Lecture & Seminar:

Contractual Exclusion
Clauses and Estoppel
Sophie Howard, MA Cantab
5 March 2018
Today’s Lecture & Seminar
1. Exclusion of liability for misrepresentation.
2. Differences between evidential estoppel
and contractual estoppel.
3. Impact of unfair contract terms legislation.
Relevance to a commercial
lawyer
 Highly technical area of the law.
 Commercial lawyers’ boilerplate provisions put to the
test.
 Brings together different strands of commercial law:
equity and contract.
 A very live aspect of commercial law with many recent
court decisions: high stakes litigation, particularly in
financial services.
Parol Evidence Rule
“it is firmly established as a rule of law that parol
evidence cannot be admitted to add to, vary or
contradict a deed or other written instrument.”
Bowen LJ in Bentsen v Taylor [1893]
 Parties are bound by the written terms of the
contract and cannot adduce evidence of pre-
contractual negotiations – Prenn v Simmonds [1971]
 Excludes both oral and written extrinsic evidence.
Exceptions
Many exceptions……
Courts may allow evidence that the written contract was not
intended to express the entire agreement between the parties,
eg:
 collateral warranty or contract (City of Westminster
Properties v Mudd, 1959);
 contract is part oral, part written (Walker Property
Investments Ltd v Walker, 1947);
Or court will accept evidence that the contract should be
rectified or is void or voidable due to lack of capacity, a
mistake, or lack of consideration….
Entire Agreement Clauses
Example:
‘The terms of this contract shall constitute the entire
agreement between the parties’
 Reaffirm the parol evidence rule.
 Reduce risk of costly litigation over pre-contractual
statements.
 Lightman J's statement in Inntrepreneur Pub Co v East
Crown Ltd [2000] 2 Lloyd's Rep 611 :
The purpose of an entire agreement clause is to preclude a
party to a written agreement threshing the undergrowth and
finding in the course of negotiations some (chance) remark or
statement (often long forgotten or difficult to recall or
explain) on which to found a claim such as the present to the
existence of a collateral warranty
Limitations of Entire Agreement Clauses

 Entire agreement clauses will not prevent a party from

bringing a claim for rectification on the basis that the
document does not reflect what was actually agreed (JJ
Huber Investments Ltd v. Private DIY Co Ltd [1995]
 Entire agreement clauses are interpreted narrowly, like
all exclusion clauses – contra proferentem.
 Standard entire agreement clauses do not exclude
liability for misrepresentation, (Browne-Wilkinson J.
Alman v Associated Newspapers [1980])
Misrepresentation
 Elements of actionable misrepresentation:
 A false or misleading statement of “material fact”
 Made pre-contract
 Statement induced the other party to enter into the
contract; i.e. the other party materially relied upon the
statement in deciding to enter into the contract
 Arises outside contract – a vitiating factor; remedy of
rescission renders contract voidable.
 3 types of misrepresentation: fraudulent, negligent and
innocent.
 Liability for fraudulent misrepresentation cannot be
excluded (HIH Casualty v Chase Manhatten Bank (2003))
Non Reliance Clauses
 Browne-Wilkinson J in Alman & Benson [1980]:
 “If an entire agreement clause were designed to exclude
liability for misrepresentation it would….[be] a clause
acknowledging that the parties had not relied on any
representations in entering into the contract”.
 Example from Bradgate & White, Commercial Law:
‘The terms of this contract shall constitute the entire
agreement between the parties. The buyer acknowledges
that in entering into this contract it has not relied on
any statements or representations made by or on behalf
of the seller’.
Known as “non-reliance clause” (NRC)
Evidential Estoppel
 Chadwick LJ in the Court of Appeal: Grimstead (1999)
and Watford Electronics (2001).
 Resurrected case of Lowe v Lombank [1960]
 Alman type clause = representation of non-reliance; only
capable of raising estoppel by representation.
 Estoppel by representation is “evidential”. Party seeking
to claim misrepresentation is “estopped” by the non-
reliance clause (“NRC”).
Estoppel – a quick guide
 Estoppel means stopped.
 The law prevents someone from doing something that
they would otherwise be entitled to do.
 Many different forms of estoppel.
 Only looking at two forms today:
 Evidential estoppel
 Contractual estoppel (very different to other forms of
estoppel as founded in contract)
Lowe v Lombank (1960)
 Lowe v Lombank Ltd [1960] 1 All ER 611, [1960] 1 WLR
196
 Lombank Ltd offered Ms Lowe an unroadworthy car on a
hire purchase contract; verbally described the car as in
almost perfect condition.
 Ms Lowe signed 2 acknowledgments (without reading
them):
 1. in hire purchase agreement: no defects in car and
purpose for which car was purchased was not made
known to Defendants;
 2. in receipt, upon delivery of the car: acknowledgment
of satisfactory order and condition of the car on
delivery.
Lowe v Lombank
 Court held that, to found estoppel:
 (1) [The buyer’s] acknowledgment [i.e. the NRC]
must be a clear and unambiguous statement;
 (2) party [buyer] making the statement [i.e. the
NRC] must have intended it to be acted upon or
behaved in such a way as to create the impression
of such intention;
 (3) recipient of statement [seller] must have
actually believed in the truth of the statement and
been induced by that belief to act upon it.
Grimstead
 E A Grimstead & Son Ltd v Francis Patrick
McGarrigan, [1998-99] Info. T.L.R. 384
 Sale of a company. Mr Grimstead only really
interested in the land, but sale of company with its
assets and liabilities (including the land) was
agreed instead.
 Mr Grimstead assumed liability for company’s net
debts of £94,000, but seller represented that the
assets and liabilities would “more or less balance”
1 st Instance Decision
 Held: The seller made a negligent
misrepresentation about the assets and liabilities of
the company to Mr Grimstead, the purchaser.
 Liability for the misrepresentation was excluded by
the contract.
 However, this exclusion of liability was
unreasonable under s.3 Misrep Act 1967 and s.11(1)
UCTA 1977.
Grimstead
Non-reliance clause: Clause 2.5 of Sale & Purchase
Agreement:

