Limiting liability: statutory and common law controls on limitation clauses

by Practical Law Commercial

A practice note that outlines the complex legal framework controlling terms that limit liability in business-to-business (B2B) contracts. This practice note examines the combined effect of common law principles, such as incorporation, restrictive interpretation and public policy, alongside statutory controls, principally the Unfair Contract Terms Act 1977 (UCTA). The note gives an overview of liabilities that cannot be limited, such as liability for a party's own fraud, and of liabilities that are hard to limit, including liability for negligence, misrepresentation and breach of certain statutory implied terms. This Practice Note also provides detailed guidance on the scope of UCTA, the UCTA reasonableness test, the incorporation of onerous and unusual terms, and the interpretation of exclusions for specific types of loss. It serves as a guide to proposing effective and enforceable limitation and exclusion clauses and to possible grounds for contesting an exorbitant limit.