Exclusion clauses

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This article is a topic within the subject Contracts.

Contents

Required Reading

Paterson, Robertson & Duke, Contract: Cases and Materials (Lawbook Co, 11th ed, 2009), pp. 379-383 [13.12-13.35].

Australian Consumer Law: An Overview (available on Blackboard); ss 51-64A (available on Blackboard).

Introduction

[1] Exclusion clauses (or exemption clauses) reduce or exclude a party’s liability for conduct that would otherwise be in breach of contract or constitute a tort.

An exclusion clause can also be defined[2] as a a term of a contract that attempts to either:

  1. Modify the principal obligations arising under a contract of that particular type or
  2. Limit or exclude the liability of a party which would otherwise arise as a result of a breach by that party of his primary obligations to perform the contract in accordance with its terms.

An indemnity clause is very similar - it excludes the liability of one party by requiring the other to indemnify it for the loss incurred.

Legislative restrictions

[3] Restrictions upon exclusion clauses are specified in s64 of the Australian Consumer Law, which is a part of the Competition and Consumer Act 2010 (Cth) and applies throughout all Australian jurisdictions.

The section prevents suppliers from trying to exclude or disclaim guarantees.

Common law approach

[4] Where not regulated by statute, a party can rely on an exclusion clause for its own benefit if it satisfies the following requirements:

  1. Is the exclusion clause properly incorporated into the contract?
  2. Does the clause apply to the issue in dispute?

This was discussed in Darlington Futures v Delco Aust:

  • When an exclusion clause (or limitation clause) is construed, it should still be done with the entirety of the contract in mind.
    • "These decisions clearly establish that the interpretation of an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity[5]."
    • contra proferentem - against the interest of the party trying to rely on it.

References

Casebook refers to Paterson, Robertson & Duke, Contract: Cases and Materials (Lawbook Co, 11th ed, 2009).

Textbook refers to Paterson, Robertson & Duke, Principles of Contract Law (Lawbook Co, 3rd ed, 2009).

ACL refers to the Australian Consumer Law.

  1. Casebook, p. 245 [13.30], Textbook, p. 379 [13.12]
  2. Greig and Davis, The Law of Contract (1987), p. 597
  3. Textbook, p. 246 [13.35]
  4. Casebook, p. 379 [13.20]
  5. (1986) 161 CLR 500, 510
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