Clauses Excluding Liability

Question 1

fundamental breach doctrine

Answer 1

Liability disclaimers are unenforceable to save fundamental breaches.

Question 2

Two different approaches to fundamental breach doctrine in Hunter Engineering Co. v. Syncrude Canada Ltd.

Answer 2

1. Rule of law: A strict legal rule dictating that you absolutely cannot contract out of liability for a fundamental breach (BCCA)
2. Rule of construction: Whether an exclusion clause covers a fundamental breach is a matter of contractual interpretation for the parties to determine (SCC)
   Wilson J puts a caveat of reasonableness on this

Question 3

evolution of fundamental breach doctrine

Answer 3

The doctrine of fundamental breach is replaced by the 3-part Tercon test

Question 4

tercon test

Answer 4

1. Does the exclusion clause apply to the circumstances?
2. If it applies, was the clause unconscionable at the time the contract was made?
3. If valid and applicable, should the court refuse to enforce it because of an overriding public policy?

Question 5

exclusion clause rule

Answer 5

Essentially, no contractual damages are barred by an exclusion clause unless there is unconscionability or policy estoppel (Hunter Engineering; Tercon v. BC)

Question 6

Hunter Engineering Co. v. Syncrude Canada Ltd.

Answer 6

When dealing with an exclusion clause, the SCC split on the proper test. Dickson CJ held that courts should strictly enforce the clause unless the contract was unconscionable at the time of formation. Wilson J held that courts retain a residual power to refuse enforcement if subsequent events make enforcing the clause unfair, unreasonable, or against public policy.

Question 7

Tercon Contractors Ltd. v. British Columbia (Transportation and Highways)

Answer 7

Introduced the 3-part Tercon test and held that the province did not succeed in excluding its liability for damages through the exclusion clause because the claim did not fall within the terms of the exclusion clause.