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IAI Actuarial Core Principles · Business Management · Implied terms, exclusion of liability, contractual remedies and damages

Meera, an actuary, buys a policy-administration service from a software vendor in Pune. The vendor's invoice, handed over after the contract was made and payment agreed, states in small print that the vendor's liability is limited to the fee paid. A system fault later causes Meera a large loss. Which is the strongest argument for Meera that the limitation does not apply?

Meera's best argument is that the limitation appeared only after the contract was made, so it was never incorporated. Terms must be notified at or before formation to bind. Disparity in size or loss amount alone does not invalidate a properly incorporated clause.

  1. AThe limitation is unfair because the loss exceeds the fee
  2. BThe vendor is a larger business than Meera
  3. CThe limiting term was introduced after the contract was concluded, so it was not part of the agreementCorrect
  4. DLimitation clauses are enforceable only when printed in bold
  5. Meera did not sign the invoice with a witness

Explanation

A term must be brought to the other party's attention at or before contract formation to be incorporated. A clause appearing only on a later invoice is not part of the contract. Size of loss or relative bargaining power alone does not defeat a validly incorporated clause, and no rule demands bold type or witnesses.

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