Apples and pears may be related fruits, but that does not mean they are the same! If I were to host a dinner party and intended to bake and serve an apple tart, but was delivered pears, I would end up with a pear frangipane and some very disappointed house guests. The context in which words are communicated is very important - apples and pears could relate to fruits or indeed stairs. Recognising intention as being important even in social contracts highlights the importance of intention in commercial transactions. The utility of contract law is to facilitate the agreement of parties and the rights and obligations assumed by them -this is the true essence of contract. Reverting to the analogy above, indemnity clauses although in some cases achieving similar ends as exclusion clauses, are not intended to result in exclusions of liability but are a more specific method of contractual risk management. One could infer that parties who specifically make use of indemnity clauses do not intend these to function as limitation of liability clauses, neither would they have intended such clauses be construed an exclusion of liability. Exclusion clauses could be construed as defences to accrued rights, however a central theme in this thesis is that an exclusion clause is clear in its function- it negates the accrual of a primary duty, implied by law. An indemnity on the other hand undeniably relates to secondary obligations to compensate or make good loss upon breach of primary obligations to perform. An indemnity clause, transfers secondary obligations to compensate to another who has assumed such obligation(s). In most cases the transferred obligation is financial; an indemnity is similar to a contractual insurance in this sense. An indemnity clause is not an exclusion clause. The difference is not only academic but also relevant to commerce. As the indemnity becomes a more common feature in high risk and high value contracting, certainty of its meaning is all too important. Where an indemnity is misconstrued as an exclusion of liability, the latter a duty defining clause, this could have an effect on the insurance arrangements between the parties ultimately making the venture uneconomical for one or both of the parties. The certainty of a contractual term enhances its effectiveness and consequently reduces the economic transaction costs of its inclusion. Thus, parties can focus on the first stage of Posner's transaction cost theory – 'negotiations and drafting' enhancing the utility of contract law.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:752642 |
| Date | January 2017 |
| Creators | Awe, Akinwale A. |
| Publisher | University of Aberdeen |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://digitool.abdn.ac.uk:80/webclient/DeliveryManager?pid=237095 |
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