CISG Advisory Council Opinion No. 17

ANNEX 1 – LIMITATION AND EXCLUSION CLAUSES IN COMPARATIVE PERSPECTIVE

 Opinion 17 -- Part 1

 Annex 1 -- Part 2

 Civil law systems

Exemption and limitation of liability clauses are permitted in most legal systems within the civil law tradition, including France, Belgium, Germany, Italy, Switzerland, Spain, Turkey, Brazil, Colombia, Argentina, Russia, Japan and Korea. See Annex 1 for more details. 

 (France) The French Civil Code is silent with respect to exemption and limitation clauses. Nevertheless, they are generally valid under the principle of freedom of contract.[1] In sales contracts, the legal regime governing exemption and limitation clauses is quite complex, as the Civil Code distinguishes between the seller´s warranty for hidden defects (garantie des vices cachés) (pejus), on the one hand, and the seller´s liability for delivery of non-conforming goods (aliud) on the other. Under Article 1645 of the Civil Code, the seller cannot exclude the warranty for those hidden defects that he knew at the time of the conclusion of the contract.  Furthermore, case law equates the professional seller’s warranty for hidden defects to that of a seller acting in bad faith, since the former is presumed to know all defects in the goods sold. Clauses exempting or limiting the professional seller’s warranty for hidden defects are, nevertheless, admitted as between professionals of the same business sector. As regards the seller´s liability for non-conforming goods (aliud), the law is more flexible. French courts have admitted the exemption of the seller´s liability in cases where the goods delivered were of a different kind of those contracted for.[2] Accordingly, the courts only invalidate limitation and exemption clauses in case of willful breach or gross fault on the part of the seller, or in cases where the clause depletes an essential obligation under the sales contract (new Art. 1170, Civil Code).[3] In addition, the 2016 reform of the French Civil Code has introduced a particular regime concerning exclusion and limitation of liability in adhesion contracts (Art. 1171). [4] With regard to CISG contracts, doctrinal authorities advocate that the Convention´s uniform treatment must prevail over the French domestic law distinction between the professional seller’s warranty for hidden defects and the ordinary seller´s  liability for non-conforming goods, even where the CISG does not specifically cover the specific aspect of the contract. [5]

 (Belgium) The Belgian Civil Code is also silent with respect to exemption and limitation clauses. However, the case law has adopted a liberal approach that permits the exclusion of consequential damages even in case of gross negligence (but not in case of willful negligence).[6] In addition, Belgian law does not contain any restriction on the exemption and limitation of liability for personal injury.[7]

 (Germany) The German legal regime is more liberal towards limitation and exclusion agreements. Hence, such clauses are valid in commercial contracts, save in cases where the obligor has intentionally breached the contract (Section 276, BGB).[8] In standard terms and adhesion contracts, exemption and limitation of liability clauses are deemed invalid in many circumstances, including where the breach of contract results from gross fault by the non-performing party.[9] Some big German companies notoriously choose foreign laws, notably Swiss law, to govern their international contracts in order to avoid the strict control on exclusion clauses in their standard terms which apply under German law. [10]

 (Italy) While this type of clause is generally valid under Italian law, Article 1229 of the Civil Code contains a specific provision invalidating the agreement where the breach of contract results either from willful or grossly negligent conduct, or from acts contravening public policy rules.[11] In addition, exemption and limitation clauses contained in standard contract terms must be specifically approved by the adhering party (Article 1341, Civil Code).[12]

 (Switzerland) In Switzerland, Article 100 of the Code of Obligations sets out a general rule validating, a contrario sensu, exemption and limitation clauses which do not exclude liability for unlawful intent or gross negligence.[13] This provision also allows the court to invalidate the exclusion of liability for minor negligence under certain circumstances. Swiss law makes no provision for control of standard terms in commercial contracts.

 (Spain) Similarly to France, the Spanish Civil Code is silent on exemption and limitation of liability agreements. However, such clauses are generally valid under the principle of freedom of contract, save in cases where the breach results from intentional conduct or gross negligence, or the agreement contravenes good morals and public order (Civil Code, Article 1102).[14] The 1998 Law on General Contract Conditions, which transposes EU Directive 93/13/CEE into Spanish law, establishes a strict control on limitation and exclusion clauses contained in standard terms. It applies not only to consumers but also to contracts between professionals. 

 (Turkey) Under the 2012 Turkish Code of Obligations, limitation and exemption agreements are valid, except in case of gross negligence (Code of Obligations, Article 115). Such clauses are also unenforceable where they contravene mandatory norms (Article 27).[15] In sale contracts, the exclusion or limitation of warranty is enforceable, except where the seller has acted intently or has been grossly negligent.[16]

 (Brazil) The Brazilian Civil Code is also silent in relation to such clauses. Nevertheless, exemption and limitation agreements are generally valid, under the principle of freedom of contract. They may be rendered null and void in situations where: a) they exempt the liability of the non-performing party in cases of intentional conduct; b) they contravene a mandatory rule;[17] c) they affect the very substance of the obligation or they concern a major obligation; and d) they concern liability for personal injury.[18] In the case of standard contract terms, the proponent has to bring the existence of the exemption or limitation clause to the attention of the other party, as a result of the contra preferentem (Article 423, Civil Code) and strict contract interpretation rules.[19]     

(Colombia) In Colombia, the Civil Code permits the parties to exclude or restrict their liability for failure to perform the contract (Article 1604, final sentence).[20] The Colombian courts have consistently validated exemption and limitation of liability clauses, including those contained in adhesion contracts. However, the Supreme Court has established that a party in breach is liable in case of willful misconduct or gross negligence, and invoked both the CISG and the UNIDROIT Principles in support of its understanding.[21] While the validity of such clauses is not expressly addressed by the Code, nullity (and not only unenforceability) seems to be the consequence of their being contrary to public policy rules (Articles 1741 and 1742).[22] The Commercial Code, like other laws (e.g., Ley 80/93 on contracts with state entities), contains specific rules on exemption and limitation of liability.

