Unreasonable exclusion of liability

Posted on 29 Aug 2015 by The Manufacturer

Chris Stait, associate solicitor in the Science and Technology Team at BPE Solicitors, weighs in on mitigating risk and liability.

Chris Stait, associate solicitor - Science and Technology Team, BPE Solicitors.
Chris Stait, associate solicitor – Science and Technology Team, BPE Solicitors.

Deciding where and how to exclude and limit liability in standard terms has always been a balancing act, weighing up the desire to extinguish or severely cap all liabilities and restrict the available remedies on the one hand, against on the other, the risk that such a stringent or all-encompassing course of action may be deemed unreasonable in law, leading to unlimited liabilities and remedies.

Top tips to consider:

  1. When attempting to exclude the statutory implied terms of satisfactory quality, fitness for purpose and adherence to descriptions, ensure that alternative (narrow) replacements are used instead of excluding a standard altogether.
  2. Beware of excluding liability for a buyer’s failure to inspect and report a defect, particularly where a tight deadline is given; instead consider allowing for replacements to be sent and/or excluding liability to the extent that it has increased due to the failure of the buyer to inspect and report any defects. Also distinguish between visible defects from those which the buyer could not see or likely to discover prior to its use.
  3. Suppliers in a strong negotiating position need to take particular care and should consider whether all indirect losses should be excluded, or whether some obvious exceptions should be permitted, subject to a limitation cap and reviewing its insurance provisions.

The balancing act will continue, but today the scales tipped slightly in the buyers’ favour and it’s important, particularly for those with more aggressive standard terms, to review the most important terms in your sale contracts to avoid unlimited liabilities arising.