Exemption clauses & unfair terms (UCTA / CRA 2015)

CON.05 — Exemption Clauses & Unfair Terms (UCTA 1977 / CRA 2015)

An exemption clause tries to exclude or limit liability. To be effective it must clear three hurdles: incorporation, construction, and statutory control.

1. Incorporation

The clause must be part of the contract. Three routes:

• Signature — a signed document binds even if unread (L'Estrange v Graucob), subject to misrepresentation of the term (Curtis v Chemical Cleaning).
• Notice — reasonable steps to bring it to attention before/at the time of contracting (Olley v Marlborough Court — notice in hotel room too late; Thornton v Shoe Lane Parking — ticket from machine, contract already made). The more onerous/unusual the term, the greater the notice required (Interfoto "red hand" rule; Spurling v Bradshaw).
• Course of dealing — consistent prior dealings (McCutcheon v MacBrayne — must be regular and consistent).

2. Construction

Clear words needed. Contra proferentem: ambiguity read against the party relying on it. Clear words can even exclude liability for negligence, but vague wording will not (Canada Steamship guidance).

3. Statutory control — the key SQE split

Apply UCTA or CRA, not both. The dividing line is who the parties are:

• UCTA 1977 → B2B (and non-consumer) contracts.
• CRA 2015 → trader v consumer (consumer = individual acting wholly/mainly outside trade/business).

UCTA 1977 (B2B):

• s.2(1): liability for death/personal injury from negligence — cannot be excluded at all (void).
• s.2(2): other negligence loss — excludable only if reasonable.
• s.3: exclusions on the other party's written standard terms — reasonableness test.
• s.6/s.7: implied terms as to title cannot be excluded; description/quality/fitness terms subject to reasonableness.
• Reasonableness test (s.11, Sch 2): judged at time of contracting; Watford Electronics, George Mitchell v Finney Lock Seeds.

CRA 2015 (consumer):

• s.31: cannot exclude the statutory rights in goods (s.9 satisfactory quality, s.10 fitness, s.11 description).
• s.57: same blanket protection for services (s.49 reasonable care/skill).
• s.65: cannot exclude/restrict liability for death/personal injury from negligence.
• Fairness test (s.62): terms (other than core/price terms in plain language, s.64) must not be unfair — contrary to good faith, significant imbalance. Grey list in Sch 2. Unfair term not binding but rest of contract continues.

Common traps

• Don't mix UCTA and CRA — classify the parties first.
• s.2(1) UCTA / s.65 CRA are absolute (death/PI by negligence — never excludable).
• Incorporation/construction come before statute — solve in order.
• CRA applies the transparency requirement; core terms only escape fairness if plain and prominent (s.64).
• Reasonableness (UCTA) ≠ fairness (CRA) — different tests and burdens.