How to exclude liability — drafting exclusion clauses

When things go wrong, a well-drafted exclusion clause could make all the difference. What should you be aware of when you are drafting or reviewing these clauses?

Exclusion clauses come in many different forms: they might try to prevent or restrict the type of loss a party can claim in the event of a breach; they might cap the value of claims that can be made under the contract to the contract price or licence fee; they might exclude all remedies other that those provided for in the contract itself. 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 1977 and the Unfair Terms in Consumer Contracts Regulations and that they are clearly drafted.

As with any contract term, if it is not in the agreement you cannot rely on it. While exclusion clauses are commonplace, they are not terms the court will imply into an agreement. If you want to rely on these clauses, make sure you can demonstrate they are agreed. You should always ensure these clauses are contained in a written agreement, ideally with a suitable heading so the other party can find them, and that the document is signed. Failing that, put them in an order acknowledgement that is sent out to the customer before any work is undertaken. You cannot incorporate terms by simply placing them on the back of an invoice that is sent out after the contract has been concluded…

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