Objective Notes: W300 – Agreements, rights & responsibilities
UNIT 17 - MANUAL THREE
EXEMPTION CLAUSES (ExCl) (COMMON LAW RULES)
1
Recognising ExCls




2
Exclusion clauses seek to exclude all liab where contract breached/ tort committed
& Limitation clauses seek to limit liab in these circumstances to certain amounts;
Examples = car parks (vehicles parked at owner’s risk), hotels (liab limited to
articles deposited in hotel safe), cloakrooms (total exclusion/ financial limit), train
tickets (issued subject to conditions excluding liab for delays etc) & publicly used
buildings (notice at entry point excluding liab re injury) but may also restrict
remedies (e.g. where seller stipulates time limit for notifying defects, liab excluded
if time exceeded).
Traditional approach = breach/ tort occurred & clause is a defence so courts have
developed special rules as breaching party seen as excluding liab for own wrong
doing & would be unfair on innocent parties were there no restrictions;.
Despite alternative view that ExCls merely define each party’s obligations, trad
approach favoured as in practice, not always voluntary agreement since innocent
party may be ‘weaker’.
Incorporation into contracts






Parties may only rely on provisions incorporated into contracts so cannot rely on
ExCls not so incorp;
Where ExCls in writing, document must be contractual in nature, if not, clause not
part of contract & test = whether A did what was reasonably sufficient to give B
notice of exemption so document is contractual in nature where people generally
will assume it contains contract’s conditions &, where objectively shown, if B
thought otherwise, this will not protect him from ExCls (Parker v S Eastern
Railway (1877));
In absence of fraud/ misrepresentation, where contract document signed by B,
binding, irrespective of whether he read it (L’Estrange v Graucob Ltd [1934]) but
where A presents document for signature by B, A’s failure to draw B’s attention to
existence/ extent of ExCl conveys impression no exemption or not as wide as
document actually says so where B relies on inadequate/ inaccurate explanation,
clause is either not incorp at all or only incorp to extent of explanation (Curtis v
Chemical Cleaning & Dyeing Co [1951]) ;
Where document not contractual in nature, B not bound by his signature (Grogan v
Robin Meredith Plant Hire [1996]);
Where document not signed by B, A must take reasonable steps (e.g. printing in
large/ bold type &/ or differently coloured ink, possibly adding “Read this” to
document & where clause on reverse, sensible to print on front “PTO” or “For
conditions see over”) to draw B’s attention to ExCl &, provided this done, A may
rely on it even if B does not read it (Parker) & only necessary to notify people
generally so not required to take illiteracy into account (Thompson v London
Midland & Scottish Railway Co [1930]);.
But where clauses unusual/ particularly onerous, courts require A to explicitly draw
B’s attention to them if he seeks to rely & where exceptions wide & destructive of
rights, cannot bind B unless drawn to his attention in most explicit way (Thornton
v Shoe Lane Parking Ltd [1971]) so sufficient notice requires them to be
particularly striking (e.g. printed in red & with red hand pointing to them) (J
Spurling Ltd v Bradshaw [1956]) & party seeking to rely on such clauses must take
more steps than required with other clauses to bring them sufficiently to other
party’s notice (Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd
[1989]);
Page 1
Objective Notes: W300 – Agreements, rights & responsibilities



3
A must take reasonable steps to bring ExCls to B’s attention at or before time
contract made & where notice ‘arrives’ after, too late (Olley v Marlborough Court
[1949]);
Where parties established previous consistent course of dealings, ExCls incorp &
irrelevant that B did not read them (Hardwick Game Farm v Suffolk Agricultural
Poultry Producers Association [1969]) but not incorp where course not consistent
(McCutcheon v MacBrayne Ltd [1964]) or insufficient (Hollier v Rambler Motors
(AMC) Ltd [1972]);
Where both parties in same business, trade custom, even in absence of regular
dealings, means clauses usual for trade, incorp not by course of dealing but on basis
of common understanding founded on parties’ conduct (British Crane Hire
Corporation Ltd v Ipswich Plant Hire Ltd [1975]).
Whether ExCl wording covers breach/ tort






By Contra Proferentem (ConProf) Rule, ambiguous/ unclear clause interp against
(contra) party relying on it (Proferens) (Houghton v Trafalgar Insurance [1954]) but
limitation clauses not subject to as rigorous interp as those totally excluding liab
since more likely to express parties’ true intentions having regard to risks relying
party exposed to, proportionality of such to contract price & innocent party’s
ability to insure (Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd [1983]);
Where Neg excluded, 3 stage test established in Canada Steamship Lines Ltd v R
[1952] - where liab expressly excluded, effect given to ExCl (Stage 1) but where
not, firstly determined on ordinary meaning whether words used wide enough
(Stage 2) &, if found, court must see if ExCl covers any other liab (e.g. strict liab
without fault) & if so, will normally be restricted to such liab & will not be interp to
exclude Neg (Stage 3) because where without such clause def may be liab both in
Neg & in contract for supplying, without being Neg, defective goods, ExCl
restricted to strict contractual liab as A unlikely to have agreed that B has absolved
himself from his own Neg but, rather, only that strict liab excluded (White v John
Warwick & Co Ltd [1953]);
Where liab excluded can only possibly be Neg, will be interp as covering Neg since
if other liabs could not occur, could not reasonably be held to cover only strict liabs
but wording used remains crucial (Rutter v Palmer [1922]);
Courts were reluctant to allow reliance on ExCls where breaches very serious/
deliberate – greater is A’s fault, more unfair to B to permit reliance, especially
where breaches deliberate & traditionally held matter of substantive law that ExCl
not effective where fundamental breach committed, irrespective of what contract
said but now held doctrine not of substantive law but of construction only, so where
wordings sufficiently clear even liab for fundamental breaches may be excluded
(Suisse Atlantique [1967) &, post-UCTA 1977, position = no substantive rule of
law preventing reliance on ExCls even where breach very serious/ deliberate
provided ExCl clearly worded (Photo Production Ltd v Securicor Transport Ltd
[1980]);
Where C not party to contract between A & B, he may rely on ExCl where contract
expressly so provides or purports to confer benefit on 3rd party (s.1 Contracts
(Rights of 3rd Parties) Act 1999);
In tort, where notice is sufficiently prominent & clear to cover tort in question,
subject to interp ConProf where it’s not, ExCls may be relied on (White v
Blackmore [1972]) & ExCls may apply both in contract & tort (Rutter v Palmer).
Page 2