Case Analysis: Exclusion Clauses

Case Analysis: Exclusion Clauses

Introduction

There are several clauses in the contract, which are part of overall terms and condition between contracting parties. An exclusion clause is a condition which is a restriction to the right of a party. For example, a person joins a gym with a six month contract with gym owner. There is a clause in that contract specifying a term that gym owner will not be responsible for any injury caused during exercise.

Usually, the district courts deal with exclusion clauses. Addition to that, there are other common laws dealing with the exclusion clauses. There are two statutory acts in Wales and England, which deal with the exclusion clause. The Unfair Contract Terms Act 1977 is applicable to every contract. The Unfair Terms in Consumer Contracts Regulations 1999 deal with contracts between businesses and customers. This law ensures protection of consumers from exploitation.

Types of Exclusion Contracts

The applicability of an exclusion clause is either to limit, restrict or exclude a liability of a party. These clauses may restrict or exclude monitory losses or, even to life or injury.

The Unfair Contract Terms Act 1977

As we have discussed earlier, Unfair Terms in Consumer Contracts Regulations 1999 deals with the breach and exploitation of consumers by businesses, therefore, we will only discuss the Unfair Contract Terms Act of 1977, as it is related to the case in hand. This act is signed, by the United Kingdom parliament, to regulate contracts by defining the legality and applicability of some contract terminologies. It is applicable to nearly all contracts and is used to limit the applicability of the proviso of liability.

The term of reasonableness is import criterion to render an excluding clause effective; otherwise, the term limiting liability and excluding are ineffective. All this depends on the nature of commitment which is required to be excluded or limit liability. This act is commonly used in combination with the Supply of Goods and Services Act 1982, the Unfair Terms in Consumer Contracts Regulations 1999 as well as the Sale of Goods Act 1979. Recently, the Law Commission has recommended that both the laws should be unified in order to make the applicability effective.

The major provisions (for businesses) of the Unfair Contract Terms Act (1977) are:

A Business is not allowed to exclude liability relating to death or injury due to the negligence of that Business.

“Reasonability” is the key for the applicability of an exclusion clause. If a case is taken to court and the court finds out the underlying reasons are not “reasonable” enough, then the clause becomes void.

Exclusion clause is not applicable for defective goods sold to a consumer (non-business).

Alteration in a contract is not allowed unilaterally, without the consent of both parties.

It is to be noted that in relation to the case, in hand, the first point is relevant to the case, i.e. “Reasonableness” of clause. To clarify the applicability of exclusion contract it is necessary to clarify the term “Reasonable”. The common law provides the definition of ...