Consumer contracts: Are exclusion and limitation clauses allowed?

by The FindLaw Team

It’s conceivable that during our daily interactions with the world, we’re under some sort of contractual arrangement that directs us to fulfil, behave or conform to various obligations. Whether it’s an employment or a consumer contract, most of us are active parties to an agreement that we may not be overtly aware of – until the worst happens. Consumer contracts can be especially fraught when it comes to unscrupulous suppliers, so it’s always useful to be aware what can, and cannot be done under a contract for goods or services.

Consumer contracts can come in various forms, but for the most part, the agreement is similar to other types of contracts, and relies on the fact that specific performance is required by a manufacturer or service provider in fulfilling their obligations towards a consumer. However, some consumer contracts may include exclusion or limiting clauses within the agreement, allowing a business to avoid remedies if a good or service falls short of the customer’s expectations. So naturally, the questions that need to be asked are: how do exclusion and limiting clauses operate? And, are exclusion and limiting clauses in consumer contracts, legal?

Contract law can be difficult at the best of times, however, the inclusion of clauses that exclude or limit the remedies available to a party who is on the wrong end of a consumer contract, may cause unexpected difficulties for a customer who is unaware of such provisions.

What are exclusion and limitation clauses?

Exclusion or limitation clauses are generally included within a consumer agreement in which a supplier or manufacturer of a good or service, seeks to limit or exclude, a liability that may otherwise arise from the contract with a customer.

When are exclusion and limitation clauses valid?

When considering if an exclusion or limitation clause is valid, the courts will usually consider the following when determining the legitimacy of such clauses:

• whether or not the exclusion or limitation clause is included in the signed agreement
• whether or not there was reasonable notice given in regards to the exclusion clause before the terms of the contract was agreed upon by the parties
• whether the parties had any prior dealings which were continuous in nature.

Readers should be aware, that not every exclusion and limitation provision will be legally valid, if the purpose of the clause was to deny a customer their legal rights, in which they may otherwise enjoy under the contract. In such a scenario, the courts may look to the construction of the clause in relation to the party who is placing a reliance on the provisions. Especially in instances where one party was in a more powerful bargaining position when compared to the other, the clause will face closer scrutiny by the courts.

In order to satisfy the courts, the party who is relying on the exclusion or limiting clause must show that the clause was part of the contract. The courts will also consider the following factors when determining the effectiveness of the clause:

• whether the exclusion clause was incorporated into the written agreement
• whether the wording of the clause was clear and covered the anticipated breach or event.

Consumer contracts which have exclusion or limitation clause that are unclear, broad or ambiguous, will usually be treated unfavourably by the courts, and the clause may be especially construed negatively against a manufacturer or service provider who is placing a reliance on the clause.

If you feel that the terms of your consumer contract are unfavourable and need assistance, please seek the appropriate legal advice to deal with your situation.



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