Exclusion of Responsibility Terms

It is possible to have a term in the contract which excludes one of the parties from responsibility for something that may go wrong in the performance of the contract or limits that responsibility.

It is called an exclusion clause, an exemption clause or limitation of liability clause.

For example, an exclusion from liability for damage done to a lawn by a builder’s backhoe might be included in a contract between the builder and a home-owner who is having an extension built to their home.

The courts have generally taken the view that exclusion clauses are unfair and have tried to limit their application.

Courts will generally interpret an exclusion clause against the party trying to rely on it and, at the least, interpret it narrowly so long as it is capable of being read down. 

Where a contract is a document signed by the parties, they will generally be bound by the exclusion clause in it.

Where a contract is an unsigned document, the court will look at what a reasonable person would assume the document contained.

Only where a reasonable person would assume the terms to include an exclusion clause will the exclusion clause in the document be able to be relied on.

It must also be shown that the exclusion clause was brought to the notice of the other party.

For example, if an automatic ticket machine in a car park had printed on it ‘issued subject to the conditions displayed in car park’ and these conditions, or exclusion clauses, were on a pillar opposite the ticket machine, then this could potentially be held to be unreasonable notice of the exclusion clause.

The driver may then be entitled to sue despite the exclusion clause in the conditions.

For consumer contracts, the Australian Consumer Law and other consumer protection legislation may imply conditions that cannot be excluded.