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How many times have you read this in a contract?

'We will not in any circumstances have any liability for loss of business, loss of profits…… etc'

This type of clause is known as "exclusion clause" whose aim is to reduce exposure of the party to the contract who are concerned about the liability which they may incur in performing their contracts.

Can you do that?

YES you can. Clauses may be inserted into a contract which aim to exclude or limit liability under that contract, but there are certain rules that have to be followed to allow those type of clauses to be relied upon, for example:

the exclusion has to be legal. There are some important obligations, particularly when dealing with consumers, that are placed on a trader and these are implied by law into contracts and cannot be excluded;
the exclusion clause should form part of the contract and have been brought to the attention of the other party. The best way to do this is to get them to sign the contract to say that they have read and understood it;
ensure the wording is plain and use clear and ordinary words. Avoid expressions in contracts which may cause ambiguity. For example, one person's definition of 'consequential loss' may be very different to that of another's;
if your contracts include particularly unusual or dangerous clauses you should draw extra attention to it and if you're going to exclude liability for negligence you must say so!

Exclusion Clauses in Your Contracts

Exclusion clauses will be of little use unless it has been drafted to suit your business. It is no use copying another business's lengthy and 'impressive looking' exclusion clause into your contracts if they turn out to be unworkable in practice because it does not fit the way in which you do business.

If you are presented with a contract containing exclusion clauses, make sure you read all the information carefully and be clear on your rights and remedies should things go wrong. If you're not sure - don't sign it!

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How many times have you read this in a contract?

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