FLK1 · Contract

Exemption clauses & unfair terms (UCTA / CRA 2015)

SQE1 revision notes — the key rules, leading cases and common traps for this topic, in plain English and current to 2026.

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.

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In January, a doctor negotiating the sale of his medical practice tells the buyer, truthfully, that the practice generates around £2,000 a month in income. Contracts are not signed until May. Between January and May the doctor falls seriously ill, stops practising, and the patient list collapses, so that by the time of signing the practice earns almost nothing. The doctor says nothing about this change. The buyer, still relying on the January figure, completes the purchase and then discovers the true position.

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