EXCLUSION CLAUSES AND LIMITING TERMS

These are contractual terms that aim to limit, modify

or exclude the liability, obligations or remedies of a
party to a contract. Such clauses are usually
incorporated into a contract by a party who is at risk of
incurring unfavorable liability to another. For an
exemption clause to be valid however, there must be a
consensus between the contracting parties, and it must
not be barred due to the operation of established legal
principles regarding the validity of such clauses.
According to the court in COOPERATIVE DEVELOPMENT
BANK PLC V. MFON EKANEM & ORS [2008] 12NWLR
(PT 910) 420, parties to a contract have the freedom to
determine the terms of their contract. Such terms as
agreed by the parties determine the rights and
obligations that arises from the contact. Hence, since
parties have the right to determine their contractual
terms, they also have the power to exclude, exempt or
limit the obligations and rights arising from such terms.
Thus, where a contracting party wishes to escape from
some obligations that should have arisen from a
contract, clauses may be inserted into the contract to
either exempt or limit the party from such obligations,
and on the long run, to deprive the other party of his
remedy for the breach of such obligation in the
contract.
Most exemption clauses are usually found in standard
form contracts, the content of which are generally
fixed and determined by a single party, whereby the
other party’s freedom of contract comprises of the
decision of whether or not he chooses to accept the
fixed contractual terms. E.g contract between banks
and customers, insurers and clients etc. Generally,
exemption clauses are enforceable as they reflect an
agreement between contracting parties. However, with
regard to factors that must be considered for exclusion
clauses to be effective, the court in EKONG
ARCHIBONG V FIRST BANK OF NIGERIA PLC [2014]
LPELR-22649 (CA) held that exclusion clauses can only
operate if they are actually part of the contract that is,
adequate notice of it must be given to the other party
before the conclusion of the contract. More
specifically, the courts have formulated some
principles and requirements that guide the operation
of exclusion clauses;
(A) UNSIGNED DOCUMENTS:
Whether or not an exclusion clause contained in a
document not signed by the other party is valid
and enforceable depends on the nature of the
document. The document containing an
exemption clause must be a contractual document
that is; it must contain contractual terms as
against a receipt, ticket or voucher. For instance,
documents such as receipts, tickets voucher, etc
are by nature evidence or acknowledgement of
payments and do not qualify as contractual
documents. Thus, for a party to be bound by an
exemption clause contained in a document not
signed by him, the document must be such
containing the whole or some terms of the
contract e.g Bill of Lading, Deed of Sale, etc.
Where the unsigned document containing the
exclusion clause is not a contractual document,
the clause will be valid and deemed incorporated
into the contract if the affected party is given
reasonable notice of the clause before or at the
time of executing the contract but not after.
Otherwise, the clause will be inoperative and
unenforceable against such party.
The essence of the rule regarding unsigned
documents is to establish that an affected party is
aware or was put on notice of the clause before
executing the contract. Where the clause is
contained in an unsigned contractual document, it
is enforceable because a party cannot claim
ignorance of the document containing the term
upon which the contract is based.
 In IWUOHA V NIGERIAN RAILWAY CORPORATIONS
(1997) 4 NWLR (pt.500) 419, the appellant claimed
40,000 damages against the railway corporation
for his missing goods the waybill given to the
appellant after paying for the freight contained the
following exclusion clause “All tariff are carried
subject to the Nigerian Railway Corporation Act on
Tariff Regulation made thereunder, copies of
which are available for examination free of charge
at the station. This document (i.e the waybill) is
evidence of contract as well as acknowledgement
of money paid”. The Tariff Regulation of 1981
limits the liability of the corporation to #20 per
package of missing goods and since it was two
package’s of the appellant goods that was
discovered missing, the respondent accepted
liability to the sum of #40. The court held that the
appellant was only entitled to the #40 because the
waybill is a contractual document which contains
the terms of the contract including the
incorporated conditions contained in the Railway
Corporation Act and the Tariff Regulations.
For non-contractual unsigned documents
containing exclusion clause, efforts must be made
by the party seeking to rely on such clause to bring
it to the notice of the other party before or when
the contract is executed. In chapel ton i. Barry
U.D.C (1940) 1KB 532,the plaintiff contracted to
hire two desk chairs from the defendant. The
defendant placed a notice stating the price for a
session of hire and the plaintiff paid and took two
chairs and was issued a receipt which he put in his
pocket without reading. While using one of the
chairs, it collapsed and the plaintiff sustained
bodily injury. In an action for damages against the
defendants, the defendants pleaded to be
excluded from liability because there was a
provision at the back of the ticket issued to the
plaintiff excluding them from all liabilities for any
injury or damage arising from the hire of the chair.
The court rejected this defense and held that the
defendants are liable for the injury. According to
the court, the receipt was not a contractual
document and no reasonable person would
imagine that it was anything but a receipt for the
money paid for the chairs. In addition, the receipt
was only issued after the contract had already
been executed. SEE ALSO ODENIYI V ZARD &CO
(1972)2 NWLR 34.
However, where reasonable steps is taken to alert
the adverse party of the existence of an exclusion
clause in an unsigned non-contractual document,
the court will enforce the clause. In MCQUARY V
BIG WHITE SKI RESORT (1993) BCJ NO. 2897, the
plaintiff sustained a fractured pelvis when he skied
off the edge of a ski run into a ten foot deep
concrete culvert. Although the plaintiff did not sign
a written document, the lift pass contained
comprehensive excluding terms which the plaintiff
denied to have read. The court considered the
drafting design, color of the ticket and the synage
at the resort and concluded that reasonable steps
had been taken to alert the plaintiff of the
exclusion clause. The lift ticket contained the
words “Exclusion of Liability” in bold, capital
letters printed in red and blue. The defendant also
placed a number of colored signs throughout its
property which highlighted in bold, capital letters
the same exclusion clause found on the ticket.
Upon consideration of all these factors, the court
upheld the exclusion clause. See also Argiros v
Whistler and Blackcomb mountain (2002) OJ NO.
3916; Imo Concorde Hotel v Anya (1992) 4 NWLR
(pt.234) 210.
Where such displayed notices are however placed
where adverse parties cannot easily see it before
contracting, exclusion of liability will not be
upheld. In OLLEY V MARLBOROVGH COURTS LTD
 (1949) 1KB 532, a couple booked in at the
reception desk of a hotel and paid for a week’s
stay after which they went into the bedroom. On
the bedroom wall was a notice stating that the
hotel would not be liable for items stolen unless
handed in for safe custody. The wife’s fur coat was
stolen from the room. In an action against the
defendant, liability was denied on the basis of the
notice placed on the wall of the bedroom. The
court held that the exemption clause could not
avail the defendants because the contract was
executed at the reception desk and the plaintiffs
became aware of the clause after executing the
contract.

