Lauren Cleveland
Unit 5, Assignment 3 – Exclusion Clauses
An exclusion clause is also known as an exception clause. This is a clause in a contract where
one party says that they will not be responsible for any loss/damage/injury caused to the
other party (whether done intentionally, accidentally or negligently). An exclusion clause is
basically a passage used by companies, businesses and traders to avoid liability.
Exclusion clauses where originally from just common law but parliament made a piece of
legislation about them in UCTA 1977 and the UTCCR 1999. However, these have now been
combined in the new CRA 2015.
Furthermore, exclusion clauses need to be regulated to provide consumer protection
because consumers have unequal bargaining power; sellers know that if someone really
wants their product/service, the consumer will be willing to take the risk. This encourages
unscrupulous trading which is harsh on consumers. It’s particularly unfair on the consumer if
the problem was caused intentionally or negligently by the seller/supplier.
Judges have long since recognised the need to regulate the use of exclusion clauses and
over the years they have created a set of rules about when exclusion clauses can and cannot
be relied upon. Anyone seeking to rely on an exclusion clause must first prove that it was
incorporated into the contract (i.e. it formed part of the contract). Once this has been
proven, that party must then prove that the extent of the clause could be clearly interpreted
by the consumer. Although, the law only offers protection in contracts between consumers
and businesses.
Common law rules on exclusion clauses include signed agreements. If a consumer signs the
contract, the law assumes that they have read and accepted all of the terms and conditions
stated. Not all contracts however are signed by both parties. Some contracts are ‘accepted’
at the point of payment – e.g. when you park your car you buy a ticket at the machine (Mr
Perkins).
This rule is shown in L’Estrange v Graucob (1934) where a lady bought a vending machine
but when it arrived it was defective. She tried to send it back, but she hadn’t read the
contract before signing it. There was a clause that said the seller has no liability for defective
products. From signing the contract, the law expects that the individual has read the terms
and conditions and has signed the document because they agree and understand what has
been stated. Therefore, the lady lost the case because she was expected to already know
these T&Cs, which included no liability for defective products.
There are differences between signed and unsigned contracts. With signed contracts, it is up
to the consumer, by themselves to read all elements of the document where any exclusion
clauses will be stated. Whereas, with unsigned agreements, the consumer must be made
aware that there is an exclusion clause at the time the contract is formed. The
seller/supplier has the burden of bringing the clause to the consumer’s attention.
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, Lauren Cleveland
If the consumer is not told about the clause until after the contract has been made, the
clause is invalid and not incorporated into the contract.
This is shown within the case of Olley v Marlborough Court Hotel (1949). A couple walked
into a hotel and booked a room at the reception desk. This was when the contract was
formed. They went out for a bit and left their key at reception. A thief grabbed it and stole
things from their room. They sued the hotel who objected, saying that there was a sign on
the back of the door avoiding their liability for lost or stolen goods. The hotel lost the case
because when booking the couple (consumer) were not made aware of the business’s
exclusion clause. It states that the consumer (Mr and Mrs Olley) must be given ‘reasonable
notice’ of the exclusion clause before or at the time the contract was formed, which did not
happen, meaning the exclusion clause is invalid.
If Mr Brown signed a contract the exclusion clause will be incorporated; in signing a
document this gives the acceptance of having the knowledge and understanding of all
clauses. If no specific document is signed and Mr Brown and the business form an ‘unsigned
agreement’ he has to have been made aware by the business with ‘reasonable notice’ about
the exclusion clause for it to be valid. Although, making the consumer aware doesn’t make a
difference if the contract is already signed.
However, the invoice given can be seen as a contractual document and in paying the sum
Mr B would be entering a ‘contract’ and therefore accepting the terms and conditions. In
the instance of the invoice, it depends when it was given to whether the exclusion clause
would be valid or not. For example, if it was received and payed before the goods were
‘received’ the clause would be valid.
If Mr Brown received the invoice after payment, it could act as a receipt for purchase. As
the clause is printed on the back of the invoice I would not be incorporated. This is
because receipts cannot be used as a capable way of incorporating clauses into contracts,
as reasonable notice of the exclusion clause was not bought to the consumers (Mr B’s)
attention. This is shown in the case of Chapelton v Barry Urban District Council (1940) and
Parker v S.E Railway Co. (1877).
If Mr Brown regularly trades with the marquee company under the same terms and
conditions he is assumed to know about the existence of the exclusion clause. However, if
they regularly trade but with different terms and conditions each time, the law assumes the
consumer (Mr B) didn’t know about the exclusion clause. Any changes made to the terms
and conditions by the business must be bought to the knowledge of the consumer.
In McCutcheon v David MacBryne Ltd. (1964) Mr M regularly used a ferry to get to the
Scottish mainland. Sometimes he was given a risk note to sign and sometimes he didn’t. On
one trip, the ferry sank, and Mr M’s car was lost. He sued the company. On this specific trip
he hadn’t been asked to sign a risk note but had been given a receipt with the exclusion
clause on the back of it. Mr M won the case because it was held that the exclusion clause
had not been incorporated into the contract, therefore, he was not made aware of any
exclusion clauses despite trading with them regularly.
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