The Difference between an Exclusion Clause and Limitation Clause - Essay Example

1. Briefly consider how the courts will determine whether or not a ment is a term Ans. The Courts can apply the test of incorporation and construction to determine whether or not a statement is a term. It is important that the application of the test of reasonableness should not be considered until it has been decided that, applying the tests of incorporation and construction, the exemption or limitation clause in question forms part of the contract and covers the events, then, however reasonable the clause, it will not apply. It has been stated that the test is one of substance 'Phillips Products Ltd. v. Hayland(1987)1W.L.R' Court should also enquire 'but for' the statement there would be liability 'Smith v. Eric S. Bush'. Courts should determine if a statement in a contract 'excludes or restricts' liability by asking whether it deprives a contracting party of the contractual performance which the parties reasonably expected 'Macdonald (1992) L.S.277.' 2. In which ways may a term be implied into a contract Ans. According to 'BP Refinery Western Port v. Shire of Hastings (1977) 180 CLR 266' the following tests should be taken for terms implied into a contract : (a) The implied term should be reasonable and equitable. (b) Business efficacy of the contract should be the main reason for incorporating the implied term. (c) The term should be quite obvious in terms of common sense and both the parties should mean and understand the term in a similar sense. (d) The term should be very clear in expression and language so that it doesn't raise any ambiguity later on. (e) The term should not contradict any of the express terms incorporated in the Contract. 3. Explain the difference between an exclusion clause and limitation clause. Ans. According to Law of Contract exclusion clause in the body of the contract between two parties will be a term incorporated in the contractual text to lessen and restrict the liability of one or the other party to the contract. Whereas, the Limitation Clause instead of excluding liability of a party to a contract tends to limit the liability as the name suggests. An Exclusion clause will only be enforceable if it is validly incorporated in the text of the contract and it is clear and not ambiguous in its meaning, there should not be any statutory hindrance over it. In comparison to an Exclusion clause, a Limitation Clause is more likely to be enforced. 4. What are the different ways in which terms (exclusion clauses) may be incorporated into a contract Ans. The different ways in which terms(exclusion clauses) may be incorporated into a contract are the following : (a) It should be a contained in the contract in a clear and unambiguous manner and there should be no confusion regarding the meaning of the clause, in addition to that both the parties must be aware about the inclusion of the clause in the text of the contract. (b) If the language or meaning of the Exclusion clause is not clear then in that case the party that is going to affected more by it should be forewarned before making of the agreement. (c) Standard Terms and Conditions according to Trade practice should be incorporated in to the contract. (d) An Exclusion clause can be incorporated in the contract by showing similar regular and consistent dealings between the parties in the past. 5. What is meant by the contra proferentum rule Ans. By Contra proferentem rule it means that if there is a clause in the contract that carries more than one meaning and is unambiguous and not easy to interpret than in that case that unambiguous and confusing term will be taken against the party that forced its inclusion or the party who drafted the contract and incorporated the said term. In other words the term will be read in favour of the second party that didn't insist on its inclusion in the body of the contract. 6. What are the main differences between the provisions of the Unfair Contract Terms Act 1977 (UCTA) and Unfair Terms Consumer Contracts Regulations 1999 Ans. The main difference between the provisions of the Unfair Contract Terms Act 1977 (UCTA) and Unfair Terms Consumer Contracts Regulations 1999 are that the regulations do not apply to some matters, which are covered by the 1977 Act. Under the regulations only a natural person can be a consumer, whereas, under Section12 of the 1977 Act, a company may qualify. Secondly, the broader scope of the regulations is accompanied by protection, which is, in some respects, less certain than the 1977 Act. There is an indicative and non-exhaustive list of terms given that may be regarded as unfair. A number of terms in this list would be of no effect under the 1977 Act. The test of 'fairness' is a major component of the regulations to judge if the terms of the contract are to the detriment of the consumer or not. A term will be 'unfair' where, contrary to the requirement of good faith, it causes a significant imbalance in the parties rights and obligations arising under the contract, to the detriment of the consumer. The determination of fairness takes account of the entire contract and a term, which in isolation, might appear to be unfair, might not be when looked at in the light of the contract as a whole. It should be noted that the regulations probably permit a broader approach to severance since they provide that 'the contract shall continue to bind the parties if it is capable of continuing in existence without the unfair term. 7. In what way does s.3 of UCTA aim to regulate exclusion clauses Ans. A more wide ranging and general control is effected by section 3 of the 1977 Act, which deals with contractual liability. This section applies in addition to sec 6 & 7 to contracts of sale and hire purchase and supply contracts. But it may also apply to any contract, unless it is of a type expressly excepted by the Act. This section, however, only applies as between contracting parties where one of them deals(1) as consumer, or(2) on the other's written standard terms of business, and the liability which it is sought exclude or restrict is a business liability. Thus, the many contracts, not only with consumers but also between businesses, made by reference to standard terms and conditions printed in order forms, confirmations of order, or in catalogue or price lists are subject to section 3. (C) Blake can claim damages from Racket Plc for the loss he has incurred due to the careless handling of computers by the Racket Plc employees that resulted in the destruction of two computers and the third one had an irreparable defect. (i) The defense that Racket Plc can take is that the following term was contained in the circular "The Company undertakes no responsibility of any kind for any loss damage, injury or depreciation in value arising (regardless of cause) during maintenance or upgrading operations. Customers are advised to take out independent insurance" and Blake was made aware that "All work is subject to conditions set out in the company's circular". It can rely on the case 'Thompson v. London, Midland and Scottish Ry. Co. [1930] 1 KB 41 , 53' to put across its point that the defendants were exempted from liability by reason of the fact that the plaintiff had sufficient notice of the special contract printed on the ticket. (ii) Whereas, I will advise Blake that he has an solid case for claiming damages and can easily distinguish his case by relying on 'Chapelton v. Barry Urban District Council [1940] 1 KB 532' He can contend that there is nothing on the face of the circular to remotely notify him about the term to exempt Racket Plc from the liability of any kind for any loss, damage , injury etc. The term itself was printed in a very light black print making it almost illegible and the Racket Plc made no effort to make Blake aware about the contents of the terms before the culmination of the contract. It will also come under the scanner of section 2 of the Unfair Contract terms Act,1977 that places restrictions on the power of a party to a contract to secure exemption from business liability for negligence. It will also come under the scanner of various tests like 'Test of Reasonableness' and the 'Test of Fairness' laid down under the Unfair Contract terms Act,1977 and Unfair Terms in Consumer Contracts Regulations 1999. Bibliography J.Beatson. Anson's Law of Contract (28th ed.) Oxford University Press. Read More