Use and limits of an exemption clause
For you, as a company, customer service is essential. Of course, a 100% optimal service is not always obvious and the customer can hold you liable if you do not (completely) fulfil your obligations. In order to limit your liability to a reasonable level (and sometimes even to exclude it), you can include an exemption clause in your contracts. However, this is subject to legal limits, some of which we will discuss below.
General contract law
Besides specific rules from which parties cannot deviate (e.g. the contractor’s ten-year liability for serious construction defects), general contract law sets two overall limits.
You cannot exempt yourself from liability for your own intentional breach. After all, such a breach should not be rewarded. This prohibition of limitation of liability does not apply to other types of breach, e.g. your own non-intentional breach (minor or serious), or the (even intentional) breach of another person you have engaged to help you perform your contract. Please note that a second overall limit and a planned reform of the law will follow below.
Secondly, you may not erode the essence of the contract. The starting point remains that a contract has binding force, therefore you may not drastically impair the main things that you promise the other party. For example, a seller of perishable items cannot exclude his liability for late deliveries.
Finally, in the (near) future, the bill on Book 5 “Obligations” of the new Civil Code will become effective. In the current version of the bill, the aforementioned overall limits (no exemption for own intentional breach and no erosion of the essence of the contract) are further tightened: in the event of a deliberate breach by an auxiliary person whom you have hired for the performance of your contract, an exemption clause will no longer be permitted either.
Consumer law
In contracts with a consumer, i.e. a person who concludes the contract for (predominantly) private use, consumer law provides for additional limits to protect the consumer. To this end, Book VI of the Code of Economic Law contains a “black list” of unlawful clauses. Thus, a company cannot release itself from its liability towards a consumer for “gross negligence” (i.e. serious breach) on the part of itself, its employees or agents.
In a B2C contract, liability cannot be excluded for serious or intentional breach (on the part of yourself, your employees or your agents), but liability can be excluded for minor breach. Whether there is a serious or a minor breach, depends on the circumstances. One can compare, for example, the late delivery of wedding clothes or a sofa.
Besides such specifically prohibited clauses, there is also a general prohibition: no exemption clause may create, to the detriment of the consumer, an “obvious imbalance” between the rights and obligations of the parties. This general wording allows any limitation of liability to be tested. The interpretation of this “obvious imbalance” again depends on the circumstances. Aspects involved include the expertise of the company, the (un)clarity of the clause and its relationship with other clauses in the contract.
Corporate law
Book VI of the Code of Economic Law also contains similar limitations for B2B contracts, by means of a general assessment standard and lists of “black” (always prohibited) and “grey” (presumption of unlawfulness) clauses. For example, an exemption clause is presumed to be unlawful if it exempts the company from liability for serious breach / gross negligence of itself or its employee.
The general assessment standard in a B2B setting also prohibits an “obvious imbalance” between the rights and obligations of the parties. Important factors include the customs, the clarity of the clause and the general economy of the contract.
Conclusion
An exemption clause is very useful, but must be drafted carefully and must respect the legal limits. Otherwise, you risk having the clause declared null and void and being held fully liable.
Matthias Meirlaen en Bruno Thoen
De Langhe Advocaten
Published in VOKA – Ondernemers, VOKA Kamer van koophandel Oost-Vlaanderen, edition February 2022
