Contact: Patrick Mead; Carter Newell (Queensland, Australia)
There is a distinction between an exclusion clause, the effect of which is to either absolve a party for the consequences of a breach of contract or duty or to define substantively the limit of the duty by negating obligations that the law would otherwise impose, and a liability cap, the purpose of which is to limit a party's exposure up to a pre-determined amount or percentage of contract value.
Often, these legal mechanisms operate in tandem with provisions in relation to liquidated damages (which are not considered to be exclusory, operating in theory for the benefit of both parties) and insurance and indemnity provisions within a contract, to create a finely balanced risk regime.
Such clauses are construed '…accordingly to their natural and ordinary meaning, read in light of the contract as a whole, thereby giving due weight to the context in which the clause appears, including the nature and object of the contract, and where appropriate, construing the clause contra proferentum in case of ambiguity…'(1)
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