Courts Limit Exemption Clauses Due to Sympathy for Weaker Party
TITLE
The restrictions imposed by the courts regarding the use of exemption clauses arise because of judicial sympathy for the weaker party. Describe the common law rules regarding incorporation and interpretation of exemption clauses. Assess the validity of the statement above.
ESSAY
Title: The Role of Exemption Clauses in English Law: Balancing Judicial Sympathy for the Weaker Party
Introduction
Exemption clauses are contractual provisions that seek to limit or exclude liability for certain types of loss or damage. The enforceability of exemption clauses in English law is subject to regulation by both common law and statutory law. This essay will explore the common law rules regarding the incorporation and interpretation of exemption clauses, and assess the validity of the statement regarding judicial sympathy for the weaker party in this context.
Incorporation of Exemption Clauses
Incorporating an exemption clause into a contract is essential for it to be enforceable. Common law provides various forms of incorporation, including:
1. Incorporation by signature (L'estrange v Graucob): A party is bound by an exemption clause if they have signed a document containing it.
2. Incorporation by notice: A clause can also be incorporated through notice, with factors such as timing (Olley v Marlborough Court Hotel, Thornton v Shoe Lane Parking), form (Chapelton v Barry UDC, Parker v South Eastern Railway, Thompson v LMS Railway), and onerous terms (Interfoto Picture Library v Stilleto Visual Programmes Ltd) being significant.
3. Previous course of dealing: If parties have a consistent course of dealing where exemption clauses are used, they may be incorporated into subsequent contracts (Hollier v Rambler Motors Ltd, McCutcheon v David MacBrayne Ltd).
Interpretation of Exemption Clauses
The contra proferentem rule applies when an exemption clause's wording is ambiguous (Houghton v Trafalgar Insurance Co Ltd), preventing the party inserting the clause from relying on it. The rule is particularly stringent in cases involving liability exclusion in negligence (Hollier v Rambler Motors).
Assessment of the Statement
The statement posits that the courts restrict the use of exemption clauses due to sympathy for the weaker party. Common law principles have indeed evolved to protect parties from unfair contractual terms, as evidenced by:
1. Stricter interpretation of onerous clauses (Interfoto Picture Library v Stiletto Visual Programmes Ltd).
2. Judicial insistence on clarity and fairness in exemption clause drafting (Lord Denning in Thornton v Shoe Lane Parking).
3. The contra proferentem rule, which favors the party against whom the clause is being invoked.
4. UCTA 1977 and CRA 2015 imposing reasonableness tests on exemption clauses.
However, recent commercial contract cases highlight a shift in approach, with courts showing more leniency in cases of equal party bargaining power (Photo Productions Ltd v Securicor Transport Ltd; Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd).
Conclusion
In conclusion, while English law has historically shown sympathy towards the weaker party in exemption clause disputes, recent developments indicate a more nuanced approach focusing on the reasonableness of contractual terms and the bargaining power of the parties involved. The role of exemption clauses in contractual arrangements continues to be a complex and evolving aspect of English legal practice.
SUBJECT
LAW
PAPER
A level and AS level
NOTES
The restrictions imposed by the courts regarding the use of exemption clauses arise because of judicial sympathy for the weaker party.
Describe the common law rules regarding incorporation and interpretation of exemption clauses. Assess the validity of the statement above.
Candidates should begin by briefly explaining what an exemption clause is and explain that they are regulated by common and statue law.
Candidates should then focus on the common law, firstly, explaining the need for incorporation and its various forms:
💥 Incorporation by signature (L’estrange v Graucob)
💥 Incorporation by notice, including timing of the notice (Olley v Marlborough Court Hotel, Thornton v Shoe Lane Parking)
💥 Form of the notice (Chapelton v Barry UDC, Parker v South Eastern Railway, Thompson v LMS Railway)
💥 The significance of onerous terms (Interfoto Picture Library v Stilletto Visual Programmes Ltd)
💥 Previous course of dealing (Hollier v Rambler Motors Ltd, McCutcheon v David MacBrayne Ltd)
Candidates should then address the issue of interpretation. The contra proferentem rule applies where wording is ambiguous (Houghton v Trafalgar Insurance Co Ltd) and prevents the party inserting the clause from relying on it. It is especially applied to exclude liability in negligence where a high standard of clarity of drafting is expected (Hollier v Rambler Motors).
Credit any other common law principle discussed, for example, an oral misrepresentation about the scope of an exclusion clause in a written contract may invalidate the clause (Curtis v Chemical Cleaning and Dyeing Co Ltd) or reference to the attempt to invoke the doctrine of ‘fundamental breach’ (Photo Productions Ltd v Securicor Transport Ltd; and Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd). Credit any other relevant case cited for AO1.
Candidates must then turn their attention to the premise of the statement and may:
💥 Consider the justification of the common law stance since both exclusion clauses and limitation clauses can be harsh on the party subject to them. For example, they are often made by the stronger party usually on his/her standard form. They are imposed on the weaker party and tend to be detrimental to their interests.
💥 Consider that the common law helped to redress the imbalance in bargaining strength between parties. Given the maxim caveat emptor (let the buyer beware) and the absence of statutory intervention until 1977 there was effectively no other way of challenging such clauses.
💥 Consider particular cases where judges have seemed to go out of their way to favour the weaker party. For example, Lord Denning’s suggestion that any exemption clause should be written in ‘red ink’ with a ‘red hand pointing to it’ before it could be deemed sufficient notice (Thornton v Shoe Lane Parking). Similarly, clauses that are particularly onerous are strictly interpreted (Interfoto Picture Library v Stiletto Visual Programmes Ltd).
💥 Consider the application of the contra proferentem rule which operates very strictly against the party inserting the clause unless they are clear as to what the clause will cover.
💥 Consider the fact that the common law principles may not be applied with the same degree of strictness given that both UCTA 1977 and the CRA 2015 apply a test of reasonableness.
💥 Consider the fact that the judiciary have taken a more liberal approach in relation to clauses inserted in contracts where the parties are of equal bargaining strength and negotiate the contract freely (Photo Productions Ltd v Securicor Transport Ltd; and Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd).
💥 Consider that in Persimmon Homes Ltd and Others v Ove Arup and Partners Ltd and another 2017, the Court of Appeal confirmed that the contra proferentem rule now had a very limited role in relation to commercial contracts negotiated between parties of equal bargaining power.