Chapter 19 Disclaimers and exclusion clauses

A disclaimer contained in a contract is essentially a clause that seeks to limit the application of some of the terms of the contract, or is otherwise a denial or renouncement of a party’s right or liability under a contract. For example, a party may wish to make clear that it ‘does not give any representation or warranty as to the completeness, accuracy or relevance of any information’. Such disclaimers will not however be effective if it can be proved as a question of fact that representations were made.

An exclusion clause operates in a similar way by seeking to exclude, limit or transfer a party’s liability under a contract. For example, a party may wish to exclude liability in relation to a matter ‘to the extent permitted by law’, or exclude liability for ‘negligence‘, or qualify the rights of parties when a breach of contract arises. It is not possible to exclude liability for fraud or to contract out of relevant legislation.

Clauses of this kind were traditionally treated with hostility by the courts, and made subject to special rules. However, since the decision in Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500, exclusion clauses subject to Australian law are to be interpreted according to their natural and ordinary meaning and read in light of the contract as a whole, looking at the context in which the clause appears. These types of clauses are usually interpreted against the party for whose benefit it is intended to operate.

A court may also take into consideration the relative bargaining power of the parties and whether there are any issues of unconscionability associated with the exclusion clause or disclaimer. Remedies are available at general law for unconscionable contracts, as well as under legislation.

The Contracts Review Act 1980 (NSW) allows a court to make orders, including to refuse to enforce a provision of a contract if it considers that provision was unjust. The Australian Consumer Law includes provisions designed to prevent unconscionable conduct in business transactions, with the relative strength of the parties’ bargaining positions able to be taken into consideration by a court in determining whether a party has engaged in unconscionable conduct.

The Australian Consumer Law represents a single, national consumer law to provide stronger protection to Australian consumers. The Australian Consumer Law replaces 17 commonwealth, state and territory laws and addresses unfair contract terms in consumer contracts (eg contracts for the supply of goods or services to an individual for personal, domestic or household use or consumption). The unfair contract terms regime applies to consumer contracts entered into on or after 1 July 2010. Contracts in existence prior to this date are not subject to the regime.

From 10 November 2023 the scope of the unfair contract terms regime will expand significantly. See Claims under statute – Construction Law Made Easy

Updated July 2020