(Argentina) The new Civil and Commercial Code of Argentina entered into force in 2015, unifying the rules on civil and commercial obligations.[23] Under the new regime limitation and exclusion clauses are valid, except where they exempt the obligor’s liability for willful conduct, contravene good faith and mandatory rules, or are abusive in nature (Article 1743).[24]

(Russia) Article 421 of the Russian Civil Code, enacted in the 1990’s, embraces the principle of freedom of contract.[25] In addition, Article 400 expressly allows the parties’ agreement to exclude or restrict their own liability for failure to perform the contract.[26] Liability can thus be limited to (a) the reimbursement of actual damages (excluding loss of profits) or of only specific types of damages; (b) cases where non-performance is based on the party’s faulty conduct; (c) a cap, including a fixed amount. However, the clause is deemed null and void where the obligor has intentionally non-performed the contract (Article 401).[27] The Russian Civil Code also governs the contract for the sale of goods, including agricultural products.[28] Article 461, for example, renders null and void the exemption of liability of the seller where the buyer has been dispossessed of the goods by a third party on grounds that already existed before the conclusion of the sales contract.[29]

(China) In China, the 1999 Contract Law mirrors the UNIDROIT Principles in many aspects, including the principle of freedom of contract.[30] Accordingly, it is possible to insert an exclusion or limitation of liability clause in most types of contracts, including sales contracts. This is qualified by the prohibition against excluding liability for bodily or personal injury (including death) and liability for damages if incurred deliberately or due to gross negligence. Standard terms are subject to further restrictions, the violation of which may result in the standard term not being validly incorporated into the contract. According to Article 39 of the 1999 Contract Law a party that provides standard clauses must draw the other party’s attention to limitations and exclusions of liability and provide adequate explanation upon request.[31] The same provision prescribes that standard clauses, by sanction of nullity, must satisfy the fairness requirement.

(Japan)  In Japan, the principle of freedom of contract allows the parties to agree on limitation and exclusion clauses. The 1896 Civil Code, under reform since 2009,[32] also permits the parties to agree on the amount of liquidated damages for the failure to perform an obligation (Art. 420(1)). On the other hand, the Civil Code establishes the general principle of good faith (Art. 1(2)) and public policy (Art. 90). [33] On the basis of these principles, courts have held that limitation and exclusion clauses do not release the obligor from liability if that liability was caused by an intentional act or by gross negligence. There are other specific statutory regulations as well. For example, concerning sales contracts, Art. 572 of the Civil Code does not permit disclaimer of warranty if the seller knew of the defects. The Japanese Consumer Contract Act further establishes both general and specific provisions which restrict the scope of limitation clauses in consumer contracts. [34]

(Korea) Limitation and exclusion clauses are valid under Korean law on the basis of the general principle of freedom of contract, as stated in Article 105 of the 1958 Korean Civil Code (also know as Civil Act). [35] On the other hand, such clauses are deemed unenforceable or invalid in cases of bad faith, intentional or grossly negligent conduct on the part of the obligor. [36] In Korea there are no specific rules governing limitation and exclusion clauses in standard terms.

(Sweden) In general, under Swedish law the parties are free to make their own bargain, and the courts will not interfere or question whether or not the terms are unreasonable. This principle is however restricted in a number of ways. Generally, a contract term cannot relieve, release or exonerate anyone from liability for breach of duty arising from his own fraud, willful misconduct, and gross negligence. The closest to codification of this principle is section 36 of the Contracts Act, which provides a general prohibition against unreasonable terms in contracts. [37]

Common law systems

In the common law tradition, agreements on the exemption and limitation of liability are generally accepted under the principle of freedom of contract.[38] This is the case, for instance, in England, the United States, Canada and Australia. Such clauses are usually referred to as “exculpation or exemption clauses”, or “limitation of liability” or “limitation of remedies”. Similarly to civil law systems, such agreements may be voided where the non-performing party’s conduct was intentional or fraudulent. Peculiar to the common law tradition is the notion of fundamental breach, [39] or breach of a fundamental term, which for purposes of invalidating an exemption or limitation of liability clause is assimilated to gross fault.

(United States) Specific provisions on exemption and limitation of liability in sales contracts are found in Section 2-719 of the American Uniform Commercial Code.[40] Under this provision the parties may limit or alter the measure of damages recoverable under the relevant UCC provisions, as by limiting the buyer’s remedies to return the goods and repayment of the price or to repair and replacement of non-conforming goods or parts. The parties may also agree to establish a remedy as exclusive of all other remedies. Where an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of the bargain, it must give way to the general remedy provisions of Part 7 of the UCC. Clauses limiting or excluding the buyer’s remedies, liability for consequential damages or personal injuries may be challenged as unconscionable under Section 2-302 of the UCC.[41] Warranty disclaimers regulated by Sections 2-314 and 2-315 of the UCC may function as a limitation or exclusion clause, given that their purpose of limiting the seller’s obligations concerning the product’s merchantability [42] or its fitness for a particular purpose.[43] Section 2-316 of the Uniform Commercial Code requires that the exclusion or modification of implied warranties in sales contracts (a) must be in writing; (b) must use language mentioning “merchantability” and (c) must show the exclusion or modification of the warranty conspicuously.[44]

(England) The English Unfair Contract Terms Act of 1977 (UCTA) regulates the exclusion and restriction of liability for breach of express and implied contractual obligations and the common law duty of care.[45] It is not possible to exclude or restrict liability for death or personal injury resulting from negligence. In the case of other loss or damage resulting from negligence, liability can be restricted, but only insofar as the term or notice satisfies the UCTA reasonableness test.[46] As regards the breach or non-performance of a contract, Section 3 of the UCTA prevents the use of an exclusion clause under certain circumstances,[47] unless it satisfies the reasonableness test.

