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Avoiding liability
02/01/2007 The Star ARTICLES OF LAW By Bhag Singh
Reliance on the exemption clause is said to be unfair because it allows
liability to be denied even though the other party is clearly otherwise in
breach, writes BHAG SINGH.
IN an article that I wrote recently I had mentioned how organisers and
promoters of entertainment events could either limit or exempt themselves
from liability on account of an event not proceeding as advertised or not
proceeding at all for that matter.
This may appear unfair to some people as it seems to suggest that a person
may undertake an activity to provide goods or services and at the same time
avoid liability.
However inconsistent and inequitable it may appear this is not really
incompatible with the principles of the Law of Contract. As has been said on
many occasions on the subject, parties are by law allowed to enter into an
arrangement or undertaking upon mutually agreed and acceptable terms.
As such, it is permissible for parties to a transaction to agree as to what
they will do and may be responsible for or not. This is merely in accordance
with the long established underlying philosophy of “freedom to contract”.
In many areas of activity one of the parties will place a limitation on its
obligations. This is especially so where the nature of the business is such
that there could be delays or cancellations which are very much inherent in
the nature of the business and cannot usually be avoided.
It is only quite natural therefore that where a party undertaking
obligations knows that it has limitations and could end up with events which
will cause detriment then such a party is only acting within the scope of
its rights to make provisions to protect itself. Thus in contracts for
travel and transportation of goods it is not uncommon for the carrier to
place a limit on its eventual liability where there is delay or cancellation
or in some other ways damage is caused or experienced.
It would therefore be relevant for any person entering into such a contract
to look carefully into the conditions based on which the transaction is
entered into. Of course, ordinarily, the ticket issued for travel may not
spell out in its body all the terms, conditions and limitations. However
there may be a reference to other documents which will contain these terms
and conditions.
No doubt in such a contract the carrier does not always completely seek to
deny liability by inserting an exemption clause. But it is most often the
case that the liability is limited to a certain amount by placing a cap on
the loss that could be suffered.
Therefore, the individual who finds himself in such a situation, but does
not care to follow up to know what these terms and conditions actually are,
refrains from and omits to do so at his own risk and to his own detriment.
Similarly, when buying a property it could in some circumstances be possible
for the seller of the property to limit his liability for any defects
existing or for any delay involved in completing the transaction without
being responsible for the loss that follows. Thus where an owner of land
enters into a contract with a contractor to carry out earth works and
infrastructure works the contractor could stipulate that notwithstanding the
arrangements to complete the work within a certain period he will not be
liable if there is a delay or only be liable for a certain amount.
Such an eventuality could also be incorporated into the buying and selling
of a house on an individual basis. But when buying a house from a housing
developer such exemptions cannot be incorporated to exclude liability.
This is because in the public interest there has been statutory intervention
through the existing legislation on Housing Development so that when a house
is purchased from a housing developer the law specifically provides for and
fixes the obligations of the developer which cannot be varied by contractual
provisions.
However, going back to the earlier discussions, does it therefore mean that
a person who purchases tickets to travel is helpless in respect of expenses
incurred because of delay or damage caused to him or other property that has
been transported?
It does not follow that the individual who suffers a loss has no remedy.
However, the effect of such a clause is that the individual cannot have
recourse to this carrier or provider of the transportation. If the
individual wants to protect himself for any loss beyond which the carrier is
liable he will need to safeguard himself by seeking indemnity from some
other source. An example would be obtaining insurance cover to provide for
the unforeseen contingencies.
When all this is said and what is involved understood there are two other
aspects which require attention and consideration.
One is that where a party seeks to rely on an exemption clause, the other
party is often inclined to take the view that such reliance is unfair. This
happens because not enough attention has been paid to what is actually
agreed to.
Therefore, the reliance on the exemption clause is said and felt to be
unfair because it allows liability to be denied even though the other party
is clearly otherwise in breach.
However, where a party does not agree with the exemption clause it should
not go ahead with the transaction. On the other hand the party that wishes
to rely on the exemption clause may not want to proceed with the transaction
if the exemption clause is not agreed to. In such a case, the bargaining
power of the respective parties comes into play.
At the end of the day, therefore, it comes back to the aspect that the
parties should make themselves consciously aware of what has been agreed to
and if all that has happened has been agreed to there is no alternative but
to honour the commitment. |
