Limiting Liability in Contract

Most contracts try and allocate particular obligations and the risks that go with performance of those obligations. A fairly wide variety of terms and clauses are used to try to limit liability and they include: - entire agreement clauses, exclusion clauses, disclaimer of liability clauses, acknowledgement of nonreliance and replacement / merger clauses.

Clauses that limit the liability of a party can be effective but much will depend upon the circumstances. Parties who take the risk of using agreements that were not prepared by lawyers for their specific situation, such as agreements downloaded from the Internet (and then adapted), may find out that liability was not limited as intended.

Potential Scenarios - Clauses that Limit Liability

  • When an insurer denies liability on the basis of an exclusion clause;
  • In a dispute with another party who seeks to rely on a disclaimer o f liability clause;
  • When the contract contains a clause of non-reliance seeking to reduce the effect of s 18 of the Australian Consumer Law.

Important Quotes in Cases on Limitation of Liability Clauses

According to general rules of construction, whilst regard must be had to the language used in an exclusion clause, such a clause must be read in light of the contract of insurance as a whole, "thereby giving due weight to the context in which the clause appears - Selected Seeds Pty Ltd v QBEMM Pty Limited [2010] HCA 37

Let Us Help You

  • determine whether or not an entire agreement/understanding clause is in fact an exhaustive statement of the express contractual terms;
  • consider the scope and application of an exclusion clause;
  • understand how a disclaimer of liability clause works in your situation;
  • look at the various ways for getting around or "attacking" clauses that purport to be acknowledgements of nonreliance;
  • work out the effect of a replacement/merger clause

* This content does not purport to give legal advice. Readers must obtain their own legal advice, that applies to the particular circumstances of their case, before taking any action at all.