Control of Exemption Clauses
The Commission's 1986 report proposes reforms to control the use of exemption clauses, especially where the parties are not of equal bargaining strength. The report recommends adopting with appropriate amendments the English Unfair Contract Terms Act 1977. The effect would be to control various types of exemption clause:
|(a)||exemption of liability for death or personal injury resulting from negligence should be prohibited and exemption of liability for other loss should be subject to the test of reasonableness;|
|(b)||where one party deals as consumer or on written standard terms of contract drafted by the other party, any exemption clause in respect of contractual liability should be subject to the test of reasonableness;|
|(c)||where a person dealing as consumer agrees to indemnify another (who is acting in the course of business), that indemnification should be subject to the test of reasonableness;|
|(d)||exemption of liability by manufacturers or distributors in respect of defective goods resulting from their negligence should be prohibited;|
|(e)||in contracts for the sale of goods and other contracts under which the ownership or possession of goods passes, exemption of liability by sellers or suppliers should either be prohibited or subject to the test of reasonableness.|
In deciding whether an exemption clause is reasonable, the court should have regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made. The language in which the contract was made should be a factor to which the court is specifically directed to have regard.
The Control of Exemption Clauses Ordinance was enacted in 1989 to implement the report's recommendations.
|Press Release (PDF) (MS Word)|
|Report (PDF) (MS Word)|