Exemption and non-reliance clauses | Allen & Overy LLP

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Richard Hooley spoke to us this lunchtime about exemption clauses.


He began by quoting from Andrew Burrows’ A Restatement of the English Legislation of Agreement (which has recently been current) and its fantastic summary of contractual interpretation. Paraphrased it claims:

  1. Inquire what the clause, “viewed in the gentle of the entire deal, would signify to a affordable man or woman obtaining all the relevant track record awareness fairly out there to the get-togethers at the time the deal was made”.
  2. When doing this look at the (a) all-natural indicating of the words employed (b) the all round function of the clause and the contract (c) the points and situation regarded by the events and (d) industrial typical feeling.
  3. But do not position too a lot emphasis on (b)-(d) at the price of (a).

But what about exemption clauses, do they have unique regulations of interpretation?

  • The contra proferentem basic principle is an strategy of past resort to be deployed when the language is one particular-sided and truly ambiguous, but not usually.
  • Clear text are required ahead of the courtroom will hold that a deal has taken away the rights or therapies which a single of the functions would have experienced at widespread legislation. (Aka the Gilbert-Ash basic principle.)
  • You can exclude negligence by express wording. If the text are not categorical then contemplate if they could cover negligence. If they are vast adequate to go over carelessness but there is a sensible alternate basis of legal responsibility then, usually, legal responsibility will not be excluded for carelessness. (Aka the Canada Steamship “framework”.)
  • A courtroom will not interpret an exemption clause so as to deprive the contractual undertakings of one party of all effect.

Current exemption circumstances

He then ran by way of some of the cases from 2020 on exemption clauses:

  • A standard clause in a debenture excluding legal responsibility for the functions or omissions of a receiver did not exclude the receiver’s equitable obligation of treatment as a mortgagee (CNM Estates). The clause failed all the factors of the Canada  Steamship framework. Even so a clause in the intercreditor which restricted the receiver’s liability to where by the receiver was grossly negligent or responsible of wilful misconduct was clear more than enough to exclude liability for negligence by implication.
  • A clause in a logistics agreement excluded legal responsibility “for any indirect or consequential loss or damage”. An arsonist commenced a fire.  The direct and natural result of the fireplace was the destruction of the goods and the warehouse, creating shed earnings and business interruption losses to the claimants. Therefore, the liability was not excluded by the clause (see May possibly the power majeure occasion be with you).
  • A clause stating that sellers ought to not be liable “in respect of goodwill” referred to the common lawful this means of “business reputation” and not the accounting which means of goodwill and so did not exclude the loss experienced (see Searching goodwill what does it indicate and was it excluded?). If a deal includes a phrase to which the functions intend to give an abnormal or technological or non-legal that means, that will have to be spelt out.


He closed by hunting at the court’s treatment method of the dilemma of whether or not a non-reliance clause is an exemption clause so that it might be topic to a reasonableness examination.

  • Initially Towers, which we’ve include on the weblog, is the key circumstance on this stage which uncovered that a non-reliance clause is a clause an exemption clause and not a “basis” clause (defining the scope of a responsibility), with the consequence that the check of reasonableness applies.
  • In contrast, in High-quality Care v NatWest the courtroom held that provisions which said that the lender was furnishing basic working services on an execution-only basis and was not providing suggestions on the deserves of a certain transaction were being “basis” provisions and so not issue to an assessment of reasonableness.
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