A. Introduction

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 749-750

Page 749

The use of exculpatory clauses in written agreements is a pervasive practice in both commercial and consumer transactions. Exculpatory clauses are used to limit the potential liability of a party for breach of contract. Such clauses may completely preclude liability for breaches of certain stipulated kinds. Others may concede liability but impose a limitation on the extent of liability, such as return of the purchase price or a numerical cap on the extent of liability assumed. Other clauses may impose strictures on the manner in which losses resulting from breach are to be claimed by imposing, for example, a short period of notice within which claims are to be advanced. Exculpatory clauses are referred to by a variety of labels, such as disclaimers, limitation of liability clauses and exclusion, exceptions or exemption clauses. When such clauses are used deliberately by the parties to consciously allocate the risk of certain kinds of losses to one party or the other, they perform a valuable function. On the other hand, where they have been inserted by one party in a written agreement that, for whatever reason, is unlikely to be read by the other party, the use of such provisions may surprise that party and lead to what may be considered to be harsh and unjust consequences. Such problems are most likely to arise, of course, in the context of transactions involving the supply of goods and services to consumers on the basis of standard forms drafted by the supplier. Understandably, then, the courts have attempted to devise

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various techniques for effecting some degree of judicial control over the use of exculpatory clauses.

In this chapter, we examine the development of the doctrine of so-called fundamental breach that has been the principal, but not the exclusive means, for achieving this objective. Although controversy continues as to the precise nature of the doctrine, it is widely accepted that it is, for the most part at least, an aspect of the law of contract interpretation. The basic idea underlying the doctrine of fundamental...