exemption clause

  

Definition

Provision in a contract under which one party (usually the one which drafted the agreement) is protected from being sued by the other party for damages, loss, negligence, non-performance, etc., or its liabilities are severely restricted. Banks, for example, use exemption clauses in documents of foreign trade where they accept no liability for any injury to the customer unless it can be proven to have been the direct result of their negligence or mistake. The courts, however, look at this clause with disfavor and often interpret it narrowly to see if it is reasonable in the circumstances. See also exclusion clause, exculpatory clause, and indemnity clause.

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