LEGAL PRINCIPLE: CONTRACT LAW – Foreign Exchange Risk Allocation – Effect of Exemption Clause
PRINCIPLE STATEMENT
An express clause providing that all risks of foreign exchange including fluctuations howsoever caused shall be borne by the borrower effectively allocates foreign exchange risk to the borrower.
RATIO DECIDENDI (SOURCE)
Per Onu, JSC, in Artra Industries Nigeria Limited v. The Nigerian Bank for Commerce and Industry (1998) NLC-271997(SC) at pp. 25; Paras A--B.
"All risks of foreign exchange including fluctuations howsoever caused shall be borne by the Borrower."
EXPLANATION / SCOPE
Parties may contractually allocate risks. An express exemption clause is binding. The principle applies to foreign exchange fluctuations. The borrower cannot complain about losses arising from currency fluctuations. The court will enforce the clear terms. The rule promotes certainty in commercial transactions. The party assuming the risk bears the consequences.