customs Brokers v UDT.
The main provision of UCTAA 1977: section 2 states exemption for liabilities for negligence :
Under section 2 (1) a person, by reference to any contractual terms or to a notice given to
persons generally or to particular persons, cannot exclude or restrict hos liability for personal
injury or death resulting from negligence.
Under section 2(2) liability for negligence for any other kind of loss or damage can be excluded,
provided the term of notice satisfied the requirement of reasonableness ( the burden is on the
seller to prove) that the clause is reasonable one in the circumstances. The question of what is
reasonable is decided by applying the reasonableness test set out in section 11.

The reasonableness test - s.11 of the UCTA 1977 provides that a term is reasonable if it can
be considered fair and reasonable in the circumstances which were, or ought to have been, in
the contemplation of both parties at the time the contract was made. The test is whether the
clause was a reasonable one to include in the first place [Stewart Gill v Horatio Myer].

s.11(5) put the onus of proving reasonableness on the party relying on the exclusion clause.
Guidance for the application of the reasonableness test can be found in Schedule 2 of the Act,
which lists five factors that should be taken into account:

1. The relative strength of the bargaining position of the parties [Smith v Eric S Bush]
2. Whether the claimant received an inducement to agree to the term
3. Whether the claimant knew or ought to have known of the existence and extent of the term
4. Whether it was reasonable to expect that compliance would be practicable
5. Whether goods were manufactured or processed or adopted to the special order of the
customer.

In Phillips v Hyland, the claimant hired an excavator from a company which a contractual
requirement for a driver be provided. The contract also contained a clause stating that the driver
became the servant of the hirer which would therefore negate the company’s liability arising
from the negligence of the driver. The driver caused significant damage to the claimants
building. EWCA held that the term acted as an exclusion clause and was unreasonable
because:

1. The contract was entered into at short notice

2. The claimant was given little opportunity to familiarize himself with the term
3. The claimant was forced into a ‘take it or leave it’ situation where he had no choice in the
selection of driver or to assess their qualifications or suitability to do the job
4. There was little opportunity to arrange own insurance cover.

The UTCCR 1999 apply to contracts entered prior to October 2015. They derive from an EU
Directive and apply only to consumer contracts (Regulation 4). A term will be regarded as unfair
under Regulation 5 if:
i. It has not been individually negotiated.
ii. It is contrary to the requirement of good faith.
iii. It causes a significant imbalance in the parties' rights and obligations to the detriment of the
consumer.
Schedule 2 contains an indicative but not exhaustive list of what may be regarded as unfair.

CRA 2015 in relation to Exclusion Clause: The CRA 2015 revokes the UTCCR (Unfair Terms
in Consumer Contract Regulations) 1999, which substantially renaming its protective regime. It
preserves the UCTA bar in terms of notices that purports to exclude a traders liability for
negligence which lead to the death or personal injury of a consumer. It follows the UCTA
approach in blacklisting attempts made by a trader to restrict or exclude liability to a consumer
in relation to the key rights (such as the right that goods should be satisfactory quality and
reasonable fit for particular purpose that services should be performed with reasonable care and
skill and so on (s.55).

The CRA applies to consumer contracts, that is contracts between trader and a consumer. At
the heart of the Act, its supervisory regime is s.62(4), that subjecting that are arguably unfair to
the new familiar European test according to which, "a term is unfair if contrary to the
requirement of good faith, if it causes a significant imbalance in the parties rights or obligation
under the contract to the detriment of the consumer".

This formulation suggests that an unfair term has two key elements: A requirement of good faith,
and that the offending term would otherwise result in a 'significant imbalance' between the
parties rights and obligations [West v Ian Finlay; Office of Fair Trading v Ashbourne
Management].

Schedule 2, Part 1 sets out a non-exhaustive list but indicative list of 20 types of terms which
are arguably unfair. This is known as the 'grey list' and includes; terms permitting traders to
retain without compensation sums paid by the consumer if the consumer decides not to proceed
with the contract (para 4). Terms requiring consumers who did not fulfil obligations to pay a
disproportionately high sum in compensation (para 6) etc. Where a term or notice is found to be
unfair, it is not binding on the consumer (s.67)
s.62(1) of the CRA provides that, "an unfair term in a consumer contract shall not be binding on
the consumer with the test of unfairness, which is contained in s.62(4)". In s.62(5), then again in
s.62(7) the Act switches from talking about "what is unfair and to what might render a term or
notice fair". This section actually states that whether or not a term or notice is fair is to be
determined by taking into account the nature of the subject matter of the contract, the
circumstances existing when the term was agreed, and the other terms of the contract. exclusivity is unfair
on hobbs.

s.55(1) states that, "a trader cannot by a term of a consumer contract or by a consumer notice
exclude or restrict liability for death or personal injury resulting from negligence".

Articles:
- ‘Exclusion clauses - what is reasonable?’ by Steven Carey.
- ‘Courts take broad view on exclusion clauses’ by Shona Frame.
- ‘Exemption clauses, risk allocation and ordinary language’ by Joanne Maclean and Suriya
Edwards.
- ‘The Contra Proferentem Rule: Contract Law's Great Survivor’ by Oxford Journal of Legal
Studies.
- ‘Implied Terms in English Contract Law: The Long Voyage of The Moorcock’ by Common Law
World Review.
- ‘Implied Terms: The Foundation in Good Faith and Fair Dealing’ by Hugh Collins.
- ‘Consumer Rights Act 2015 — a new regime for digital content’ by Jackie White.
- Law Commission Consultation Paper 188 Consumer Remedies for Faulty Goods (November
2008).
- Office of Fair Trading response to consultation, Consumer Remedies for Faulty Goods,
(February 2009).
- Law Commission Report - Unfair Terms in Consumer Contracts 2012.
Essay Angel: Express and implied terms.