An exclusion clause
is a term in a contract that seeks to restrict
the rights of the parties to the contract.
Exclusion clauses generally fall into one of
these categories:
* True exclusion clause: The
clause recognises a potential breach of the
contract, and then excuses liability for the
breach. Alternatively, the clause is constructed
in such a way it only includes reasonable care to
perform duties on one of the parties.
* Limitation clause: The clause
places a limit on the amount that can be claimed
for a breach of contract, regardless of the
actual loss.
* Time limitation: The clause
states that an action for a claim must be
commenced within a certain period of time or the
cause of action becomes extinguished.
As espoused in Darlington Future Ltd v. Delcon
Australia Pty Ltd (1986) 161 CLR 500, the meaning
of an exclusion clause is construed in its
ordinary and natural meaning in the context.
Although we construe the meaning much like any
other ordinary clause in the contract, we need to
examine the clause in light of the contract as a
whole.
However, if after construing the contract in its
ordinary and natural meaning, there is still
ambiguity in the exclusion clause, the contra
proferentem rule shall apply; that is to say, the
clause is contrued against the person trying to
take advantage of the rule.
In terms of negligence, the decision in Canada SS
Lines Ltd v. The King [1952] AC 192 held that:
* If the exclusion clauses mention
"negligence" explicitly, then liability
for negligence is excluded.
* If "negligence" is not mentioned,
then liability for negligence is excluded only if
the words used in the exclusion clause are wide
enough to exclude liability for negligence. If
there is any ambiguity, then the contra
proferentem rule applies.
* If a claim on another basis can be made, then
liability for negligence is not covered by the
exclusion clause.
In Australia, the four corners rule has been
adopted in preference over the idea of a
fundamental breach (The Council of the City of
Sydney v. West (1965) 114 CLR 481). The court
will presume that parties to a contract will not
exclude liability for losses arising from acts
not authorised under the contract. However, if
acts of negligence occur during authorised acts,
then the exclusion clauses shall still apply.
If the contract is for the carriage of goods, if
the path is deviated from what was agreed, any
exclusion clauses no longer apply.
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