Exemption Clauses
Definitions:
An exemption clause is a particular type of term claiming to exclude or limit either
the liability or the remedies which would otherwise be available.
An exemption clause operates as a possible defence to liability (i.e. a defence to a
breach of contract). So if D breaches the contract, P will claim damages. But then D
will rely on the exemption clause to get out of liability.
If the clause purports to exclude liability or remedies, it is an exclusion clause.
If the clause purports to limit liability or remedies, it is a limitation clause. There is a
threshold to how much a party can pay.
Steps answering a problem question:
1. Has liability arisen i.e. what has happened? And what type of liability? (in contract or
negligence)
2. Identify the legal liability attaching to each event. Either liability in negligence
(QUALIFIED contractual liability) or breach of STRICT contractual liability. Qualified
contractual obligations are treated as liability in negligence for the purposes of
exemption clauses. The promisor needs to use reasonable care and skill to try to
achieve such a result. If this standard is met there is no breach even if the desired
result isn’t achieved. A strict obligation requires a particular result to be achieved or
there will be a breach. There can be both contractual and negligence liability.
3. Can this particular exemption clause be relied upon by this party in these
circumstances? The party seeking to rely on the exemption clause must satisfy all 3
requirements and in this order:
(1) That the exemption clause has been INCORPORATED as a term of the
contract.
(2) That, on its natural and ordinary meaning, the exemption clause covers
what has happened (CONSTRCUTION)
(3) That the clause isn’t rendered unenforceable by either The Unfair
Contract Terms Act (1977)- this regulates exemption clauses in B2B contracts
either by rendering the particular clause totally unenforceable or enforceable
only if it can be shown to be reasonable. The applicable test turns on the
liability. Or the Consumer Rights Act (2015) as applicable.
Definitions:
An exemption clause is a particular type of term claiming to exclude or limit either
the liability or the remedies which would otherwise be available.
An exemption clause operates as a possible defence to liability (i.e. a defence to a
breach of contract). So if D breaches the contract, P will claim damages. But then D
will rely on the exemption clause to get out of liability.
If the clause purports to exclude liability or remedies, it is an exclusion clause.
If the clause purports to limit liability or remedies, it is a limitation clause. There is a
threshold to how much a party can pay.
Steps answering a problem question:
1. Has liability arisen i.e. what has happened? And what type of liability? (in contract or
negligence)
2. Identify the legal liability attaching to each event. Either liability in negligence
(QUALIFIED contractual liability) or breach of STRICT contractual liability. Qualified
contractual obligations are treated as liability in negligence for the purposes of
exemption clauses. The promisor needs to use reasonable care and skill to try to
achieve such a result. If this standard is met there is no breach even if the desired
result isn’t achieved. A strict obligation requires a particular result to be achieved or
there will be a breach. There can be both contractual and negligence liability.
3. Can this particular exemption clause be relied upon by this party in these
circumstances? The party seeking to rely on the exemption clause must satisfy all 3
requirements and in this order:
(1) That the exemption clause has been INCORPORATED as a term of the
contract.
(2) That, on its natural and ordinary meaning, the exemption clause covers
what has happened (CONSTRCUTION)
(3) That the clause isn’t rendered unenforceable by either The Unfair
Contract Terms Act (1977)- this regulates exemption clauses in B2B contracts
either by rendering the particular clause totally unenforceable or enforceable
only if it can be shown to be reasonable. The applicable test turns on the
liability. Or the Consumer Rights Act (2015) as applicable.
