4.2.1 Exclusion Clauses – Introduction
Welcome to part two of the fourth lesson of this module guide – exclusion clauses! During this module guide we have already referred to a number of exemption clauses. An exemption clause in a contract is a term which either limits or excludes a party’s liability for a breach of contract, and these are often used in many of today’s contracts. There are a number of particular rules in this area that determine whether an exclusion clause is binding and operable and these are important to understand.
It can be suggested that exclusion clauses are nonsensical in the context of contract law; why would you exclude a party’s liability for a promise they have made? However, it is evident that the exemption clause is a vital tool in allocating the risk of contracts between the parties and allows for commercial efficacy. It is therefore important to understand the different types, how they may be successfully incorporated as well as how courts may interpret them.
This section will begin by examining the different types of exclusion clauses. How they are constructed and incorporated will be discussed next, as well as the various rules to remember as to how courts will interpret them. Exclusion clauses can be limited, and this is also considered. Finally, the two main statutes affecting these clauses are detailed in-depth, with the important “reasonableness” test highlighted.
Goals for this section
- To understand the importance of exclusion clauses
- To understand what exclusion clauses are and their types
- To understand how courts will interpret and limit exclusion clauses
Objectives for this section
- To understand what it takes for an exclusion clause to be binding and operable
- To be able to distinguish between the different types of clause
- To understand the ways in which they may be incorporated into a contract
- To understand how they may be constructed
- To understand the limitations placed upon exclusion clauses
- To understand how the courts have and will interpret exclusion clauses
- To become familiar with the various provisions of UCTA and CRA that affect exclusion clauses
- To understand and be able to apply the “reasonableness” test
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