Saturday, February 21, 2009

What Did You Agree To? Liability

In this part of the What Did You Agree To? series, the concept of liability will be looked at. Liability is often a word thrown around, without complete understanding. Effectively liability means level of responsibility or accountability. Should something happen you are responsible for it, or will be held accountable for it. That is Liability.

What happens if you don't want to be responsible for certain eventualities? That is called Limited Liability.

But why is this important in a contract? The contract is the source of the rules of the agreement. If someone agrees to do something or sell something, they may want to try to protect themselves by keeping their level of responsibility as low as possible.

If you have read my article Coat Check: General Disclaimer you will remember that Cindy left her coat at a coat check. the company had put up a sign saying "Not responsible for Lost or Stolen Goods." That is an attempt by the company to reduce is level of responsibility. It is Limiting its Liability.

When contracts address liability they are usually very heavily in favour of the company that wrote or presented the document. When a company tries to reduce their level of responsibility they usually do it through either

a) Express Disclaimers. i.e. The Coat Check.

b) Limited Liability Clauses.

c) Waivers

As this series is driven around paper contracts, we will stay focused on the Limited Liability Clauses, and Waivers.

Lets look at the Google Agreement we looked at in the second part of the series What Did You Agree To? Jurisdiction. In the event you did not read that article, the Terms and Conditions are the main governing rules for you using Goggles services. Section 15 talks about Goggles Liability. So we will use part of it as an example. Here is a piece of that section.


The first thing you will notice is that it is all in capital letters. This is because the company want to limit arguments that you did not notice or did not understand the terms. Most mid to large sized companies will capitalize clauses that impact a persons rights. Its a great place to start when scanning a document. However not all do. So beware. Ideally you should be looking for key words.

You will notice the I have made the words EXPRESSLY and AGREE larger. This is because these words have been chosen specifically. In contract terms, the opposite to express, is implied. So Google did not want any confusion. They wanted it such that you openly accept, and AGREE to this limitation.

You will notice that the end of the sentence above says NOT BE LIABLE TO YOU FOR.

Now you know this is a list of things you Google say they are not responsible for. They are washing their hands of it. They are saying, if you relied heavily on the accuracy of an an advertisement, and that advertisement is inaccurate, you can not hold Google liable.

When you are looking at the agreement specifically look for these clauses. You will be amazed at what limits are imposed.

As a reasonable person, you know that any good relationship has boundaries. Clearly Google don't want to be on the hook for things not in their control. Trying to limit the liability is important is part of the ways to set up boundaries. But what happens when there is a loss, that is within their control, but the boundaries say it is not?

This is where things get a bit messy. Just because a company puts the clause in their agreement, does not mean they are allowed to rely on it. In actuality the law will step in. Sometimes there are particular laws for agreements in particular industry's. Insurance, Mortgages etc. Any industry that is regulated usually has regulations for the level of responsibility that must be honoured no matter what.

On that counter side there may be a section the describes the level of responsibility you have. Sometimes these provisions are not as obvious. In the Google Terms and Conditions here is the clause that sets the boundaries of your responsibilities.

5.6 You agree that you are solely responsible for (and that Google has no responsibility to you or to any third party for) any breach of your obligations under the Terms and for the consequences (including any loss or damage which Google may suffer) of any such breach.

Effectively if you breach the agreement, and Google suffers, they are saying you are responsible. Do you notice that the agreement uses the word responsible here, but liability or liable elsewhere? It is interesting, and very common in contracts. Sometimes the purpose is to make certain provisions clear, and other times it is to confuse.

Every agreement has boundaries of responsibility. The term liability is part of the responsibility boundaries. There are always two sides, so make sure you are aware of both sides.

If you are about to sign an agreement, and the liability clauses is confusing or does not make sense, you should get some legal advise. This is even more important when you are dealing with a regulated industry such as mortgages, investments etc. To speak to a lawyer, click HERE. Lawyers are online, and can answer your question within minutes for as little as $15.

The next article will be about Warranties.

Until then...

Copyright © 2009 Peter MacSweeney.
All rights reserved. Reproduction in whole or in part without the express written consent of the author is forbidden. Contact the author through the comment form for all inquiries, including media.

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