(5) Section 3 of the Misrepresentation Act 1967
Section 3 of the Misrepresentation Act 1967 ("the MRA 1967"), as substituted by
section 8 of UCTA, provides:
"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."
The terms "any liability" and "any remedy" are wide enough to cover provisions which
would exclude or restrict a claim to damages, or the right to rescind, or the right to set up a misrepresentation by
way of defence to an action: see Chitty paragraph 6-134.
(6) Onerous clauses requiring a "red hand" to be incorporated
There are certain circumstances in which a clause (typically in a party's standard terms and
conditions) will not be incorporated into a contract because it is so onerous that special notice of it should have
been given. This is a common law rule. In J Spurling Ltd v Bradshaw  1 WLR 461, Denning LJ commented
that "some clauseswould need to be printed in red ink on the face of the document with a red hand pointing
to it before the notice could be held to be sufficient."
Whether a clause is particularly onerous or unusual is considered by reference to the nature of the
transaction in question, the character of the parties to it and whether in all the circumstances it is fair to hold
the parties bound by it: Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd  1 QB 433.
For a recent consideration of these principles, see Shepherd Homes Limited v Encia Remediation
Limited  EWHC 70 (TCC).
SECTION 2: SPECIFIC CLAUSES
(1) Net Contribution Clauses
The nature of net contribution clauses
An example of a net contribution clause is paragraph 8.1B of the ACE Conditions of
"Notwithstanding anything to the contrary contained elsewhere in this Agreement, the total liability of
the Consulting Engineer under or in connection with this Agreement (other than liability for claims arising out of
or in connection with pollution or contamination which is excluded) whether in contract or in tort, in negligence or
for breach of statutory duty or otherwise for any claim shall be limited to the lesser of:
the amount stated in the Memorandum of Agreement as the limit of the Consulting Engineer's total liability,
such sum as the Consulting Engineer ought reasonably to pay having regard to his responsibility for the total
loss or damage suffered on the basis that all Other Consultants and all other parties providing design management or
financial services or labour or materials or plant or equipment for incorporation in the Project or the Works or
executing the project or the works or any part thereof shall be deemed to have provided contractual undertakings on
terms no less onerous than that set out in condition 2.4 hereof to the Client (whether or not they shall have been
so provided to the Client) in respect of the provision of their services or labour or materials or plant or
equipment in respect of executing the Project or the Works or any part thereof and shall be deemed to have paid to
the Client such contribution which it would be just and equitable for them to pay having regard to the extent of
their responsibility for any loss or damage."
The purpose of a net contribution clause is to ensure that where two or more parties to a
construction project are liable for the same damage, the liability of each party will be limited to the amount which
would normally be apportioned to that party. If, for example, an architect and a contractor were each liable for the
same defective work (the former being 70% liable and the latter 30% liable), in the absence of a net contribution
clause the client could recover 100% of the damages from the architect who would then have to recover from the
contractor under the Civil Liability (Contributions) Act 1978. However, the effect of the net contribution clause
is that the client can only recover 70% from the architect.
Such clauses clearly have unattractive implications for an employer. In their absence, the risk of insolvency of
one or other professionals, contractors or sub-contractors will fall on the solvent professionals, contractors or
sub-contractors, from whom the employer may claim 100% of the damages. However, when such clauses are introduced the
limitation of their liability entails that the risk falls on the employer.
When will net contribution clauses be unenforceable?
There is no authority on whether such clauses are unenforceable.
Nevertheless, a net contribution clause could fall within the scope of UCTA and so would be subjected to the
test of reasonableness in accordance with section 11. Equally, it could fall within the scope of the Regulations.
The circumstances of the contracting parties will be looked into to determine whether the cap on liability is
reasonable. However, the key issue which needs to be determined is whether the employer or the professional should
bear the risk of the contractor's insolvency. On this issue, a material consideration will be the existence of
professional indemnity insurance on the one hand and the availability of appropriate insurance for the employer on
(2) Entire Agreement Clauses
Entire agreement clauses are frequently relied upon in an attempt to prevent one party from
asserting that the written contract is not the sole repository of the terms of the contract and that there is in
fact another term of the contract which has been broken by the other party. The aim is thus to prevent liability
arising for breach of contract outside of the terms of the written agreement, and has the effect of denuding what
would otherwise constitute a collateral warranty of contractual effect. Entire agreements can also be utilized for
another purpose, namely the elimination of any possible liability for misrepresentation.
Examples of entire agreement clauses
An entire agreement clause which sought to achieve both of these functions was the subject of
dispute in Watford Electronics Ltd v Sanderson CFL Ltd  BLR 143:
"The parties agree that these terms and conditions (together with any other terms and conditions
expressly incorporated in the Contract) represent the entire agreement between the parties relating to the sale and
purchase of the Equipment and that no...