.

Exclusion Clauses & Standard Form Contracts

● Clauses which exclude or limit a party’s liability
● Justification: freedom of contract (a party is free to reject
the clause) AND efficiency
● BUT weaker party may have no capacity to negotiate
● Transaction risk passed to the weaker party even where
co. is negligent.
● The law attempts to limit the effect of such clauses
through legislation & courts
Main Approaches
● 1. Protectionism: Courts should interfere
To correct power imbalances in the market place

● 2. Freedom of contract: Courts should not interfere

with the bargaining process
CONSIDERATIONS
1. Manner of Incorporation
Signed Documents: L’Estrange v Graucob
∏ Bought a cigarette vending machine and signed a sales agreement
without reading it. It contained a broad exemption clause in small
print on poor quality paper.
It stopped working and could not be fixed.
It contained a clause excluding all implied conditions & warranties
not contained in the document.
Held: Scrutton LJ: “When a document containing contractual terms
is signed, then, in the absence of fraud, or I will add
misrepresentation, the party signing is bound…”
NB: If you sign a document, you cant argue you did not read or
understand.
Exception: i. Fraud or Misrepresentation
Curtis v Chemical Cleaning & Dyeing Co.
● Π took a wedding dress for cleaning
● She was asked to sign a document and she asked what it
was.
● Δ told her that it excluded liability for damages to sequins
& beads
● In reality, it excluded them from liability from any sort of
damage
● HELD: she was not bound by her
signature since Δ had misrepresented facts.
ii. Type of Document:
Grogan v Robin Meredith Plant Hire [1996]

● The signed document should be one that ordinarily

contains contractual conditions
Document : Time sheet
Held: a timesheet was not a document which might be
expected to contain contractual clauses
Electronic signatures
● Kenya Information and Communications Act (2/98)
● 83J.Formation and validity of contracts. (83C-83R)
(using electronic messages)
● Evidence Act. (Part VII – Electronic Records) e.g S.106F
“A court shall presume that every electronic record
purporting to be an agreement containing the
electronic signatures of the parties was concluded by
affixing the digital signature of the parties”
Unsigned Documents
1. Time of Notice : Olley v Malborough
● The Olleys booked a hotel room
● They went out and left the key at the reception desk
● Someone took the key & stole Mrs. Olley’s fur coat.
● She asked for compensation and they declined
● Informed that they only refunded items given to hotel for
safekeeping
● The Exclusion was on a wall in their room
HELD: Contract formed at the time of checking in at the
reception desk
Exclusion did not form part of the contract since they read it
after the contract was formed.
Exception: Course of Dealings
Spurling J Ltd v Bradshaw
●Δ had stored orange juice in Π’s warehouse for years.
●He stored 8 barrels of juice
●They were missing when he went to collect them
●He refused to pay the storage charges. He was sued.
●Δ argued Π had been negligent
●Π stated exclusion clause exempted them from liability for
negligent acts
HELD: Clause was valid. Parties had dealt on those terms
previously.
2. Sufficiency/Degree of Notice:
Parker v S.E Railway Parker left his baggage at the railway
station luggage office. He was given a ticket which had
the words “see back”. The back contained a clause
limiting liability for loss of luggage. The luggage was lost
and he sued.
● Held: The test was whether the defendant had done
enough to bring the clause to the notice of the plaintiff.
● It was decided that they had done so and the plaintiff was
bound by the agreement.
Lewis Ralph Dodd v Chandrakant Nandha [1971]
EA 58
● Π left his car at the Δ’s garage for storage. The garage was
negligent and the car was stolen. The garage claimed that
they had exempted their liability by a notice at the back of
the yard. They also argued that the plaintiff had been to the
garage on at least 3 occasions.
● Held: The notice had not been brought to the plaintiff’
attention.

