What does this clause do?

It limits the liability of one or more parties for specific loses or the amount of the loss.

Generally in law you will be responsible for any failure to perform an agreed obligation or any loss that naturally arises out of any act or failure to act.  Because business involves risk parties will often agree to a limitation of liability clause to limit the loss that they will incur to each other if something goes wrong or if they don’t perform.

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The parties ability to limit their liability is limited by common law and legislation.  You cannot exclude liability for fraud or intentional acts by the contracting party for example.

Note: it is possible and quite common to have one sided limitation of liability clauses where one party excludes all their liability.

You will have different types of limitation of liability for example:

  • Excluding losses arising from the happening of certain events or if one of the parties doesn’t perform.
  • Excluding specific types of losses like consequential or indirect or unforeseeable harm;
  • Limiting the legal causes of action and the loss arising from, for example no liability arising out of delict, breach of contract or negligence.
  • Limiting the extent of liability for example to a maximum of the contract value or a monetary limit.

You should read these carefully to see what harm is excluded if something does go wrong.

Real life example:

You take your children a water park called Splash City.  The sign that is prominently displayed at the entrance and on your ticket states:

DISCLAIMER:   I/We enter Splash City and participate in any or all activities at my/our own risk and indemnify and absolve Splash Co (Pt) Ltd, its shareholders, directors, management and staff members of any damage or loss to my/our personal property, physical injury or death (or that of my spouse, children, family members). Splash Co will not be held responsible or liable for any accident or incident or resultant medical or emergency care or assistance including those listed/stated here.

Legislation:

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The Consumer Protection Act requires that any assumption of risk or limitation of liability is brought to the attention of a user when contracting. Make sure that you bring any indemnity clauses to the attention of the other party (if they are an individual or a company with a turnover less than R2million) or they may not be bound!  A good way to do this is to ensure that they sign along side it and to make sure that it is prominent.

 

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