- The defect may arise from the manufacturing process or a problem of
design. - The Act covers liability for death, personal injury or damage to property
valued at over £275, but not for damage to the product itself – Aswan
Engineering Establishment v Lupdine. - Defences include: producer not in business, defect arising after
manufacture, fault with the whole product design, not this component,
‘state of the art’.
Exemption clauses
See also Chapter 8, Exemption clauses. An exemption clause is a term of a
contract either limiting liability (a limitation clause) or excluding liability
(an exclusion clause). There are three stages to considering validity:
- Is the term incorporated? Olley v Marlborough Court Hotel, Thornton v
Shoe Lane Parking, etc. - Does the term, when construed (interpreted) cover the damage caused?
Main purpose rule and contra proferentem rule. - Does legislation apply to the term? Unfair Contract Terms Act 1977 and
Unfair Terms in Consumer Contract Regulations 1999.
The Unfair Contract Terms Act 1977
The main provisions in the Unfair Contract Terms Act 1977:
- Exclusion or restriction of liability for death or personal injury resulting
from negligence is not allowed – section 2(1). - Exclusion or restriction of other liability caused by negligence will only
be allowed if reasonable – section 2(2).
Under Schedule 2 in assessing reasonableness the court may consider: the
bargaining strength of the parties, any inducement given to agree to the
term, the customer’s knowledge of the term, any special manufacture.
Exclusion of implied terms is only allowed in limited circumstances and
often subject to a test of reasonableness.
The UnfairTerms in Consumer Contract Regulations 1999
Implemented the European Directive on Unfair Terms in Consumer Contracts
(93/13). Terms are unfair which are ‘significant to the detriment of the
consumer’, and ‘contrary to the requirement of good faith’. Reasonableness
includes circumstances, resources to meet liability and possibility of
insurance. Bargaining power of parties, any alternative sources, any
inducement, trade custom and previous dealings, the difficulty of the task, and
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