“The Purchaser confirms that it has not relied on any

warranty representation or undertaking of or on behalf
of the Vendors (or any of them) or of any other person
in respect of the subject matter of this Agreement save
for any representation or warranty or undertaking
expressly set out in the body of this Agreement ...”
Grimstead
Entire Agreement provision (clause 8.1):

“This Agreement sets out the entire agreement and

understanding between each of the parties hereto in
connection with the Company and the sale and
purchase of the Shares and no party hereto has
entered into this Agreement in reliance upon any
representation, warranty or undertaking of any other
party which is not set out or referred to in this
Agreement.”
Grimstead
Court of Appeal: (Chadwick LJ)
• Mr Grimstead lost again on appeal, but for very
different reasons.
• Chadwick LJ took a different view on every
point:
• (i) there was no misrepresentation;
• (ii) if there had been a misrepresentation,
liability would not have been excluded;
• (iii) however, if liability had been excluded, this
would have been reasonable under UCTA.
Grimstead
 Chadwick LJ analysed both the non-reliance and the
entire agreement clauses as giving rise to evidential
estoppel only:
 “In my view an acknowledgement of non-reliance,
in the form which appears in clauses 2.5 and 8.1 in
the present agreement, is capable of operating as
an evidential estoppel.
 It is apt to prevent the party who has given the
acknowledgement from asserting in subsequent
litigation against the party to whom it has been
given that it is not true.”
Grimstead
• “In order to establish an estoppel it was for [the
seller] to plead and prove that the three
requirements identified by this Court in Lowe v
Lombank Ltd [1960] were satisfied:

• (i) that the statements in those clauses were clear

and unequivocal [i.e. there must be a clear
statement by the purchaser that (s)he did not rely
on any representations],

• (ii) that the purchaser had intended that [the

seller] should act upon those statements [e.g. the
purchaser signed the NRC with the intention of
persuading the seller to sell to him/her] and

• (iii) that [the seller] had believed the statements

to be true and had acted upon them.” [i.e. the
seller must have believed that the purchaser was
not induced by representations and acted upon
this.]
Grimstead
• Chadwick LJ held that, as seller made a
representation to “persuade Mr Grimstead to
agree to the purchase”, he knew that the
acknowledgments of non-reliance in clauses
2.5 and 8.1 did not reflect the true positon –
i.e. he knew the buyer relied on
representations.

