I often hear these words from clients, and potential clients when talking about business models and terms and conditions and using disclaimers. It is understandable to want to protect your legal exposure and avoid ‘being sued’. But here’s something you should know.
YOU CAN’T STOP SOMEONE FROM SUING YOU.
What? Isn’t that what you pay a lawyer for – to draft contracts that stop you being sued?
Firstly, anyone call fill out the necessary documents, pay the court or tribunal fees, and start a legal action. The only way to ‘stop’ someone from that doing that, would be to physically restrain them. That involves kidnapping and a world of trouble so let’s not go there. My point is you cannot stop someone bringing an action against you.
Secondly, my job as a lawyer is to draft a legally binding contract for you. This means that your contract (or terms and conditions) need to contain clauses that can be enforced, if you need to rely on them.
“Yes, and I want a legally binding disclaimer”.
That is fine. Disclaimers certainly have a place and use in contracts, but here are some important things that you need to understand about disclaimers.
1. Understand what a disclaimer is.
Disclaimers are used to deny a right or liability under a contract. For example, “we do not guarantee that you will achieve the perfect life”. A disclaimer only works if the facts actually support it. For example if you have the above disclaimer but on your website you say “Achieve the perfect life today!” – your disclaimer means nothing.
2. You want an exclusion clause.
Clients often ask for disclaimers because they want to reduce their legal liability. This can be done through the use of clauses that will described events or circumstances that the business or provider is not responsible for. By accepting contracts with exclusion clients and customers are acknowledging that the provider will not have legal responsibility in the events or circumstances described. But I think you knew this right – because you want to ensure that you can’t be sued for anything.
3. You can’t avoid responsibility for your services and products.
You have a business providing a product or service as a result you have legal responsibility for providing that product and service. It can’t be avoided! You can’t disclaim responsibility for everything that you do. Because you are legally responsible. There is legislation that says that you are responsible, and there are legal principles that apply in unwritten law, that also makes you responsible.
4. Exclusion clauses can be illegal.
Wait, what? The Australian Consumer Law contains guarantees that all businesses must satisfy. If you don’t satisfy the guarantees then the customer has rights. You cannot use a disclaimer to avoid, or remove this responsibility. Any disclaimer that tries to limit the law, will (a) not be upheld and (b) you can be found liable for trying to avoid the law.
5. Exclusion clauses can be unfair.
Certain contracts (such as terms and conditions used by small businesses) are subject to the Australian Consumer Law, which prohibits unfair contract terms. Contract terms can be unfair for a number of reasons, including that the term imposes a penalty on the customer, and that the customer had no bargaining power. As a lawyer, part of my role is to make sure your contracts are not ‘unfair’ and not ‘illegal’. This includes telling you that you can’t avoid responsibility for certain things.
6. But what about these terms I found on the internet/my friend gave me?
YOU KNOW THE ONES WITH THE CAPITAL LETTERS THAT TELL YOU EVERYTHING IS AT YOUR OWN RISK. Put those American terms and conditions away and forget about them. Firstly, they are scary and secondly, no-one reads them. But most importantly, the Australian law applies to Australian businesses, and I’ve just explained what you need to be careful about. America and other countries are different, and what is fine in America can actually be illegal here.
7. So what can I exclude?
You can exclude responsibility for things that you are legitimately not responsible for. This includes decisions and choices of customers, the actions of third parties and events outside of your control. If you are entering into a contract outside of the consumer law – then it is ‘game on’ with exclusion clauses because the restrictions in the Australian Consumer Law will not apply. Ultimately every business is different – even your closest competitor will not necessarily be the same as you.