What is an exclusion clause and what does the contra proferentem rule address?

• A. An exclusion clause seeks to limit liability; contra proferentem provides ambiguity is construed in favor of the non-drafter.
• B. An exclusion clause creates a binding agreement; contra proferentem clarifies payment terms.
• C. An exclusion clause is always invalid; contra proferentem favors the drafter.
• D. An exclusion clause limits remedies only in consumer contracts.

Answer: (A)

Exclusion clauses are terms in a contract that try to limit or exclude liability for certain events, such as breach or damages. The contra proferentem rule deals with how such terms are interpreted when there is ambiguity: the ambiguous language is construed against the party who drafted the clause. So, the clause’s purpose is to limit liability, and if its wording is unclear, the court will favour the other party by interpreting the ambiguity against the drafter. This makes sense because those who draft standard terms should bear the risk of any unclear wording.

Other statements miss the point: exclusion clauses don’t by themselves create a binding contract, and they aren’t always valid or limited to consumer contracts. The rule in question doesn’t favour the drafter when there’s ambiguity; it favours the non-drafter.