UNIVERSITY OF NAIROBI

COURSE CODE: GPR 332

COURSE NAME: COMMERCIAL LAW
ASSESSMENT TEST
GROUP G

MEMBERS
NAME REGISTRATION NUMBER
Onyango Felix Omondi G34/3905/2021
Britney Nyangasi G34/3869/2021
Mary Nikita G34/3778/2021
Tonny Kaunda G34/3892/2021
Opar Davis Lukas G34/3893/ 2021
Patience Karega Ndwiga G34/3779/2021
Eric Mwita Nyanseme G34/3894/2021
Royfas Ochieng G34/3870/2021
Godwin Titus Owiti G34/2648/2021
Using statute and case law, explain how the exclusion clauses have been dealt with in Sale of
Goods contracts and their effect on e-commerce.

INTRODUCTION
A sale of goods contract is ‘a contract whereby the seller transfers or agrees to transfer the
property in goods to the buyer for a money consideration, called the price’ as defined by section
3(1) of the Sale of Goods Act. In most sale of good contracts, exclusion clauses are used to limit
the liability of the seller. In the contract for sale of goods, each party is under obligation to
perform their part of the contract. Under the sale of goods act, if there’s a contract for the sale by
sample the implied conditions are that the bulk shall correspond with the sample, the buyer shall
have a reasonable opportunity of comparing the bulk with the sample and the goods shall be free
from any defect rendering them none merchantable which would not be apparent on reasonable
examination of sample.1 When the seller delivers to the buyer a quantity of different description
or quantity ordered by the seller, the seller is allowed to reject the goods all together or reject
part of it provided there’s no special agreement or course of dealing between parties.2

EXCLUSION CLAUSES
Contracts often include clauses that limit or exclude a party's liability for potential breaches.
These exemption clauses aim to restrict the scope of a party's contractual obligations or limit the
remedies available to the other party in case of a breach. There are different types of exemption
clauses which have different degrees to exclusion including, exclusion clauses, limitation clauses
and indemnity clauses.3 Courts generally recognize exclusion clauses as valid conditions
within a sales contract. This upholds the principle of freedom of contract, allowing parties to
negotiate and agree on their own terms as emphasized in Photo Production Ltd v. Securicor
Transport Ltd.4 The House of Lords held: “…the parties were free to reject or modify by express
words both their primary obligations to do that which they had promised and also any secondary
obligations to pay damages arising on breach of a primary obligation.”

1
Sale of Goods Act, Sec 17(2)
2
Sale of Goods Act, Sec 31
3
Cohen, Selwyn, and Mark Costa. "Exemption clauses." Professional Accountant 2007, no. 1 (2007): 4-9.
4
Photo Production Ltd v. Securicor Transport Ltd.
In England, exemption clauses in standard contracts are governed by common law, and in some
cases by statutes like the Unfair Contract Terms Act 1977. In Kenya, exemption clauses are
largely governed by common law as observed In Securicor Courier Kenya Limited Vs Benson
Onyango and another5 where the Court confirmed that position: “In our jurisdiction however,
such contracts are purely governed by common law.”

Requirements for a valid exclusion clause

 Incorporation

Exclusion clauses are in themselves terms of a contract, therefore, rules of incorporation of other
terms into a contract apply apply too.

a. Signature

As with terms in general, the initial position is that when a party has signed a written agreement
he is prima facie bound by the agreement. This applies generally even though the party caught
by the exclusion clause has not read the contract. This was the holding in L’Estrange v Graucob6
where the purchaser of a vending machine was subject to an exclusion clause despite the fact that
she had not read it.

b. Notice

If a term is included in a document where contractual terms are typically found, and there is
notice of the existence of these terms before or at the time of contracting, the term will be
incorporated. The party who is subject to the clause ought to be sufficiently aware of the
existence of the clause in the contract.

c. Previous course of dealings

Where parties have dealt on the same terms in the past it may be possible to imply knowledge of
the clause from those past dealings. In this case it may be possible to argue that the clause has
been incorporated into the contract as a term and can therefore be relied upon. Previous dealings

5
Securicor Courier Kenya Limited Vs Benson Onyango and another Court of Appeal, Civil Appeal 323 of 2002
[2008] KLR 252, [2008] e KLR
6
L’Estrange v Graucob [1934] 2KB 394
are only relevant if they prove knowledge of the terms and not constructive and assent to them.
In McCutcheon v David Brayne Ltd 7, it was found that where there was a consistent course of
dealings on the conditions, a party contracting would be subject to those conditions because of
implied knowledge of the conditions.

