4.Contract Drafting, Review and Negotiation

Q5 (Limitation of Liability in Terms of Use)

Regarding terms of use for services targeting individual users, we wish to include a provision disclaiming our liability for damages.  Is this a problem?

We often see disclaimer of liability provisions in terms of use. However, contractual relationships with individual users are often considered consumer contracts under the Consumer Contract Act. This means that disclaimers of liability for damages are restricted. Generally speaking, provisions completely disclaiming liability for damages are invalid, and partial disclaimer provisions are invalid in cases of willful misconduct or gross negligence (which means the provisions are valid in cases of simple negligence). Accordingly, in terms of use targeting individual users, in general, you should not include a complete disclaimer provision, but rather a partial disclaimer provision with a limit on the amount of damages and restrictions on the scope of liability.

(Posted: January 27, 2012)