Académique Documents
Professionnel Documents
Culture Documents
LimitationofLiabilityClauses|ContractDraftingEssentials
Rajeev Mishra
(http://blog.contractdrafting.co.in/Blog/index.php/2011/11/19/limitation-of-liability-clauses/#comments)
As a dedication to readers of this Blog (http://blog.contractdrafting.co.in/Blog/) , I am forcing myself to write something after a long hiatus.
The topic that I have chosen is Limitation of Liability and my discussion of this topic will cover:
1. Relevant section of Indian Contract Act;
2. Relevant judgements, which address the issue directly;
3. Suggestions to draft such clause in the agreements; and
4. Suggestions by other prominent authors on the subject.
http://blog.contractdrafting.co.in/Blog/index.php/2011/11/19/limitationofliabilityclauses/
1/7
12/4/2014
LimitationofLiabilityClauses|ContractDraftingEssentials
Observations
In light of above observations, it becomes clear that scope of any Limitation of Liability Clause in any contract cannot restrict the
scope of compensation payable for damages or loss suffered by the non-defaulting party due to breach or non-performance of
contract by the defaulting party, as this compensation is payable under the Indian Contract Act of 1872.
Although, there is no specific clause in Indian Contract Act of 1872, which gives guidance on Limitation of Liability provisions, there
is enough guidance on framing of such clauses.
Now, coming back to the Questions that we have asked initially, readers can now answer these as follows:
Answer to question in item (a). Inclusion of Limitation of Liability clause in a contract is important, especially in light of different status
of such clause in international business relations, to define a clear guideline for the parties to a contract. A Contract drafter should
take into account the residential status of parties, choice of law clause, jurisdiction clause, liquidated damages provision, and
subject matter clause. If a strong relation with India has been created in the contract through these clauses, the Limitation of Liability
clause should take this into account. If a strong relation with foreign law is being created, contract drafter should then take into
account the legal position applicable to Limitation of Liability clause in such foreign jurisdiction.
Answer to question in item (b). Inclusion of a Limitation of Liability clause is important in case one of the parties to the contract is from
India and another is from a foreign country.
Answer to question in item (c). If the parties, subject matter of contract, applicable law and jurisdiction, all are strongly linked to India,
contract drafters may exclude such Limitation of Liability clause from the contract; provided, they have included Liquidated
Damages Clause in the contract. It is recommended that they have included either of the two clauses, Limitation of Liability or
Liquidated Damages, in their contracts. But see the below discussion on the Judgement of Honble Supreme Court of India in
Bharathi Knitting versus DHL Worldwide (http://indiankanoon.org/doc/1042742/) . In international contracts, involving one of the
Indian Parties, and strong link to Indian law, must have both Limitation of Liability clause and Liquidated Damages Clause.
Otherwise, the international party may not be able to seek compensation under Section 74 of the Indian Contract Act, which is more
liberal in meaning as compared to Section 73 and Section 75 of the Indian Contract Act.
http://blog.contractdrafting.co.in/Blog/index.php/2011/11/19/limitationofliabilityclauses/
2/7
12/4/2014
LimitationofLiabilityClauses|ContractDraftingEssentials
readers attention is drawn to observations made by Honble Supreme Court: It is true that the limit of damages would depend upon
the terms of the contract and facts in each case. Readers are also advised that the appeal by complainant was based on absence of
consensus ad idem between the parties. Another point that Honble Supreme Court noted was that the complainant had failed to
take put insurance covers for the goods as advised in Clause 7 of the Consignment note. In light of above discussion, it cannot be
stated that above case is a definite state of law on all situations involving Limitation of Liability Clause. Also to be noted is the fact
that the award of such limited compensation was towards deficient services; which is better addressed by Tort law (still in nascent
stage inIndia). Since, no punitive damage is allowed in light of Section 73 of the Indian Contract Act, awarding a higher sum for
deficient services might be seen as penal.
I am sure, the findings might have been different had the facts were different.
