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: prior dealings must be regular and consistent enough to justify treating the same terms as part of the present contract, even without a fresh signature or notice. The test is objective; failure to read terms already accepted through the parties' conduct does not prevent incorporation. In Henry Kendall & Sons v William Lillico & Sons [1968] UKHL 3, more than a hundred similar contract notes over three years established acceptance.
- Too few: three or four repair transactions over five years were insufficient in Hollier v Rambler Motors (AMC) [1971] EWCA Civ 12. Inconsistent: documents sometimes signed and sometimes not did not establish a consistent course in McCutcheon v David MacBrayne [1964] UKHL 4.
- Incorporation, construction and statutory control are separate. There is no rule that a course of dealing can incorporate ordinary terms but never an exclusion of negligence liability. Whether the wording covers negligence is a separate construction question (also considered in Hollier); UCTA or the CRA may then prevent reliance on an incorporated term. For consumer services, CRA 2015 s.57(1) prevents exclusion of liability for failure to exercise reasonable care and skill.
- Common understanding in a trade is a different route. In British Crane Hire v Ipswich Plant Hire [1973] EWCA Civ 6, the court relied on the parties' shared understanding of usual plant-hire conditions, not simply two earlier transactions. Both parties were in the same trade, of equal bargaining power and knew the substance of the conditions. Do not treat that decision as an automatic rule incorporating a trader's usual terms against a consumer.

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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