Question

When is an exclusion clause valid?(Business law).

Answer 1

Introduction

Exclusion clause: is a term in a contract which intends to exclude one of the parties from liability or limit the person’s liability to specific listed conditions, circumstances, or situations. It can be inserted into a contract which aims to exclude or limit one’s liability for breach of contract or negligence. However the party may only rely on such a clause if

1. It has been incorporated into the contract
2. It has been made clear
3. Adheres to the unfair contract terms act 1977 (UCTA) And the unfair terms an consumer contract regulations. Statutory control.

Incorporation

If you want to rely on an exclusion clause you have to be in a position to provide evidence and point out that it really is a part of the contract. An exclusion clause can be incorporated into the contract by three different ways i.e

• By signature
• By notice
• By course of dealing

Signature

If the plaintiff signs a document having contractual effect containing an exclusion clause, it will automatically form part of the contract, and he/she is bound by its terms. This is so even if he has not read the document and regardless of whether he understands it or not. However the party will not be binded by the exclusion clause if he/she has been orally misrepresented as to the effect of the exclusion clause.

Examples:

Curtis V Chemical Cleaning Co [1951]

The plaintiff took a wedding dress to be cleaned by the defendants. She signed a piece of paper headed ‘Receipt’ after being told by the assistant that it exempted the cleaners from liability for damage to beads and sequins. The receipt in fact contained a clause excluding liability “for any damage howsoever arising”. When the dress was returned it was badly stained. It was held that the cleaners could not escape liability for damage to the material of the dress by relying on the exemption clause because its scope had been misrepresented by the defendant’s assistant.

What Is an Exclusion Clause Contract Law?

Exclusion clauses can enter a contract with or without a signature. If a contract does incorporate an exclusion clause, the court must determine whether it covers the breach that has occurred. If the language regarding liability is confusing, the contra proferentem rule comes into play. However, if there is an issue regarding negligence, the wording must be easy to understand.

The exclusion clause must also comply with specific conditions that restrict liability for negligence or breach of contract. In these instances, the clauses are either deemed invalid or must endure a test of reasonableness.

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