 Construction

This requirement refers to the interpretation of the exclusion clause to determine its coverage of
the loss that has occurred. The rules that courts will apply in the construction of exclusion
clauses:

1. The courts will not imply greater exclusion than what is explicitly present in the
exclusion clause.
2. The contra proferentum rule will apply in case of ambiguity in the exclusion
clause.
3. Exclusion clauses will be limited to matters covered by the contract

GENERAL RULES GOVERNING EXCLUSION CLAUSES

1. An exemption clause should not be construed in the very strict terms of clauses of
complete exclusion of liability or indemnity.8
2. Exemption clauses have limitations, particularly when it comes to negligence.
Stricter scrutiny is applied to clauses that purport to exclude liability for negligence
altogether.9 Where an exemption clause relates to negligence, or it is particularly onerous,
there is a duty on the defendant to show that the clause was brought to the attention of the
plaintiff as seen in Thompson Vs Lms Railway10. Moreover, such exemption clauses, if
ambiguous, will also be interpreted contra proferentem.11

7
McCutcheon v David Brayne Ltd [1964] 1WR 125
8
Ailsa Craig Fishing Company Limited Vs Malvern Fishing Company Limited [1983] 1 ALL ER 101.
9
Chitty on Contracts, 27th edition, London, Sweet & Maxwell
10
Thompson v London, Midland and Scottish Railway Co Ltd [1930] 1 KB 41
11
Sze Hai Tong Bank Company Ltd Vs Rambler cycle Company Ltd [1959] AC 576 at 588.
 3. Exclusions that are oppressive or unreasonable and do not wholly apply. 12 In
Consolidated Bank of Kenya Limited v Securicor Security Services Kenya Ltd, it was
held that the restrictions and limitations on liability were vitiated by the acts of
negligence of the defendant. The defendant was thus liable for negligence and damages.
4. A party to a contract who seeks to rely on protection of an exclusion clause has to be able
to show that it has become incorporated into the contract. The ways in which a person
may do this are; incorporation through a signature, incorporation by notice and
incorporation by previous course of dealings.
5. If the term was not brought to the attention of the other party, the exemption clause will
not form part of the agreement.13In Securicor Courier (K) Ltd v Benson David Onyango
and Margaret R Onyango, the court of appeal stated that: “… where clauses
incorporated into a contract contain particularly onerous or unusual Condition, the party
seeking to enforce that condition has to show that he did what was Reasonably sufficient
to bring it to the notice of the other party, otherwise [in the absence Of such notice], the
condition does not become part of the contract.” 14 In the above appeal, the appellant was
challenging the award of damages to the respondents by the trial court. The court of
appeal found that the exclusion clause was brought to the attention of the respondents
who even signed the notice after reading the terms of the contract, and the appeal was
allowed. However, in Parker v South Eastern Railway Co, the court held that the
defendants had not given enough notice of the exemption clause.15 Moreover, if there’s an
ambiguity in the exemption clause, it’s upon the party relying on it to explain to the other
party.
6. If there is a written contract which is signed, the aggrieved party is bound by the
exclusion clause irrespective of their knowledge of the terms as established in
L'Estrange Vs Grancob.16

12
Consolidated Bank of Kenya Limited v Securicor Security Services Kenya Ltd [2013]eKLR
13
Olley Vs Marlborough Court [1949] 1 KB 532
14
Securicor Courier (K) Ltd v Benson David Onyango and Margaret R. Onyango [2008] KLR p.252 at p.261; Thornton
v Shoe Lane Parking Ltd [1971] 2 QB p163.
15
Parker v South EasternRailway Co [1877] 2 CPD p.416.
16
L’Estrange Vs Grancob [1934] 2 KB
 7. An exclusion clause must at all times be part of the signed contract and not a separate
document veiled behind a contract.17

How Exclusion clauses have been dealt with in the Sales of Goods Contract.

The primary statute controlling exclusion clauses in sales contracts is the Sale of Goods Act (Cap
31).
Section 55
Section 55 of the Sale of Goods Act states that; ‘Where any right, duty, or liability would arise
under a contract of sale by implication of law, it may be negatived or varied by express
agreement or by the course of dealing between the parties, or by usage, if the usage be such as to
bind both parties to the contract.’
If the exclusion clause is clearly framed then the parties are bound by the part in section 55 of the
Sale of Goods Act which states that where any right, duty or liability would arise under a
contract of sale by implication of law, it may be negated by an express agreement between the
parties.

