The courts’ approach to both types is similar in the procedure followed, so
in this chapter the term ‘exemption clauses’, where used, refers to both
exclusion and limitation clauses.
To examine the validity of an exemption clause there are three steps
traditionally taken by the courts. These are seen in the chart below.
If the exemption clause survives the first ‘hurdle’ and is found to be
incorporated, the court then enquires whether the clause can be interpreted
to cover the damage. If this is the case, then the relevant statutes will be
applied, to see if the clause should stand. This process in logical since, of
course, if the term is not incorporated into the contract the other
considerations will be irrelevant. In practice, however, the legislation is
often the first point of discussion. The traditional route should be followed
in analysing problems for examinations, and is pursued in detail here.
Incorporation
The court will ask the question: Is the clause part of the contract? An
exemption clause, just like any other term of a contract, must be
incorporated into the contract. Incorporation was covered in detail in
Chapter 6, but the most relevant issues are that:
- The term must not come too late – Olley v Marlborough Court (1949).
- The term must be brought to the attention of the other party in a
reasonable way – Parker v South Eastern Railway (1877).
For both of the above points in a modern setting, see Thornton v Shoe Lane
Parking Ltd (1971). In addition, if the term is in a document it should be
one which would be regarded as of a contractual nature – see Chapelton v
Barry UDC (1940), and the writing must not be obscured – see Sugar v
LMS Railway (1941). Remember also that the parties may have formed a
‘course of dealing’ – Hollier v Rambler Motors (1972).
See Chapter 6, pp. 97–101, for details of the cases mentioned above.
120 Contract law
1 Incorporation⇒is the term part of the contract?2 Construction⇒can the damage which has occurred be interpreted as
falling within the boundaries of the exemption clause?3 Legislation⇒is the term allowed within current statute law?Figure 8.2