Exclusion of Liability Clauses and Enforceability

insurance policy and legal gavel with pen

“Give me honorable enemies rather than ambitious ones, and I’ll sleep more easily by night.”
― George R.R. MartinA Game of Thrones

Often times business relations are governed by a contract. These contracts generally have an exclusion of liability clause drafted by the more powerful party.

In Bank of Montreal v Demakos, [1996] OJ No 4667, Justice Killeen states that:

Someone once said ‘life isn’t necessarily fair’. The same could be said about credit card liability. However, so long as the stringency of the agreement language is clear-cut and is free of unconscionability, it must be enforced. The language is not unconscionable and it is unambiguous in its reach over all cardholders. Accordingly, it must be given its full effect.

Courts tends to enforce clear contractual clauses that comply with the law. However, overly broad, exculpatory clauses that place an unreasonable risk on the customer may not be upheld. In Tercon Contractors Ltd. v. British Columbia2010 SCC 4, Justice Binnie in dissent writes that exclusion clauses that are either unconscionable or raise an overriding public policy that outweighs the strong public interest in the enforcement of contracts will not be upheld. Unconscionability includes such factors as an overwhelming imbalance in the bargaining power or a grossly unfair transaction.

The more specific the clause, the higher the likelihood of enforceability. The contra proferentem rule “interpretation against the draftsman” stipulates that ambiguous language will be interpreted against the draftsman.

Advertisements