Additionally, the English Sale of Goods Act of 1979 and the Supply of Goods (Implied Terms) Act of 1973 imply warranties as to title and quiet possession into contracts for the sale of goods and hire-purchase agreements which effectively confirm the seller's right to sell. Under section 6(1) of UCTA, liability for breach of these implied warranties cannot be excluded or restricted. Likewise, similar warranties which are implied by the Supply of Goods and Services Act 1982 into other types of contract cannot be excluded.[48]

(Canada) In the common law provinces of Canada, a court shall refuse to give effect to an exclusion or a limitation of liability clause where it finds the clause unconscionable or concludes that it is contrary to public policy. [49]

(Australia) Under Australian law limitation and exclusion agreements in business contracts are generally enforceable. There is no requirement for reasonableness in an exclusion clause. Generally, there is no concept of gross negligence in Australian law outside of particular legislative uses of the phrase. Accordingly, it is possible to exclude liability for gross negligence subject to clear language being used to achieve this outcome. On the other hand, it is not possible to exclude liability for fraud or to contract out of relevant legislation. Since the High Court of Australia decision in Darlington Futures Ltd v. Delco Australia Pty Ltd (1986) 161 CLR 500, [50] exclusion clauses subject to Australian law are to be interpreted according to their natural and ordinary meaning and read in light of the contract as a whole, looking at the context in which the clause appears. Thus, limitation and exclusion clauses are usually interpreted against the party for whose benefit it is intended to operate, and not in a manner that results in an absurd outcome or in a way that defeats the giving of consideration under a contract. A court may also take into consideration the relative bargaining power of the parties and whether there are any issues of unconscionability associated with the exclusion clause or disclaimer. In consumer and domestic transactions there are a number of statutory guarantees and implied conditions that cannot be excluded.

Other jurisdictions

In mixed systems such as Quebec (Canada) and South Africa, limitation and exclusions clauses are generally accepted, subjecting to the same kind of restrictions found in other jurisdictions (exclusion of liability for willful conduct, for death or moral injury etc.).

(Canada) In Quebec, Article 1474 of the Civil Code forbids the exclusion or restriction of liability for material injury caused to another through an intentional or gross fault.[51] Under this same provision, it is not possible to exclude or limit liability for bodily or moral injury caused to another. As for contracts of sale, manufacturers and professional sellers are presumed to know of latent defects existing at the time of sale. Therefore, an exclusion clause addressing latent defects is valid only if the seller or manufacturer can rebut the aforesaid presumption of knowledge (Articles 1473 and 1733). As in Canadian common law provinces, limitation and exclusion clauses are restrictively interpreted under the law of Quebec.

(South Africa) South African law generally follows the common law approach. An exemption clause excluding liability for willful conduct or fraud is deemed to be against public policy and void and so is a clause which excludes liability for an intentional breach of contract. However, it is noteworthy that a clause excluding liability for ordinary and gross negligence is not against public policy.[52] In contrast, doctrine and case law have developed a general presumption according to which, in case of doubt, the contracting parties’ intention was not to exclude liability for negligent acts. Secondly, where the exemption clause is ambiguous, or the language used in the contract is capable of more than one meaning, the exemption clause is interpreted narrowly. [53]

European Union law and soft law

The CISG applies only to the sale of goods for business purposes. Contracts for the sale of goods for personal use, which generally characterize consumer contracts, are excluded from the scope of the Convention (Article 2(a) CISG).[54] Therefore, the European Union instruments in the field of consumer protection that deal with the validity of exemption and limitation clauses are of little or no importance for comparative purposes (see Annex 1 for more details).

In the context of this Opinion it is nevertheless worth mentioning two European Union Directives in the field of consumer protection law that deal with the validity of exemption and limitation clauses. As per the EU Directive of April 5, 1993 on unfair terms in consumer contracts, [55] such clauses may be considered “unfair”, thus non-binding on the consumer, where they are found to be “contrary to the requirement of good faith” or to cause “a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer” (Article 3.1). Member States must provide that such clauses are not binding on the consumer (Article 6).

Similarly, exemption or limitation clauses may be considered “ineffective” in consumer contracts, as per the EU Directive of May 25, 1999 on the sale of consumer goods and associated guarantees.[56] It provides that under conditions set out by domestic law, the consumer is not bound by “any contracted terms or agreements concluded with the seller before the lack of conformity is brought to the seller’s attention which directly of indirectly waive or restrict the rights resulting from this Directive” (Article 7). The 1999 EU Directive has been incorporated into the more recent 2011 Directive on Consumer Rights, which, however, does not deal directly with the validity of exemption or limitation of liability clauses.[57]

Under the recent proposal for a Common European Sales Law,[58] which deals with both consumer and non-consumer contracts, the principle of freedom of contract plays a central role, as stated in Article 1. However, “unfair contract terms”, such as those listed in Article 84, are deemed not binding on the parties (Article 79). The list of “unfair contract terms” include agreements on the exclusion or limitation of liability of the trader (a) for death or personal injury caused to the consumer; or (b) for any loss or damage to the consumer caused deliberately or as a result of gross negligence. In addition, may be deemed unfair any term excluding or hindering the consumer’s right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to submit disputes exclusively to arbitration.

The Principles of European Contract Law (PECL) have resorted to a flexible standard, similar to the UNIDROIT Principles (see below), which allows for the exclusion or restriction of remedies for non-performance, “unless it would be contrary to good faith and fair dealing to invoke the exclusion or restriction”. [59]

Uniform law instruments

At the international level, a specific provision on exemption clauses has been included in the UNIDROIT Principles since their first edition (1994).[60] While such clauses are generally valid, Article 7.1.6 has retained the more flexible idea of “gross unfairness” as the standard for invalidity, thus introducing yet another approach to the other common criteria indicated above. In accordance with a commentator, the idea of “gross unfairness” comprehends those of “gross negligence” and “intentional conduct”. [61]

Other international instruments, such as the 1999 Montreal Convention on the Unification of Certain Rules for International Carriage by Air, establish limitations and exclusions of liability and, by the same token, invalidate any agreement to the contrary. The Convention, which has replaced the 1929 Warsaw Convention, establishes several limitations and exemptions of liability of the international carrier.[62] In addition, Article 26 of the Convention invalidates any contractual provision tending to relieve the carrier of liability or to fix a lower limit than that which is laid down in the Convention.

