Unfair Contract Terms Directive, Article 1, 1. Unfair Contract Terms Directive, ANNEX I, 1.

1. An exemption clause may operate in favour of the debtor only if he has done what he was obliged to do.
Note: this decision was given in 1985 well before the coming into force of the applicable provisions on unfair terms under the Consumer Affairs Act (which provisions came into force in 2001). This notwithstanding, the Court, based on the general principles applicable under Civil Law, decided that the said term was unfair
2. When a person has not honoured the contract within a reasonable period, an exemption clause cannot limit his liability for consequential damages.
3. Agreements should not be contrary to custom and public policy and for this reason an exemption clause cannot exempt liability when there is a breach of contract.
Note: this decision was given in 1985 well before the coming into force of the applicable provisions on unfair terms under the Consumer Affairs Act (which provisions came into force in 2001). This notwithstanding, the Court, based on the general principles applicable under Civil Law, decided that the said term was unfair

The plaintiff company in this case claimed it was owed an amount of money representing the balance for the carriage of merchandise in 1982. The defendant claimed that the said merchandise was delivered months after the originally planned delivery date and that this was in breach of the contract of carriage. In reply, the plaintiff company argued that there was a condition in the Bill of Lading that exempted the carrier from any direct or indirect loss caused due to delay. The court concluded that the clause was invalid because the exemption clause constituted a fundamental breach of the contract.

The court held that the clause in question could not favour the plaintiff by exempting him for liability for delay. The clause could only operate in his favour if he did all that he was obliged to do in the manner in which he was obliged to do it. In this case the plaintiff had not honoured the contract by providing the delivery at significant delay and thus causing consequential damage. The court concluded that it is a principle of mercantile law that agreements should not be contrary to custom and public policy and for this reason an exemption clause cannot exempt liability when there is a breach of contract or duty.

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