S contracted gearboxes from H. K included a limited liability warranty. Boxes were defective. S sues for damages
Can H take advantage of the exemption clause?
Only where the contract is unconscionable should the courts interfere with agreement the parties have freely concluded
*Replace the doctrine of fundamental breach with a rule that holds the parties to the terms of their agreement, provided the agreement is not unconscionable
*Unconscionablily usually arises in situations of unfair bargaining power.
*The exclusion clause cannot be interpreted in isolation from other provision of the contract.
*Doctrine of unconscionably is too narrow.
*Public policy concerns outweigh freedom of contract
*You look to see what is fair and reasonable in the light of what has occurred, in light of the breach
In the event of a breach you must construe the contract – add one qualification- if the clause was unconscionable.
Possibilities to look at exemption clauses:
*Pure question of construction (Photo Production)
*Question of whether fair or reasonable (Denning – George Mitchell)
*Unconscionability (Hunter Engineering - Majority)
*Fair and reasonable to rely on clause in the light of what has occurred (Hunter Engineering – Dissent)