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What is an exemption clause?
An exemption clause seeks to exclude liability completely or to limit liability if a breach of contract or a tort is committed.
What is the common law on exemption clauses?
- An exemption clause must:
- A) be incorporated into the contract AND
- B) must cover the breach of contract ad the loss/damage which has occurred.
In order to be effective, what type of document must the exemption clause be contained in?
- The document must be contractual in nature. It will be so if people in general would assme it contained the terms of the contract (such as a holiday booking form)
- See Chapleton v. Barry Urban District Council  1KB 532 and Grogan v. Robin Meredith Plant Hire  CLC 1127
What is the basic rule about signing contractual documents?
- If you sign a contractual document, generally you are bound by the contents, even if you haven't read it fully.
- L'Estrange v. Graucob Ltd  2 KB 394
When will the innocent party not be bound by what they have signed?
- 1. When there has been a misrepresentation about the exemption clause (Curtis v. Chemical Cleaning & Dyeing Co.  1 KB 805
- 2. Where the document was not contractual in nature.
- 3. If the exemption clause was not legible.
Can an exemption clause be incorporated if it has not been signed for?
Yes. If the innocent party is aware of the clause or the party relying on the clause has taken reasonable steps to bring it the other parties attention before the contract is finalised. It is not necessary for the innocent party to be aware of the clause if reasonable steps have been taken - Parker v. South Eastern Railway (1877)2 CPD 416 CA
What does Locus poenitentiae mean?
The opportunity of withdrawing from a projected contract before the parties are finally bound.
Thornton v. Shoe Lane Parking Ltd  2 QB 163
Case that illustrates Onerous/unusual exemption clauses.
Interfoto Picture Library v. Stiletto Visual Programmes Ltd  QB 433 CA
Onerous/unusual clause other than exemption clause.
Kendal (Henry) & Sons v. Lillicoe & Sons  AC 31 HL
- Exemption clauses can be incorporated by a previous course of dealings. In this case, the dealings took place 3-4 times a month for 3 years.
- In Hollier v. Rambler Motors 2 QB 71 CA, the court decided that 3 or 4 dealings over the space of 5 years did not constitute a previous course of dealings.
In common law, how might an exemption clause be incorporated into a contract?
- 1. By signature
- 2. By notice
- 3. By a consistent course of previous dealings
What is the Contra Proferentem rule?
- If a party tries to rely on a clause which is unclear or ambiguous, the clause will be construed against him.
- The rule applies to any unclear/ambiguous rule, not just exemption clauses.
- Houghton v. Trafalgar Insurance  1 QB 247
What test was laid down in Canada Steamship Lines Ltd v. R  AC 192?
- A three stage test to determine whether an exemption clause would cover negligence.
- 1. If the clause expressly exempts the party from negligence, liability is excluded. IF NOT
- 2. The court must decide whether the words in their everyday meaning are enough to exclude liability. if so:
- 3. The court must now ask if the clause couldcover liability for anything other than negligence. If so, the clause is restricted to that and the party will be liable for negligence.
In common law, what are the main principles of construction regarding exemption clauses?
- 1. Ambiguous clauses will be construed agaist the party trying to rely on it - Houghton v. Trafalgar Insurance
- 2. Clear words are needed to exclude liability for negligence although if they are clear enough, the word negligence is not needed - Canada Steamship Line
- 3. An exemption clause can cover a very serious or a deliberate breach as long as it is clearly worded - Photo Production Ltd v. Securicor Transport Ltd
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