201followers
(http://digg.com/submit?
url=http%3A%2F%2Fblog.contractdrafting.co.in%2FBlog%2Findex.php%2F2011%2F11%2F19%2Flimitation-of-liabilityclauses%2F&title=An+Introduction-Limitation+of+Liability+Clauses)
(http://www.reddit.com/submit?
http://blog.contractdrafting.co.in/Blog/index.php/2011/11/19/limitationofliabilityclauses/
3/7
12/4/2014
LimitationofLiabilityClauses|ContractDraftingEssentials
url=http%3A%2F%2Fblog.contractdrafting.co.in%2FBlog%2Findex.php%2F2011%2F11%2F19%2Flimitation-of-liabilityclauses%2F&title=An+Introduction-Limitation+of+Liability+Clauses)
(http://www.stumbleupon.com/submit?
url=http%3A%2F%2Fblog.contractdrafting.co.in%2FBlog%2Findex.php%2F2011%2F11%2F19%2Flimitation-of-liabilityclauses%2F&title=An+Introduction-Limitation+of+Liability+Clauses)
(http://buzz.yahoo.com/buzz?
targetUrl=http%3A%2F%2Fblog.contractdrafting.co.in%2FBlog%2Findex.php%2F2011%2F11%2F19%2Flimitation-of-liabilityclauses%2F&headline=An+Introduction-Limitation+of+Liability+Clauses)
(http://www.dzone.com/links/add.html?title=An+IntroductionLimitation+of+Liability+Clauses&url=http%3A%2F%2Fblog.contractdrafting.co.in%2FBlog%2Findex.php%2F2011%2F11%2F19%2Fli
mitation-of-liability-clauses%2F)
(http://www.facebook.com/sharer.php?t=An+IntroductionLimitation+of+Liability+Clauses&u=http%3A%2F%2Fblog.contractdrafting.co.in%2FBlog%2Findex.php%2F2011%2F11%2F19%2Fli
mitation-of-liability-clauses%2F)
(http://delicious.com/save?title=An+IntroductionLimitation+of+Liability+Clauses&url=http%3A%2F%2Fblog.contractdrafting.co.in%2FBlog%2Findex.php%2F2011%2F11%2F19%2Fli
mitation-of-liability-clauses%2F)
(http://www.dotnetkicks.com/kick/?title=An+IntroductionLimitation+of+Liability+Clauses&url=http%3A%2F%2Fblog.contractdrafting.co.in%2FBlog%2Findex.php%2F2011%2F11%2F19%2Fli
mitation-of-liability-clauses%2F)
(http://dotnetshoutout.com/Submit?title=An+IntroductionLimitation+of+Liability+Clauses&url=http%3A%2F%2Fblog.contractdrafting.co.in%2FBlog%2Findex.php%2F2011%2F11%2F19%2Fli
mitation-of-liability-clauses%2F)
(http://www.linkedin.com/shareArticle?
mini=true&url=http%3A%2F%2Fblog.contractdrafting.co.in%2FBlog%2Findex.php%2F2011%2F11%2F19%2Flimitation-of-liabilityclauses%2F&title=An+Introduction-Limitation+of+Liability+Clauses&summary=&source=)
(http://www.technorati.com/faves?
add=http%3A%2F%2Fblog.contractdrafting.co.in%2FBlog%2Findex.php%2F2011%2F11%2F19%2Flimitation-of-liabilityclauses%2F)
(http://twitter.com/home?
status=Reading+http%3A%2F%2Fblog.contractdrafting.co.in%2FBlog%2Findex.php%2F2011%2F11%2F19%2Flimitation-of-liabilityclauses%2F)
(http://www.google.com/buzz/post?
url=http%3A%2F%2Fblog.contractdrafting.co.in%2FBlog%2Findex.php%2F2011%2F11%2F19%2Flimitation-of-liability-clauses%2F)
Sharethis:
Share
http://blog.contractdrafting.co.in/Blog/index.php/2011/11/19/limitationofliabilityclauses/
4/7
12/4/2014
LimitationofLiabilityClauses|ContractDraftingEssentials
2Comments
ContractDraftingEssentials
Login
Share Favorite
SortbyBest
Jointhediscussion
TanyaJain22 3yearsago
canderebetotalexclusionofliablityunderindiancontractact?
Reply Share
raajeevmishra
Mod >TanyaJain22
3yearsago
Yes,exclusionofliabilityisamatterofagreementbetweentheparties.