• Seller could not rely on any estoppel as failed

to meet 3rd head of Lowe v Lombank.

• In other words, the purchaser (Mr Grimstead)

was not estopped from claiming damages or
rescission for misrepresentation (although, on
the facts of the case, there was no actionable
misrepresentation, so Mr Grimstead’s claim
failed on appeal).
Watford Electronics v Sanderson [2001]

 Chadwick LJ obiter comments on evidential estoppel…

 Referred back to his analysis in Grimstead.
 ”it may be impossible for a party who has made
representations which he intended should be relied
upon to satisfy the court that he entered into the
contract in the belief that a statement by the other
party that he had not relied upon those representations
was true.”
 In other words, it may be impossible for a seller to
satisfy the third limb of the test in Lowe v Lombank.
Quest v Maxfield (2013)
 Quest 4 Finance Ltd = provider of short term payroll
financing to small businesses.
 Hilmax Engineering Ltd suffered cash-flow problem; sought
funding to pay its employees.
 Director of Hilmax met with a broker to discuss Quest
loan. Told broker that neither he nor 2 other Directors
were willing to act as personal guarantors for any loan.
Broker assured him that no personal guarantee would be
required.
 Quest’s brochure also contained statement “no personal
guarantees are required from company directors”.
 Quest required Directors to sign separate warranties,
agreeing to indemnify Quest. Effect of these warranties
was to make the Directors personally liable for repayment
of the loan when Hilmax went into administration.
Quest v Maxfield
 Directors had signed a declaration: “I have placed no
reliance upon any advice or opinion of....any person
representing the interests of Quest.”
 Quest brought action to recover the loan amount from
the Directors under the terms of the warranties.
 Directors argued that the warranty should be rescinded
as they were induced to sign it by Quest’s
misrepresentation. Quest argued that the Directors were
estopped from relying on misrepresentation by the non-
reliance clause.
 Court applied 3 stage test in Lowe v Lombank. Quest
could not satisfy the third requirement that it believed
the declaration to be true and had relied upon it. Quest
intended that potential clients would rely upon the clear
statements in the brochure.
Summary of Evidential
Estoppel

Seller makes a
misrepresentation Buyer signs NRC
before the in the contract
contract
Evidential Estoppel

