Exclusion clauses: incorporation into the contract, construction against the party relying on the clause, and statutory control under the Unfair Contract Terms Act 1977 and the Consumer Rights Act 2015.

What this dot point is asking

This dot point covers exclusion (and limitation) clauses: terms that try to exclude or limit one party's liability. The law controls them in three stages: the clause must be incorporated into the contract, it must on its construction cover the breach, and it must survive statutory control under the Unfair Contract Terms Act 1977 (business contracts) and the Consumer Rights Act 2015 (consumer contracts). WJEC tests this three-stage approach applied to scenarios.

The answer

Stage one: incorporation

• By signature: a signed contractual document binds the signer even if unread (L'Estrange v Graucob), unless its effect was misrepresented (Curtis v Chemical Cleaning).
• By notice: the clause must be brought to the other party's attention by reasonable steps, before or at the time of contracting. Notice given too late does not bind (Olley v Marlborough Court, a notice in the hotel room; Thornton v Shoe Lane Parking, terms after a ticket machine), and the more unusual the clause, the greater the notice required (Interfoto v Stiletto).
• By a course of dealing: a clause used consistently in previous dealings may be incorporated (Spurling v Bradshaw), but the dealings must be regular and consistent (Hollier v Rambler Motors).

Stage two: construction

Stage three: statutory control

Statutory control depends on the type of contract:

• Unfair Contract Terms Act 1977 (UCTA) governs business-to-business contracts. Liability for death or personal injury caused by negligence can never be excluded; liability for other loss caused by negligence, and for breach, is valid only if the clause satisfies the reasonableness test.
• Consumer Rights Act 2015 governs consumer contracts. Terms must be fair (not causing a significant imbalance to the consumer's detriment), and certain liabilities, including the statutory quality terms and negligently caused death or personal injury, cannot be excluded at all.

Examples in context

The notice cases turn on timing. In Olley v Marlborough Court a hotel guest contracted at the reception desk, so a notice excluding liability displayed later in the bedroom came too late to be incorporated; in Thornton v Shoe Lane Parking the contract was made when the motorist put money into the ticket machine, so conditions referred to on the ticket or inside the car park were too late. Interfoto adds that an onerous or unusual clause needs special, prominent notice to bind, the so-called "red hand" point. Construction can then defeat even an incorporated clause if its wording does not clearly cover what happened, because it is read against the party relying on it. Finally the statutes do the heavy lifting for consumers: under the Consumer Rights Act 2015 a clause excluding liability for negligently caused personal injury, or excluding the satisfactory-quality term, is simply ineffective, no matter how clearly it was incorporated.

Try this

Q1. Name the three ways an exclusion clause can be incorporated. [3 marks]

• Cue. By signature, by reasonable notice given before or at the time of contracting, and by a consistent course of dealing.

Q2. What does contra proferentem mean? [2 marks]

• Cue. An exclusion clause is interpreted against the party seeking to rely on it.

Q3. Advise whether a party can rely on an exclusion clause to avoid liability. [20 marks]

• What the marker wants. Incorporation (signature, notice, course of dealing), construction (contra proferentem, covering the loss), and statutory control (UCTA 1977 or the Consumer Rights Act 2015), applied with a conclusion.