Exclusion Clause - Term Must Be Incorporated

Term Must Be Incorporated

The courts have traditionally held that exclusion clauses only operate if they are actually part of the contract. There seem to be three methods of incorporation:

  • Incorporation by signature: according to L'Estrange v Graucob, if the clause is written on a document which has been signed by all parties, then it is part of the contract. If a document has not been signed, any exception clause which it contains will only be incorporated if the party relying on the clause (the 'proferens') can show that he took reasonable steps to bring it to the attention of the other party before the contract was made. In somewhat of a contradiction, that is not to say that the proferens actually has to show that the other person read the clause or understood it (except where the clause is particularly unusual or onerous). It is not even necessary to show that the attention of that particular person was actually drawn to it. It is somewhat like the 'reasonable man' test in tort: the party trying to rely on the clause needs to take reasonable steps to bring it to the attention of the reasonable person.
  • Incorporation by notice: the general rule, as provided in Parker v SE Railway is that an exclusion clause will have been incorporated into the contract if the person relying on it took reasonable steps to draw it to the other parties' attention. Thornton v. Shoe Lane Parking seems to indicate that the wider the clause, the more the party relying on it will have had to have done to bring it to the other parties' attention. The notice must be given before formation of the contract as illustrated in Olley v Marlborough.
  • Incorporation by previous course of dealings: according to McCutcheon v David MacBrayne Ltd, terms (including exclusion clauses) may be incorporated into a contract if course of dealings between the parties were "regular and consistent". What this means usually depends on the facts, however, the courts have indicated that equality of bargaining power between the parties may be taken into account.

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