What is Exemption/Exclusion Clause? Is all exemption/exclusion clause valid?
Exemption/Exclusion Clause are Clauses in the Contract that exempt/exclude the liabilities of one of the contracting parties
(an example of an exclusion clause is… XXX shall not be liable in the event of …)
An exemption/exclusion clause usually incorporated in a contract where one of the parties have a higher bargaining power over another such as contracts between company and individual where the individual has lesser bargaining power to negotiate in a contract.
However, there are some contracts are governed by the Law such as Sale and Purchase Agreement that falls under the Housing Development (Control and Licensing) Act 1966 where the Developer is not allowed to contract out the Sale and Purchase Agreement under the Act. Therefore, the Developer is unable to amend the contract as they like.
For those contracts which are not governed by the Act, exemption/exclusion clauses are valid so long that they are incorporated into the contract.
However, those clause can be challenged if it is:-
- The Notice of Exemption Clause are pointed out after the contract is made;
- The clause exempted something that is fundamental in the contract;
- The Exemption Clause that restraint the parties to commence a legal proceeding;
- The Exemption/Exclusion Clause is unfair which is arguable;
- The Exemption/Exclusion Clause is subject to strict interpretation, where the contract will read it against the parties who is trying to rely on it.
