Exclusion and Limitation Clauses
Once incorporated, a clause must satisfy common law construction and then pass statutory controls.
Common Law Construction
- Courts construe exclusion clauses strictly against the party relying on them (contra proferentem).
- To exclude liability for negligence, the clause must do so in clear and unambiguous terms: Canada Steamship Lines v R [1952] AC 192 (PC) (three-stage test: (1) express reference to negligence; (2) if not, does the language cover negligence on its natural meaning; (3) if so, is there another head of liability to which the clause could apply).
Statutory Controls
Unfair Contract Terms Act 1977 (UCTA) — Business-to-Business (B2B)
- s.2(1) UCTA 1977: Cannot exclude or restrict liability for death or personal injury caused by negligence — void, no reasonableness test applies.
- s.2(2) UCTA 1977: Exclusion or restriction of liability for other loss or damage caused by negligence is subject to the reasonableness test.
- s.3 UCTA 1977: Where one party deals on the other's written standard terms of business, any term purporting to exclude or restrict liability for breach, or to allow performance substantially different from what was reasonably expected, must satisfy the reasonableness test.
- Reasonableness is defined in s.11 UCTA 1977: the term must have been fair and reasonable to include having regard to the circumstances known or reasonably contemplated at the time of contracting. Schedule 2 UCTA 1977 lists guidelines (relative bargaining strength, whether an inducement was given, the customer's knowledge of the term, whether compliance with a condition was practicable, and whether goods were manufactured to special order).
Consumer Rights Act 2015 (CRA 2015) — Business-to-Consumer (B2C)
- CRA 2015 supersedes UCTA 1977 for contracts between a trader (as defined in s.2(2) CRA 2015) and a consumer (s.2(3) CRA 2015).
- s.31 CRA 2015: A trader cannot exclude or restrict the statutory rights implied by ss.9–18 CRA 2015 (satisfactory quality, fitness for purpose, goods matching description/sample, etc.) — any such term has no effect.
- s.65 CRA 2015: A trader cannot exclude or restrict liability for death or personal injury resulting from negligence — void.
- s.62 CRA 2015: A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations to the detriment of the consumer; unfair terms are not binding on the consumer.
- s.67 CRA 2015: The contract continues to bind the parties if it is capable of subsisting without the unfair term.
- Schedule 2 CRA 2015 contains an indicative (non-exhaustive) list of terms that may be regarded as unfair.
Scope Note
- UCTA 1977 applies to B2B contracts and, residually, to non-trader/non-consumer situations not governed by CRA 2015.
- CRA 2015 governs B2C contracts exclusively where the trader acts in the course of a business and the consumer acts for purposes wholly or mainly outside their trade, business, craft or profession (s.2(2)–(3) CRA 2015).
Common SQE Traps
- Applying UCTA 1977 to a consumer contract — CRA 2015 governs instead.
- Assuming a clause can exclude liability for death or personal injury by negligence if it is reasonable — it cannot under either s.2(1) UCTA 1977 or s.65 CRA 2015.
- Confusing CRA 2015 fairness (s.62: significant imbalance + good faith) with UCTA 1977 reasonableness (s.11 + Sch 2) — they are distinct tests.
- Overlooking that s.31 CRA 2015 renders void any exclusion of implied statutory rights regardless of fairness.
Exam tip: Identify the parties first — B2B → UCTA 1977; B2C → CRA 2015. Then check whether an absolute prohibition applies (death/personal injury; s.31 statutory rights). If not, apply the reasonableness (UCTA) or fairness (CRA) test as appropriate.