Law 5110 Lecture Notes - Lecture 12: Unfair Contract Terms Act 1977, Consumer Rights Act 2015, Satin
LECTURE 12
EXCLUSION CLAUSES – COMMON LAW PRINCIPLES
A clause may be inserted into a contract, which purports to exclude (or financially limit) one
party's liability for breach of contract, misrepresentation or negligence. This is an inevitable
corollary of the doctrine of freedom of contract.
Judicial hostility has, over the years, led to the development of certain common law rules
relating to the validity of exclusion clauses. Parliament has intervened with the Unfair Contract
Terms Act 1977 and most recently with the Consumer Rights Act 2015.
The effect of the Consumer Rights Act 2015 is to amend the Unfair Contract Terms Act 1977
(UCTA) so that UCTA only applies only to business-to-business and consumer-to-consumer
contracts.
The Consumer Rights Act 2015 will apply to business-to-consumer contracts and will
completely replace the Unfair Terms in Consumer Contracts Regulations 1999.
The common law and statutory rules will be considered in turn.
(a) Common Law Rules
Control by the courts at common law has proceeded on two fronts, (i) the defendant may
only rely on the clause if it has been incorporated into the contract, and if, (ii) as a matter of
construction it extends to the loss in question; ie is the clause appropriately worded to cover
what has occurred?
(i) Incorporation
An exclusion clause will only be binding if it is a term of the contract, i.e. it is incorporated into
the contract. It may be incorporated in three ways: by signature, by notice or by a course of
dealing.
1. Signature; L'ESTRANGE v GRAUCOB (1934)
"The claimant, having put her signature to the document and not having been induced to do
so by any fraud or misrepresentation; cannot be heard to say that she is not bound by the
terms of the document because she has not read them." (Scrutton L J).
- Signature = evidence of consent to terms, even if they haven’t been read
The rule is qualified by the presence of fraud or misrepresentation; CURTIS v CHEMICAL
CLEANING AND DYEING CO (1951)
The claimant took a white satin wedding dress to the defendant cleaners. The assistant asked
her to sign a ticket headed 'receipt', which included a clause stating that clothing 'is accepted
on condition that the company is not liable for any damage howsoever arising.' Before she
signed, however, the claimant was told by the assistant that the document simply excluded
liability for certain risks, including the risk of damage to the beads and sequins on the dress. The
claimant then signed; when the dress was returned it was stained.
Held:
- As the assistant had misrepresented the nature of the document, the defendants
could not rely on the clause
Document Summary
A clause may be inserted into a contract, which purports to exclude (or financially limit) one party"s liability for breach of contract, misrepresentation or negligence. This is an inevitable corollary of the doctrine of freedom of contract. Judicial hostility has, over the years, led to the development of certain common law rules relating to the validity of exclusion clauses. Terms act 1977 and most recently with the consumer rights act 2015. The effect of the consumer rights act 2015 is to amend the unfair contract terms act 1977 (ucta) so that ucta only applies only to business-to-business and consumer-to-consumer contracts. The consumer rights act 2015 will apply to business-to-consumer contracts and will completely replace the unfair terms in consumer contracts regulations 1999. The common law and statutory rules will be considered in turn. (a) An exclusion clause will only be binding if it is a term of the contract, i. e. it is incorporated into the contract.