(B) SIGNED DOCUMENT: Generally, a party who

signs any contractual document in the absence of
fraud or misrepresentation, is bound by its terms
including any exemption clause it may contain.
According to the court in L’ESTRANGE V GRAUCOB
LTD (1934) 2 KB 394, where a party signs a
document which he knows affects his rights, the
party is bound by the document in the absence of
fraud or misrepresentation even though the party
may not have read or understood the document.
According to the court in MARVCO COLOUR
RESEARCH LTD V HARRIS (1982) 141 DLR, 577, an
individual cannot rely on his/her failure to read the
agreement to argue that the terms of the
agreement are not legally binding.
In BLOMBERG V BLACKCOMB SKING ENT LTD
(1992) 64 BCLR 51, the court held that a document
containing exclusion clauses, signed by the plaintiff
at the time of purchasing his ticket was sufficient
to fully exonerate the defendant from liability. In
this case, the plaintiff sustained serious injuries
after colliding with another skier at the defendant
ski resort. The plaintiff had signed a document
containing an exclusion clause before obtaining a
pass into the resort. The plaintiff argued that he
did not understand that he was signing a
document of such nature, that none on behalf of
the defendant informed him of the terms in the
document, and that he required eyeglasses for
reading and did not have his glasses with him
when he was signing the document. The court
upheld the exclusion clause.
The court in GOOD-SPEED V. TYAX MOUNTAIN
LAKE RESORT LTD [2005] BCSC 1577, recognized
some exceptions to this general rule including: non
est factum, an agreement induced by fraud or
misrepresentation, and mistakes as to the
excluding terms.

