Exclusion Clause

Problem question on exclusion clauses and privity of contract.

Sinbad and his wife wish to sue the company which provided the holiday for breach of contract. The legal issues which arise are:

  i) whether the company can rely upon the exclusion clause;
  ii) whether Sinbad’s wife is prevented from bringing an action by the rules on privity of contract.

These two issues shall be considered here separately in turn.

Exclusion clauses

Sinbad must show that Bluebeard cannot rely on the exemption clause. An exemption clause is a clause in a contract which purports to exclude the liability of one of the parties in particular circumstances. Bluebeard can only rely on the clause if it has been incorporated into the contract, the clause covers the breach, and the clause does not fall foul of the statutory regulations.


A clause cannot be effective to exclude liability if it is not part of the contract. The general principle is that a party must have had reasonable notice of the exclusion clause. However, where the contract has been signed by the claimant, the exclusion clause will be held to have been validly incorporated into the contract, such as in the case of L’Estrange v Graucob[1] an exclusion clause was in very small print which was difficult to read. However, in Chapelton v Barry UDC[2] it was held that items such as cloakroom tickets are not contractual documents.

Sinbad did not sign the contract in the usual manner, but rather indicated his willingness to be bound by the terms of the contract by clicking the mouse onto the Internet site. In the absence of any case law on the issue, it is likely that this will be equivalent to a signature, since much business is now done over the Internet.

The clause must be incorporated before or at the time the contract is concluded – Hardwick Game Farm v Suffolk Agricultural etc Association[3]. Thus in Olley v Marlborough Court Hotel[4] a notice in a hotel room which could...