Clauses that attempt to exclude or limit liabilities are well established in construction contracts. Every contract should identify particular risks and the party who assumes liability for each one. The pressure to regulate clauses that seek to exclude or limit liabilities ultimately gave rise to the 1977 Unfair Contract Terms Act (UCTA). Section 3 of the act states that a party that is in breach of contract cannot exclude or restrict its liability in respect of the breach except and insofar as the contract term satisfies the requirement of reasonableness. Clauses that seek to exclude or limit liability for personal injury or death are ineffective in every case. However, the act will only apply where one of the parties deals as a consumer or on the other’s written standard terms of business.

Furthermore, despite its somewhat vague title, the act does not extend to strike out any clause that either party would belatedly consider to be unfair. Its application is limited only to clauses that purport to exclude or limit liability. Nobody would want to admit that their written terms of business limiting or excluding its liabilities are unreasonable, but there may be occasions when they may be so judged.

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