Exemption Clauses Essay

CONSTRUCTION OF EXEMPTION CLAUSES

Exemption clauses are the contractual term deal with the Indian contract law which aims to limit, alter or exclude the liability, obligation or remedies of a contracting party. There are two types of exemption clause first is exclusion clause and second is limitation clause. Exclusion clause where a party tries to exclude his liability at all and limitation clause where a party limits his liability, for example limit or purport to confine damages payable on a breach of contract to a stated sum. The terms exemption clause and exclusion clause are repeatedly used to cover both situations but, in an effort to avoid confusion, the practice accepted here is to use exemption clause as a general term,

Denning noted the more unreasonable a clause is, the greater notice which must be given of it. He is making reference to the ‘red hand rule’ which applies to clauses which are unusual or unreasonable, although more recently it has been referred to as an onerous clause. In Interfoto Picture Library Ltd. exemption clauses were thoroughly examined and held to be unusual, whilst concluding there is no rule of law that liability for fundamental breach can never be excluded. Since Photo Production, the courts have not invariably adopted a robust attitude towards exclusion clauses even in commercial contracts, and still hold that clear words have not been used to exclude particularly serious breaches. However, there has been a requirement for clarification in the area through statute. UCTA have tried to codify and modify these issues through guidelines laid out in the legislation. The existence of this legislation has reduced the impetus for the common law to revert to devices such as the ‘red hand rule’. However, there are limitations on the application of legislation; UCTA only applies to exemption clauses the broad context of the ‘red hand rule’. There is a requirement for transparency as Common Law Rules surrounding incorporation and construction hold fragilities which have been eradicated through legislation. This has indefinitely made it easier for courts to construe exemption