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Disclaimer of liability clauses

29 October 2021 Donald Dinnie, Norton Rose Fulbright
Donald Dinnie, Norton Rose Fulbright

Donald Dinnie, Norton Rose Fulbright

A contract of carriage had been concluded by way of an exchange of e-mails. After conclusion of the contract, the customer had signed a credit application with standard trading conditions which contained an exemption from liability for loss or damage.

The appeal court found that the credit application with the exemption clauses did not form part of the contract.  Because of the way the contract was concluded, the credit application incorporating the standard trading conditions exempting UPS from liability from loss or damage had not been furnished nor brought to the customer’s attention.

The customer had not sought credit. He only signed the credit application so as to be allocated an account number which he was told was required for shipments to and from the United States and he had understood that the completion and signing of that credit application was to enable UPS to capture his details and allocate him an account number.  UPS did not explain to the customer that the credit application incorporated provisions that excluded or limited UPS’s liability for loss or damage. The standard trading conditions and the relevant clauses which UPS sought to rely on appear in fine print and are not conspicuously legible. They appeared on the second and third pages of the credit application which could only be read with extreme difficulty and concentrated effort.  In addition, the credit application was sent without the conditions being attached.

The court confirmed that a clause contained in the conditions of contract which undermines the very essence of the contract (for instance of carriage or deposit) should be clearly and pertinently brought to the attention of the customer who signs a standard form and not by way of an inconspicuous and barely legible clause that refers to the conditions on the reverse side of the page in question.

While our courts do uphold the use of disclaimer and limitation of liability clauses in appropriate circumstances, the party wishing to rely on such clauses should ensure that they are clearly and boldly identified in the contracting documents or warning signs, easily legible, and brought to the attention of the counter party at the time of contracting.

This appeal judgment by the Supreme Court upheld the trial court judgment.

First published by: Financial Institutions Legal Snapshot

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