The appointment of a firm of engineers said that: “Liability for any claim in relation to asbestos is excluded.” The Technology & Construction Court was happy with that. The relevant agreement and associated warranties were examples of contracts where businessmen capable of looking after their own interests and deciding how contract performance risks could most economically be borne had reached an agreement that the court should be very slow to disturb or to characterise as unbusinesslike. But what did the Court of Appeal think?
The Court of Appeal confirmed that the exclusion of liability was effective. They had to consider the contra proferentem rule, which requires any ambiguity in an exemption clause to be resolved against the party who put the clause forward and relies on it. They said, however, that, in relation to commercial contracts, negotiated between parties of equal bargaining power, the rule now has a very limited role.
They also considered the case law on exemption clauses, in particular the decision in Canada Steamship Lines Ltd v The King, but decided that the case law did not rescue the claimants. The Court noted that, in recent years, and especially since the Unfair Contract Terms Act, the courts have softened their approach to both indemnity clauses and exemption clauses. Its impression was that, at any rate in commercial contracts, the Canada Steamship guidelines, in so far as they survive, are now more relevant to indemnity clauses than to exemption clauses.
In major construction contracts the parties commonly allocate the risks between them and agree who will insure against what. Exemption clauses are part of the contractual risk distribution apparatus. There is no need for the court to approach such clauses with horror or a determination to cut them down. Contractors and consultants who accept large risks will charge for doing so and will no doubt take out appropriate insurance. Contractors and consultants who accept lesser degrees of risk will presumably reflect that in the fees which they agree.