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3 top tips for exclusion clauses in contracts

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With some companies, have you noticed that the Terms and Conditions (T&Cs) seem to be longer than Shakespeare’s Hamlet, in size 6 font? 

Even if you can manage to find the ‘Limitation of Liability’ clause with a magnifying glass, is it a standard term that’s fit for the purpose of the contract?

At Law 365 we think T&Cs should be easy to navigate and understand, especially if you want to add exclusion clauses.

An exclusion clause is simply a clause, or set of clauses, which sets out ways to exclude your liability (limiting your risk) in the contract so that your customer can’t pursue you for these sets of exclusions.

An exclusion clause might look something like this: 

The Supplier shall not be liable for a Products' failure to comply with the warranty set out in Clause XX if the defect arises because the Customer has:

  1. failed to follow the Supplier’s written instructions for the use and maintenance of the Products; or
  2. attempted to decompile, reverse compile, disassemble or reverse engineer all or any part of the Products.

Exclusion clauses and liability caps are a crucial tool for Microsoft Partners to allocate risk. Depending on your bargaining position, you may be able to include certain caps or carve-outs that work in your favour, but if they are buried in T&Cs in a way that means the other party is unlikely to read or understand them, you may end up losing that protection completely.

Bottom line: You don't want to ruin a good client relationship by burying away terms that you may need to rely on later.

3 top tips for exclusion clauses in contracts

1. Signpost exclusions

Any harsh or unusual exclusion clauses should be well signposted, visible and brought to a client’s attention in a clear, readable font size (as obvious as it sounds!)

2. Put the exclusion clause in the right place

Put the exclusion clause in an easily identifiable section in your T&Cs -- the section of the contract where a customer would expect to find it -- with the title “Limitation of Liability” or “Exclusions and Limitation of Liability”. 

3. Make sure your client has read the terms

Make sure that your T&Cs are acknowledged by your customer and expressly incorporated into your contracts.

If you are intending to incorporate your standard T&C's into a contract, there should be a clause in your contract that says that the terms of the agreement are “subject to our Standard Terms of Business” or “subject to our Terms & Conditions” depending on what your terms are called.

They can also be attached to the contract as an Annex or Schedule to confirm that your customer has understood your T&C's are incorporated without any uncertainty or confusion.

These are just a few practical points to consider while drafting exclusion clauses and standard terms> If you’d like to discuss your contracts or any exclusion clauses with our friendly Commercial Team, then please do not hesitate to get in touch with us. We offer free, no-obligation teams calls on our Get Started page.

Further reading

Contract Liability for Beginners | What, Why and How (law365.co)

Find out why you should cap indemnities

Fancy a natter about legal matters?

Are legal worries getting you down? Let the Law 365 team help you grow your business with less risk.

What makes us different?

  • We only work for Microsoft Partners, just like you.
  • We offer our services as a monthly subscription – so you can budget your legal costs for the year. No surprises.
  • We’re your  'in-house’ legal team, but we won’t bog you down in legal jargon.
  • We’ll work at your pace to get deals over the line. Fast.

Call us on 01892 313 943 or drop us a note at hello@law365.co

Law 365 – The Award-Winning Microsoft Partner Law Firm

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