By contrast to other international instruments and most domestic laws, the 1956 United Nations Convention on the Contract for the International Carriage of Goods by Road has not embraced the principle of freedom of contract.[63] While establishing several rules on the liability of the carrier (Articles 17 to 29), the Convention does not allow the parties to contract out of its provisions (Article 41).

It is also worth mentioning 2008 United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea, widely known as the Rotterdam Rules.[64] Though not yet in force, this instrument establishes a modern, comprehensive, uniform legal regime for the international maritime carriage of goods, updating, and in some cases replacing, many provisions in the Hague Rules, Hague-Visby Rules and 1978 Hamburg Rules. As compared to the latter instruments, the Rotterdam Rules are much stricter with respect to the parties’ freedom to agree on exemption and limitation of liability clauses.[65]

 [1] The author of this Opinion would like to thank Professor Claude Witz for his valuable comments and suggestions in respect of this topic.

[2]    See, e.g., Cour de Cassation, Chambre civile 1, 20 décembre 1998, nº 87-16369 (delivery of kiwi plants of a different kind).

[3]    See, e.g., Cour de Cassation, Chambre civile 1, 24 février 1993, D. 1993.IR.78, available at : https://www.legifrance.gouv.fr/affichJuriJudi.do?idTexte=JURITEXT000007028954 (access on 15.4.2016). In regard to exemption and limitation of liability clauses under French law, see Larroumet (n. 2), paras. 694-695. The new Article 1170 of the French Civil Code reads as follows: “Toute clause qui prive de sa substance l´obligation essentielle du débiteur est réputée non écrite”. This provision codifies the famous Chronopost (Cass. com., 22 octobre 1996, nº 93-18632) and Faurecia II (Cass. com., 29 juin 2010, nº 09-11841) cases.

[4]    Article 1171 of the Civil Code now reads as follows : « Dans un contrat adhésion, toute clause qui crée un déséquilibre significatif entre les droits et obligations des parties au contrat est réputée non écrite. L´appréciation du déséquilibre significatif ne porte ni sur l´objet principal du contrat ni sur l´adéquation du prix à la prestation. ».

[5]    For more information on this topic, see : Witz, Claude. « Forces et faiblesses du droit interne français de la vente par rapport à la Convention de Vienne », in CREDA et Philippe Delebecque (dir.), L´entreprise et la vente internationale de marchandises. Brussels : Larcier , 2016, pp. 102 et. ss.

[6] See Fontaine and De Ly on contract clauses (n. 2), p. 385.

[7] Idem, p. 386.
However, exemption and limitation of liability for damages caused by third parties, even in the event of a grossly negligent conduct, may be valid under a combination of Articles 276 and 278 of the BGB. On this subject, see Fernandes – Cláusulas de Exoneração e de Limitação (n. 2), p. 383.

[9] See, for example, Sections 305 to 310 of the German Civil Code (BGB), which govern standard contract terms. Those provisions have replaced the Standard Contract Terms Act (Gesetz zur Regelung des Rechts der Allgemeinen Geschäftsbedingungen, AGB-Gesetz). For an English translation, see: http://www.iuscomp.org/gla/statutes/BGB.htm#b2s2 (accessed on April 27, 2014). For more information on the German law of standard terms, see: Zerres, Thomas. Principles of the German Law on Standard Terms of Contract, available at: http://www.jurawelt.com/sunrise/media/mediafiles/14586/German_Standard_Terms_of_Contract_Thomas_Zerres.pdf (access on 5 Sept. 2015).

[10] Vogenauer, S., Commentary on the UNIDROIT Principles (n. 39), p. 26.

[11] Italian Civil Code, Art. 1229 Clausole di esonero da responsabilità
      “E' nullo qualsiasi patto che esclude o limita preventivamente la responsabilità del debitore per dolo o per colpa grave (1490, 1579, 1681, 1694, 1713, 1784, 1838, 1900).

      E' nullo (1421 e seguenti) altresì qualsiasi patto preventivo di esonero o di limitazione di responsabilità per i casi in cui il fatto del debitore o dei suoi ausiliari (1580) costituisca violazione di obblighi derivanti da norme di ordine pubblico (prel. 31).”

      On this subject, see Fernandes – Cláusulas de Exoneração e de Limitação (n. 2), p. 384.

[12] Italian Civil Code, Art. 1341 Condizioni generali di contratto

      “Le condizioni generali di contratto predisposte da uno dei contraenti sono efficaci nei confronti dell'altro, se al momento della conclusione del contratto questi le ha conosciute o avrebbe dovuto conoscerle usando l'ordinaria diligenza (1370, 2211).

      In ogni caso non hanno effetto, se non sono specificamente approvate per iscritto, le condizioni che stabiliscono, a favore di colui che le ha predisposte, limitazioni di responsabilità, (1229), facoltà di recedere dal contratto(1373) o di sospenderne l'esecuzione, ovvero sanciscono a carico dell'altro contraente decadenze (2964 e seguenti), limitazioni alla facoltà di opporre eccezioni (1462), restrizioni alla libertà contrattuale nei rapporti coi terzi (1379, 2557, 2596), tacita proroga o rinnovazione del contratto, clausole compromissorie (Cod. Proc. Civ. 808) o deroghe (Cod. Proc. Civ. 6) alla competenza dell'autorità giudiziaria.”

[13]  Swiss Code of Obligations, Article 100
      “1 Any agreement purporting to exclude liability for unlawful intent or gross negligence in advance is void.
      2 At the discretion of the court, an advance exclusion of liability for minor negligence may be deemed void provided the party excluding liability was in the other party’s service at the time the waiver was made or the liability arises in connection with commercial activities conducted under official licence.
      3 The specific provisions governing insurance policies are unaffected.”

On this subject see Fontaine and De Ly on contract clauses (n. 2), p. 383.

[14] Artículo 1102
      “La responsabilidad procedente del dolo es exigible en todas las obligaciones. La renuncia de la acción para hacerla efectiva es nula.”
On this subject, see Fernandes – Cláusulas de Exoneração e de Limitação (n. 2), p. 386.