 NON-EST FACTUM: literally means “not my

deed” whereby a party claims that the
document signed by him/her is fundamentally
different from what he/she intended to sign. In
other words, the document was signed by
mistake, without knowledge of its meaning. In
CHAGOURY V. ADEBAYO TAYLOR [1973] 3VILR,
532, where a party signs a document which
forms part of a contract and the document
further refers to another document which
contains exclusion clauses whether he reads
them or not unless there is fraud or
misrepresentation. In CURTIS V. CHEMICAL
CLEANING AND DYEING CO. [1951] 11CB, 805.
Curtis took her wedding dress to be dry cleaned.
She was asked to sign a receipt upon which
Curtis inquired to know why she had to sign the
receipt. She was told that the dry cleaners will
not accept certain risks and specifically
mentioned the beads and sequins on the dress
as something they could not take responsibility
for. Curtis then signed the receipt. The exclusion
clause was however very wide and covered
 much more than the beads and sequins. When
Curtis went to recover her dress, the beads and
sequins were okay but there was a bad stain on
the dress. She complained and the dry cleaner
pointed to the clause she had signed. In an
action for damages, the court held that the shop
assistant had misled Curtis as to the scope of the
exclusion clause and the dry cleaner could only
rely on the clause as it was represented and not
as it was.
NOTE: With regard to the plea of non-est
factum, the adverse party must be such that
through no fault of his, is unable to have any
understanding of the purpose of the particular
document maybe as a result of blindness,
illiteracy, or some other disability which requires
the reliance on others for advice as to what is
being signed.
Secondly, the signatory must have made a
fundamental mistake as to the nature and effects
of a document being signed, or the document
must have been radically different from one
intending to be signed.
In SAUNDERS V. ANGLIA BUILDING SOCIETY [1970]
UKHL5, the plaintiff signed a document without
first informing herself of its contents. She was lied
to by her nephew’s business partner that the
documents were merely to confirm a gift of her
house to her nephew. In fact, the documents were
such that allows the nephew’s business partner to
grant a mortgage over the property in favor of
Anglia Building Society. When the business partner
defaulted on the mortgage, Anglia Building Society
claimed to foreclose and repossess the house.
Judgement was given against the plaintiff.
According to the court, the plaintiff has the burden
of demonstrating that she has not acted
negligently and the plea of NON EST FACTUM can
generally not be claimed by a person full of
capacity.
 It is noteworthy that in CURTIS case, the receipt
contained a clause exempting the defendants
from all liability for damage to items signed.
Upon further inquiry by Curtis, she was told that
the defendants would not accept liability for
certain specified risks in this case, any damage
done to the beads and sequins on the dress. The
decision in that case was therefore based on the
inducement of the plaintiff to believe that the
clause only referred to the beads and sequins.
 Mistake refers to an erroneous believe or
incorrect understanding of the nature or effect
of the exclusion clause at the time of signing the
document. Thus, non est factum and mistake
are of the same legal implications.
Other exceptions that restrict the scope and
effect of excluding terms and are applicable to
both signed and unsigned documents include:
a) THE CONTRA PROFERENTEM RULE – In
considering the validity of an exemption
clause, the courts resolve any doubt in favour
of an adverse party and against the person
seeking to rely on it. In other words, the
courts interpret the wordings of an exclusion
clause strictly and where there is any
ambiguity or vagueness in the way the clause
is drafted, it will be interpreted against the
party relying on it contra proferens. In
INSIGHT VACATIONS PROPERTY LTD V YOUNG
(2011) 4 CA 16, Mrs Young was travelling
around Europe with her husband in a motor
coach. While the coach was in transit, she got
up to retrieve an item from her bag in the
overhead luggage shelf. The coach braked
suddenly and she fell backward and suffered
injury. In an action for breach of an implied
term, insight vacations relied on an exclusion
clause contained in the contract stating that
where the passenger occupies a motor-coach
seat fitted with a safety belt, neither the
operators nor their agents will be liable for
any injury arising from an accident or incident,
if the safety belt is not worn at the time of
such accident or incident. The court held that
the words should be given their ordinary
meaning with the effect that the exclusion
would only apply to those time a passenger
occupies his/her seat and not where a
passenger stands up to move about the coach
to retrieve some items from the overhead
shelf.
In HOUGHTON V TRAFALGAR INSURANCE
(1954) 1QB 247, a term in a car insurance
policy excluded the insurers liability where
excess load was being carried. A car was
involved in an accident when six passengers
instead of five for which it was constructed.
The court interpreted the term “load” strictly
thereby excluding passengers.
Aside instances of ambiguity or vagueness,
the rule is also applied in cases of negligence.
An exclusion clause will not be construed to
exclude liability for negligence except the
clause expressly refers to negligence.
Similarly, where a party’s contractual liability
could arise both from negligence and another
cause of action such as breach of contract,
unless an exemption clause specifically refers
to or mentions negligence, it will not be
construed to cover negligence. According to
the court in GILLESPIE BROS LTD V BOWLES
TRANSPORT (1973)1QB 400, it is inherently
improbable that a contracting party would
intend to absolve the other party from the
consequences of that other party’s
negligence.
Thus, where a party wishes to exempt his
liability for negligence, he must specifically
ascertain that fact to the other party. In
WHITE V WARRICK (1953)2 ALL ER 1021, the
plaintiff hired a bicycle from the defendants. It
was a term of their agreement that ‘nothing in
this agreement shall render the owners liable
for any personal injuries to the riders of the
machine hired’. The plaintiff was injured when
he was thrown off the bicycle when the
defective saddle suddenly tipped over. He
brought an action for negligence in tort and
for breach of contract. It was held that the
exemption clause covered only the liability for
breach of contract (such as implied term as to
fitness for purpose etc) but not from liability
in negligence which is a tortious liability.
Even where the only type of liability possible
in a situation is negligence, it has been held
that in the absence of the express mention of
‘negligence’ in the wordings of the exemption
clause, the clause will not be interpreted to
cover negligence. In HOLLIER V RAMBLER
MOTORS(AMC) LTD (1972) 2QB 71, the
plaintiff brought his car to the defendants’
garage for repair, and it was damaged in a fire
caused by the negligence of the defendants’
servants. In an action for negligence, the
defendants relied on a clause providing that
the defendants were not responsible for any
damage caused by fire to customers’ cars on
their premises. The court held that the clause
did not protect the defendants from the
consequences of their negligence but only
operated as a warning to customers that the
defendants would not be liable if the cars
were damaged by fire not due to their
negligence.
 B) THIRD PARTIES- By the doctrine of privity
of contract, a contract cannot confer any
rights or liabilities on a person who is not a
party to the contract. Thus, an exclusion
clause generally cannot protect someone who
is not a party to a contract in which it is
contained. In ADLER V DICKSON (1955) 1QB
158, the plaintiff who was a passenger on a
ship fell from the gangway of the ship. He
consequently sued the captain of the ship. The
captain sought protection under a clause
contained in the ticket for the voyage which
excludes the company’s liability for any injury
whatsoever to the person of any passenger
arising or occasioned by the negligence of the
company’s servants. The court held that the
clause only protected the company and even
if it had been extended to include the servants
of the company, it would have been
unenforceable since the servants were not
parties to the contract.

