Exemption (Exclusion or Limitation) Clauses

Exemption (Exclusion or Limitation) Clauses


This requirement applies to all terms, but has been interpreted strictly in the case of exemption clauses. A term may be incorporated into a contract by being.


Where the offered has been induced to sign as a result of misrepresentation. In Curtis v Chemical Cleaning Co (1951), the plaintiff signed a ‘receipt’ when she took a dress to be cleaned, on being told that it was to protect the cleaners in case of damage to the sequins. In fact, the clause excluded liability for all damage. Held—the cleaners were not protected for damage to the dress; the extent of the clause had been misrepresented and therefore the cleaners could not rely on it.

Notice by display

Notice by display Notices exhibited in premises seeking to exclude liability for loss or damage are common, for example, ‘car parked at owner’s risk’ and must be seen before, or at the time of entry into contract.  In Olley v Marlborough Court Hotel (1949), Mr. and Mrs. Olley saw a notice on the hotel bedroom wall which stated ‘the proprietors will not hold themselves responsible for articles lost or stolen, unless handed to the manageress for safe keeping’.

On a proper construction, the clause covers the loss in question

An exclusion clause is interpreted contra proferentem, that is, any ambiguity in the clause will be interpreted against the party seeking to rely on it:

  • In Houghton v Trafalgar Insurance Co Ltd (1954), it was held that the word ‘load’ could not refer to people;
  • in Andrews Bros v Singer & Co Ltd (1934), an exclusion referring to implied terms was not allowed to cover a term that the car was new, as this was an express term.

Unfair Contract Terms Act 1977

Note—the title is misleading.  The Act does not cover all unfair contract terms, only exemption clauses.  The Act covers certain tortious liability, as well as contractual liability. The following must be examined.


The Act covers contractual, tortious and statutory (that is, under the Occupiers’ Liability Act 1957) negligence. The difference between excluding liability for negligence, and transferring liability for negligence is seen in Phillips Products v Hyland Bros (1987) where the contract transferred liability for the negligence of the driver of a hired excavator to the hirer. The driver negligently damaged property belonging to the hirer. Held—the clause was an exclusion clause and was subject to UCTA. In Thompson v Lohan (Plant Hire) (1987), on the other hand, an excavator and driver were hired under the same conditions. The driver negligently killed a third party. Held—the clause transferring liability to the hirer was not an exclusion clause in this case as the third party was able to sue the hirer. It was merely a clause transferring liability.

Decisions of the courts

In Smith v Bush (1990) and Harris v Wire Forest DC (1989), the House of Lords dealt with two cases involving the validity of an exclusion clause protecting surveyors who had carried out valuations of a house. The House of Lords decided that the clauses were exclusion clauses designed to protect the surveyors against claims for negligence. Lord Griffiths declared that there were four matters which should always be considered.

Unfair Terms in Consumer Contracts Regulations 1999

This will be so, even if some other parts of the contract have not been drafted in advance. The regulations do not apply to contracts which relate to employment, family law, or succession rights, companies or partnerships terms included in order to comply with legislation or an international convention. They do, however, cover insurance policies and contracts relating to land. A ‘business’ is defined to include a trade or profession and the activities of any government department or local or public authority.  A ‘consumer’ means a natural person who is acting for a purpose outside his business.

Last word

It was this power that was used in the first reported case on the regulations, Director General of Fair Trading v First National Bank plc. (2000), discussed above. For the first time, a similar power to apply for such an injunction is given to certain other ‘qualifying bodies’, including the Data Protection Registrar, various Directors General (of gas supply, electricity supply, telecommunications, water services) and the Consumers’ Association.

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