Has the exclusion clause been incorporated into the contract?

An exclusion clause cannot be effective unless it is actually a term of a contract. There are three ways in which such a term may be inserted into a contractual agreement.

By signature

If a person signs a contractual document then they are bound by its terms, even if they do not read it.

            In L’Estrange v Graucob a café owner bought a vending machine, signing a contract without reading it, which took away all her rights under the SoGA 1893. When the machine proved faulty, she sought to take action against the vendors, but it was held that she had no cause of action, as she had signified her consent to the terms of the contract by signing it and the exclusion clause effectively exempted liability for breach.

            The rule in L’Estrange v Graucob may be avoided where the party seeking to rely on the exclusion clause misled the other party into signing the contract, after a misleading oral explanation of the clause

By notice

Apart from the above, an exclusion clause will not be incorporated into a contract unless the party affected actually knew of it or was given sufficient notice of it. In order for notice to be adequate, the document bearing the exclusion clause must be an integral part of the contract and must be given at the time that the contract is made

            In Chapelton v Barry UDC the plaintiff hired a deck chair and received a ticket, which stated on its back that the council would not be responsible for any injuries arising from the hire of the chairs. After he was injured when the chair collapsed, Chapelton successfully sued the council. It was held that the ticket was merely a receipt, the contract already having been made, and could not be used effectively to communicate the exclusion clause.

            In Olley v Marlborough Court Hotel Ltd a couple arrived at a hotel and paid for a room in advance. On reaching their room, they found a notice purporting to exclude the hotel’s liability in regard to thefts of goods not handed in to the manager.A thief later stole the wife’s purse. It was held that the hotel could not escape liability, since the disclaimer had only been made after the contract had been formed.

            The notice given must be sufficient for the average person to be aware of it; if it is sufficient, it matters not that this contracting party was not aware of it. In Thompson v LM & S Railway a woman who could not read was bound by a printed clause referred to on a railway timetable and ticket because the average person could have been aware of it.

            Whether the degree of notice given has been sufficient is a matter of fact but, in Thornton v Shoe Lane Parking Ltd it was stated that the greater the exemption, the greater the degree of notice required.

            In Interfoto Picture Library Ltd v Stiletto Programmes Ltd the Court of Appeal decided that a particular clause was not to be considered as imported into a contract, even though it had been available for inspection before the contract was entered into. The clause in question sought to impose almost £4,000 liability for any delay in returning the photographic negatives which were the subject of the contract. It was held, following Thornton v Shoe Lane Parking Ltd, that this penalty was so severe that it could not have been fairly brought to the attention of the other party by indirect reference; explicit notification was necessary where a clause was particularly onerous  and unusual. This is sometimes referred to as the red ink or red hand principle, and was recently re-examined in relation to scratch cards in O’Brien v MGN Ltd