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Exclusion of Liability DRAFTING EXCLUSION CLAUSESBASIC PRINCIPLES?DEATH OR PI ?
TYPES OF EXCLUSION CLAUSE
Know commercial background a) What sort of customers does client normally deal with?
b) What type of products does client sell and what can go wrong with them?
c) Which of client's employees actually make the contracts ( 'operate' exclusion clauses)?
d) How, if at all, are any exclusions introduced to customers?
e) Are certain exclusions/limitations or standard-form contracts common in industry?
Drafting to litigate or negotiate? Check with client which strategy Know the law a) implied terms that may affect contract, eg in relation to delivery, title and quality b) likely remedies for breach of express or implied terms c) common law rules relating to incorporation and construction; d) rules in UCTA 1977; and e) factors which determine whether clause will pass reasonableness test or not Know drafting principles. Use precedents. Draft for severance Cannot exclude liability for death or personal injury (UCTA, s. 2(1)) Type of Effect of clause Example clause Exclusion of Excludes liability 'The Seller accepts no liability for liability altogether the late delivery of the Goods.' Limitation of Limits extent of liability 'The Seller's liability is limited to liability the contract price of the Goods.' Exclusion of Limits remedies are 'Where S is in breach of any remedies available to B, eg right terms of this Agreement B may to terminate / right to not reject the goods or terminate damages. Includes noncontact and any claim is limited rejection clauses. (An to damages.' alternative is to provide for substitute remedies, eg repair or replacement.) Exclusion of Limits liability for a 'The Seller accepts no liability for types of loss particular type of loss, indirect or consequential loss or eg loss of profit or damage (whether loss of profit, consequential loss. loss of business or otherwise), costs, expenses or other claims for consequential compensation whatsoever (howsoever caused) which arise out of or in connection with this Agreement.' Time bar Excludes liability unless 'The Seller will not be liable for notice of breach is given any defect in the quality of the within a specified time Goods unless such defect is period. notified to the Seller within 7 days beginning with the date of delivery.' Duty defining Prevents liability arising 'Any delivery dates specified are in the first place. approximate only and whereas every attempt will be made to
Excludes liability for failure to perform the contract as a result of events outside the seller's control.
Subject to MA, s. 3, which imposes UCTA reasonableness test
Exclusion of fraudulent misrep. will fail, but negligent and innocent may fail too Statement that parties have agreed to the terms contained in the contract and nowhere else (e.g. precontractual statements). Will not prevent:
- Misrepresentation claims
- Claim based on events after contract signed
- Claim for rectification on basis the contract does not reflect agreement
- Implied terms (unless express exclusion)
TESTING THE CLAUSE
ESTABLISHING LIABILITY /
meet these dates the Seller cannot promise to do so.' 'The Seller is not liable for any delay in performing or failure to perform any of the Seller's obligations in relation to the Goods if the delay or failure was due to circumstances outside the Seller's reasonable control.' (A non-exhaustive list of the force majeure circumstances, eg war, riot, flood, fire, abnormal weather, etc, should be included.)
'(a) This Contract constitutes the entire agreement between the parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter. (b) Each party agrees that it shall have no remedies in respect of any statement, representation, assurance or warranty (whether made innocently or negligently) that is not set out in this agreement. Each party agrees that it shall have no claim for innocent or negligent misrepresentation
[or negligent misstatement]
based on any statement in this agreement.'
- Identify relevant contract terms, express and implied
- Decide whether likely to be breached and how
- Anticipate remedy sought and consider whether available Burden is on C to establish cause of action Burden then shifts to D to show validity of exclusion clause; must prove 3 things: 1) Incorporation (that clause forms part of contract) 2) Construction (that, on true construction, wording is wide enough to cover breach) 3) UCTA (that clause is not invalidated by UCTA) Three ways clause may be incorporated:
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