Preeti Wadhawan (CS & Legal Manager) 15 April 2010

Enforceability of limited liability clause in agreement

Dear all,

Can someone advise on the enforceability of clauses limiting liability in a agreement. Our bank, authorised dealer for us gave an advise while availing a loan. Based on the advise, we took the loan and now, the regulator have imposed penalty on the loan as it was in contravention of the guidelines. We do not have a local agreement with the bank. A global agreement do exist with them. However if the global agreement provides for a clause limiting their liability, can we still go ahead and sue the bank for recovering the penalty as we relied on their advise. It would be really helpful if someone can share a case law related to this query.

Thanks in advance

Regards,

Preeti

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3 Replies

Pradeep (Advocate) 15 April 2010

Facts presented by you are not very clear, also better to quote the exact terms of the clause. explain the situation by an illustration (eg. X took loan from Y...), also mention which country's regulator are u referring to ? and in which country are you doing business (if at all such things are relevant)

Preeti Wadhawan (CS & Legal Manager) 15 April 2010

I am referring to Indian Regulator and Indian Company. The loan was taken from outside India as per the foreign exchange regulations. As under these regulations, authorised dealer i.e. bank was involved who advised that we comply with the regulations which was not the case. I do not have the exact clause with me as we are yet to receive the global agreement between the bank and our parent company.

Trust this helps.

R.R. KRISHNAA (Legal Manager) 15 April 2010

The limitation of liability will a lot depend on to what extent the bank is liable under the global agreement. A global agreement is certainly a valid one and if the bank relies on the global agreement and takes defence of limitation of liability the courts will certainly uphold the clause (limitation of liability) in the global agreement unless it is unjust and unilateral and it is advisable first to go through the global agreement and analyse the merits of the clause before issuing a legal notice against the bank.