Exemption from liability

Exemption from liability

Exemption clause / Article

 

Exemption clause / Article is a written and plain clause in a contract for exempting one part of the contract or both parties from their liability to perform their obligation and duties as specified for in the contract.

The above exemption maybe complete exemption or limited exemption, it all depends on the drafting of the said contract.

One of the major, well known, recognized and fundamental clause in exemption is the clause of Force Majeure.

Force Majeure Clause

The definition of the above clause is that:

Occurrence of an unexpected and unavoidable public event beyond the control of either party which renders the performance of the contract impossible for both parties.

There are many recognized events of force majeure, but the parties should be guided and adhered to the events as mentioned in the contract, therefore both parties of the contract should be aware and keen while drafting or accepting the clause of force majeure in order to protect their interests in the future.

The force majeure clause is also known or recognized in different countries / legislation as Act of God or impossibility of execution or impracticality of execution, therefore in the above names or classification which leads to impracticality of the performance of the contract, the parties should know that this will automatically lead to the exemption of their liability.

 

There is no specific name to the clause of the force majeure, and it is left to the draftsman who drafts the contract to give certain name or definition to save the interests of his client, but  nevertheless there  are some / certain events can be classified as force majeure by its nature and can not be disputed, avoided or ignored, and can not be subject different interpretation, such as: riots, earthquakes, war, invasion …….etc. also there are some recognized events such as increase  in the price of the product, negligence of either parties …… etc. which can not be treated as force majeure.

Conditions of force majeure:

1. The party who alleges the force majeure must notify the other party in writing about the occurrence of such event.
2. The contract should contain the time for the notice.
3. The contract should contain solutions or options in case of the continuity of the event of force majeure
4. The termination of the contract in case of the expiry of the notice or the agreed upon period between the parties.
5. To close down the project and to finalization the contractual relation between the parties.

We have to draw the attention and to differentiate between the force majeure and the hardship circumstance doctrine which means occurrence of an event due to economic, political or social circumstance which make drastic change in the performance or the conclusion of the contract, such as:

1. To ban importation of goods or put restriction in the usage of certain items
2. To increases the price of certain items
3. General inflation in the market which renders the performance is hard difficult but it can not lead to the impossibility of the execution.

The swift and improper drafting of the clause of force majeure and the misinterpretation and misunderstanding between force majeure and hardship circumstances, may lead to open dispute between the parties of the contract, and definitely will end to courts, therefore the plain / clear and definite drafting of the clause of force  majeure will close the door for any allegation or litigation in the future.