ABSTRACT
Law Commission, Report No 69, Second Report on Exemption Clauses in Contracts , 1975, para 11
It is clear that exemption clauses are much used both in dealings with private individuals and in purely commercial transactions. We are in no doubt that in many cases they operate against the public interest and that the prevailing judicial attitude of suspicion, or indeed hostility, to such clauses is well founded. All too often they are introduced in ways which result in the party affected by them remaining ignorant of their presence or import until it is too late. That party, even if he knows of the exemption clause will often be unable to appreciate what he may lose by accepting it. In any case, he may not have suffi cient bargaining strength to refuse to accept it. The result is that the risk of carelessness or of failure to achieve satisfactory standards of performance is thrown onto the party who is not responsible for it or who is unable to guard against it. Moreover, by excluding liability for such carelessness or failure the economic pressures to maintain high standards of performance are reduced. There is no doubt that the misuse of these clauses is objectionable. Some are unjustifi ed. Others, however, may operate fairly or unfairly, effi ciently or ineffi ciently depending on the circumstances: for example, the cost and practicability of insurance may be factors in determining how liability should be apportioned between the two contracting parties. The problem of devising methods of controlling the use of these clauses, and indeed of identifying some of them, has proved both diffi cult and complicated.
