An exclusion clause is a term in a contract that seeks to restrict the
An exclusion clause is a term in a contract that seeks to restrict the

rights of the parties to the contract. Traditionally, the district courts have
rights of the parties to the contract. Traditionally, the district courts have

sought to limit the operation of exclusion clauses. In addition to
sought to limit the operation of exclusion clauses. In addition to

numerous common law rules limiting their operation, in England and Wales Consumer
numerous common law rules limiting their operation, in England and Wales Consumer

Contracts Regulations 1999. The Unfair Contract Terms Act 1977 applies to all
Contracts Regulations 1999. The Unfair Contract Terms Act 1977 applies to all

contracts, but the Unfair Terms in Consumer Contracts Regulations 1999,
contracts, but the Unfair Terms in Consumer Contracts Regulations 1999,

unlike the common law rules, do differentiate between contracts between
unlike the common law rules, do differentiate between contracts between

businesses and contracts between business and consumer, so the law seems
businesses and contracts between business and consumer, so the law seems

to explicitly recognize the greater possibility of exploitation of the
to explicitly recognize the greater possibility of exploitation of the

consumer by businesses. Types of Exclusion Clause
consumer by businesses. Types of Exclusion Clause

True exclusion clause: The clause recognizes a potential breach of
True exclusion clause: The clause recognizes a potential breach of

contract, and then excuses liability for the breach. Alternatively, the clause is
contract, and then excuses liability for the breach. Alternatively, the clause is

constructed in such a way it only includes reasonable care to perform
constructed in such a way it only includes reasonable care to perform

duties on one of the parties. Limitation clause: The clause places a
duties on one of the parties. Limitation clause: The clause places a

limit on the amount that can be claimed for a breach of contract, regardless of
limit on the amount that can be claimed for a breach of contract, regardless of

the actual loss. Time limitation: The clause states that
the actual loss. Time limitation: The clause states that

an action for a claim must be commenced within a certain period of time or the
an action for a claim must be commenced within a certain period of time or the

cause of action becomes extinguished. Term Must be Incorporated
cause of action becomes extinguished. Term Must be Incorporated

The courts have traditionally held that exclusion clauses only operate if they
The courts have traditionally held that exclusion clauses only operate if they

are actually part of the contract. There seem to be three methods of
are actually part of the contract. There seem to be three methods of

incorporation: Incorporation by signature: according to
incorporation: Incorporation by signature: according to

L'Estrange v Graucob, if the clause is written on a document which has been
L'Estrange v Graucob, if the clause is written on a document which has been

signed by all parties, then it is part of the contract. If a document has not
signed by all parties, then it is part of the contract. If a document has not

been signed, any exception clause which it contains will only be incorporated if
been signed, any exception clause which it contains will only be incorporated if

the party relying on the clause can show that he took reasonable steps to bring
the party relying on the clause can show that he took reasonable steps to bring

it to the attention of the other party before the contract was made. In
it to the attention of the other party before the contract was made. In

somewhat of a contradiction, that is not to say that the proferens actually has
somewhat of a contradiction, that is not to say that the proferens actually has

to show that the other person read the clause or understood it. It is not even
to show that the other person read the clause or understood it. It is not even

necessary to show that the attention of that particular person was actually
necessary to show that the attention of that particular person was actually

drawn to it. It is somewhat like the 'reasonable man' test in tort: the party
drawn to it. It is somewhat like the 'reasonable man' test in tort: the party

trying to rely on the clause needs to take reasonable steps to bring it to the
trying to rely on the clause needs to take reasonable steps to bring it to the

attention of the reasonable person. Incorporation by notice: the general
attention of the reasonable person. Incorporation by notice: the general

rule, as provided in Parker v SE Railway is that an exclusion clause will have
rule, as provided in Parker v SE Railway is that an exclusion clause will have

been incorporated into the contract if the person relying on it took reasonable
been incorporated into the contract if the person relying on it took reasonable

steps to draw it to the other parties' attention. Thornton v. Shoe Lane Parking
steps to draw it to the other parties' attention. Thornton v. Shoe Lane Parking

seems to indicate that the wider the clause, the more the party relying on it
seems to indicate that the wider the clause, the more the party relying on it

will have had to have done to bring it to the other parties' attention. The
will have had to have done to bring it to the other parties' attention. The

notice must be given before formation of the contract as illustrated in Olley v
notice must be given before formation of the contract as illustrated in Olley v

