Fresh templates, fewer headaches: make your liability exclusions reasonable and enforceable in 2026

Updating your standard terms and contract templates is a smart way to protect your business in 2026 – but excluding all liability rarely works.

An attempt to exclude all contractual liability will usually fail because statute and case law place strict controls on liability clauses. For example:

• Certain types of liability can’t be limited by law or contracted out of
• Many exclusions must satisfy the ‘reasonableness’ test under the Unfair Contract Terms Act 1977, which applies to most business-to-business contracts, with some exceptions such as the international supply of goods, insurance and shipping
• An exclusion can’t go ‘too far’ and be construed as leaving the counterparty with no remedy for a breach. Clauses that do risk being simply void, causing the whole contract to be invalid or being interpreted more restrictively than drafted by the courts.

An exclusion clause that aims to provide maximum protection by excluding all liability may therefore offer very little protection at all.

Enforceability is one aspect to consider, but the commercial impact is important too – an attempt to exclude all liability is likely to be perceived by a counterparty as wholly unreasonable and justifiably so.

Rather than adopting a blanket ‘exclude all’ approach, clients are often better served by:

• Identifying specific risks to exclude, such as those within the counterparty’s control or those they couldn’t financially meet or insure against
• Including clear, reasonably drafted clauses in their contracts to achieve this.

It may be easier to justify the reasonableness of an exclusion clause in a negotiated contract between parties with similar bargaining strength. This is because courts in England and Wales tend to uphold what experienced businesses have agreed between them, subject to the statutory and case law controls mentioned earlier. A little negotiation can therefore improve a clause’s effectiveness.

Consumers have greater protection under English law. It’s harder for a business to exclude or limit liability to consumers than to other businesses. For example, certain statutory obligations relating to the supply of goods and services can’t be contracted out of and consumer terms must be fair and transparent.

In our experience, clauses relating to limitation or exclusion attract the most negotiation and discussion between parties and their lawyers, given their purpose as a key contractual protection.

If budgets won’t stretch to a full contract review, we strongly recommend getting the limitation and exclusion of liability clauses checked by a professional, so you have a clear understanding of their effect and the level of protection they offer you and your counterparty.