Compiled by; Lkite Gbemisola.
Area of Law: Contract Law.
Introduction:
Have you ever heard of an exclusion clause?
An exclusion clause is an extremely important term in a contract, it can lead to loss of money or in fact getting a lot of money. What then is an exclusion clause?
It is quite simple but before that it is pertinent to quickly outline what a contract is.
A contract is a mutual agreement between parties enforceable by law, individuals have the liberty to enter into agreements voluntarily without coercion or undue influence . Parties therefore have the ability to negotiate terms, make choices and exercise freedom in contractual relationships. This freedom extends to parties who wish to limit or exclude some obligations which might later arise.
These obligations are excluded by inserting terms known as ' exclusion clause ' , ' limiting term', ' exemption clause ' or ' exception clause'
Meaning of Exclusion Clause
An exclusion clause are clauses or terms in a contract to restrict or exclude a party's liability that is, exclusion clause limits a person from pursuing a right or remedy. Exclusion Clause is a very essential and integral mechanism for averting the risk of a contract, it is a protection for the party who made the clause.
That is, if Mr A and Mr B enter into a contract for the delivery of carbonated drinks but Mr B inserts a term stating that if the drinks arrive later than expected he is not liable for compensation then he has included an exclusion clause into the contract which limits his liability,
You should therefore be very careful when entering into a contract, as most contracts have exclusion terms protecting them if a default occurs. However there are certain instances where exclusion clauses are unenforceable .
Exceptions to Exclusion Clause in Contract
Exclusion clauses can be found in nearly all types of contracts, especially ones made by business enterprises or corporations to avoid lawsuits that can lead them to bankruptcy and other problems, whilst exclusion clauses might appear to be final, they can often be unenforceable in certain instances.
There should be no ambiguity or unclarity in the terms of a contract, an ambiguous clause shall be interpreted with the "Contra Proferentem rule" which states that if there is lack of transparency in a contract, it should be interpreted against the party who drafted the contract. This rule aims at protecting innocent parties from unfair terms in a contract
If there is misrepresentation, a party is not bound by an exclusion clause or term. Misrepresentation is an untrue, false or misleading fact made by a party or its agent prior to a contract to induce the other party into the contract. A party is also not bound by an exclsion clause in a case of duress and undue influence, that is if a party is pressured, manipulated or forced to enter into a contract, the exclusion clause or term is not binding.
In a case where an exclusion clause excludes the fundamental element of a contract it will be unenforceable. An exclusion clause must be a term that entails the true nature of the contract and is not contrary to the intent of the contract.
A party is not bound to an exception clause he did not sign, it seems so basic but yes, if a party did not sign an exemption clause he is not liable to it.
Statutory Provision
Section 5(1) of the Unfair Terms in Consumer Contracts Regulation 1999
"A contractual term which has not been individually negotiated shall be regarded as unfair if, 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."
An exclusion clause therefore will be void if it contravenes this section.
Decided Case
Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805
Fact:
Mrs Curtis, The plaintiff, took her wedding dress which was a white satin dress to be cleaned by the defendants, Chemical Cleaning and Dyeing Co. The plaintiff was asked to sign a form, which according to the oral explanation of an assistant, excluded the company from liability for damages caused to any beading and sequins on garments. When the plaintiff later returned for her dress, there was stains on it. In response to a suit for damages, the defendants claimed that Mrs Curtis had signed a form which excluded the company from liability for all damages to garments, and not just damages to the beading and sequins as Mrs Curtis was told.
Decision:
The court held in favour of the plaintiff, Mrs Curtis, Although the plaintiff had signed the document, the misrepresentation on the part of the defendants led to the deception of Mrs Curtis and they could not rely on an exception clause, Mrs Curtis was awarded damages.
Similar cases
L'Estrange v F. Graucob [1934] 2 KB 394
Chapelton v Barry Urban District Council [1940] 1 KB 532
Olley v Marlborough Court Ltd [1949] 1 KB 532
Thanks for reading.
LK…making a statement.
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