Marlborough. Incorporation by previous course of
Marlborough. Incorporation by previous course of

dealings: according to McCutcheon v David MacBrayne Ltd, terms may be
dealings: according to McCutcheon v David MacBrayne Ltd, terms may be

incorporated into a contract if course of dealings between the parties were
incorporated into a contract if course of dealings between the parties were

"regular and consistent". What this means usually depends on the facts,
"regular and consistent". What this means usually depends on the facts,

however, the courts have indicated that equality of bargaining power between the
however, the courts have indicated that equality of bargaining power between the

parties may be taken into account. Judicial Control of Exclusion Clauses
parties may be taken into account. Judicial Control of Exclusion Clauses

= Strict Literal Interpretation = For an exclusion clause to operate, it
= Strict Literal Interpretation = For an exclusion clause to operate, it

must cover the breach. If there is, then the type of liability arising is also
must cover the breach. If there is, then the type of liability arising is also

important. Generally, there are two varieties of liability: strict liability
important. Generally, there are two varieties of liability: strict liability

and liability for negligence. The courts have a tendency of requiring
and liability for negligence. The courts have a tendency of requiring

the party relying on the clause to have drafted it properly so that it exempts
the party relying on the clause to have drafted it properly so that it exempts

them from the liability arising, and if any ambiguity is present, the courts
them from the liability arising, and if any ambiguity is present, the courts

usually interpret it strictly against the party relying on the clause.
usually interpret it strictly against the party relying on the clause.

As espoused in Darlington Future Ltd v. Delcon Australia Pty Ltd, the meaning of
As espoused in Darlington Future Ltd v. Delcon Australia Pty Ltd, the meaning of

an exclusion clause is construed in its ordinary and natural meaning in the
an exclusion clause is construed in its ordinary and natural meaning in the

context. Although we construe the meaning much like any other ordinary
context. Although we construe the meaning much like any other ordinary

clause in the contract, we need to examine the clause in light of the
clause in the contract, we need to examine the clause in light of the

contract as a whole. The judge in R & B Custom Brokers Co. Ltd. v United
contract as a whole. The judge in R & B Custom Brokers Co. Ltd. v United

Dominions Trust Ltd. refused to allow an exemption clause, of which did cover the
Dominions Trust Ltd. refused to allow an exemption clause, of which did cover the

nature of the implied term, on the grounds that it did not make specific
nature of the implied term, on the grounds that it did not make specific

and explicit reference to that term. = Contra Proferentem =
and explicit reference to that term. = Contra Proferentem =

If, after attempting to construe an exclusion clause in accord with its
If, after attempting to construe an exclusion clause in accord with its

ordinary and natural meaning of the words, there is still ambiguity then the
ordinary and natural meaning of the words, there is still ambiguity then the

contra proferentem rule applies. Essentially this means that the clause
contra proferentem rule applies. Essentially this means that the clause

will be construed against the person who imposed its inclusion. that is to say,
will be construed against the person who imposed its inclusion. that is to say,

contra the proferens. In terms of negligence, the courts have
contra the proferens. In terms of negligence, the courts have

taken the approach that it is unlikely that someone would enter into a contract
taken the approach that it is unlikely that someone would enter into a contract

that allows the other party to evade fault based liability. As a result, if a
that allows the other party to evade fault based liability. As a result, if a

party wishes exempt his liability for negligence, he must make sure that the
party wishes exempt his liability for negligence, he must make sure that the

other parties understand that. The decision in Canada SS Lines Ltd v. The
other parties understand that. The decision in Canada SS Lines Ltd v. The

King held that: If the exclusion clauses mention
King held that: If the exclusion clauses mention

"negligence" explicitly, then liability for negligence is excluded.
"negligence" explicitly, then liability for negligence is excluded.