Subscribe
Reply Share
AddDisqustoyoursite
Privacy
Recent Posts
Learn Contract Drafting Part 4 Write for your audience Part 1 (http://blog.contractdrafting.co.in/Blog/index.php/2014/07/15/learn-contract-draftingpart-4-write-for-your-audience-part-1/)
Food for thought Is university syllabus a contract? (http://blog.contractdrafting.co.in/Blog/index.php/2014/06/27/food-for-thought-is-university-syllabusa-contract/)
Learn Contract Drafting Part 3 Read Patiently (http://blog.contractdrafting.co.in/Blog/index.php/2014/06/22/learn-contract-drafting-part-3-readpatiently/)
Learn Contract Drafting Part 2 Read Carefully (http://blog.contractdrafting.co.in/Blog/index.php/2014/06/20/learn-contract-drafting-part-1-startreading-2/)
Learn Contract Drafting Part 1 Start Reading (http://blog.contractdrafting.co.in/Blog/index.php/2013/11/27/learn-contract-drafting-part-1-startreading/)
Archives
Select Month
Tags
acceptance (http://blog.contractdrafting.co.in/Blog/index.php/tag/acceptance/) Agreement
Contract
Contract Drafting
(http://blog.contractdrafting.co.in/Blog/index.php/tag/contract-drafting/)
(http://blog.contractdrafting.co.in/Blog/index.php/tag/contract-clauses/)
http://blog.contractdrafting.co.in/Blog/index.php/2011/11/19/limitationofliabilityclauses/
5/7
12/4/2014
LimitationofLiabilityClauses|ContractDraftingEssentials
Law
Indian
Liquidated Damages
Reading
Writing
(http://blog.contractdrafting.co.in/Blog/index.php/tag/writing/)
(http://blog.contractdrafting.co.in/Blog/index.php/tag/website-terms/)
Meta
Log in (http://blog.contractdrafting.co.in/Blog/wp-login.php)
Entries RSS (Really Simple Syndication) (http://blog.contractdrafting.co.in/Blog/index.php/feed/)
Comments RSS (Really Simple Syndication) (https://contractdraftingessentials.disqus.com/latest.rss)
WordPress.org (http://wordpress.org/)
Blogroll
Legal Development Blog (http://legaldevelopments.blogspot.com/)
Mondaq Article Database (http://www.mondaq.com/search/article_search_process.asp?itopic_id=97&iproduct_id=3&bsummary=on)
Spicy IP (http://spicyipindia.blogspot.com/)
http://blog.contractdrafting.co.in/Blog/index.php/2011/11/19/limitationofliabilityclauses/
6/7
12/4/2014
LimitationofLiabilityClauses|ContractDraftingEssentials
LiveTrafficFeed
AvisitorfromShanghai,China
viewedContractDraftingClauses
DefinitionCla...24minsago
AvisitorfromChirala,Andhra
Pradeshviewed"IndianContractAct,
1872DownloadPDF|Contract
DraftingEssentials"44minsago
AvisitorfromBangalore,Karnataka
viewed"Section37&40,Indian
ContractAct|ContractDrafting
AvisitorfromNewDelhi,Delhi
Essentials"57minsago
viewed"AgreementversusContract|
ContractDraftingEssentials"1hr16
AvisitorfromDelhiviewed"Listof
minsago
Sections,IndianContractActof1872|
ContractDraftingEssentials"1hr39
minsago
AvisitorfromChennai,TamilNadu
viewed"IndianContractAct|
ContractDraftingEssentials"2hrs19
AvisitorfromNewDelhi,Delhi
minsago
viewed"Whencommunicationis
completeunderIndianContractAct?|
ContractDraftingEssentials"2hrs27
AvisitorfromIndiaviewed"Contract
minsago
DraftingEssentialsunderIndian
ContractActof1872"3hrs8mins
AvisitorfromJaipur,Rajasthan
ago
viewed"ContractDraftingEssentials
underIndianContractActof1872"4
hrs57minsago
AvisitorfromKolkata,WestBengal
viewed"SampleContractClauses|
ContractDraftingEssentials"5hrs9
AvisitorfromMontreux,Vaud
minsago
viewed"CommunicationunderIndian
RealtimeviewMenu
http://blog.contractdrafting.co.in/Blog/index.php/2011/11/19/limitationofliabilityclauses/
7/7