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Law - Essay Example

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Exclusion Clause A clause inserted in a contract limiting a party’s actions or liabilities is called an exclusion clause, as in the case of A-Z Financial Services Ltd and Schatz Legal Services that excludes liabilities of Schatz Legal Services from those caused by management staff negligence…
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Download file to see previous pages... 68). There are some cases where a party includes an exclusion clause that states that they are exempted from all liability if things do not go as expected, which is under scrutiny because many people have argued that it only works to protect one party (Bradgate and White, 2007, p. 64). There have also been arguments relating to cases where an exclusion clause should be deemed unfair as per UCTA-Unfair Contract Terms Act 1977. The court of appeal in April 15 2008 overruled a high court decision in the case of Regus Ltd v Epcot Solutions Ltd that had suppliers raise their concerns due to an exclusion clause. In this case, the court of appeal came up with factors that should be put into consideration while deciding whether an exclusion clause is valid or not (Hayward, 2011, p. 43). The case facts were that a supplier company Regus relied on an exclusion clause that stated that Regus would be exempted from liabilities that would occur under any circumstances. In addition, another clause limited Regus’ liability to ?50,000 for any other types of damages. Epcot were Regus’ customers and they complained about air conditioning in their offices. Regus did not act and, therefore, Epcot stopped paying for the charges of their services as per the contract. Thus, Regus sued Epcot for the amount that was due, while Epcot on their part argued that when Regus failed to provide air conditioning, it resulted to a breach of contract. They counterclaimed for damages that had resulted from Regus actions for causing low profits, low opportunities for their business, inconvenience and distress because of not having air conditioning. In order for Regus to win, the case held the responsibility of proving that their exclusion clause was enforceable and fair as per Unfair Contract Terms act 1977. The high court judges ruled that even though it may seem theoretically reasonable for Regus to exempt themselves from liability for profit loss, the clause in this case was too wide to be enforceable. The clause did not leave Epcot with any remedy for the service of air conditioning and was, therefore, invalid and unenforceable. Regus appealed arguing that the high court judges were wrong in saying that the exemption clause was unreasonable as per unfair contract terms act of 1977. The court of appeal decided in favour of the defendants, thereby reversing the high court’s decision (Andrews, 2011, p. 76). The UCTA plays the role of protecting parties that are contracting from contractual provisions that are onerous like limitation and exclusion clauses. UCTA states limits to which liability for breach of contract and other types of breach of duty can be avoided through an exemption clause. When an exclusion clause fails to meet the restrictions that are stated in UCTA, it is held to be invalid and, therefore, unenforceable. Such a clause is held to be unreasonable and unfair to the other contracting party. Section 3 of UCTA is, in particular, vital while dealing with business contracts especially where a supplier is involved (Gillies, 2004, p. 93). This section states that a clause that is deemed to exclude liability of a supplier for breaching a contract can only be enforceable if it passes the test of reasonability. Reasonable test is described in section 11 (1) of UCTA as circumstances that are reasonable and that are known or are to be known by the contracting parties. UCTA schedule 2 has a list of factors that are to be used in assessing reasonability, which are normally ...Download file to see next pagesRead More
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