Excluding Exclusions In Contract Law: Judicial Reluctance To Enforce Exclusion Clauses

• Author: Joe McGrath
• Pages: 137-148

Cork Online Law R eview 2006 13

McGrath, Excludi ng Exclusions in Contract

Law: Judicial Rel uctance to Enforce

Exclusion Clauses

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EXCLUDING EXCLUSIONS IN CONTRACT LAW: JUDICIAL

RELUCTANCE TO ENFORCE EXCLUSION CLAUSES

Joe McGrath

The author undertakes an examination of exclusion clauses within

contracts, and the judiciary’s reluctance to enforce them with particular

detail paid to the weapons available to the judiciary to side step or even

strike them down altogether. The author submits that while certain

procedural and substantive exclusion clauses are needed for the efficient and

practical running of a business, the vast majority of substantive clauses seek

to take advantage of the consumer.

In this essay I will use legal reasoning to critically analyse the

judiciary’s approach in assessing exclusion clauses. In particular I shall argue

that the judiciary are justifiably reluctant to give effect to such clauses and, in

doing so, I shall highlight the tools the judiciary use in denying effect of said

clauses. Furthermore I will argue that substantive exclusion clauses applied by

commercial interests against consumers are largely unjustifiable.

Exclusion clauses are terms included in a contract that exclude or limit,

or purport to exclude or limit, a liability that would otherwise arise.1 The

judiciary has tended to identify two types of exclusion clauses: procedural and

substantive. A procedural clause is one that regulates entitlement to damages.

Examples of such clauses include notifying non-compliance within a time

limit or the limiting of damages to a fixed sum.2 A substantive clause is one

where no liability is entertained.3 Clark notes, however, that the judiciary

seem to confuse the two.4 In the case of British Leyland Exports Ltd v

Brittain Group Sales Ltd5 an exclusion clause in their contract stated that

while they would endeavour to meet orders placed they would not be liable for

any failure, delay, error in delivery or any consequential loss there from,

however caused. O’Hanlon J held that this did not exclude the primary

obligation to deliver complete and satisfactory kits, only the obligation to pay

damages when defective kits were delivered. With respect, this would appear

to be an exercise in semantics. Indeed Clark holds that this analysis ignores

the purpose of the clause that the implied obligation was excluded.6

Furthermore, it is submitted that the judiciary tend to construe a substantive

clause as a procedural one in order to limit the scope of such clauses and deny

the drafters of the ability to not honour their commitments with the other

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1 J.C. Smith & J.A.C . Thomas, A Casebook on Contra ct, (London: Sweet and Maxwell 1 992,

9th edition) p.444 .

2 R. Clark Contract Law in Ireland (Dublin: Round H all Sweet & Maxwell 1998 4th edi tion)

p.138.

3 R.J. Friel The Law of Contract, (Dublin: The Round Hall Press 2000 2nd edition), p. 197.

4 supra fn 2.

5 [1981] IR335.

6 supra fn 2.