Exemption Clauses: With the rise of trade and commerce the idea of creating a new contract for each individual was scrapped and instead led to the establishment of the standard form contract as the norm. Their advantage was the convenience they provided which included standard terms and conditions which were standard to all those engaging in business with a trader[1].

The rise of said standard form contracts also led to exemption clauses being inserted into the terms and conditions to limit the trader’s liability, sometimes even to altogether omit any liability from their side. A practical example of this is for instance when a moving company (used to move bulky furniture) inserts an exemption clause in its contract stating that the company shall not be liable for any damage caused to the furniture in transit thereof.

Maltese law follows the volonta’ theory which is based upon the principle of “pacta sunt servanda”[2] which means that the contract is binding and must be adhered to including the exemption clauses. However, the Maltese Courts have done away with this principle and instead started including concepts from the affidamento theory[3] in their judgements.

Maltese Courts in fact do not accept exemption clauses which prove to be extremely and unreasonably fair. (This does not render the entire contract null but simply the unreasonable clauses). These conditions were most likely in breach of good faith[4] such as in the case of F (Advertising) Ltd. vs Mifsud[5] where the company printed its conditions in small print and against a colored background with the intention of making them difficult to read. The Court held that such conditions are to be ignored, even though the agreement was signed by the other party (Mifsud).

The Court further dismisses such exemption clauses if they were not brought to the attention of the other contracting party (the client), as established in the case of Giordano vs Grech[6] and in later cases such as that of Sammut vs Sullivan et[7].

The Court went into further detail on the matter of exemption clauses and has repeatedly shown that in any case, no exemption clause may exonerate a person from dolo, culpa lata or culpa levis[8]. This prevents an exemption clause to be used to justify fraud or negligence. This was originally established in the case of Borg vs Calascione[9]. This is also enshrined in Article 1132 of the Civil Code[10] which states that when executing an obligation one must act with the diligence of a bonuspaterfamilias[11]. Technically speaking fraud or negligence would also lead to the non-performance of the obligation of the contract.

An example of all this is seen in the case of Camilleri vs Pisani[12] where a wedding dress (worn once) was taken to the drycleaners. The company had an exemption clause of liability in their terms and conditions (which she was not made aware of). She was informed by the manager that the dress was delicate and that some pears may fall off. The client still accepted to proceed with her order since the manager guaranteed that the material would remain intact. After the dry-cleaning process, Camilleri discovered that her dress ended up torn in pieces with parts of it being burnt as well. The Technical Expert appointed by Court however, tested some fabric scraps from the dress and confirmed that it was in good condition, 100% silk and that it is resistant to the normal conditions of dry-cleaning of delicate clothes. It was concluded that the damage occurred because of high temperatures used out of negligence during the drying cycle.

After quoting Borg vs Calascione and also referring to Article 1132 and other judgements, disregarded the exemption clause since the damage caused to the dress was caused by the negligence of the company and could not rely on the exemption clause for fraud or negligence. Camilleri was in fact awarded LM 700 (approx. €1630) in damages.

It is important for one to be aware of such exemption clauses in contracts, especially those of significant importance and value. Thus, they would be able to protect themselves with the defenses provided by the Courts of Malta as seen in the various examples of case law.

For more information or assistance please contact Dr Robert Tufigno and Dr Delilah Vella

GTG’s experienced team is able to assist clients throughout the whole lifecycle of a commercial decision. Find out more here.

[1] An economically active person.

[2] English Translation: ‘Agreements must be followed’.

[3] The affidamento theory is a counter-theory to the volonta’ theory and is implemented in other Western-European States such as Germany and Italy.

[4] With deceiving intentions – bad faith.

[5] First Hall Civil Court – 21/11/2014.

[6] Commercial Court – 1933.

[7] First Hall Civil Court – 16/10/1995.

[8] These are varying degrees of negligence.

[9] Commercial Court – 25/05/1961.

[10] Chapter 16 of the Laws of Malta.

[11] Concept emerging from Roman Law, used to refer to a person of reasonable diligence and means.

[12] First Hall Civil Court – 13/11/1995.

Disclaimer This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.
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