An exemption clause in a contract exempts one party from legal responsibilities and liabilities. There are two types: limiting and exclusion clauses. They can be used in legal and customer-related situations, but may be deemed unfair or unreasonable by a judge.
An exemption clause is a part of a contract that specifies certain conditions from which one party is exempt. These conditions are usually legal responsibilities and liabilities in specific situations. Typically, a disclaimer works more to the benefit of the party entering into the contract in order to protect that party from providing onerous financial assistance or being sued. Both parties, however, can agree to a compromise if the other party disagrees with the drafted clause.
There are two general types of opt-out clause, the first of which is the ‘limiting clause’. This clause aims to place a limitation on the party’s liability when situations of loss and damage arise. For example, in the event of bodily injury, the party will only pay up to 30% of the costs incurred in treating the injured person. Sometimes, a limiting clause might also specify the amount of liability the party will accept, such as in a certain amount of money or in non-financial terms.
The other type of disclaimer is the “exclusion clause”, where the party wants to be totally excluded from any liability. If this clause is agreed, the party will avoid any liability in any harmful or prejudicial situation. Some contracts would also include this clause in case one of the parties involved violates the clauses of the contract. If, for example, one party violates a non-disclosure clause in the contract, the other party is automatically barred from any negative outcome of disclosing the information.
An opt-out clause can often be used in legal situations, but it can also be used in customer-related circumstances, such as warranties and guarantees. The clause, however, is not openly stated as such, so customers should be wary. For example, a limiting clause would be in the form of a statement such as “the company will not be liable for any damages after six months of purchase”.
In many countries, the court usually checks a company’s authority to include an exemption clause, especially if the company may be involved in situations of injury, accident or even death. Car manufacturers, for example, cannot rely on this clause if a manufacturing defect has caused serious injury to a passenger or driver. Hospitals cannot have limited or excluded liability if an employee’s negligence resulted in the death of a patient. The judge also has the power to override the exemption clause if the clause is deemed unfair or unreasonable.
Protect your devices with Threat Protection by NordVPN