If "negligence" is not mentioned, then liability for negligence is excluded
If "negligence" is not mentioned, then liability for negligence is excluded

only if the words used in the exclusion clause are wide enough to exclude
only if the words used in the exclusion clause are wide enough to exclude

liability for negligence. If there is any ambiguity, then the contra
liability for negligence. If there is any ambiguity, then the contra

proferentem rule applies. If a claim on another basis can be made
proferentem rule applies. If a claim on another basis can be made

other than that of negligence, then it covers that basis instead.
other than that of negligence, then it covers that basis instead.

In Australia, the four corners rule has been adopted in preference over the idea
In Australia, the four corners rule has been adopted in preference over the idea

of a "fundamental breach". The court will presume that parties to a contract
of a "fundamental breach". The court will presume that parties to a contract

will not exclude liability for losses arising from acts not authorised under
will not exclude liability for losses arising from acts not authorised under

the contract. However, if acts of negligence occur during authorised acts,
the contract. However, if acts of negligence occur during authorised acts,

then the exclusion clauses shall still apply; see also
then the exclusion clauses shall still apply; see also

If the contract is for the carriage of goods, if the path is deviated from what
If the contract is for the carriage of goods, if the path is deviated from what

was agreed, any exclusion clauses no longer apply.
was agreed, any exclusion clauses no longer apply.

In Australia, exclusion clauses have been recognised as valid by the High
In Australia, exclusion clauses have been recognised as valid by the High

Court. They do not apply in cases of deliberate breach.
Court. They do not apply in cases of deliberate breach.

Statutory Control Even if terms are incorporated into the
Statutory Control Even if terms are incorporated into the

contract and so would be effective, there are various statutory controls
contract and so would be effective, there are various statutory controls

over the types of terms that may have legal effect. The Unfair Contract Terms
over the types of terms that may have legal effect. The Unfair Contract Terms

Act 1977 renders many exemption clauses ineffective. The Unfair Terms in
Act 1977 renders many exemption clauses ineffective. The Unfair Terms in

Consumer Contracts Regulations 1999 provide further protection for
Consumer Contracts Regulations 1999 provide further protection for

consumers. References
consumers. References

^ [1934] 2 KB 394 ^ 4 CPD 416
^ [1934] 2 KB 394 ^ 4 CPD 416

^ [1971] 2 WLR 585 ^ [1949] 1 All ER 127
^ [1971] 2 WLR 585 ^ [1949] 1 All ER 127

^ [1964] 1 WLR 125 ^ 161 CLR 500
^ [1964] 1 WLR 125 ^ 161 CLR 500

^ [1988] 1 All ER 847 ^ The term in question was the implied
^ [1988] 1 All ER 847 ^ The term in question was the implied

term as to fitness-to-purpose pursuant to the Sale of Goods Act 1979 s14(3).
term as to fitness-to-purpose pursuant to the Sale of Goods Act 1979 s14(3).

^ Darlington Futures v Delco Aus HCA ^ [1952] AC 192
^ Darlington Futures v Delco Aus HCA ^ [1952] AC 192

^ The Council of the City of Sydney v West 114 CLR 481
^ The Council of the City of Sydney v West 114 CLR 481

^ Davis v Pearce Parking Station Pty Ltd [1954] HCA 44: Clear words are necessary
^ Davis v Pearce Parking Station Pty Ltd [1954] HCA 44: Clear words are necessary

to exclude liability for negligence. ^ Thomas National Transport v May &
to exclude liability for negligence. ^ Thomas National Transport v May &

Barker [1966] HCA ^ See Thomas National Transport Pty Ltd
Barker [1966] HCA ^ See Thomas National Transport Pty Ltd

v May and Baker Pty Ltd [1966] HCA 46; 115 CLR 353
v May and Baker Pty Ltd [1966] HCA 46; 115 CLR 353