2. Buyer
3. The seller
intends that
believes the
1. Buyer signs the seller will
buyer’s NRC to
NRC act on the NRC
be true and
(e.g. by selling
acts upon it
to him)
Difficulties of Evidential
Estoppel
 Consider facts of Grimstead:
 Seller makes a misrepresentation.
 Misrepresentation induces buyer to enter into contract.
 In the contract, buyer acknowledges that he was not
induced by misrepresentation.
 Seller must show that he believed that the buyer did not
rely on his misrepresentation and that the seller was
himself induced to sell to the buyer by the non-reliance
clause.
 Alexander Trukhtanov article: “requires an impossible
feat of doublethink” . Watford “took all vitality” out of
non-reliance clauses.
Estoppel by Contract
 A “different jurisdictional basis”
 Looking at 3 cases today:
 Peekay Intermark Limited, Harish Pawani v Australia and
New Zealand Banking Group Limited [2006]
 Springwell Navigation Corp v JP Morgan Chase Bank
[2010]
 Trident Turboprop (Dublin) Limited v First Flight Couriers
Limited [2008]
Other recent cases on
contractual estoppel…..
 Raiffeisen Zentralbank Osterreich AG v The Royal Bank of
Scotland [2010]EWHC1392(Comm)
 Titan Steel Wheels Limited v Royal Bank of Scotland
[2010]EWHC211(Comm)
 Standard Chartered Bank v Ceylon Petroleum Corporation
[2011]EWHC1785(Comm)
 Bank Leumi (UK) plc v Wachner [2011] EWHC656(Comm)
 Casa di Risparmio della Repubblica disn Marino SpA v
Barclays Bank Ltd [2011]EWHC484(Comm)
 Wilson v MF Global UK Limited [2011] EWHC138(QB)
 Grant Estates Limited and others v The Royal Bank of
Scotland plc and others [2012] CSOH133
 Barclays Bank plc v Svizera Holdings BV and another [2014]
EWHC1020( Comm) [2014]EWHC1020(Comm)
 Bailey and another v Barclays Bank
plc[2014]EWHC2882(QB),(27August2014)
Peekay/Springwell
 Both cases founded on the Russian debt crisis of 1998.
 17 August 1998, the Russian government devalued the
ruble, defaulted on domestic debt, and declared a
moratorium on repayment of foreign debt.
 The Russian government declared that certain state
securities (GKOs and OFZs) would be transformed into
new securities.
 GKOs = short-term zero coupon Russian Government
Treasury Bills. At one point were paying 150% interest
and trading at a discount.
Peekay (2006)
 Peekay was an investment trading company; Mr Pawani
was a shareholder and director.
 ANZ investment banking division sold Peekay
“structured US$ hedged Russian Treasury bill deposits”
linked to GKO bonds issued by the Russian government
(derivatives).
 Indicative Term Sheet drew attention to risks, including
sovereign default by Russian government (putting
principal at risk).
 Mr Pawani signed final terms and conditions and an
“Emerging Markets Risk Disclosure Statement”.
 Russian government announced moratorium on its debt.
Peekay recovered only ca.$5k on an investment of
$245k.
Peekay
 Final terms and conditions (“FTCs”) contained an
“Important Notice”:
 “Before considering entering into this transaction
you must make your own independent assessment as
to whether it is appropriate for you based upon your
own judgment and upon advice from such advisors
as you consider necessary. ANZ Bank is not acting as
your financial advisor or in fiduciary capacity in
relation to this transaction. It is an express term
that….you are not relying on any communication
(written or oral) made by ANZ Bank as constituting
either investment advice or a recommendation to
enter into this transaction.”
Peekay
 The 5 page Risk Disclosure Statement contained this
warning in capital letters:
 “BEFORE MAKING AN INVESTMENT IN AN EMERGING
MARKETS INSTRUMENT, YOU SHOULD INDEPENDENTLY
SATISFY YOURSELF THAT YOU UNDERSTAND AND
APPRECIATE THE SIGNIFICANCE OF THE RELEVANT
RISKS…..
 YOU SHOULD ALSO ENSURE THAT YOU FULLY
UNDERSTAND THE NATURE OF THE TRANSACTION AND
CONTRACTUAL RELATIONSHIP….
 THE ISSUER ASSUMES THAT THE CUSTOMER IS AWARE OF
THE RISKS AND PRACTICES…AND THAT PRIOR TO EACH
TRANSACTION THE CUSTOMER HAS DETERMINED THAT
SUCH TRANSACTION IS SUITABLE FOR HIM.”
 Mr Pawani signed and initialled the contract documents,
but said that he did not read them.
Peekay
 Judge at 1st instance found that ANZ’s employee had
misrepresented the nature of the investment and
awarded damages under section 2(1) Misrepresentation
Act 1967.
 ANZ appealed, arguing that, by signing the Risk
Disclosure Statement, Peekay were estopped from
asserting that they had not understood the nature and
effect of the FTCs and could not maintain that they
had been induced by a misrepresentation to enter into
the contract.
Peekay
 Compare the facts of Peekay with Grimstead:
 ANZ allegedly made a misrepresentation.
 In reliance on the misrepresentation, Peekay
entered into contract.
 In contract, Peekay represented that it was not
induced by ANZ’s misrepresentation.
 Applying Grimstead, to establish evidential
