exemption clause

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A term in a contract purporting to exclude or restrict the liability for breach of obligation of one of the parties in specified circumstances. The courts do not regard exemption clauses with favour. If such a clause is ambiguous, they will interpret it narrowly rather than widely. If an exclusion or restriction is not recited in a formal contract but is specified or referred to in an informal document, such as a ticket or a notice displayed in a hotel, it will not even be treated as a term of the contract unless reasonable steps were taken to bring it to the notice of the person affected at the time of contracting (Parker v South Eastern Railway (1877) 2 CPD 416, All ER 166). The Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contracts Regulations 1999 contain complex provisions limiting the extent to which a person can exclude or restrict his business liability towards consumers. In addition, the 1977 Act subjects certain types of exemption clause to a test of reasonableness, even in a business-to-business transaction. The Office of Fair Trading runs an unfair terms unit to monitor such clauses and enforce the 1999 Regulations. Other statutes forbidding the exclusion or restriction of particular forms of liability are the Defective Premises Act 1972, the Consumer Protection Act 1987, and the Road Traffic Act 1988. See also exclusion and restriction of negligence liability; international supply contract.

Subjects: Law.

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