Exclusion Clauses Exclusion clauses are found in most commercial contracts.

Their purpose is to define contractual duties and obligations and to provide a defence to claims of breach of contract. Exclusion clauses may also be called an exemption or exception clause. There are three main types of exclusion clauses: 1. clauses excluding the rights a party; 2. clauses restricting the rights of one party without necessarily excluding the liability of the other party; and 3. clauses operating to qualify rights or remedies by subjecting them to specified procedures. Exclusion clauses can be effective in protecting a party to a contract, however not all exclusion clauses will be effective at law. For example, if an exclusion clause is not reasonably brought to the attention of the other party, then it may be ineffective at law. Sometimes, the exclusion clause could be very harsh or unusual and it may require extra attention to be drawn to it. An exclusion clause that is very wide as to exclude any obligation under a contract may void a contract. Additionally there may be a case where a particular exclusion clause can be barred by the operation of statute, such as s.68 of the Trade Practices Act 1974 which provides for consumer protection in certain circumstances or by common law such as excluding the liability for negligent misstatement or gross negligence. Disclaimers Although disclaimers and exclusion clauses are used interchangeably in various commercial contexts, they are in fact distinct concepts in the eyes of the law. Disclaimers can often be seen where information, products or services are supplied. Generally, the function of a 'disclaimer' is to advise the person to whom it is addressed (before entering the contract) that the disclaiming party does not intend to undertake any duty towards that person. In other words, the aim of a disclaimer is to negate the existence of a duty of care. Although you can disclaim responsibility for a variety of duties in a contract, you can rarely disclaim responsibility for misleading or deceptive conduct if you are the source of information which is said to be misleading or deceptive. Disclaimers that are drafted carefully, drawn to the attention of the contracting party and acknowledged in writing can help protect parties from costly litigation. To ascertain whether a disclaimer is likely to be effective it is necessary to consider not only the wording and

substance, but the timing, manner and circumstances of its execution or provision. For example, the law stipulates that a disclaimer in a Franchise Agreement should not be in a stand alone document and that it should be signed and dated by the Franchisee. There are several stages that a court will consider before deciding if an exemption clause is enforceable. The term of incorporation means including the clause within the contract. Consideration will be given to whether the exemption clause is within the contract. In the case of Olley v Marlborough Court (1949), the court decided that the terms of the exemption clause were too late. In the case of Thornton v Shoe Lane Parking (1971), this is where the court decided that the other party must have knowledge of the terms of the exemption clause. Furthermore, in the case of Hollier v Rambler Motors (1972), it was decided that there was no course of dealing at the time. The court decided that the defendants could not exclude themselves of liability. Inter In the case of Glynn v Margeston (1893), there was a clause within the contract that allowed a ship to stop at any port in Europe and North Africa, however, its intended journey was from Spain to Liverpool. The court decided that clause that was printed must not interpret in such a way that it defeats the object of the contract and what the contract intends to do. The purpose of the contract, in this case, was that oranges were to be shipped from Spain to Liverpool. Fairness Another case of St Albans City and DC v International Computers (1994), the court decided that there was a breach of contract by the defendants (International Computers), that there was negligence on the part of the defendants, and the clause was seen as unreasonable. In the case of Overland Shoes Ltd v Schenkers (1998), the requirements under the Unfair Contract Terms Act 1977 had been fulfilled. This was appealed by the defendants; the court decided the defendants could not claim that the clause was unfair or unreasonable. In the case of George Mitchell v Finney Lock Seeds (1983), the plaintiffs (George Mitchell) claimed that seeds were not the cabbage seeds that were ordered because they did not have commercial value. The plaintiff endured a financial loss. The court awarded the plaintiff, and decided that limiting liability did not apply in this contract. The defendants appealed, however, the court dismissed the appeal, deciding that the defendants liability was not limited due to conditions, and that breach of contract could not be due to conditions, without the defendants

negligence. The court decided that it would not be fair to rely on conditions when concerned in the seed business, and that defendants could provide guarantee against crop damage, without increasing price of seeds, and that it would not be fair or reasonable to depend on conditions that were not enforceable.