[15] Turkish Code of Obligations (Law No. 6098 of January 11, 2011). See also: Schwimann, Ceyda Akbal. The Turkish Code of Obligations, available at: http://www.specht-partner.com/wp-content/uploads/2012/11/SpechtBoehm-The-Turkish-Code-of-Obligations.pdf (access on 10.11.2015).

[16] Schwimann, Ceyda Akbal. The Turkish Code of Obligations (n. 117), p. 3.

[17] E.g. Article 51, I, of the Consumer Protection Code, which expressly forbids this type of clauses in consumer contracts.

[18] In this regard see Azevedo, Antonio Junqueira de Azevedo – Cláusula cruzada de não indenizar (cross waiver of liability) (n. 2) and Fernandes – Cláusulas de Exoneração e de Limitação (n. 2), Ch. 5.

[19] The reasons for subjecting exemption and limitation of liability clauses to strict construction are twofold: first, these clauses derogate from the legal liability regime set out in the Brazilian Civil Code; second, in this type of agreement, the obligee relinquishes the right to full compensation in case of breach. In this regard, see Fernandes – Cláusulas de Exoneração e de Limitação (n. 2), p. 343.

[20] The relevant provision of the Colombian Civil Code reads as follows:

      “ARTICULO 1604. RESPONSABILIDAD DEL DEUDOR. El deudor no es responsable sino de la culpa lata en los contratos que por su naturaleza solo son útiles al acreedor; es responsable de la leve en los contratos que se hacen para beneficio recíproco de las partes; y de la levísima en los contratos en que el deudor es el único que reporta beneficio.

      El deudor no es responsable del caso fortuito, a menos que se haya constituido en mora (siendo el caso fortuito de aquellos que no hubieran dañado a la cosa debida, si hubiese sido entregado al acreedor), o que el caso fortuito haya sobrevenido por su culpa.

      La prueba de la diligencia o cuidado incumbe al que ha debido emplearlo; la prueba del caso fortuito al que lo alega.

      Todo lo cual, sin embargo, se entiende sin perjuicio de las disposiciones especiales de las leyes, y de las estipulaciones expresas de las partes.”

[21] Colombia Constitutional Court, case C-1008, Enrique Javier Correa de la Hoz et al., 09.12.2010, available at: UNILEX http://www.unilex.info/case.cfm?id=1591 (accessed on April 27, 2014).

      In a challenge of the constitutionality of Article 1616 of the Colombian Civil Code according to which, except in case of willful misconduct or gross negligence, a party in breach is liable on for the harm it had foreseen or should have foreseen as a consequence of its non-performance, on the ground that such limitation violates, among others, the parties' fundamental right to full compensation, the Constitutional Court rejected the claim. In so doing the Court pointed out that not only was the provision in question neither irrational or arbitrary but was inspired by basic criteria of justice and contractual fairness, and moreover was in conformity with important international instruments such as the Vienna Sales Convention (Article 74) and the UNIDROIT Principles (Article 7.4.4).

[22] Gual Acosta, José Manuel – Cláusulas restrictivas de responsabilidad – Observaciones al régimen vigente y propuestas de reforma, Univ. Sergio Arboleda. Bogotá (Colombia) 8 (15): 15-34, julio-diciembre de 2008, available online at:  http://www.usergioarboleda.edu.co/civilizar/revista15/cLAUSULAS%20RESTRICTIVAS.pdf (accessed on April 27, 2014).

[23] Law no. 26.994 of October 8, 1994. For the influence of the CISG in the new Civil and Commercial Code of Argentina, see Garro, Alejandro and Zuppi, Alberto L.. The New Civil and Commercial Code of Argentina (2015) and the Vienna Convention on Contracts for the Sale of Goods, available at http://www.sbm.com.ar/assets/pdf/prensa/nuevo_codigo/final_the_new_CCiv_com_Argentina_and_the_cisg4.pdf (access on Sept. 5, 2015).

[24] Article 1743 of the new Civil and Commercial Code reads as follows:

      “ARTICULO 1743.- Dispensa anticipada de la responsabilidad. Son inválidas las cláusulas que eximen o limitan la obligación de indemnizar cuando afectan derechos indisponibles, atentan contra la buena fe, las buenas costumbres o leyes imperativas, o son abusivas. Son también inválidas si liberan anticipadamente, en forma total o parcial, del daño sufrido por dolo del deudor o de las personas por las cuales debe responder. »

[25] Article 421 of the Russian Civil Code reads as follows:

      “Article 421. The Freedom of the Contract

  1. The citizens and the legal entities shall be free to conclude contracts. Compulsion to conclude contracts shall be inadmissible, with the exception of the cases, when the duty to conclude the contract has been stipulated by the present Code, by the law or by a voluntarily assumed obligation.
  2. The parties shall have the right to conclude a contract, both stipulated and unstipulated by the law or by the other legal acts.
  3. The parties shall have the right to conclude a contract, in which are contained the elements of different contracts, stipulated by the law or by the other legal acts (the mixed contract). Toward the relationships between the parties in the mixed contract shall be applied in the corresponding parts the rules on the contracts, whose elements are contained in the mixed contract, unless otherwise following from the agreement between the parties or from the substance of the mixed contract.
  4. The contract terms (provisions) shall be defined at the discretion of the parties, with the exception of the cases, when the content of the corresponding term (provision) has been stipulated by the law or by the other legal acts (Article 422). In the cases, when the contract provision has been stipulated by the norm, applied so far as it has not been otherwise stipulated by the agreement between the parties (the dispositive norm), the parties may by their own agreement exclude its application, or may introduce the provision, distinct from that, which has been stipulated by it. In the absence of such an agreement, the contract provision shall be defined by the dispositive norm.

[26] Article 400 of the Russian Civil Code reads as follows:

      “Article 400. Limitation of the Scope of Liability by Obligations

  1. By the individual kinds of obligations and by those obligations, which are related to a definite type of activity, the right to the full compensation of the losses may be limited by the law (the limited responsibility).
  2. The agreement on limiting the scope of the debtor's responsibility by the contract of affiliation or by another kind of contract, in which the creditor is the citizen, coming out in the capacity of the consumer, shall be insignificant, if the scope of responsibility for the given kind of obligations or for the given violation has been defined by the law and if the agreement has been concluded before the setting in of the circumstances, entailing the responsibility for the non-discharge or for an improper discharge of the obligation.”

