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03 August 2010
The Court of Cassation has re-examined the difference between limitation of liability clauses - which are unenforeceable unless specifically approved in writing pursuant to Section 1341 of the Civil Code - and clauses that define the limits of the risk to which a contract relates.(1)
The court held that a contractual provision which circumscribes the consequences of negligence or default, or excludes an otherwise covered risk, is a limitation of liability clause. As such, the clause must be approved in writing pursuant to Section 1341. However, all clauses concerning the content and limits of insurance cover (ie, those specifying the covered risk) relate to the object of the contract and are not subject to Section 1341.
In the present case, the exclusion from coverage of a relatively broad category of damages was nonetheless deemed unlawful pursuant to Section 1229 of the code, which states that "an agreement which, in advance, excludes or limits the liability of the debtor for fraud or gross negligence is void".
In considering the formulation of the clause, the court held that:
"rather than aiming at specifying the contractual risk (which would be permissible), [the clause] unlawfully excludes such risk in its entirety... [and thus] negatively affects... the existence of the clause in an insurance contract whose aim is specifically that of guaranteeing the risks arising from entrepreneurial activity."
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