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Exclusion and limitation of liability

Exclusion and limitation of liability clauses offer the commercial lawyer an opportunity to manage their client’s risk under the contract. Such clauses are heavily negotiated in most contracts and in the spotlight if things go wrong. The legislation which regulates clauses of this type is complex and the law impacting their interpretation is nuanced. An in-depth understanding of the background law is essential when negotiating exclusion and limitation of liability clauses. Clear and precise drafting is also key to a strong exclusion and limitation of liability clause.

A contract term which excludes or limits liability is subject to both statutory and common law controls. The Practice Note: Exclusion and limitation of liability considers exclusion and limitation of liability in business-to-business (B2B) contracts. It provides guidance on the common law and statutory controls affecting exclusion and limitation of liability clauses (also known as limitation of liability clauses, limitation clauses, exclusion of liability clauses, exclusion clauses and exemption clauses), including the provisions of the Unfair Contract Terms Act 1977 (