[27] Articles 401 and 402 of the Russian Civil Code reads as follows:
“Article 401. The Grounds of Responsibility for the Violation of the Obligation

  1. The person, who has not discharged the obligation or who has discharged it in an improper way, shall bear responsibility for this, if it has happened through his fault (an ill intention or carelessness on his part), with the exception of the cases, when the other grounds of the responsibility have been stipulated by the law or by the contract. The person shall be recognized as not guilty, if, taking into account the extent of the care and caution, which has been expected from him in the face of the nature and the terms of the circulation, he has taken all the necessary measures for properly discharging the obligation.
  2. The absence of the guilt shall be proven by the person, who has violated the obligation.
  3. Unless otherwise stipulated by the law or by the contract, the person, who has failed to discharge, or has discharged in an improper way, the obligation, while performing the business activity, shall bear responsibility, unless he proves that the proper discharge has been impossible because of a force-majeure, i.e., because of the extraordinary circumstances, which it was impossible to avert under the given conditions. To such kind of circumstances shall not be referred, in particular, the violations of obligations on the part of the debtor's counter-agents, or the absence on the market of commodities, indispensable for the discharge, or the absence of the necessary means at the debtor's disposal.
  4. An agreement on eliminating or limiting the liability for an intentional violation of the obligation, concluded at an earlier date, shall be insignificant.”

 “Article 402. The Debtor's Responsibility for His Employees
      The actions of the debtor's employees, involved in the discharge of his obligation, shall be regarded as those of the debtor himself. The debtor shall be answerable for these actions, if they have caused the non-discharge or an improper discharge of the obligation.”
(Available at http://www.russian-civil-code.com/PartI/SectionIII/Subsection1/Chapter25.html)

[28]  Articles 454 to 538 of the Russian Civil Code.

[29] Articles 461 of the Russian Civil Code reads as follows:
“Article 461. The Liability of the Seller in Case of the Withdrawal of Goods from the Buyer

  1. If goods are withdrawal from the buyer by third persons on the grounds that arose before the execution of the contract of sale, the seller shall be obliged to compensate the buyer's losses, unless he proves that the buyer knew or should have known about these grounds.
  2. The agreement of the parties thereto about the release of the buyer of the liability in case third persons reclaim the acquired goods from the buyer or about its restriction shall be null and void.”
    (Available at http://www.russian-civil-code.com/PartI/SectionIII/Subsection1/Chapter30.html)

[30] An English version of the 1999 People’s Republic of China Contract Law may be found at http://www.npc.gov.cn/englishnpc/Law/2007-12/11/content_1383564.htm (accessed on April 17, 2014). For an overview of the PRC Contract Law see Zhang, Yuqing and Huang, Danhan - The New Contract Law in the People’s Republic of China and the UNIDROIT Principles of International Commercial Contracts : A Brief Comparison – Revue de Droit Uniforme / Uniform Law Review, Rome: UNIDROIT, 2000-3, p. 429-440.

[31]  The Supreme People’s Court Interpretation clarifies that this obligation of alerting and explanation is satisfied if the party who provides the standard clauses uses scripture, symbols, signs, or other means that sufficiently draw the other party’s attention to the limitation or exclusion clause. The party using standard terms bears the burden of proving that it has fulfilled this obligation of alerting and explanation. The Interpretation provides that, if a party fails to comply with the obligation of alerting and explanation, the other party may petition a people’s court to void the relevant clause. The Supreme People’s Court has rendered two general (and binding) interpretations since the enactment of the 1999 PRC Contract Law.

[32] The Japanese Civil Code was enacted in 1896. It was influenced not only by German and French law, but also by English law (see, e.g., the foreseeability rule on Art. 416). While partial amendments on the guarantee system were legislated along with modernization of the language of the Civil Code in 2004, the contents of the law of obligations which are mainly compiled in the Book III remain basically intact. Ministry of Justice, Japan. Civil Code Reform (Law of Obligations), available at: http://www.moj.go.jp/ENGLISH/ccr/CCR_00001.html  (access on 12 Sept. 2015). For accounts of the reform process, see Kamo, Akira (2010). “Crystallization, Unification, or Differentiation? The Japanese Civil Code (Law of Obligations) Reform Commission and Basic Reform Policy (Draft Proposals).” Columbia Journal of Asian Law 24: 171-212; Uchida, Takashi (2011). “Contract Law Reform in Japan and the UNIDROIT Principles.” Uniform Law Review 2011: 705-717, available at : http://www.unidroit.org/english/publications/review/articles/2011-3/705-717-uchida.pdf; Ishikawa, Hiroyasu (2013). “Codification, Decodification, and Recodification of the Japanese Civil Code." University of Tokyo Journal of Law and Politics 10: 61-80; Sono, Hiroo (2014). "Integrating Consumer Law into the Civil Code: A Japanese Attempt at Re-Codification" in Keyes, Mary and Therese Wilson eds. Codifying Contract Law: International and Consumer Law Aspects, Ashgate: 107-129; and Kozuka, Souichirou and Luke Nottage (2014), “Policy and Politics in Contract Law Reform in Japan” in Adams, Maurice and Dirk Heirbaut eds., The Method of Culture of Comparative Law, Hart: 235-253. The author of this Opinion would like to thank Professor Hiroo Sono for his valuable comments and suggestions in respect of this topic.

[33]  For an English translation of the 1896 Japanese Civil Code see: http://www.moj.go.jp/content/000056024.pdf (access on 12 Sept. 2015).

