Trade Practices: Litigation and Dispute Resolution Insights

What do in-house counsel really need to know about exclusion clauses?

By Douglas Bishop , Peter Keel and Norman Lucas

Key Points:
When drafting an exclusion clause you must carefully consider what clause will best serve your interests.

How do exclusion clauses operate?

Exclusion of liability clauses operate:

• for risk allocation purposes: parties can agree on appropriate allocation of risks between them by excluding (such as excluding liability for a certain type of loss (loss of profits, punitive damages)), limiting (including limiting liability to a certain amount) or qualifying (such as requiring warranty claims to be made within a specified time frame) a party's rights under a contract. If the parties understand the risks they have been asked to accept, they can better allocate those risks to the party who is best placed to manage those risks.