An exclusion clause is a term in a contract that seeks to restrict the rights of the parties to the contract.
Traditionally, the district courts have sought to limit the operation of exclusion clauses. In addition to numerous common law rules limiting their operation, in England and Wales, the main statutory interventions are the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999. The Unfair Contract Terms Act 1977 applies to all contracts, but the Unfair Terms in Consumer Contracts Regulations 1999, unlike the common law rules, do differentiate between contracts between businesses and contracts between business and consumer, so the law seems to explicitly recognize the greater possibility of exploitation of the consumer by businesses.
Types of Exclusion Clause
- True exclusion clause: The clause recognises a potential breach of contract, and then excuses liability for the breach. Alternatively, the clause is constructed in such a way it only includes reasonable care to perform duties on one of the parties.
- Limitation clause: The clause places a limit on the amount that can be claimed for a breach of contract, regardless of the actual loss.
- Time limitation: The clause states that an action for a claim must be commenced within a certain period of time or the cause of action becomes extinguished.
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Statutory Control
Even if terms are incorporated into the contract and so would be effective, there are various statutory controls over the types of terms that may have legal effect. The Unfair Contract Terms Act 1977 renders many exemption clauses ineffective. The Unfair Terms in Consumer Contracts Regulations 1999 provide further protection for consumers.
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