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There are several ways a business can seek to limit its liability to customers or third parties, including exclusion clauses, disclaimers and waiver forms. All three examples seek to limit one party’s liability to another, typically when something goes wrong. Their enforceability is dependent on several factors. Therefore, it is crucial to understand the distinctions between these provisions. This article explores the differences between exclusion clauses, disclaimers and waiver forms within commercial contracts.
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What is an Exclusion Clause?
Contracts often include exclusion clauses designed to limit the liability of one or both parties. Exclusion clauses seek to limit or exclude liability for something when the other party suffers loss or damage or a contract is breached. Depending on the circumstances, they can exempt some or all liability for certain damages and even limit the amount payable for loss or damage arising from the agreement.
To be enforceable, an exclusion clause should be part of a written agreement that all parties sign. Courts typically uphold these clauses if the agreement is valid and the terms are deemed fair. If there is a power imbalance, exclusion clauses will not be applicable. Be careful of including unfair contract terms in business contracts, as these might not be enforceable.
Party A excludes all liability for any loss or damage suffered by Party B as a result of any third-party software malfunctions or errors.
An example of an exclusion clause.
What is a Disclaimer?
Goods or service providers commonly use disclaimers to limit their liability. While you can include disclaimers in a contract, they are common in marketing and other business communication to disclaim liability for a specific loss or damage. Since these disclaimers typically lack a written agreement, their enforceability depends on reasonable notice provided to the other party. It is unlikely that giving notice of the disclaimer to the other party after the purchase and payment for a service will be considered reasonable notice.
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The parking facility shall not be liable for any car damage while parked on the premises. Users are advised to exercise caution regarding their personal belongings in the vehicle and use the parking garage at their own risk.
An example of a disclaimer.
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What is a Waiver Form?
A waiver form is a legally binding document that releases one party from specified liabilities and obligations. Waivers often contain indemnity, limitation of liability, and waiver and release clauses. Typically, waivers are one-time documents where a party assumes responsibility for risks involved in activities, such as recreational endeavours or product testing.
For a waiver to be legally binding, it must be part of an enforceable contract, clearly detailing the risks involved and the excluded liabilities. Before signing, the signing party should be provided reasonable time to comprehend the waiver’s contents and associated risks.
In certain scenarios where personal injury results from a supplier’s reckless conduct during a recreational activity, liability limitations might not stand. Furthermore, a service provider’s obligation to exercise reasonable care for those under its supervision or particular laws may render certain waivers unenforceable.
A skydiving company requires participants to sign a waiver form before committing to the skydive. The form states: “I acknowledge the risks involved in skydiving and waive all claims against the company for any injuries or damages sustained during the activity.”
An example of a waiver form.
Key Similarities and Differences
|Limit or exclude liability in contracts.
|Limit liability or deny responsibility.
|Releases one party from certain liabilities.
|Contractual agreements such as service agreements and leases.
|Goods or service provision, and notices.
|Recreational activity participation, service provision.
|Limits a party’s liability for certain circumstances or damages that may arise.
|Allows parties to escape responsibility for certain risks or losses.
|Releases one party from specified obligations.
|In a written agreement, signed by all parties.
|Requires reasonable notice to the other party.
|Part of an enforceable contract.
|Contracts with defined terms and conditions.
|Notices, notices of risks, or liabilities.
|Specific activities or service provisions.
|Enforceable if fair, valid, and agreed upon in a contract.
|Enforceability depends on reasonable notice given to the other party.
|Only enforceable if it is part of an enforceable contract.
|May exclude liability for specific events or damages.
|Denies or limits responsibility under specific circumstances.
|Limits specified liabilities and obligations.
The enforceability of exclusion clauses, disclaimers, and waivers varies depending on multiple factors and your business needs. Businesses can apply these types of limitation clauses in many different ways. Before consenting to or drafting these clauses, it is recommended that you seek legal advice. These clauses may feature in written business contracts or appear as signage, particularly common for disclaimers. You should also look out for certain laws that mean a party’s liability cannot be excluded, disclaimed or waived, such as the Health and Safety at Work Act 2015.
If you are interested in using an exclusion clause, disclaimer or waiver form for your business, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.
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