estoppel, ANZ would have to prove that it believed
Peekay’s representation of non-inducement + was
induced by the representation to sell the notes to
him.
Peekay
 Reality is that Peekay, a sophisticated investor, did
not take separate advice and relied on ANZ’s
description. ANZ no doubt was aware of this.
 At whose risk should this be? ANZ had expressly
limited their role – were not acting as investment
adviser and were not assuming a duty of care as
such.
 Court is recognising a distinction between giving
advice and assuming responsibility for that advice.
Peekay
 Moore-Bick LJ (C.A.):
 “There is no reason in principle why parties to a
contract should not agree that a certain state of affairs
should form the basis for the transaction, whether it be
the case or not. For example, it may be desirable to
settle a disagreement as to an existing state of affairs
in order to establish a clear basis for the contract itself
and its subsequent performance.”
 “Where parties express an agreement of that kind in a
contractual document neither can subsequently deny
the existence of the facts and matters upon which they
have agreed, at least so far as concerns those aspects of
their relationship to which the agreement was directed.
The contract itself gives rise to an estoppel: see
Colchester Borough Council v Smith [1991] Ch. 448,
affirmed on appeal [1992] Ch. 421 .”
Peekay
 “I can see no reason in principle why it should not be
possible for parties to an agreement to give up any
right to assert that they were induced to enter into it
by misrepresentation, provided that they make their
intention clear, or why a clause of that kind, if properly
drafted, should not give rise to a contractual estoppel
of the kind recognised in Colchester Borough Council v
Smith.”
Contractual Estoppel
 Developed from different line of cases to evidential
estoppel.
 Facts of Colchester BC v Smith: compromise agreement.
Smith agreed that had no rights of adverse possession as
part of settlement agreement.
 Smith estopped from later asserting adverse possession
rights.
 Can evidential estoppel still arise? Yes – Moore Bick LJ:
 “A clause of that kind may also be capable of giving rise
to an estoppel by representation if the necessary
elements can be established, see EA Grimstead….
 but I would not allow it at this stage…since the judge
was not asked to consider that question.”
Peekay
 ANZ won their appeal - it was not open to Peekay to say
it did not understand the nature of the transaction
described in the FTCs.
 Moore-Bick LJ: Question is whether, in light of Mr
Pawani’s signature of the declaration in the Risk
Disclosure Statement Peekay “is precluded as a matter
of contract from contending that it did not understand
the true nature of the investment”.
 Judge at 1st instance was not asked to “consider the
contractual effect of the documents”.
 The Risk Disclosure Statement made it clear that ANZ
was only willing to enter into a contract on the
assumption that Mr Pawani had satisfied himself that the
transaction was suitable for him.
Peekay
 Chadwick LJ agreed:
 ‘The Risk Disclosure Statement was a contractual
document….ANZ accepted the investment instructions
on the basis of the investor’s confirmation that it had
read and understood the terms of the Statement.’
 ‘That confirmation operates as a contractual estoppel
to prevent Peekay from asserting in litigation that it
had not in fact read and understood the Risk Disclosure
Statement.’
 ‘ANZ would assume that it fully understood the nature
of the transaction…, was aware of the risks, and had
determined that the transaction was suitable for its
purposes.’
Springwell (2010)
 Springwell invested in notes linked to Russian GKO bonds
with a US$ hedge.
 At the date of the Russian moratorium, Springwell held
notes which it had acquired at a cost of US$87m.
 At 1st instance, Springwell’s claim was dismissed.
Springwell appealed, arguing that Chase, through its
employee JA, had made specific misstatements or
misrepresentations that the notes were ‘conservative’,
liquid and without currency risk.
 Judge at 1st instance held that JA had given expressions
of opinion, no actionable representations.
Springwell
 Court of Appeal:
 Representations made by JA were properly characterised
as expressions of opinion, not representations.
 Parties could agree that a state of affairs would be the
basis of their contractual dealings, even if they knew it
was not the case. There was a doctrine of contractual
estoppel separate from evidential estoppel.
 Terms and conditions meant Springwell was estopped
contractually from contending that there were
actionable representations by Chase.
 Springwell had signed letters which stated that it was a
sophisticated investor, familiar with and able to evaluate
the risks and merits.
Springwell
 Aikens LJ:
 ‘In Peekay, all three judges were agreed that the
