Chapter 6 Multiple Choice Questions

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. How can exemption clauses be incorporated into a contract? Please select all that apply.

By one party giving reasonable notice to the other party. correct incorrect

If one party holds a genuine subjective intention to incorporate the clause. correct incorrect

If one party signs a document containing the clause, whether or not he reads it. correct incorrect

If there has been a sufficient course of dealing. correct incorrect

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. The courts always object to exemption clauses because they allow a party in breach of contract to avoid paying damages for the loss suffered by the innocent party.

True correct incorrect

False correct incorrect

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. An exemption clause caught by any of the provisions of UCTA 1977 is unenforceable.

True correct incorrect

False correct incorrect

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. The CDA 2015:

Brings together all the statutory controls relating to exemption clauses correct incorrect

Replaces the Unfair Terms in Consumer Contracts Regulations but leaves the Unfair Contract Terms Act 1977 untouched correct incorrect

Brings together all the statutory controls relating to exemption clauses in consumer contracts and amends UCTA 1977 so that it deals only with non-consumer contract. correct incorrect

Contains all the statutory controls relating to contracts for the sale of goods. correct incorrect

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. Contra proferentem means:

'against the parties' preferences', with the consequence that the exemption clause is unenforceable because it is in neither parties' interest to enforce it. correct incorrect

'against all reason', and is used to signify that an exemption clause does not make sense and is therefore unenforceable. correct incorrect

'against the person putting it forward', so that any ambiguity in an exemption clause is interpreted against the party seeking to exclude their liability. correct incorrect

'contradictory proposal', and both the exemption clause and the clause it contradicts are unenforceable. correct incorrect

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. Match the case to the facts and reasoning.

Karsales v Wallis (1956)

A security guard burnt down the factory he was guarding, but his employer was able to exclude liability for breach of contract because the House of Lords ruled that termination of a contract did not bring the contract to an end, but merely cancelled the parties' future obligations. The fundamental breach of contract therefore did not prevent the employer from relying on the exemption clause. The defendants designed a wholly inappropriate system for storing the chemical products and caused the claimant's factory to burn down. The Court of Appeal interpreted a previous House of Lords decision in such a way that the fundamental breach of contract by the defendants brought the contract to an end and so the defendant could not rely on the exemption clause in the contract. A consumer bought a car that did not move and the seller sought to exclude his liability under the contract. Denning LJ, in the Court of Appeal, said that the breach of contract (providing a faulty car) went to the root of the contract and disentitled the seller from relying on the exemption clause. Lord Reid, orbiter dicta: validity of exemption clauses does not depend on whether there has been a fundamental breach. The control of exemption clauses should be left to Parliament.

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Suisse Atlantique (1967)

A consumer bought a car that did not move and the seller sought to exclude his liability under the contract. Denning LJ, in the Court of Appeal, said that the breach of contract (providing a faulty car) went to the root of the contract and disentitled the seller from relying on the exemption clause. A security guard burnt down the factory he was guarding, but his employer was able to exclude liability for breach of contract because the House of Lords ruled that termination of a contract did not bring the contract to an end, but merely cancelled the parties' future obligations. The fundamental breach of contract therefore did not prevent the employer from relying on the exemption clause. Lord Reid, orbiter dicta: validity of exemption clauses does not depend on whether there has been a fundamental breach. The control of exemption clauses should be left to Parliament. The defendants designed a wholly inappropriate system for storing the chemical products and caused the claimant's factory to burn down. The Court of Appeal interpreted a previous House of Lords decision in such a way that the fundamental breach of contract by the defendants brought the contract to an end and so the defendant could not rely on the exemption clause in the contract.

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Harbutts Plasticine Ltd. v Wayne Tank & Pump Co Ltd (1970)

The defendants designed a wholly inappropriate system for storing the chemical products and caused the claimant's factory to burn down. The Court of Appeal interpreted a previous House of Lords decision in such a way that the fundamental breach of contract by the defendants brought the contract to an end and so the defendant could not rely on the exemption clause in the contract. A security guard burnt down the factory he was guarding, but his employer was able to exclude liability for breach of contract because the House of Lords ruled that termination of a contract did not bring the contract to an end, but merely cancelled the parties' future obligations. The fundamental breach of contract therefore did not prevent the employer from relying on the exemption clause. A consumer bought a car that did not move and the seller sought to exclude his liability under the contract. Denning LJ, in the Court of Appeal, said that the breach of contract (providing a faulty car) went to the root of the contract and disentitled the seller from relying on the exemption clause. Lord Reid, orbiter dicta: validity of exemption clauses does not depend on whether there has been a fundamental breach. The control of exemption clauses should be left to Parliament.

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Photo Production v Securicor (1980)

A consumer bought a car that did not move and the seller sought to exclude his liability under the contract. Denning LJ, in the Court of Appeal, said that the breach of contract (providing a faulty car) went to the root of the contract and disentitled the seller from relying on the exemption clause. A security guard burnt down the factory he was guarding, but his employer was able to exclude liability for breach of contract because the House of Lords ruled that termination of a contract did not bring the contract to an end, but merely cancelled the parties' future obligations. The fundamental breach of contract therefore did not prevent the employer from relying on the exemption clause. The defendants designed a wholly inappropriate system for storing the chemical products and caused the claimant's factory to burn down. The Court of Appeal interpreted a previous House of Lords decision in such a way that the fundamental breach of contract by the defendants brought the contract to an end and so the defendant could not rely on the exemption clause in the contract. Lord Reid, orbiter dicta: validity of exemption clauses does not depend on whether there has been a fundamental breach. The control of exemption clauses should be left to Parliament.

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. Specific criteria for determining the reasonableness of an exemption clause in a (non consumer) sale of goods contract are to be found in ……… of UCTA 1977.

Your response

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. Which of the following has the legal effect of placing a ceiling (a maximum limit), but not a floor (minimum level), on the liability of a party in breach of contract?

A liquidated damages clause. correct incorrect

A limitation clause. correct incorrect

An exclusion clause. correct incorrect

A penalty clause. correct incorrect

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. The controls on unfair terms in Part 2 of the CDA 2015 can only have an impact if the parties to the contract dispute the fairness of the terms in their contract.

True correct incorrect

False correct incorrect

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. Clarence books with Royal Luxury Conferences (RLC) a business conference for three nights at The Palace, a five-star hotel in London belonging to RLC, for £800 per delegate. The RLC brochure states that they have the right to change the hotel and substitute it for one of their other London hotels at any time. Which one of the following is correct?

The term is unenforceable under s. 3(2)(b) of the UCTA 1977, because it allows RLC to render no performance. correct incorrect

The term is unenforceable under s. 3(2)(b) of the UCTA 1977, because it allows RLC to render substantially different performance and Clarence is acting as a consumer. correct incorrect

The term may be unenforceable under s. 3(2) of the UCTA 1977, because it allows RLC to render substantially different performance and it is not reasonable for the operator to swap The Palace for another hotel that may not be of the same standard that Clarence expects or be as appropriate or convenient for his delegates correct incorrect

The term is enforceable, because Clarence is not a consumer and is acting in the course of a business and so is not protected. correct incorrect

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. A term of a consumer contract may not be assessed for fairness under section 62 of the CDA to the extent that it specifies the main subject matter of the contract or the assessment is of the appropriateness of the price but these exclusions from review only apply if the term is ……….

Your response

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. In ………, the early payment commission rate of 1.5% was regarded as a core term and was not reviewable under UTCCR, but the term requiring 3% commission if payment was not made within ten days of completion was a non-core term and was found to be unfair.

Your response