Exclusion of Limitation Clauses

Exclusion Clauses – A Recap

It is not uncommon to come across clauses seeking to limit liability in a wide variety of contracts and particularly in a party’s standard terms and conditions.

Quite often these clauses are extensive and there is a temptation to make them as wide ranging as possible.

However, care needs to be taken when drafting and interpreting such clauses to ensure  that the clause  does not fall on the wrong side of the line when it comes to being enforceable.

Here is a reminder of some of the principles that should be borne in mind:

Negligence:

A party cannot exclude or restrict its liability for negligence unless it satisfies the requirement of reasonableness (the reasonableness test in the Unfair Contract Terms Act 1977 – UCTA).

A party cannot exclude liability for negligence for personal injury or death because of section 2 of UCTA / section 65 of the Consumer Rights Act 2015

Standard terms and notice:

Even if party A is aware that party B’s standard terms are provided as part of a contract, a term which is particularly onerous or unusual will not be incorporated into the contract unless it has been fairly and reasonably brought to the party’s attention.

A practical solution that is commonly seen is that the particular clause is in a larger font and in bold or is otherwise given prominence.

Insurance:

Where a party seeks to restrict its liability to a particular amount, the ability of a party to cover itself with insurance will be taken into account by the court in terms of the reasonableness of such a restriction (section 11(4), UCTA).

The general approach of the courts is that parties should be able to freely agree to allocate liability and risk in their commercial contracts and UCTA should not unnecessarily intrude into contracts between parties of equal bargaining power, who should be free to determine what obligations they are willing to accept.

Therefore the bargaining power of the respective parties is an important consideration.

All of these issues were recently considered by the Court of Appeal in Goodlife Foods Limited v Hall Fire Protection Limited [2018] EWCA Civ 1371. A case that involved fire damage totalling around £6 million.

This blog was written by:  Michael Stewart

DISCLAIMER: Please note that this post sets out the general position under the general law. It should not be acted upon in any specific circumstances without taking specific legal advice as to those circumstances. Also, it should not be relied upon, acted upon or treated as a substitute for specific advice relevant to particular circumstances. If you do require specific advice please contact us for assistance.

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