Lecture Notes: Exemption Clauses in Contracts

Introduction

• Topic: Exemption clauses (exclusion clauses) and limitation clauses in contracts.
• These clauses are used by one party to limit or exclude their liability in the event of a breach of contract.
• Two types:
  • Total exclusion clause: Completely exempts a party from liability.
  • Limitation clause: Limits liability to a certain amount.

Freedom of Contract

• Parties have the freedom to negotiate terms, including exemption clauses.
• Controversy arises when clauses are perceived as unfair, especially against the weaker party.
• Historical context: Courts have intervened to protect vulnerable parties.

Legal Requirements for Validity

1. Incorporation:

   • Exemption clauses must be part of the contract.
   • Two conditions:
     1. Clause must be part of the contract terms.
     2. Clause must cover the specific breach.
   • Courts are strict in interpretation to avoid unfair practices.

2. Tests for Incorporation:

   • By Signature: If a document is signed, the signatory is bound by its terms unless fraud or misrepresentation occurred.
     • Case: Lestrange v. Graucob - Signature binds unless deceived.
     • Exception: Non est factum ("it is not my act") applies if a document is fundamentally different than expected.
   • By Notice: If no signature, sufficient notice of the clause must be given.
     • Objective test: Reasonable notice must be given.
     • Case: Parker v. South Eastern Railway - Notice must be reasonably sufficient.
     • Reasonable notice can vary based on the unusualness of the clause.

Case Examples

• Chapelton v. Barry UDC: Ticket was considered a receipt, not part of contract terms.
• Curtis v. Chemical Cleaning Co.: Misrepresentation of clause's scope invalidated its use.
• Thornton v. Shoe Lane Parking: Unusual clauses require more notice.
• Interfoto v. Stiletto: Unusual terms require higher notice.

Modern Considerations

• Modern laws and acts address how clauses should be presented to persons with disabilities.
• Example: Persons with Disability Act impacts notice requirements.

Conclusion

• Exemption clauses must be carefully drafted and notified to be valid.
• The courts aim to maintain fairness and protect weaker parties.
• Importance of understanding terms before agreeing to them in contracts.