[34] On this topic see Okino, Masami (2012). “Recent Developments in Consumer Protection in Japan”, UT Soft Law Review 4: 10-18, available at : http://www.gcoe.j.u-tokyo.ac.jp/en/publications/UTsoftlaw4.pdf; Sono, Hiroo (2012). "Private Enforcement Of Consumer Law: A Sketch Of The Japanese Landscape" Hokkaido Journal of New Global Law and Policy 16: 63-80, available at : http://lex.juris.hokudai.ac.jp/gcoe/journal/LPG_vol16/16_4.pdf; and Sono, Hiroo (2014). "Integrating Consumer Law into the Civil Code: A Japanese Attempt at Re-Codification" in Keyes, Mary and Therese Wilson eds. Codifying Contract Law: International and Consumer Law Aspects, Ashgate: 107-129. More generally, see Karaiskos, Antonio (2010). “Regulation of Unfair Contract Terms in Japan”, Waseda Bulletin of Comparative Law vol. 28: 13-44, available at: https://www.waseda.jp/flaw/icl/assets/uploads/2014/05/A02859211-00-000280013.pdf (access on 12 Sept. 2015).

[35]  The relevant provision of the Civil Act reads as follows:
“Article 105 (Optional Provisions)
If the parties to a juristic act have declared an intention which differs from any provisions of Acts or subordinate statues, which are not concerned with good morals or other social order, such intention shall prevail.”
The author of this Opinion would like to thank H. E. Chang-ho Chung, Judge of the International Criminal Court for his valuable comments and suggestions in respect of this topic.

[36] See, for example: Act on the Regulation of Terms and Conditions
“Article 7 (Prohibition on Exemption Clause)
       A clause in terms and conditions concerning the liability of contracting parties that falls under any of the following subparagraphs shall be null and void:
A clause which exempts an enterpriser from liability for intentional or gross negligence on the part of the enterpriser, his/her agents, or his/her employees.” 
See also: Commercial Act
“Article 659 (Reasons for Insurer's Non-liability)
"If a peril insured against has occurred due to bad faith or gross negligence of a policyholder, the insured or beneficiary, the insurer is not liable to pay the insured amount.”

[37] Catarina af Sandeberg. “Exemption of Liability – Where to Draw the Line”, Stockholm Institute for Scandinavian Law 1957-2009 pp. 279-291, available at: http://www.scandinavianlaw.se/pdf/45-16.pdf (access on 14 April 2016).

[38] See Farnsworth on Contracts (n. 2), para. 4.26, in which the author states that “a number of cases support discharge of a duty to pay damages for partial breach of contract by renunciation, written or oral, by the obligee on acceptance from the obligor of some performance under the contract” and para. 9.1. See also Yates on exclusion clauses (n. 2), p. 197 and Lawson on exclusion clauses (n. 2).

[39] The doctrine of fundamental breach started with a 1956 judgment of the English Court of Appeal. The Supreme Court of Canada in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways) (2010) described the doctrine as follows:
      “… where the defendant had so egregiously breached the contract so as to deny the plaintiff substantially the whole of its benefit … the innocent party was excused from further performance but the defendant could still be held liable for the consequences of its ‘fundamental breach’ even if the parties had excluded liability by clear and express language”.

[40] For the language contained in § 2-316 of the UCC (EXCLUSION OR MODIFICATION OF WARRANTIES), see n. 64 supra. § 2-719 of the UCC reads as follows:
Ҥ 2-719. CONTRACTUAL MODIFICATION OR LIMITATION OF REMEDY.
      (1)Subject to the provisions of subsections (2) and (3) of this section and of the preceding section on liquidation and limitation of damages,
     (a) the agreement may provide for remedies in addition to or in substitution for those provided in this Article and may limit or alter the measure of damages recoverable under this Article, as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of non-conforming goods or parts; and
     (b) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.
      (2)Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this Act.
(3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.”

[41] See Farnsworth on Contracts (n. 2), para. 4.28. The provision of the UCC read as follows: 
Ҥ 2-302. UNCONSCIONABLE CONTRACT OR CLAUSE.
      (1) If the court as a matter of law finds the contractor any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.
      (2) When it is claimed or appears to the court that the contractor any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.”

[42] For the language of § 2-314 of the UCC (IMPLIED WARRANTY: MERCHANTABILITY; USAGE OF TRADE), see n. 62 supra.

[43] For the language of § 2-315 of the UCC (IMPLIED WARRANTY: FITNESS FOR PARTICULAR PURPOSE), see n. 63 supra.

[44] For the language of § 2-316 of the UCC (EXCLUSION OR MODIFICATION OF WARRANTIES), see n. 64 supra.

[45] The Unfair Contract Terms Act 1977 is an Act of Parliament of the United Kingdom that regulates contracts by restricting the operation and legality of some contract terms. It extends to nearly all forms of contract and one of its most important functions is limiting the applicability of disclaimers of liability. The terms extend to both actual contract terms and notices that are seen to constitute a contractual obligation. The Act renders terms excluding or limiting liability ineffective or subject to reasonableness, depending on the nature of the obligation purported to be excluded and whether the party purporting to exclude or limit business liability is acting against a consumer. It is normally used in conjunction with the Unfair Terms in Consumer Contracts Regulations 1999, as well as the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982.

[46] The five guidelines to interpreting "reasonableness" laid down in Schedule 2 to UCTA are, in summary:

  • the relative strengths of the parties' bargaining positions;
  • whether the customer received any inducement to accept the term;
  • whether the customer knew or should have known that the term was included;
  • in the case of a term excluding liability if a condition is not complied with, the likelihood of compliance with that condition at the time the contract was made; and
  • whether the goods were a special order.

[47] That is, where the clause (a) excludes liability for breach of contract; or (b) claims to permit a contractual performance substantially different from what is expected; or (c) in respect of the whole or any part of a contractual obligation, claims to allow no performance at all (e.g. if a condition precedent is not satisfied); nless in each case the clause satisfies the reasonableness test. 

[48]  For example, a seller who is unable to pass good title should therefore agree with the buyer to transfer only such title as it has, rather than purporting to transfer good title then trying to exclude liability for the breach. The Sale of Goods Act 1979 (as amended by the Sale and Supply of Goods Act 1994) implies warranties as to the quality of goods into contracts for the sale of goods. Similar terms are implied into hire-purchase contracts by the Supply of Goods (Implied Terms) Act 1973. Under section 6(2) of UCTA, liability for breach of these implied terms cannot be excluded as against a consumer. It is, however, possible to exclude or restrict liability for breach against other persons, but only in so far as the clause in question satisfies the requirement of reasonableness. It is likely to be reasonable if the buyer is given the chance to inspect the goods or to provide input into their design and/or manufacture.

