It can be suggested that exclusion clauses are nonsensical in the context of contract law; why would you exclude a party’s liability for a promise they have made? However, it is evident that the exemption clause is a vital tool in allocating the risk of contracts between the parties and allows for commercial efficacy. Take the following example:
Party A delivers cargo on his one ship that makes him a moderate amount of money to feed his family. Party B would like to deliver some expensive cargo on Party A’s ship on a route that is notorious for storms and is a risky trip. Party B are a national multi-million-dollar company. It makes sense in this context for Party A to be entitled to an exclusion clause limiting their liability for damage to the cargo – Party A would not be able to afford to replace the cargo, but Party B would be. Without an exclusion clause, Party A would probably be unwilling to take on the commercially beneficial contract.
The courts are happy for parties to use exclusion clauses, and to restrict them would undermine the freedom of parties to contract on terms they wish to. Nonetheless, the law will interfere in some forms of contract will be examined later in this chapter. Generally, except for those the law interferes with, the common law provides no rule whereby an exclusion clause would be declared unenforceable on the grounds that it is unfair or unreasonable – Photo Production Ltd v Securicor Transport Ltd [1980] AC 827.