4. Exemption Clauses - Chapter 11 Exemption Clauses...

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Chapter 11 – Exemption Clauses Definition: A term that seeks to exclude or limit the liability of one of the parties in the event of a breach of contract. - Seeks to exclude liability completely - Seeks to limited liability (monetary liability) - Seeks to indemnify the party (Shift liability to a third party) Review of the law relating to exemption clauses must take in two developments: 1) Freedom of contract where parties to the contract have unrestrained rights to enter contracts of their choice (without interference from the government) 2) Subsequent intervention by the courts and legislature to control its excesses UCTA ( Unfair contract terms Act) – a measure to prevent a stronger party from imposing unfair clauses on a weaker party during negotiations For an exemption clause to be valid , it must fulfil these requirements: 1. It must be properly incorporated into a contract 2. It must be properly construed 3. Its operation must not be excluded or restricted by statute, namely, UCTA 1. Incorporation 1) By Signature : a person who signs a contract is bound by it, whether he has read it or not. (In the absence of vitiating factors) – Page 294 Exceptions: 1. Non est factum (Not the person’s deed; blind or illiterate) – people who sign under a mistaken belief as to their nature and effect. (Saunders v Anglia Building) 2. Where there is misrepresentation (of the exemption clause) to the nature of the document signed and to the effect of the exemption clause ( Curtis v Chemical Cleaning and Dyeing Co (1951) 3. A Collateral contract which may override the written contract. An oral undertaking (subsidiary contract) at the time of signing may overshadow the written contract and neutralise the exemption clause. This does not violate Parol evidence rule. ( Evans (J) & Son (Portsmouth Ltd v Andrea Merzario Ltd (1976))- Shipment under deck case ( oral assurance to plaintiff formed a collateral contract) 2) By Notice: The contract is not written or the terms are in an unsigned document. – Page 295 The person seeking to rely on it must show : ( Parker v South Eastern Railway (1877)) i. The other party knew or ought to have known that the document was one that could be expected to contain such terms.
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ii. Done everything reasonable to give sufficient notice of the exemption clause to the other party.
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