Exemption Clauses
Business and Company Law An exemption 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. In the case study there are two examples of how Derek attempts to limit his liability against both personal injury and loss (due to theft) through an exemption clause. Before Derek can rely on the exemption clause in his favour a court must be satisfied that the clause is incorporated into contract. An exemption clause can be incorporated into the contract by signature, by notice, or by a course of dealing. ... Let us look at the first of Derek’s intended exclusion clauses; that of the signed declaration excluding liability for injury caused during the racing of Go-karts. ... The Court of Appeal held that the hotel was not protected by the exemption clause because the contract had been made before the exemption clause was communicated so that it formed no part of the contract. ... Later, he received a document from them which acknowledged receipt and referred to clauses on the back, one of which excluded the plaintiffs from any liability for any loss or damage occasioned by their negligence. ... The Court of Appeal held that the exemption clause was incorporated into the contract and the defendant was bound by it, because in previous dealings he had received a document containing the clause, although he had never read it. ... On the last two of these occasions, the plaintiff signed a note containing exclusion clauses but this had not happened on the last occasion. ... The general rule is that exemption clauses will be construed contra proferentem which means if there is any doubt as to the meaning and scope of the exemption clause, the ambiguity should be resolved against the party wishing to rely on it. ... The Court of Appeal held that the exemption clause would not protect the defendants from liability in tort if they were found to have been negligent. ... Katie may seek to have the clause(s) struck down under the Unfair Contract Terms Act 1977: Section 2(1) of the act provides that a person cannot, by reference to an exemption clause or notice, exclude or restrict his liability for death or personal injury resulting from negligence. ... Bibliography Books R Card & J James, Law for Accountancy Students, 6th edn (1997) W T Major & C Taylor, Law of Contract, 9th edn (1996) R Lawson, Exclusion Clauses and Unfair Contract Terms, 5th edn (1998) R Duxbury, Nutshells Contract Law, 5th edn (2000) Table of Cases Donoghue v Stevenson (1932), HL Hollier v Rambler Motors Ltd (1972), CA Jones v Livox Quarries Ltd (1952), CA L’Estrange v Graucob (1934) Olley v Marlborough Court Hotel (1949), CA Parker v South Eastern Railway Co (1877), CA J Spurling Ltd v Bradshaw (1956), CA White v John Warrick & Co Ltd (1953), CA Table of Statutes Unfair Contract Terms Act 1977