How to write an effective exclusion clause

Top tips for drafting exclusion clauses In addition to the Kudos case, there have been a string of important decisions relating to exclusion clauses in recent years.

How to draft a successful exclusion clause: lessons from the Glencore case

Although the Court of Appeal in Kudos Catering UK Ltd v Manchester Central Convention Complex Ltd confirmed there is no presumption that an exclusion clause will not apply to deliberate breach, such clauses would likely be construed as narrowly as possible.

Parties intending to exclude certain types of liability—eg in relation to loss of profit—for deliberate breach as well as defective performance need to spell this out.

Remember that the courts look much more favourably on a clause which limits liability rather than one which excludes it. Tips for drafting exclusion causes If you want to include a wide or an unusual exclusion clause in an agreement you are negotiating, make sure the How to write an effective exclusion clause is absolutely clear, put the exclusion in a separate clause or sub-clause, and explain the commercial reason for the clause in a recital, to help avoid the outcome in Kudos.

The actual case is concerned with a standard-form contract whereby the exemption clauses have not been freely negotiated pre-formulated contract whereby the UTCCRreg.

Except as specifically provided in the Special Provisions or in Section If the exclusion clauses mention "negligence" explicitly, then liability for negligence is excluded.

So if you are drafting a wide-ranging exclusion of liability, it is worth considering what remedy the other party will be left with. The Unfair Terms in Consumer Contract Regulations The Unfair Terms in Consumer Contract Regulations place some additional burdens on suppliers selling to consumers under contracts that have not been individually negotiated.

Loss of profit, for example, has been held to be a direct loss. Exclusion clauses should not be subject to a strained construction in order to reduce the ambit of their operation.

Since Glencore had been able to terminate its contract with its supplier without any liability and without taking delivery of any crude oil, the nature of its loss was a loss of the profit that would have been earned had the transaction proceeded.

An Entire Agreement Clause will almost certainly contain exclusions and those clauses will generally be found towards the end of the contract. Certain liabilities can never be excluded or restricted — such as liability for fraud, or for death or personal injury.

The impact of this has been that various types of loss have all been recoverable as direct losses, and an exclusion of liability for indirect loss has not reduced the liability of the party seeking to rely on the exclusion clause.

Details of the case can be found by clicking here. If the company is trying to exclude liability for negligence, at common law, clarity of words is vital as seen in Canada Steamship Lines v The King and White v John Warwick Co.

What is the background to this case? Thus, the company cannot exclude liability for breach of the implied obligations, as it is trying to do in its second exclusion clause that is, s.

The clause places a limit on the amount that can be claimed for a breach of contractregardless of the actual loss. The courts have a tendency of requiring the party relying on the clause to have drafted it properly so that it exempts them from the liability arising, and if any ambiguity is present, the courts usually interpret it strictly against the party relying on the clause.

You cannot incorporate terms by simply placing them on the back of an invoice which is sent out after the contract has been concluded.

Exclusion clauses: Top drafting tips and recent developments

Consider whether the innocent party will have an adequate remedy for breach One of the issues highlighted by the Court of Appeal in Kudos was that if the exclusion of liability for loss of profit applied to non-performance - as MCCC tried to argue - Kudos would have had no effective remedy.

The Unfair Contract Terms Act places some important restrictions on what you can and cannot exclude. Glencore sought damages from Cirrus Oil for repudiation of a contract for the sale of aroundbarrels of crude oil.

Clarity is king Where an exclusion clause is unclear, the Court will construe the clause against the party who is seeking to rely on it. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

Therefore, the exclusion clause may not be effective and applying the contra proferentem rule reg. The notice must be given before formation of the contract as illustrated in Olley v Marlborough Court Ltd. For example, a supplier of services will often limit its liability to the value of those services.

Also, in Internet Broadcasting Corporation Ltd v Mar LLCthe judge stated that clarity and unambiguousness of words in a clause were essential, rather than merely pointing out to their literal meaning.

Whatever they do, it is essential that exclusion clauses are properly incorporated into the contract, that they comply with the statutory framework set out in the Unfair Contract Terms Act and the Unfair Terms in Consumer Contracts Regulations, and that they are clearly drafted.

It is not even necessary to show that the attention of that particular person was actually drawn to it. Lawyers now need to go beyond a belt-and-braces approach to drafting exclusion clauses. Cirrus Oil submitted that the effects of this exclusion clause were twofold: Practical Electricals Ltd can thus not rely on the two exclusion clauses for the reasons set above.

Applying the lessons learned from these decisions, businesses should bear in mind the tips set out below when negotiating exclusions and limitations of liability in commercial agreements. Incorporate, incorporate, incorporate As with any contract term, if it is not in the agreement you cannot rely on it.An exclusion clause is a term in a contract that seeks to restrict the rights of the parties to the contract.

Traditionally, the district courts have sought to limit the operation of exclusion clauses. Exclusion clause: is a term in a contract which intends to exclude one of the parties from liability or limit the person's liability to specific listed conditions, circumstances, or situations.

It can be inserted into a contract which aims to exclude or limit one's liability for breach of contract or negligence.

What is an exclusion clause? An exclusion (sometimes called a limitation or exemption clause) clause is one which attempts to exclude or limit a party’s liability, or to exclude or limit the other party’s rights or remedies, for example.

Law of Contract - Exclusion Clauses Essay An exclusion clause is a term in a contract purporting to exclude or restrict the liability of one or more parties to the contract for breach of obligation - Law of Contract - Exclusion Clauses Essay introduction.

Glencore sought damages from Cirrus Oil for repudiation of a contract for the sale of aroundbarrels of crude oil. The contract included the following exclusion clause: How to exclude liability - drafting exclusion clauses a well drafted exclusion clause could make all the difference.

What should you be aware of when you are drafting or reviewing these.

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How to write an effective exclusion clause
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