Commercial Contracts: Limiting Liability with a Consumer
In this article, we are looking at limiting liability when dealing with consumers. Other Cousins Business Law Fact sheets illustrate that to limit liability in a contract, you need to time exactly when the terms doing so get into the contract i.e. before it is made. All we’ll say here on that subject is just a reminder that, if you don’t get the terms properly in front of the consumer, then you may as well not have them at all.
Some people disapprove of limiting liability at all. We don’t understand that view. If, for example, you sell a widget for £50 to someone who puts it into a conveyor belt which goes wrong and stops a factory’s production for a few days you might have a £100,000 claim for a £20 profit. That should surely have been limited. And the good news is it can be done.
But many people think you can limit liability for anything. You can’t. For example, by law you simply cannot limit your liability for personal injury or death caused by negligence or your liability for fraud.
Many of us will be dealing with consumers, especially when selling from websites and then you are much more restricted as to what you can limit, such as their statutory rights**. If you try to do such-things, you are at great risk of the whole attempt at restriction being disregarded and even interest from trading standards and/or the OFT! And any other limiting you do has to be reasonable.
We see many examples where people have copied others. They are often totally ineffective contracts so far as limiting liability is concerned; indeed some are illegal. Basically (as we’ve just seen), if you over-limit liability the whole clause that is on this point is ignored—so do be careful. In every case, your terms have to be fair so e.g. something (which we’ve often seen) saying words to the effect of “If this doesn’t work we won’t be liable” will probably be void for unfairness.
So, you have to get the positioning of the terms right and also get the wording right. There are many ways of dealing with these issues and we could all do with some official guidance—taking what some might call an extreme view, the OFT have published guidance on how to deal with these issues on-line. The guidance is about 75 pages long if you’re interested! It’s here: http://www.oft.gov.uk/News/Publications/Leaflet+Ordering.htm
The basics of what they suggest (it is of course heavily consumer biased but you can at least see how they might view you if there were a complaint) are:
- Intriguingly they suggest we shouldn’t put “I have read and understood the terms and conditions” as we all know they haven’t! Instead it is said there should be a warning to them to ensure they do read them and that they contain the legal contract that applies if they go ahead—(Microsoft does the former I have just noticed!)
- Don’t use words like “statutory remedies” as the OFT think these are not understood and are thus unfair.
- Don’t use typical complex legal wording.
- Most terms need to be in a “durable medium” so best that any can be printed off and/or permanently stored.
**These are rights such as the right that the thing bought should be good for the (disclosed) purpose it’s bought for, decent quality etc. You might be amazed how many terms suggest the opposite can occur!
Contact Cousins Business Law for advice on this topic.
Note: Since this article was written, protection for consumers has been increased by further regulations such as those relating to unfair trading, provision of services and so on, all of which need to be complied with when dealing with consumers. Further changes are proposed in the new Consumer Rights Bill to implement the EU Consumer Rights Directive. This aims to consolidate the main consumer legislation and enhance consumer protection. The government plans to consult on the Consumer Rights Bill in the summer of 2012.
Article reviewed May 2012.
Article added before March 2008 © Cousins Business Law
This article is not intended to constitute legal advice, nor is it intended to be a complete and authoritative statement of the law, and what we say might be out of date by the time you read it. You should always seek legal advice to confirm whether or how any information in this article applies to your particular situation. We offer a free telephone consultation to discuss your particular circumstances.
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