A clear and unambiguous exclusion clause may be relied upon to avoid liability for damages arising from the negligent failure to fulfil a contractual duty. The wording of the exclusion clause must, however, specifically mention the extent to which liability is excluded. The courts generally interpret an exclusion clause as not covering negligent conduct if the clause does not specifically mention negligence and is wide enough to include another realistic (not fanciful) basis of potential liability.

 In Osman Tyres and Spares CC & another v ADT Security (Pty) Ltd, the plaintiff entered into a written agreement with the defendant, a private security company, in terms of which the defendant would provide security services at the plaintiff’s business premises, including telephonic monitoring and armed response. In terms of the agreement, the defendant had a duty to render these services with reasonable care. Clause 6 provided that the defendant was not liable for any loss or damage arising from its negligent act or omission, and that the plaintiff waives any right to claim such damages.

On 21 December 2007 at 0h00, a burglary took place at the plaintiff’s business premises. At 00h24 an employee of the defendant responded to the activation of the alarm at the premises and reported that everything was in order. At 06h48, the plaintiff received a text message from the defendant indicating that the defendant had responded to the activation of the alarm at its premises. The plaintiff’s attempts to contact the defendant were unsuccessful. When the plaintiff arrived at the premises at 08h00, he discovered that the locks had been broken and goods had been stolen. The plaintiff accordingly instituted a claim for damages alleging that in rendering the services, the defendant failed to exercise reasonable care (which is an allegation of negligence).

The plaintiff testified, and after the close of the plaintiff’s case, the defendant applied for absolution from the instance. This is an order dismissing the plaintiff’s case on the basis that the plaintiff has not produced any evidence upon which a reasonable court may find in favour of the plaintiff. In granting this application, the high court found that the plaintiff had (in terms of clause 6) waived any right to claim that may arise out of negligent acts or omissions on the part of the defendant.

The Supreme Court of Appeal upheld the trial court’s finding and held that clause 6 unambiguously excluded the defendant’s liability for any loss or damage caused by the defendant’s negligence. The court held that where (as in this case) the contract has been reduced to writing, the writing is regarded as the exclusive memorial of the intention of the parties, and any extrinsic evidence to the contrary is inadmissible.

A party may not rely on an exclusion clause to avoid liability for its own dishonesty (for example theft or fraud). To the extent that an exclusion clause purports to exclude such liability, it is contrary to public policy and void. However, the exclusion clause may absolve a party from liability for dishonest acts committed by its employees and for which it would otherwise be vicariously liable (see for example First National Bank of SA Ltd v Rosenblum and Another [2001]).

Some exclusion clauses may be prohibited by legislation. The Consumer Protection Act 2008 and the National Credit Act 2005, for example, prohibit the inclusion of various types of exclusion clauses in consumer agreements and in credit agreements.