provisions in the documentation gave rise to a
contractual estoppel which contractually precluded the
claimant from making assertions of fact to the contrary.
This was in addition to and distinct from any question of
estoppel by representation...’
 ‘Their reasoning was firmly rooted in, and consistent
with, the importance of freedom of contract and
contractual certainty. The particular clauses in that case
concerned the question of understanding as to the
nature of the instrument..’.
Springwell
 ‘the parties are contractually free to determine the
factual basis upon which they conduct business...’
 ‘what is envisaged… is an agreement “that a certain
state of affairs should form the basis for the
transaction”.
Springwell
 ‘…where the contract provided that, by placing an
order, Springwell represented (clause 4 of the 1997
DDCS Letter) that it was a sophisticated investor
and that it had independently and without reliance
on Chase made a decision to acquire the instrument,
that was not a mere statement of historical fact,
but a contractual representation forming the agreed
and binding basis upon which the parties would
transact every future purchase’.
 Also found, as a matter of fact, that Springwell was
an aggressive investor, willing to take risks.
Springwell
 ‘Nor do I accept that there is any inconsistency
between Peekay and the line of authority running
from Lowe v Lombank to Watford Electronics….’
 Peekay not decided ‘per incuriam’. Chadwick LJ
gave the leading judgment in Grimstead and
Watford Electronics and the second judgment in
Peekay (but no reference to Lowe v Lombank in
Peekay!)
 ‘The contractual estoppel argument of Peekay is
not in any way inconsistent with the analysis of
estoppel by representation….they are different
forms of estoppel with different jurisdictional
bases.”
Trident (2008)
 1st Instance Decision (Aikens J)
 Trident entered into 2 Aircraft Operating Lease Agreements
with First Flight Couriers.
 Negotiations conducted between BAE as agent for Trident
and FFCL
 Discussions over 2 matters: (i) payload that the aircraft
would be able to carry and (ii) flight times for proposed
routes.
 BAE provided a Route Analysis and Performance Study. FFCL
alleged that many representations in the study were
materially inaccurate.
 3 aircraft delivered: 1 in Sweden; the other in the UK.
 FFCL technical experts inspected the aircraft and signed
“Acceptance Certificates” confirming that the aircraft
complied fully with the condition required on delivery by
the Lease Agreement.
Trident
 FFCL stopped paying rent under the 2 Lease Agreements.
 Trident served Notice of Default.
 FFCL claimed that it rescinded the 2 Lease Agreements
prior to Trident’s purported termination because of
defects in aircraft and pre-contractual
misrepresentations.
 Trident argued that clauses 19.1 and 19.2 of the Lease
Agreements contractually prevented FFCL from asserting
that it was induced to enter into the Lease Agreements
by a non-fraudulent misrepresentation.
Trident
 Clause 19.1 of Lease Agreement:
 Exclusion:
 “The Lessee [ie FFCL] agrees and acknowledges that save
as expressly stated in the Lease Agreement, Trident (as
“Lessor”) shall not have any liability in relation to “the
description…satisfactory quality, fitness for any use or
purpose…condition or design of the Aircraft”….
 The Lessee also agrees and acknowledges that save as
expressly stated in this Agreement and the other
Transaction Documents to which the Lessor [Trident] is a
party, the Lessor has not and shall not be deemed to
have made any warranties or representations, express or
implied, about the Aircraft, including but not limited to
the matters referred to above”.
Trident
 ‘The legal effect of provisions such as this has
been analysed by the courts in terms of estoppel
created by contract, see Colchester Borough v
Smith and Peekay…..it is commercially convenient
and desirable for parties to a contract to agree
that a certain state of affairs….is the case, so as
to provide a clear basis for the contract itself‘
 ‘If the parties do agree a certain factual basis on
which the contract is made, the contractual
agreement is that neither party can subsequently
deny that basis. Hence the phrase “estoppel by
contract”.’
Trident
 “I am quite satisfied, having looked at the cases, that
the two forms of “estoppel” are different.”
 “Here the parties agree that no representation was made
at all. FFCL has agreed with Trident that a state of
affairs is the case, i.e. that there were no pre-contract
representations by Trident.”
 “Even if it was not in fact the case that there had been
no representations, the parties are free to agree that it
was so.”
Terminology Checkpoint
Estoppel by representation = evidential estoppel
Relevant cases: Lowe v Lombank, Grimstead, Watford
Electronics, Quest v Maxwell

