The Legal Saga of Exclusion Clauses in Malaysia

Abstract

One of the issues that could affect the success or the sustainability of a business organisation is its ability to manage the legal risk of liability that it faces in running its business. One common tool utilised by businesses is to insert an exclusion or limitation clause in their contracts. This would allow them to predict and apportion the possible amount of liability that could arise from breach of contract or negligence. The courts usually exercise caution in allowing such clauses to be enforced in order to prevent unfairness especially to the weaker party. Malaysia is of no exception. The Malaysian courts have display willingness to strike down the validity of an exclusion clause to ensure that a business organisation does not escape liability arising from its own fault. The Federal Court and the Court of Appeal decision in Bourke v CIMB Bank Bhd (2018) are good examples of such an approach. However, the legal reasoning adopted by the courts in this case has led to numerous confusions on the legal principles of contract law in Malaysia. It is therefore necessary to examine the legal position of exclusion clauses in Malaysia today and to determine what is the most appropriate way forward. This research found that there are difficulties with the legal coherency and application of Bourke in future cases.