The use of exclusion clauses to limit liability in case a contract goes wrong is common in many kinds of contract – especially where the ‘downstream’ effects may be large relative to the value of the contract. Typically, such a clause will limit the damages payable to a particular sum or will exclude certain types of consequential loss. If such a clause is reasonable and lawful, the court will normally uphold it. However, if the clause is not reasonable, it is unenforceable and may be attacked using the Unfair Contract Terms Act 1977 (UCTA).

Recently, the UCTA was used with success by an IT company that wished to claim damages for loss of profits from the provider of serviced offices from which it rented its premises. The offices had defective air-conditioning and became stiflingly hot. This prevented the IT company from holding training courses, which in turn caused it to suffer financial loss. It sued.

The serviced office provider had a ‘catch-all’ term in its contract which attempted to exclude any liability whatsoever for losses suffered by its tenants – even those which amounted, in essence, to a failure to provide habitable offices.

The court considered the exclusion clause to be unreasonable under the UCTA and allowed the tenant’s claim.

“The law is constantly changing,” says Maung Aye, “and it is worth undertaking periodic reviews of the standard legal documents you use, to ensure that they still comply.”