[49] Supreme Court of Canada. Tercon Contractors Ltd. v. British Columbia (Transportation and Highways) (2010). The court in Tercon did not however set out what the unconscionability test should be. In Titus v. William F. Cooke Enterprises Inc. (2007), MacPherson J. adopted the four-part test applied in an earlier Alberta Court of Appeal decision:

  1. a grossly unfair and improvident transaction;
  2. the victim’s lack of independent legal advice or other suitable advice;
  3. an overwhelming imbalance in bargaining power caused by victim’s ignorance of business, illiteracy, ignorance or the language of the bargain, blindness, deafness, illness, senility, or similar disability; and
    4. the other party’s knowingly taking advantage of this vulnerability.

[50] Darlington Futures Ltd v. Delco Australia Pty Ltd (1986) 161 CLR 500, available at: http://www.austlii.edu.au/au/cases/cth/HCA/1986/82.html (access on 15 April 2016).

[51] Quebec Civil Code, Article 1474
A person may not exclude or limit his liability for material injury caused to another through an intentional or gross fault; a gross fault is a fault which shows gross recklessness, gross carelessness or gross negligence.
 He may not in any way exclude or limit his liability for bodily or moral injury caused to another.
1991, c. 64, a. 1474.

[52] Lerm, Henry – A Critical Analysis of Exclusionary Clauses in Medical Contracts, Doctoral Thesis, Faculty of Law, University of Pretoria (2008), p. 809-810. Available at: http://upetd.up.ac.za/thesis/available/etd-05252009-215044/unrestricted/06chapter12.pdf (accessed on April 27, 2014).

[53] Idem at 810.

[54] See Article 2(a) CISG and Schwenzer/Hachem, Commentary (n. 10), Art. 2, par. 4-7.

[55] Official Journal, April 21, 1993, L. 95/29.

[56] Official Journal, July 7, 1999, L. 171/12.

[57] DIRECTIVE 2011/83/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 25 October 2011 (accessed on April 17, 2014 at http://ec.europa.eu/justice/consumer-marketing/rights-contracts/directive/index_en.htm).

[58] Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on a Common European Sales Law (COM/2011/0635 final - 2011/0284 (COD)) (accessed on April 17, 2014 at http://ec.europa.eu/justice/contract/cesl/index_en.htm). Specifically on the CESL provisions limiting the debtor’s liability, namely: foreseeability of loss, loss attributable to the creditor, and mitigation, see the in-depth analysis by Zimmermann, Reinhard, in Limitation of Liability for Damages in European Contract Law. The Edinburgh Law Review 18.2 (2014), p. 193-224.

[59] The PECL provision reads as follows:
“Article 8:109: Clause Excluding or Restricting Remedies
Remedies for non-performance may be excluded or restricted unless it would be contrary to good faith and fair dealing to invoke the exclusion or restriction.”
See also a revised version of PECL, as presented by Fauvarque-Cosson, Bénédicte and Mazeaud, Denis (eds.) – European Contract Law, Materials for a Common Frame of Reference: Terminology, Guiding Principles, Model Rules, Munich: Sellier (2008), p. 603, which reads as follows:
“Article 9:109: Clause Excluding or Restricting Remedies
      Remedies for non-performance may be excluded or restricted by a contractual clause. This clause is without effect if its implementation is contrary to good faith, for example in the case of non-performance which is deliberate or of particular gravity.”

[60] Article 7.1.6 of the 2010 UNIDROIT Principles reads as follows:
(Exemption clauses)
A clause which limits or excludes one party’s liability for non-performance  or which permits one party to render performance substantially different from what the other party reasonably expected may not be invoked if it would be grossly unfair to do so, having regard to the purpose of the contract.”

[61] See Article 7.1.6 of the 2010 UNIDROIT Principles and the official comments. See also Schelhaas, Harriet, Commentary on the UNIDROIT Principles (n. 39),, p. 858-863, esp. 861.

[62]    Especially Articles 17 to 28.  The Montreal Convention (formally, the Convention for the Unification of Certain Rules for International Carriage by Air) is a multilateral treaty adopted by a diplomatic meeting of ICAO member states in 1999. The full text of the Montreal Convention is available at:
http://www.jus.uio.no/lm/air.carriage.unification.convention.montreal.1999/26.html (accessed on April 17, 2014).

[63]  The CMR Convention (full title Convention on the Contract for the International Carriage of Goods by Road) is a United Nations convention that was signed in Geneva on 19 May 1956. It relates to various legal issues concerning transportation of cargo by road. It has been ratified by the majority of European states. As of 2013, it has been ratified by 55 states. For more information see:
https://treaties.un.org/Pages/ViewDetails.aspx?src=TREATY&mtdsg_no=XI-B-11&chapter=11&lang=en (access on 14 April 2016)

[64] For the text and status of the Rotterdam Rules, see the UNCITRAL website at: http://www.uncitral.org/uncitral/en/uncitral_texts/transport_goods/2008rotterdam_rules.html (accessed on April 27, 2014).

[65] In this regard, see Article 79 of the Rotterdam Rules :
“Validity of contractual terms
Article 79 General provisions
      1 . Unless otherwise provided in this Convention, any term in a contract of carriage is void to the extent that it:
      (a) Directly or indirectly excludes or limits the obligations of the carrier or a maritime performing party under this Convention;
      (b) Directly or indirectly excludes or limits the liability of the carrier or a maritime performing party for breach of an obligation under this Convention; or
      (c) Assigns a benefit of insurance of the goods in favour of the carrier or a person referred to in article 18.
      2 . Unless otherwise provided in this Convention, any term in a contract of carriage is void to the extent that it:
      (a) Directly or indirectly excludes, limits or increases the obligations under this Convention of the shipper, consignee, controlling party, holder or documentary shipper; or
      (b) Directly or indirectly excludes, limits or increases the liability of the shipper, consignee, controlling party, holder or documentary shipper for breach of any of its obligations under this Convention.