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Exclusion Clauses, Exemption Clauses and Disclaimers: Are They Enforceable?

Exclusion Clauses

Exclusion clauses are found in most commercial contracts. Their purpose is to define contractual duties and obligations and to provide a defence to claims of breach of contract. Exclusion clauses may also be called an ‘exemption’ or ‘exception’ clause.

There are three main types of exclusion clauses:

  1. clauses excluding the rights a party;
  2. clauses restricting the rights of one party without necessarily excluding the liability of the other party; and
  3. clauses operating to qualify rights or remedies by subjecting them to specified procedures.

Exclusion clauses can be effective in protecting a party to a contract, however not all exclusion clauses will be effective at law. For example, if an exclusion clause is not reasonably brought to the attention of the other party, then it may be ineffective at law. Sometimes, the exclusion clause could be very harsh or unusual and it may require extra attention to be drawn to it. An exclusion clause that is very wide as to exclude any obligation under a contract may void a contract. Additionally there may be a case where a particular exclusion clause can be barred by the operation of statute, such as s.68 of the Trade Practices Act 1974 which provides for consumer protection in certain circumstances or by common law such as excluding the liability for negligent misstatement or gross negligence.

Disclaimers

Although ‘disclaimers’ and ‘exclusion clauses’ are used interchangeably in various commercial contexts, they are in fact distinct concepts in the eyes of the law.

Disclaimers can often be seen where information, products or services are supplied. Generally, the function of a 'disclaimer' is to advise the person to whom it is addressed (before entering the contract) that the disclaiming party does not intend to undertake any duty towards that person. In other words, the aim of a disclaimer is to negate the existence of a duty of care. Although you can disclaim responsibility for a variety of duties in a contract, you can rarely disclaim responsibility for misleading or deceptive conduct if you are the source of information which is said to be misleading or deceptive.

Disclaimers that are drafted carefully, drawn to the attention of the contracting party and acknowledged in writing can help protect parties from costly litigation.   To ascertain whether a disclaimer is likely to be effective it is necessary to consider not only the wording and substance, but the timing, manner and circumstances of its execution or provision. For example, the law stipulates that a disclaimer in a Franchise Agreement should not be in a stand alone document and that it should be signed and dated by the Franchisee.

The Commercial and Business Law team at Berrigan Doube Lawyers provides client-focussed legal advice. We avoid the use of standard form disclaimers and specifically drafts disclaimers concerning our client’s individual commercial interests.

Should you have any questions in relation to this article, please feel free to contact us.