Keenan and Riches’BUSINESS LAW

trading stamps for goods. The sources of these implied
terms are summarised in Fig 9.3.

Exemption clauses

Exemption clauses are a common feature of business
contracts. They are express terms which seek to exclude
or limit the liability that might belong to one party in the
event of a breach of contract. Such clauses are perfectly
fair where they are the result of free negotiations between
equals, but all too often they are imposed on a weaker
party by a stronger party. This abuse of freedom of con-
tract was most commonly practised against consumers.
The courts attempted to deal with the problem, but the
common law ultimately proved unequal to the ingenuity
of those who sought the protection of the exemption. Over
the years, Parliament stepped in to control the use of
unfair exemption clauses in particular kinds of contracts
and now the overwhelming majority of these clauses are
covered by the provisions of the Unfair Contract Terms
Act 1977, as supplemented by the Unfair Terms in Con-
sumer Contracts Regulations 1999 (SI 1999/2083). Stat-
utory control of exemption clauses has been grafted on
to the pre-existing common law rules. It is still neces-
sary, therefore, to examine the attitude of the courts to
these clauses. After we have done this, we will consider
how Parliament has dealt with the problem.

Judicial control

The judges based their attack on exemption clauses on

two main fronts: incorporation and interpretation.

Incorporation

The person wishing to rely on the exclusion clause must

show that it formed part of the contract. In this connec-

tion note the following rules.

1 Signed documents. Where the exemption clause is

contained in a document which has been signed, it will

automatically form part of the contract. The signer is

presumed to have read and understood the significance

of all the terms contained in the document.

Part 3Business transactions

286

Goods supplied by way of:

Sale of goods Hire-purchase Barter, work and Hire Redemption of

materials trading stamps

Sale of Goods Supply of Goods Supply of Goods Supply of Trading Stamps

Act 1979 (Implied Terms) and Services Goods Act 1964**

Act 1973* Act 1982 and Services

Act 1982

Title s 12 s 8 s 2 s 7 s 4

Description s 13 s 9 s 3 s 8 _

Quality and

suitability*** s 14 s 10 s 4 s 9 s 4

Sample s 15 s 11 s 5 s 10 _

Figure 9.3The sources of statutory implied terms in contracts for the supply of goods

Express and implied terms

• As amended by the Consumer Credit Act 1974
  ** As amended by the Supply of Goods (Implied Terms) Act 1973
  *** The implied term as to quality has been amended by the Sale and Supply of Goods Act 1994 and the Sale and Supply of Goods to Consumers Regulations 2002

L’Estrangev Graucob(1934)

Miss L’Estrange bought an automatic cigarette vending

machine for use in her café. She signed a ‘sales agree-

ment’ which provided that: ‘Any express or implied con-

dition, statement or warranty statutory or otherwise, not

stated herein is hereby excluded.’ She did not read this

document and was completely unaware of the sweeping

exclusion clause hidden in the small print. The machine

did not work properly but it was held that she was still

bound to pay for it because by signing the agreement

she had effectively signed her rights away.