Can I exclude all liability in a contract?

As a transport and logistics operator, while you cannot exclude all liability, you can limit your liability.

Trying to exclude all liability is extremely high-risk, if not impossible.

Limited liability

We generally recommend a more realistic approach to liability which is likely to be both reasonably acceptable to the other party, reduce negotiation, and is much more likely to be effective and enforceable.

At its core, this means assigning liability based upon responsibility for the loss, rather than excluding liability.

Such limitations can include mechanisms such as:

• Excluding consequential loss and damage — this means trying to limit the liability to direct loss and damage resulting from the wrongful act.  Such exclusions have to be quite specific by listing the indirect loss that is excluded such as loss of profit, loss of goodwill and loss of business.
• Capping the amount of the liability — depending on the circumstances, you could consider capping the liability at the value of the goods or services, or perhaps to a fixed monetary amount, or the amount of your insurance.
• Exclude other causes — we would usually try excluding any loss or damage to the extent to which it is caused by the other party or perhaps a third party.
• Limiting the time limit for claims — this is requiring claims to be made in a certain time frame (although this can be risky under recent laws) and query whether it is worthwhile having regard to legislation which limits the time in which a claim can be made (although this is often as much as six years).

Most importantly, we would try and limit claims only to the extent to which you caused or contributed to the loss and damage.

Legal impediments

Trying to exclude or even limit liability can run into various legal difficulties such as :

1. Australian Consumer Law consumer guarantees

The Australian Consumer Law (ACL) includes a number of guarantees as to goods or services that cannot be excluded in certain contracts such as:

• goods or services being fit for their purpose;
• services being provided with due care and skill; and
• goods being of acceptable quality.

2. Unfair contract terms

The ACL has recently been amended to expand the reach of the prohibition on unfair contract terms (UCT). This prohibition applies to standard-form contracts:

• where at least one of the parties employs 100 or less persons or has an annual turnover of less than $10,000,000; or
• where the contract concerns the supply of goods or services wholly or predominantly for personal, domestic or household use or consumption where at least one of the parties is an individual.

A term is unfair if it satisfies the following three limbs:

• it causes significant imbalance in the parties’ rights and obligations arising under the contract;
• it is not reasonably necessary to protect the legitimate interests of the party advantaged by the term; and
• it causes detriment (financial or otherwise) to the other party if it were to be applied or relied on.

3. ACL misleading or deceptive conduct

You cannot exclude liability which results from conduct that is misleading or deceptive or likely to mislead or deceive.

4. Death or injury

Various statutory protections prevent excluding liability for personal injury or death in many situations.

What you need to do

We recommend assessing your contracts and avoiding complete exclusion of liability.  Instead, contracts should contain clauses that are much more likely to be enforceable, are reasonably balanced, and go no further than is necessary to protect your business, having regard to other protections such as insurance.

Contact us

To significantly improve your chances of your limitations for liability being enforceable, contact a member of our Transport & Logistics team to have your contracts assessed.