CONTRACT LAW ā Exemption Clauses ā Fundamental Breach Prevents Reliance on Exemption Clause
Principle Statement
The consequence of an exemption clause on a fundamental breach is a matter of contract interpretation: whether the clause was intended to exempt from fundamental breach. Section 190 of the Contract Law (Anambra State) provides that a party guilty of fundamental breach cannot rely on an exemption clause to escape liability.
Ratio Decidendi (Source)
Per Edozie, JSC, in International Messengers (Nig.) Ltd. v. Pegofor Industries Limited (2005) NLC-1032000(SC) at pp. 6ā7; Paras CāA.
"The present position of the common law would appear to be that the consequence or effect of an exemption clause on a fundamental breach of contract or breach of a fundamental term is not a rule of law but, in each case, the question is one of interpretation of the contract to determine whether the exemption clause was intended to give exemption from the consequences of a fundamental breach. This rule of common law has been modified by section 190 of the Contract Law, Cap. 32, Revised Laws of Anambra State, 1991 which enacts: 'Nothing in the foregoing shall be construed as to enable a party guilty of fundamental breach of a contract, or a breach of a fundamental term to rely upon an exemption clause so as to escape liability.'"
Explanation / Scope
At common law, exemption clauses are interpreted to see if they cover fundamental breach. Under section 190 of the Contract Law (Anambra State), a party committing fundamental breach cannot rely on any exemption clause. The principle applies to contract law. The statutory provision overrides common law rules. Fundamental breach precludes exemption clause protection as a matter of law, not interpretation.