It was very small in size and was not prominently

displayed.
Chapelton v Barry Urban Council
● ∏ hired some deck chairs and was given some small
tickets. He thought it was a receipt
● The back had exclusion clause for damages or accidents
resulting from use of the chairs
● The canvas on a chair collapsed & Π was injured
● Held: the exemption clause had not been sufficiently
brought to his attention.
He would not have automatically assumed that the receipt/
ticket contained contractual terms.
NB: Nature of the document is important
Thornton v Shoe Lane Parking
● ∏ was injured in the Δ’s car park.
● Entrance had a notice showing charges and stating
that parking was done at the owner’s risk.
● Motorist would stop to obtain a ticket.
● The barrier would then lift
● The ticket indicated that it was subject to conditions
displayed on the premises
 Thornton case cont’d

● Premises contained several notices spelling out the

conditions
Lord Denning: ‘In order to give sufficient notice, it
would need to be printed in red ink with a red hand
pointing to it”, or something similar..
Held: The notices were NOT sufficiently drawn to the
Π’s attention.
Review: Machine: offer or invitation
to treat?
V.W Nehra v The Commissioner for Transport
● ∏ was travelling from Jinja to Msa. She stopped in
Nairobi for sometime. When she got to Mombasa, her
luggage was lost.
● Δ’s argued that their liability was limited by the
conditions in their tariff handbook
● The EA Railways & Harbours Administration Act
provided that such goods were to be collected within 24
hours.
● HELD: The Act was clear enough to deter her claim.
Construction of the Clause
1. The Contra Proferentum Rule
● Used where a contract is ambiguous
● The exemption clause must be very specific and clear
if a party wishes to rely on it/ the drafter.
● If not, the ambiguity is resolved against the party
seeking to rely on the clause
NB: courts will be more lenient if the clause is a
limitation clause as opposed to an exclusion clause
Houghton v Trafalgar Insurance Co Ltd
● An insurance policy did not provide protection if a
car was carrying an “excess load”
● The car had an accident when it was carrying 6
instead of 5 passengers.
● The insurance company refused to pay
● Held: the word ‘Load’ was ambiguous. It does not
ordinarily refer to passengers.
● The insurance Co. was liable.
Fundamental Breach Theory
● Developed by courts to prevent parties from relying
on exemption clauses to get away with serious
breaches
● If a “central” term was affected, courts would declare
it a fundamental breach.
● The entire contract was then repudiated.
Karsales (Harrow) Ltd v Wallis
● Δ bought a car on hire purchase terms.
● Exemption clause provided that there was no
warranty regarding age, condition, roadworthiness or
fitness for any purpose
● He inspected the car and found it ok.
● BUT on delivery, it was damaged and some items
had been removed.
● HELD: There was a fundamental breach. The
Company could not rely on the exemption clause.
Fundamental Breach (Contd)
● Fundamental breach theory was NOT popular with
all judges because
i) it interfered with the idea of FOC.
ii) Created uncertainty regarding what amounts to a
fundamental breach.
iii) Reluctance to apply it where there was equality in
bargaining power
Photo Productions Ltd v Securicor Transport
● Securicor contracted to provide a night patrol.
● A clause in its terms exempted it from liability for its
employees actions unless they were foreseeable.
● The night officer started a fire which went out of control
and burnt a large part of the factory.
● Trial: The exemption Clause applied
● COA: applied fundamental breach theory
● HOL: parties were free to negotiate their own agreements.
The clause was clear and unambiguous.
● Fundamental breach theory disregarded
● Courts should focus on construction..
Reforms Elsewhere:
● England: Regulation of such clauses via statute.
● Unfair Contract Terms Act 1977
i. Some limitations are VOID: e.g. for death/injury caused
by a party’s negligence
ii. Distinguishes between consumer contracts and
business contracts
● Unfair Terms in Consumer Contracts Regulations 1999
● Unfair term: contrary to good faith; causes a power
imbalance.
Kenya: Consumer Protection Act
S. 88 – clauses which dictate arbitration as the method
of dispute resolution

See also: Competition Act: part 6 (consumer welfare)