Exclusion clauses
Exclusion clauses

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Exclusion clauses

1 What is an exclusion clause?

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An exclusion clause aims to limit, or exclude, the liability of one party to a contract. In other words, it will try to, in some way, lessen their contractual responsibilities. You may not always be aware of it, but exclusion clauses are in common use in everyday life.
Often, you may not see them or perhaps be fully aware of their content, as they form part of standard form contracts. On other occasions, it may be hard to tell whether they are part of the contract at all. The courts have devised formal rules to decide when such clauses are valid.
For example, there are a large number of cases dealing with whether or not an exclusion clause does form part of a contract. If no contract is signed, the courts will look at whether reasonable notice of the clause was given. In addition, both the Westminster Parliament and the European Union have passed laws to regulate the use of exclusion clauses. Their focus has been on protecting consumers who are entering into contracts with businesses.
You may think it’s fair that the consumer is protected in these circumstances. But it’s not always straightforward. It’s important to ask yourself how far the courts should go in protecting one party to a contract at the possible expense of the other.
Does the issue of whether they are standard terms or individually negotiated make a difference?
What about if it’s two businesses involved in a contract?
Should clauses included in their contracts be regulated by the courts and legislation, or should these contracts be treated differently?
Isn’t a small shop entering into a contract with a large manufacturer in a similar position to a consumer?
As you work through this unit, you should think about the balance that’s being struck between freedom-to-contract on the terms you choose and the need to protect consumers and other parties who enter into a contract. And, this unit illustrates that it’s still a fascinating and ongoing debate.
End transcript: Exclusion clauses
Exclusion clauses
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An exclusion clause is a term in a contract which seeks to exclude or limit the liability of one of its parties. For example, it may state that a party has no liability if the contract is breached or, alternatively, seek to limit the range of remedies available or the time in which they can be claimed.

… they are terms whereby one party seeks to disclaim or reduce his or her responsibility under the contract …

(Wheeler and Shaw, 1994, Chapter 11)

Exclusion clauses are found in many different areas of everyday life from car parks and supermarkets to swimming pool changing rooms and train tickets.

Described image
Figure 1 An exclusion clause

Box 1 Tricky terminology for troublesome terms!

Some authors refer to ‘exclusion clauses’ and ‘limitation clauses’ separately (such as Furmston, 2017, Chapter 6). This is because ‘exclusion clauses’ exclude liability altogether, whereas ‘limitation clauses’ only limit it. For example, an exclusion clause might state that no damages are payable for late delivery of a product. A limitation clause might state that damages would be limited to £100 for late delivery.

In addition, some authors use the term ‘exemption clauses’ when referring to one or both of the above. For example, in Anson’s Law of Contract (Beatson et al., 2010, Chapter 6).

If you were drafting or reading a contract which contained an exclusion clause you may well choose not to use any of these terms and simply write down the clause itself. This can make them harder to identify in practice.

In this course, the term ‘exclusion clauses’ is intended to cover both exclusion and limitation clauses. Where there is any legal difference in the way they are treated, this is highlighted.

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