An exemption clause is a specific type of clause used in a contract to exclude or limit liability for breach of contract. The clause can be used to rely, if it has been incorporated into the contract and, by reference to interpretation, if it extends to the breach in question; if both the above matters are confirmed, the validity of the clause is tested under the Unfair Contract Clauses Act 1977 and the Unfair Clauses in Consumer Contracts Regulations 1999. In our specific scenario the following clause is mentioned: “Electric Motors Ltd limits its liability for any violation of the terms implied in the ss. 13-14 of the Sale of Goods Act 1979 at £500.” Ethical Co and Electric Motors Ltd have already concluded other deals in the past but, in this particular purchase, the former found a serious defect in the purchased car, which would have seriously cost the company. Incorporation To proceed in order, first you should consider incorporation; the party who wants to rely on the exclusion clause must demonstrate that it is a contractual clause. Problems in this regard normally arise because one often does not have adequate knowledge of all the clauses; it often happens that a contract is signed without real knowledge of its contents. Considering the specific typology of the clauses discussed here, they can be inserted by signature, by notice or by a deed of negotiation. To be incorporated, clauses must be introduced before a contract is made and the leading case on the matter is Olley; furthermore, generally, terms on an unsigned document are incorporated if there is sufficient notice, in Parker this specific issue arises: the term is valid if there has been reasonably sufficient notice. In the Ethical Co case, there is no ... ... middle of paper ...... g power as stated by the House of Lords in the Photo Production Ltd case. In the Mitchell Ltd case it was made clear that exemption clauses can be employed to avoid the need to pay indemnity insurance. The fairness test is defined, in turn, in the UTCCR 1999, in Reg. 5, paragraph 1, “A contractual term that has not been individually negotiated is considered unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the rights and obligations of the parties arising from the contract, with respect to the detriment of the consumer. “In my opinion Ethical Co, as a company within the meaning of section 6 of the UCTA 1977, would not be able to obtain compensation; if instead you refer to Reg. 3 of the UTCCR 1999 and therefore to Reg. 5 (1) you may be able to demonstrate your consumer status in the negotiation and thus obtain compensation exceeding the limit of £ 500.