Contractual estoppel: estoppel by contract

Relevant cases: Peekay, Springwell, Trident.

Warning: proprietary estoppel or promissory estoppel are

different forms of estoppel, not relevant to this unit.
How distinguish between 2
forms of estoppel?
 Courts distinguish:
 1. mutual agreement, describing the basis upon
which the parties contract (contractual estoppel);
 2. statement made by just one party by which only
he is bound, but which induces reliance (evidential
estoppel)
 Form of clause is not decisive. Courts will look at
“true intention” of the parties and the substance of
the agreement. Gloster J (1st instance, Springwell):
 “the fact that some statements are expressed in the
language of representation or acknowledgment
cannot…..make any difference to the analysis
whether the statements gave rise to a contractual
estoppel.”
Equitable Principles
Evidential estoppel applies equitable principles:
 - seller must come with clean hands (i.e. must believe the
buyer was not induced by his misrepresentation)
 - seller must have relied on the estoppel and suffer
detriment if he is denied relief: (i.e. there must have
been reliance by the seller on the NRC, requiring the
court's intervention to avoid injustice).
 Equity : common/contract law. For a short history see
http://www.slideshare.net/mblemieux/common-law-and-
equity-a-very-short-history
Documentary fundamentalism?
”Absent statutory or common law restrictions, the general
principle of the English law of contract is [freedom of
contract]. The parties have freedom to agree whatever terms
they choose to undertake, and can do so in a document, by
word of mouth, or by conduct.” Globe Motors Inc v TRW Lucas
Varity Electric Steering [2016] EWCA Civ 396
Academic criticism of contractual estoppel:
 McNeel: contractual estoppel does not apply the usual
equitable principles of estoppel (e.g. representation,
reliance, unconscionability).
 Courts are giving “super-charged effect” to boilerplate
clauses used in many contracts, including ISDA. Contract is
king.
 Recent misselling scandal: sale of “interest rate hedging
products” (IRHPs) to British small and medium-sized
businesses (SMEs) by high street banks. FCA thematic
review: over 90% of IRHP products were missold.
 McNeel: contractual estoppel is a “get out of jail free” card
for banks.
Policy Considerations
 Lowe v Lombank – strong public policy considerations
(Hire Purchase Act); vulnerable consumer; pre-UCTA.
 Peekay, Springwell, Trident – contract is king -
commercially astute parties.
 Raiffeisen Zentralbank Osterreich AG v Royal Bank of
Scotland (2010): Christopher Clarke J: contractual
estoppel must accommodate the car dealer as well as
the bond dealer
 s.3 Misrepresentation Act 1967
• Section 3, Misrepresentation Act, 1967
• If a contract contains a term which would exclude or
restrict—(a) any liability to which a party to a
contract may be subject by reason of any
misrepresentation made by him before the contract
was made; or
• (b) any remedy available to another party to the
contract by reason of such a misrepresentation,
• that term shall be of no effect except in so far as it
satisfies the requirement of reasonableness as
stated in section 11(1) of the Unfair Contract Terms
Act 1977; and it is for those claiming that the term
satisfies that requirement to show that it does.
Does s.3 Misrep Act apply?

Courts consider whether the NRC is a term which:

1.excludes or restricts liability for

misrepresentation; or
2. excludes or restricts any remedy available for
misrepresentation.

The courts then consider whether this exclusion is

reasonable under S.11 UCTA.
Section 11 UCTA
• Section 11 UCTA. The “reasonableness” test
• (1) In relation to a contract term, the requirement
of reasonableness for the purposes of this Part of
this Act, section 3 of the Misrepresentation Act 1967
and section 3 of the Misrepresentation Act (Northern
Ireland) 1967 is that the term shall have been a fair
and reasonable one to be included having regard to
the circumstances which were, or ought reasonably
to have been, known to or in the contemplation of
the parties when the contract was made.
 Case Law
 Evidential Estoppel: Watford Electronics (2001):
UCTA applied and reasonableness considered at 1st instance and
Court of Appeal:
 1st instance: clause was unreasonable under section 3 Misrep
Act & s.11 UCTA.
 Court of Appeal: clause was reasonable (Chadwick LJ):
 “where experienced businessmen representing substantial
companies of equal bargaining power negotiate an
agreement, they may be taken to have had regard to the
matters known to them. They should, in my view be taken to
be the best judge of the commercial fairness of the
agreement which they have made… unless satisfied that one
party has, in effect taken unfair advantage of the other - or
that a term is so unreasonable that it cannot properly have
been understood or considered - the court should not
interfere”.
Case Law
Contractual Estoppel: Basis clause

Crestsign Ltd v National Westminster Bank plc [2014]

EWHC 3042 (Ch). Tim Kerr QC at [112]:
“the principle is simple enough: you look at the words
to see whether, understood in their proper context
from the perspective of an impartial and reasonable
observer (i.e. the court) they prevent a
representation from having been made, or whether,
by contrast, they exclude liability for making it.”
Rewriting history?

