6. Contents of a contract 2: Exemption clauses and unfair terms

Unfair terms can be incorporated into contracts by?

1. Signature: - person is generally bound after signing except if: a. someone signs an exemption clause as a result of fraud or misrepresentation; b. non est factum/it is not my deed (the courts take a very restrictive approach); - through no fault of his own , the person signing did not understnad the document he signed; and - there was a radical or very substantial difference between what the person signed and what the person believed he was signing. c. the document is not contractual: - signing a document that is typically not contractual such as timesheets, invoices or receipts will usually not result in a person being bound. 2. Reasonable notice: a. notice must be timely; b. reasonable steps have been taken to bring the term to the notice of the other party (onerous terms must bring to attention more 'red hand rule'); and c. the document must be one that normally has contractual effect (gernally understood to have contractual effect). - The TRC test (timely, reasonable, contractual) 3. Consistent course of dealing. - the term has to be incorporated basically always not sometimes, even if dealings are frequent. - more common in B2B dealings. 4. Common knowledge/awareness of industry practice (has to be very same industry) - E.g. certain terms are always used in crane industry - courts may hold that such terms are incorporated.

Unfair terms are only enforceable if:

1. They have been incorporated into the contract; 2. The wording in the clause covers the claim; and 3. They are not rendered unenforceable by statute or common law.

The largest category of unfair terms is that of exemption clauses. What are they?

An exemption clause is a term in a contract that excludes or limits a party's liability, for example, by limiting it to a specific amount, or by restricting liability to a certain time frame.

What tests are there for the interpretation for exemption clauses where there is liability for negligence and on another ground?

If the exemption clause covers liability in negligence, the clause must be: 1. reasonable in B2B; or 2. fair in B2C; to be enforceable.

Can a party exclude negligence liability that results from death or personal injury?

No.

Can sections 9-16 CRA 2016 under the B2C regime be excluded?

No. Furthermore, a consumer is not bound by an unfair term (a terms contrary to the requirements of good faith, and causes detriment to the consumer).

If you conclude that a term has been incorporated into a contract, the next step is to analyse whether the words used in the term cover the claim in question. If the words are clear then you need to analyse the ordinary meaning of the words. If they are unclear you must?

The courts may look outside the meaning of the words to the context in which the contract was concluded OR apply the contra proferentum rule (unclear wording is to be interpreted in the least favourable way to the party seeking to rely on it to limit or exclude his liability.

Once clear that an unfair term or exemption clause has been incorporated, what needs to be checked to see whether it covers the relevant claim?

The language must be tested. Reminder of the effect of the contra proferentem rule on ambiguous wording (any clause considered to be ambiguous should be interpreted against the interests of the party that introduced it).

Can a trader, in respect to of the B2B regime exclude s 13-15 SGA 1979?

Yes, but only if it's reasonable.

Can you exclude liability for negligence in common law?

Yes. By an exemption clause and if the clause is wide enough to exclude liability in negligence on another basis.

Is a person generally bound by a document he signs?

Yes. Unless he signs it as a result of fraud or misrepresentation, non set factum (agreement is invalid) applies, or the document does not have contractual effect.