Section 16:

This section allows the exclusion or variation of implied terms if agreed upon by the parties.
However, the exclusion must be clear and unambiguous. It starts by stating that by default,
there's no guarantee the goods will be of a certain quality or work for a specific purpose
(principle of "caveat emptor" - let the buyer beware).It also provides exceptions to that rule.

The first is that there will be an implied condition that the goods will be fit for any particular
purpose made known to the seller by the buyer, if the buyer shows at the time of the sale that he
is placing reliance on the seller's skills and judgement. In addition the item sold must be
normally supplied by that seller as part of his business.

The illustration of how this section can be interpreted is seen in the case of Doola Singh and
Sons versus The Uganda Foundry and Machinery Works18. The Plaintiffs purchased a saw

17
Icea Lion General Insurance Company Limited v Chris Ndoo Mutuku t/a Crystal Charlotte Beach Resort Ltd
[2021] eKLR
18
Doola Singh & Sons V Uganda Foundry & Machine Works 12 EACA 33.
bench from Uganda Foundry; upon installation, it functioned for some minutes before abruptly
breaking down. The seller had put it together erratically. The judge concluded that the exclusion
clause did not apply and that there is an implied condition that the goods sold by him will be in
good working order because he was a seller dealing in items of that specific type.

Section 16(a): Fitness for Purpose

When the buyer, expressly or by implication, makes known to the seller the particular purpose
for which the goods are required, there is an implied condition that the goods shall be reasonably
fit for such purpose, whether or not it is a purpose for which such goods are commonly supplied,
except where the circumstances show that the buyer does not rely, or that it is unreasonable for
him to rely, on the seller’s skill or judgment.

Section 16(b): Merchantable Quality

Where goods are bought by description from a seller who deals in goods of that description
(whether the seller is the manufacturer or not), there is an implied condition that the goods shall
be of merchantable quality; provided that, if the buyer has examined the goods, there shall be no
implied condition as regards defects which such examination ought to have revealed.

Similar to the kenyan SGA, the Canadian SGA provides that parties may contract out of any
right, duty or liability that would otherwise arise by implication of law in a contract of sale (s.
53). It may do so, among other ways, by “express agreement”. The Canadian Supreme Court has
emphasized discerning the objective intention of the parties as the central consideration when
interpreting this provision of the SGA. In Earthco Soil Mixtures Inc. v. Pine Valley Enterprises
Inc19., the Canadian Supreme Court decided on whether a seller could avoid the implied
condition of sale by description under the Sale of Goods Act through an express agreement. The
case involved a buyer, Pine Valley Enterprises Inc., claiming that purchased topsoil didn't match
its description and seeking damages. The seller, Earthco Soil Mixtures Inc., argued that they
weren't liable because the buyer waived the right to test the goods before purchase. Because the
buyer chose to waive its right to test and approve the goods before they were shipped, the seller
claimed this exclusion clause operated to exclude any statutory condition that the goods must

19
Earthco Soil Mixtures Inc. v. Pine Valley Enterprises Inc., 2024 SCC 20
meet certain compositional specifications. The Court agreed with the seller, stating that the
express agreement between the parties excluded the implied condition of sale by description.
Kenya should adopt this stance when dealing with cases where implied laws in section 16 of the
SGA and exclusion clauses contrast ensuring that the key consideration is the objective intention
of the parties.

In essence, Section 16 of the Sales of Goods Act works as a basic protection in sales of goods
contracts, balancing the interests of buyers and sellers while encouraging fair and honest
business practices. It ensures that consumers can rely on the quality and fitness of the things they
buy, boosting consumer confidence and trust in the marketplace.

EXCLUSION CLAUSES IN E COMMERCE

E-commerce has been described as the sharing of business data, maintenance of business
connections and the execution of business transactions by means of telecommunication
networks.20 Furthermore, e-commerce is viewed as the execution of commercial ventures by use
of electronic media, with the internet being the most common means.21

An electronic contract, also known as an e-contract, is the computerized facilitation of a contract

in a cross organizational business progression. It governs and facilitates electronic commerce (e-
commerce). In Esso Petroleum v Customs & Excise22 the courts held that contractual
agreements created in a commercial set up are presumed to be agreements that have an intent to
create a legal relationship. E-commerce operates in a commercial context and therefore there is a
rebuttable presumption that the parties have an intent to be legally bound.