 Raiffeisen Zentralbank: if the clause “rewrites history” or

“parts company with reality”, s.3 Misrepresentation Act
1967 and UCTA more likely to apply.
 Thornbridge Ltd v Barclays Bank plc [2015] EWHC 3430: HHJ
Moulder QC: “the test is not whether the clause attempts
to rewrite history or parts company with reality. The first
step is to determine as a matter of construction whether
the terms define the basis upon which the parties were
transacting business or whether they were clauses inserted
as a means of evading liability.”
Proactive Sports Management Ltd v Rooney
[2010] EWHC 1807 (QB)
 “The Client and the Player hereby confirm that in
reviewing this Agreement prior to execution and
deciding to enter into this agreement, they have
sought, taken, and understood independent legal advice
and hereby confirm that the terms and conditions
thereof, including without limitation the Term and
financial provisions of the Company’s appointment
hereunder, are reasonable.”
 HH Judge Hegarty QC [at 670]: contractual estoppel did
not apply: “restraint of trade is a matter of public
policy out of which the parties cannot contract.”
 NB: case reversed in part [2011] EWCA Civ 1444
Consumer Rights Act 2015
 The Consumer Rights Act applies to contracts and
notices between a 'trader' and a 'consumer'.
 A 'consumer' is defined as "an individual acting for
purposes that are wholly or mainly outside that
individual's trade, business, craft or profession“ (section
2(3)).
 The Act replaces UCTA and UTCCRs in business to
consumer contracts.
 New section 3(2) Misrepresentation Act 1967 excludes
consumer contracts falling within Part 2 of the
Consumer Rights Act.
 Requirements of section 11 UCTA 1977 now replaced by
Part 2 (sections 61-76) of the Consumer Rights Act 2015
which regulates “unfair terms” in consumer contracts.
These sections came into effect on 1 October 2015.
Consumer Rights Act 2015
 Section 62(4) provides that a term is unfair if, contrary
to the requirement of good faith, it causes a significant
imbalance in the parties' rights and obligations under
the contract to the detriment of the consumer.
 Section 62(5): Whether a term is fair is to be
determined—
 (a) taking into account the nature of the subject
matter of the contract, and
 (b) by reference to all the circumstances existing
when the term was agreed and to all of the other terms
of the contract or of any other contract on which it
depends.
 Note: UCTA applies to exclusion clauses only; Consumer
Rights Act applies to all terms.
Competition Law
 CMA “Consumer Protection and Unfair Contract Terms
Guidance”: entire agreement clauses may limit a seller’s
obligation to respect promises or commitments made by
its agents.
 Consumers tend to rely on what they are told by
salespeople.
 Sellers should make contract easily understandable, give
opportunity for consumers to read it and take steps that
they fully understand.
 CMA has statutory powers to investigate unfair and anti-
competitive behaviour and to fine companies at fault.
Summary
1. When does an entire agreement clause exclude liability
for misrepresentation?
If the clause includes special wording (acknowledgment of
non-reliance clause, NRC) and satisfies either the test for
evidential estoppel or contractual estoppel.
2. When does UCTA apply?
Only applies to exclusion clauses. Courts distinguish
between “basis” clauses and “exclusion” clauses, applying
the test in Raiffeisen Zentralbank.
3. Impact of the Consumer Rights Act
Business to Consumer contracts are no longer subject to
UCTA, but subject to Part 2 of the Consumer Rights Act 2015
from 1 October 2015. The clause must be “fair”.
Exam Questions on Estoppel
 May 2014: “The doctrine of evidential estoppel is a just
and fair regulation of contractual clauses that attempt
to exclude liability for misrepresentation.” Analyse
critically the statement above.
 September 2014: “ Critically analyse how the English
Courts both apply and restrict the doctrine of
contractual estoppel.”
 April 2016: “The development of contractual estoppel by
the Courts does little to assist commercial clients to
bring certainty to their transactions.” Critically
evaluate this statement.
 Additional materials on the VLE: Notes and Flowchart.
Use the flowchart to work through problem questions on
this topic.