Exclusion clauses and commercial contracts

29/06/2017

Many commercial contracts can be complex and often include a number of exclusion clauses, which aim to allocate risk by setting out circumstances when certain liabilities are excluded.

Usually if there is any ambiguity about a clause, the matter is resolved against the party that put the clause forward. This is known as the contra proferentem rule (or ‘interpretation against the draftsman’), with the idea being that the onus is on the drafter of the contract to ensure the terms are as clear and explicit as possible.

However, a recent Court of Appeal case (Persimmon Homes v Ove Arup & Partners) has confirmed that this rule now has a limited role in commercial contracts between parties of equal bargaining power.

Ove Arup & Partners provided engineering and environmental consultancy services to the owners of a site being regenerated in South Wales. However, when development work began on the site a greater quantity of asbestos contamination was found than expected, leading the developers to claim that Arup had been negligent in failing to identify and report the presence of asbestos at an earlier stage. Arup denied liability, due to an exclusion clause in the contract relating to asbestos.

Despite the developer arguing in their appeal that the clause only excluded liability for causing the spread of asbestos, not negligence in the finding of asbestos, the Court of Appeal ruled that the clause did in fact exclude liability for all claims for asbestos, whether arising from negligence or not.

The decision reflects an increasing judicial willingness to broadly interpret and enforce exclusion clauses agreed by commercial parties of equal bargaining power, only applying the contra proferentem rule in cases of genuine ambiguity as to meaning.

Having a commercial lawyer look over all contracts is essential. Only by examining the small print and working through all possible scenarios can you be sure that the risk of costly surprises has been properly minimised.

If you would like advice on any commercial contract or dispute, please contact Karen Elder, Beswicks Disputes Partner, on 01782 404639 or email Karen.elder@beswicks.com