C) FUNDAMENTAL BREACH- This refers to

an event resulting from the failure of a contracting
party to perform a primary obligation under a contract
with the effect of depriving the other party of
substantially the whole benefit which it was the
intention of the parties that he should obtain from the
contract. In other words, it is a breach in consequence
of which the performance of the contract becomes
something totally different from that which the
contract contemplates. In other words, a fundamental
breach is a breach of a condition or fundamental term.
In addition to the right of an aggrieved party to
repudiate the contract and claim damages in such
instances, another legal effect is the inapplicability of
any exemption clause inserted in the contract for the
benefit of any party in breach. In other words, a party
guilty of a fundamental breach cannot avoid liability by
relying on an exemption clause no matter how
comprehensively drafted. According to the court in
Karsales ( Harrow) Ltd V Wallis (1956) 2 ALL ER 866,
exempting clauses, no matter how widely they are
expressed, only avail a party when he is carrying out
the contract in its essential respects. He is not allowed
to use them as a cover for misconduct or indifference
or enable him turn a blind eye to his obligations. They
do not avail him when he is guilty of a breach which
goes to the root of the contract. In ADEL BOSCHILLI V
ALLIED COMMERCIAL EXPORTERS LTD (1961) 1 ALL NLR
917, in a contract for the supply of cloth between a
supplier in London and a buyer in lagos, the shipped
sample was found very much inferior in quality to the
sample which formed the basis of the agreement. The
suppliers tried to rely on an exemption clause to wit ,
‘for goods not of UK origin, we cannot undertake any
guarantees or admit any claims beyond such as are
admitted by and recovered by the manufacturers’. The
court held that the clause did not avail the defendants
any protection in this instance. In SHOTAYO AND
ARUNKEGBE V NIGERIAN TECHNICAL CO (1970) 2 ALR
159, the plaintiffs who were transporters, bought a
second-hand lorry from the defendants under a hire
purchase agreement which contained a clause
excluding all warranties and conditions as to fitness or
road worthiness of the lorry. The lorry turned out to be
unfit for its work and unroadworthy. Over a period of
seven months, it broke down four times and was only
able to make three business journeys and was under
repairs the rest of the time. The plaintiffs sued for
breach of condition as to fitness for purpose and the
defendants denied liability relying on the exemption
clause. It was held that the defendants were not
entitled to protection under the exemption clause
because they had committed a fundamental breach of
the contract.
 According to the court in GEORGE MITCHELL (CHESTER
HALL) LTD V FINNEY LOCK SEEDS LTD (1981) 1 LLOYD’S
REP 476, an exclusion clause could only operate in the
situation where the person relying on it was
performing the contract in the manner contemplated
by both parties as expressed in their agreement. Thus,
an exclusion clause will not excuse a non-contractual
performance that is, performance totally different
from that which the contract contemplates.