What is a Contract Disclaimer?

When two parties enter into a contract for goods or services, each assumes certain obligations and liabilities. A party who wishes to limit or eliminate those obligations and liabilities can do so with a contract disclaimer. A contract disclaimer is a clause in a contract’s language that sets parameters on the exchange. Contract disclaimers are usually designed to prevent one party from being able to sue the other if things do not turn out as planned.

Contract disclaimers, like all disclaimers, are written to protect one party from an undesired outcome. Signs advising visitors to “Enter at Your Own Risk” or warnings that “Management Is Not Responsible for Loss” are examples of general disclaimers. A contract disclaimer is similar in spirit but different in that it exists in a shared writing between parties who have negotiated the terms.

There is no set language that a contract disclaimer must contain, and spotting a contract disclaimer is not always easy. Language such as “as is” in a sales contract is a disclaimer, because it protects the seller from allegations that the product turned out to be defective. A statement limiting the monetary amount that a party can recover in case of injury or product defect is also a contract disclaimer, because it sets a cap on one party’s obligation to pay if something goes wrong.

Contract disclaimers are easy to put into contracts, but whether a disclaimer will actually be enforceable cannot be answered without consulting regional contract laws. In the United States, the Uniform Commercial Code (UCC) sets guidelines for contract disclaimers, including a requirement that contract disclaimers in consumer sales agreements be set out “conspicuously.” Almost every U.S. state has adopted the UCC in some form. In other countries, national contract rules address disclaimers. The United Nations Convention on Contracts for the International Sale of Goods, which applies to contracts for goods sold internationally, also has rules governing contract disclaimers.

Some of the most difficult things to successfully disclaim in contracts are warranties — contractual assumptions, either articulated or implied, about the quality of the goods or services guaranteed by the contract. Express warranties are statements that a party affirmatively makes about a product, such as a car’s average miles per gallon, the expected performance of a certain product, or a specific description of what a product will look like. A party cannot generally disclaim these sorts of assurances.

Implied warranties, on the other hand, can sometimes be disclaimed. Implied warranties include assumptions or tacit promises about a good or service. Implied warranties that automatically attach to contracts include the implied warranty of merchantability, which is an assumption that the goods sold are at least average in quality, and the implied warranty of fitness for a particular purpose, which assumes that a product sold for a specific use is actually appropriate for that use. The UCC sets out certain circumstances and ways in which implied warranties can be disclaimed but, even still, enforceability of any disclaimer depends on how local laws interpret and apply the UCC provisions.

Disclaimers can be a valuable way for contracting parties to protect themselves and their assets. The best way to ensure that a contract disclaimer is both enforceable and effective is to consult an attorney familiar with the local law. Just because a contract contains a disclaimer does not necessarily mean that anything has legally been disclaimed.