Electronic transactions typically include the exchange of goods and services between parties
located at separate places. Subsequently, the seller hires a third party to deliver the items to the
buyer's address. The problem is in the fact that the purchaser is unable to inspect the items'

20
Vladimir Z, Electronic Commerce: structure and issues, 1 International Journal of Electronic Commerce
Research., (1996), 3-23
21
Kinuthia J, Akinnusi D, The Magnitude of Barriers Facing E-Commerce Businesses in Kenya, 4 Journal of
Internet and Information Systems, (2014), 12–27.
22
Esso Petroleum v Customs & Excise [1976] 1 WLR 1 House of Lords
amount and quality or determine whether they meet his or her demands. The vendor can easily
give false information about his capacity to provide a specific commodity or service.

E COMMERCE LAWS IN KENYA

The Electronic Transactions Bill of 2007 and the Information and Communication Bill of 2008
were Kenya's first e-commerce-related laws. The amendments acknowledged e-commerce as a
valid method of conducting business. The 2009 Kenya Information and Communications Act
included all of the amendments. The Electronic Transactions Regulations of 2009 were put
forward in response to the Act, and they started to take operation in the year 2010.

The Consumer Protection Act (CPA) of 2012 offers protection to consumers of goods who
transact through electronic commerce. The CPA was enacted to protect consumers from unfair
trade practices in trading transactions including electronic transactions. It captures certain aspects
of electronic transactions including internet and remote transactions. One of the CPA's main
contributions was clarifying the legal connection between businesses and customers during
electronic transactions in section 2.

THE IMPACT OF EXCLUSION CLAUSES ON E-COMMERCE

Exclusion clauses can have a significant impact on e-commerce in Kenya, as they can limit the
liability of online sellers and affect the rights of consumers. Online sellers may use exclusion
clauses to limit their liability for defects or breaches of contract, which can make it difficult for
consumers to seek redress.

Exclusion clauses are frequently found in standard-form contracts used for online sales of goods.
These clauses can limit the seller's liability for issues arising from the transaction. Buyers
entering online sales contracts may have limited bargaining power regarding these clauses. As a
result, online retailers may utilize exemption clauses to restrict their responsibility or even
entirely exclude certain terms from the contract.
E-commerce businesses must take steps to ensure buyers have reasonable notice of exclusion
clauses, such as requiring a positive action (e.g., ticking a box) to acknowledge them. Exclusion
clauses are frequently hidden in long terms and conditions papers used by e-commerce
companies. The buyer may not be fully aware of the restrictions on their rights if they tick a box
acknowledging acceptance of these terms, frequently without even reading them. The precedent
for the terms and conditions of the contract as set by Gary Patchett v. Swimming Pool and
Allied Trades Association Ltd23, is that it is the obligation of the customer to read the entirety of
the terms and conditions documents before signing the contract.

There are particular difficulties when it comes to including exclusion clauses in e-commerce
transactions. Click-wrap agreements are frequently used, requiring users to click "I agree" to the
terms and conditions before continuing. The simplicity of pressing a button, nevertheless, begs
the question of whether or not purchasers have actually read and comprehended the terms.
The question of whether a provider has done enough to highlight an exemption clause is closely
related to incorporation of the clause. It is ideal to present the clause as a step in the ordering
process, requiring the site visitor to click in order to accept them.

Among the notable contractual businesses in the modern world of e-commerce is the sale of
tickets for travel and events, where whoever buys the ticket reads all the terms and conditions
which can either be to the effect that there’s no refund of cash or no liability for the injuries
suffered during the event in question or any other condition that exempts the event organizers or
the travel companies. In cases where a ticket has an exclusion clause, it has been held that such
clauses are unenforceable. In the case of Chapelton v Barry UDC , the trial had court had held
that the plaintiff had sufficient notice on the exemption clause printed on the ticket and was
enforceable.24 However, this decision was reversed on appeal. The contention of the appellate
court was that:

 The notice excluding liability was not a term of the contract

 Cases which deal with railway tickets, cloak room tickets or other contractual documents
issued by bailers when they take charge of goods

Conclusion
23
Gary Patchett v. Swimming Pool and Allied Trades Association Ltd (SPATA) [2009] EWCA Civ 717
24
Chapelton v Barry UDC [1940] 1 ALL ER p.356.
In conclusion, the enforceability of exclusion clauses in sale of goods contracts remains a
complex issue. This is because the realm of e-commerce is ever growing. Albeit statutes like the
Sale of Goods Act and established case law provide a framework for evaluating the validity of
exclusion clauses, there is still need for consumer protection in the online marketplace. E-
commerce continues to grow, and existing laws need to be amended to ensure a balance between
fostering commercial activity and upholding consumer rights.