When you instruct a professional person to act for you, the Terms and Conditions or Terms of Business of the professional will generally be included in the ‘contract’ between you and that professional.
The contract will outline the obligations of the parties and govern how disputes will be resolved should they arise.
A dispute between a client and their professional can arise for many reasons. A common cause of dispute will be the allegation that the professional provided of negligent advice or undertook a negligent act or omission, which causes the client loss.
To avoid liability in such circumstances, a professional may seek to include an exclusion of liability clause in the contract with their client. This can seek to limit liability to a certain amount, such as to a sum of £1million, or seek to exclude liability in its entirety.
However, exclusion clauses will not always be enforceable. The Court will consider three issues when deciding if an exclusion clause is enforceable or not.
Firstly, the Court will consider if the term was incorporated into the contract. A person who signs a contract is bound by its terms. In English law, it is no defence to say that you did not read or understand the terms if you have signed the contract. There are only two exceptions to this rule; whether the party was induced into the contract by misrepresentation, or whether the party has no understanding of the document they have signed and there was a fundamental difference between what they signed and what they thought they had signed. A party who sought legal advice before they signed the contract will struggle to rely on the latter exception.
An exclusion clause must also be bought to the attention of the party it seeks to bind and therefore reasonable steps must be taken to bring it to the other party’s attention. What constitutes ‘reasonable steps’ is fact sensitive, and the more onerous the clause the more steps must be taken to bring it to the other party’s attention. The exclusion clause must also be bought to the attention of the other party before they sign the contract.
Secondly, the Court will consider if the clause is properly drafted so that it is construed as excluding liability effectively. Exclusion clauses must be clear and unambiguous. If there is any ambiguity in the clause, the Court will seek to interpret the ambiguity against the person who drafted the clause, which otherwise known as the ‘Contra Proferentem’ Rule.
Lastly, the Court will consider whether the clause is prohibited by statute. The relevant statute for business to business contracts is the Unfair Contract Terms Act 1977, and for consumer to business contracts it’s the Consumer Rights Act 2015.
Under the Unfair Contract Terms Act 1977, any clause which seeks to exclude liability for death or personal injury by negligence will be automatically void. Any term which seeks to exclude other loss caused by negligence, will be void unless reasonable. Therefore, the Court applies a reasonableness test. Under the reasonable test, the Court will look at the bargaining position of the parties, any inducement received, and if the customer knew about the exclusion clause, amongst other things.
Under the Consumer Rights Act 2015, a trader cannot limit or exclude liability for failures to comply with statutory implied terms such as the requirement for a product or service to be fit for purpose and of sufficient quality. The Act states that a term is unfair if it is “contrary to the requirements of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer”. The test is one of fairness. A trader can also not exclude liability for death or personal injury under this Act.
Therefore, if are a party to a contract which contains an exclusion of liability clause which the opposing party is seeking to rely on, you should seek the advice of a legal professional to advise you on the prospects of proving the clause is unenforceable and therefore invalid.
Specters Solicitors have acted on cases where professionals have sought to exclude or limit their liability via the terms of retainer with a client. For reasons stated above, it is imperative that the clause is reviewed in line with the individual facts of the case to decipher if the professional will be able to rely on such a clause and limit their liability either partially or entirely.
You should also ensure that you have read and fully understand each term of a contract in advance of signing it and seek legal advice if you are unsure about the meaning of any of the terms.
