When you have a business lawyer assist you with drafting your business’ sales terms and conditions, limiting liability should be the primary aim wherever possible (and legal). Your business likely moves quickly. Thus, it can be easy to neglect to update the information on your website that may be outdated or incorrect. Accordingly, you must avoid making misleading representations to your business’ customers. For this reason, your business lawyer must limit the liability of the business, its directors, officers and employees wherever possible.
What Does Limiting Your Liability Mean?
Limiting your liability refers to limiting the scope or reason someone can sue you for breaching a contract. This may include your sales terms and conditions. While it might appear as legalese in your contracts, it is an important aspect of your business’ risk management.
What Liability Can I Limit?
The first provision under this clause should explain that while you believe all information found on the website is accurate, it may be:
- incorrect;
- out of date; or
- inaccurate to some degree.
Explain that your business provides the information ‘in good faith’ on an ‘as is’ basis. This means viewers should take it at face value and not rely on it to any extent beyond what the law requires. This is because certain information must be accurate by law. For example, this includes pricing and descriptions of your goods and services.
Continue reading this article below the formLiabilities You Cannot Exclude or Limit
In your second provision, acknowledge the ACL and accept that your business will provide certain rights and remedies to customers regarding the provision of goods and services. This provision is essentially an acknowledgment of the “rights” of consumers who purchase your business’ products and services.
The ACL requires businesses to guarantee certain aspects of goods and services, known as consumer guarantees. Similarly, if you are delivering your products to your customers, then you will be liable for any delivery issues. This applies even if you use a third-party delivery service to deliver the goods. Suppose the customer does not receive the goods. Accordingly, you will be liable to the customer, as they have no contract or agreement with your delivery provider.
Limiting Conditions and Warranties
In the third provision, have your business lawyer draft an exclusion clause that limits the applicability of implied conditions or warranties, apart from the customer’s rights as defined above. Of course, limit this exclusion to the extent the law permits. It should apply to the following:
- expressly disclaim any implied or express guarantees, warranties, representations or conditions of any kind which are not mentioned in the terms of sale;
- explain that no promise will be made to the site user that accessibility and use of the site will be error-free or always available. Your business lawyer might want to also limit your liability insofar as the server transmitting or storing viruses to users of the site; and
- draft this sub-provision so that the business is not responsible for any loss, damage or costs users incur. This should be broad enough to encompass every possible variation of liability, i.e. direct, indirect, incidental, special, consequential etc.
Capping Your Liability
The last provision should frame your business’ liability in terms of the price of the specific product the customer purchases.
Know which key terms to negotiate when buying a business to protect your interests and gain a favourable outcome.
Key Takeaways
A business must limit its liabilities to avoid financial responsibility for issues customers or third parties may encounter. In doing so, be careful that you only limit the liabilities you are legally entitled to. Furthermore, it is essential that your contracts correctly word any limitations or caps.
If you need help drafting a limitation of liability clause, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
No. There are certain obligations, such as those under Australian Consumer Law, that you cannot contract out of. This means that even if you say that you are excluding your liability, this will not be the case.
A liability clause outlines the types of loss that are recoverable, the amount that can be claimed and the circumstances loss cannot be recovered under an agreement or contract.
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