Disclaimer

Most important points

• A disclaimer is a contractual clause or declaration that limits or excludes the liability of a party – e.g. in general terms and conditions, contracts or on websites (disclaimer).

• The typical purpose is to reduce the financial risk of damage: In this way, companies try to exclude or limit certain claims for damages.

• Under German law, exclusions of liability are only permissible to a limited extent: Liability cannot be excluded for intent and gross negligence (Section 276 BGB); many other exclusions are also ineffective against consumers (e.g. in the case of injury to life, limb or health, or in the case of cardinal obligations).

• In business relationships between entrepreneurs (B2B), liability can be limited somewhat further, e.g. maximum liability amounts or the exclusion of certain indirect damages, but even there the core obligations of the contract cannot simply be negated.

• Disclaimers on websites (e.g. “No responsibility for the content of external links”) only have a limited legal effect – you cannot exempt yourself from all obligations with a one-page text.

• It is important for start-ups and the self-employed to negotiate realistic limitations of liability in contracts (e.g. limitation to the order amount) and to know the legal limits in order to avoid using ineffective clauses.

• In case of doubt, an ineffective exclusion of liability will be struck out by the courts so that statutory liability applies – it is therefore better to choose permissible formulations than to blindly “exclude” all liability.

Introduction

Companies understandably want to avoid unforeseeable risks. An exclusion of liability sounds as if you could absolve yourself of all responsibility – but in practice it’s not that simple. In legal terms, the term refers to contractual clauses by which a party excludes or limits its liability for certain cases of damage. Such clauses are often found in general terms and conditions, in individual contracts with business partners or as disclaimers on websites. Particularly in sectors such as IT or media, where an error can quickly lead to financial losses for the customer, for example, companies try to contractually limit their liability. However, it is important to note that German law sets clear limits here so that essential obligations and consumer protection are not undermined.

Exclusion of liability in the contract vs. statutory liability

In principle, liability means having to pay compensation in the event of a breach of contract or a tortious act. The law (BGB) normally regulates this liability quite strictly – anyone who intentionally or negligently causes damage to another person must be held liable. A contractual exclusion of liability attempts to modify this legal obligation.

Example: A startup delivers software to a customer. The contract contains a clause: “Liability for slight negligence is excluded.” This means that if the damage was only caused by slight negligence on the part of the startup, it should not be liable.

Such agreements are permitted to a certain extent in business-to-business (B2B) transactions. The idea behind it: Two merchants on an equal footing should enjoy contractual freedom and be allowed to distribute risks freely. Therefore, maximum liability limits are often agreed in B2B contracts (e.g. up to a maximum of the order amount or a certain amount) or certain types of damage are excluded (e.g. no liability for loss of profit or indirect damage).

The situation is different in consumer contracts (B2C): Here, many disclaimers are invalid because the law protects consumers from unreasonable disadvantages. The relevant standards (Sections 305 et seq. of the German Civil Code) declare a number of restrictive clauses in general terms and conditions for consumers to be null and void. For example, an online store may not completely exempt itself from the warranty or exclude compensation in the event of physical injury or damage to health – such clauses would simply have no effect.

Boundaries: What must never be excluded?

Whether B2B or B2C, there are a few “red lines” in liability law:

• Intent: Liability can never be excluded for damage caused intentionally. If you deliberately cause damage to someone, you always have to answer for it. A clause “We are not liable for intentional behavior” would therefore be null and void – and also questionable from an ethical point of view.

• Gross negligence: The courts also practically exclude indemnification for this in general terms and conditions vis-à-vis consumers. In B2B clauses, attempts are occasionally made to exclude gross negligence, but this rarely holds up in court, at least not across the board for all obligations.

• Injury to life, limb and health: Damages arising from injury to these legal interests may never be excluded in general terms and conditions (Section 309 No. 7a BGB). Example: A manufacturer of a product may not write in the GTC that it accepts no liability for personal injury caused by its product.

• Cardinal obligations: These are essential contractual obligations, the fulfillment of which forms the basis of the contract. If their breach were excluded, the contract would become meaningless. Example: A service provider cannot completely release itself from the obligation to provide a service at all. The core of the service must therefore not be undermined by an exclusion of liability. Clauses that reduce liability for the breach of material obligations to zero are invalid. However, it is often permitted to limit the amount of liability in such cases (e.g. “in the event of a breach of material obligations, we are liable, but limited to €100,000”).

• Warranty for consumers: In consumer contracts, the statutory liability for defects (warranty) for new goods cannot be excluded or reduced before the expiry of 2 years. A complete exclusion of liability for material defects in a B2C sales contract would be invalid. In the case of used goods, the period may be shortened to 1 year, but not completely deleted.

Disclaimer in general terms and conditions and on websites

Many companies – especially online – use general disclaimers. This is familiar from websites: “Content without guarantee; no liability for external links” etc. Such statements have a limited scope.

External links: A frequent disclaimer on websites reads: “Despite careful checking, we accept no liability for the content of external links; the operators of these sites are solely responsible for their content.” This disclaimer is useful so that visitors know that external sites do not originate from the same operator. However, it only provides limited legal protection: according to the law (Telemedia Act, now TTDSG), a website operator is not liable for third-party content as long as they are not aware of any legal infringements. The disclaimer can help to show that you distance yourself, but does not replace the obligation to remove illegal links as soon as you become aware of them. It is more of a signal to users, but not a license.

Contents without guarantee: Operators of blogs or knowledge bases (such as itmedialaw) often write that the content does not constitute legal advice and that, despite careful research, no guarantee is given for accuracy and topicality. The following also applies here: You cannot completely avoid responsibility – anyone who disseminates grossly incorrect information could still be liable under certain circumstances. However, in the event of a dispute, the reference can put the reader’s expectations into perspective (“I did not seek binding advice, it was general information”).

GTC clauses: If disclaimers are used in general terms and conditions, they must stand up to the so-called content review (Sections 307-309 BGB). Many pre-formulated clauses have passed through the courts. An example of a permissible clause in the B2C sector: “We are not liable for slightly negligent breach of insignificant contractual obligations.” This leaves room for maneuver: In the case of insignificant obligations (i.e. minor matters) and only slight negligence, there would be no liability – but there would be for important obligations or in the case of major negligence. That should usually be okay. On the other hand, the following would be inadmissible: “We are not liable for negligent behavior in any case.” – This also excludes material obligations and gross negligence and would therefore be invalid.

Design for start-ups – sensible protection

It is wise for young companies to keep an eye on their potential liability and limit it contractually where possible. However, experienced lawyers should be involved in order to formulate clauses that will stand up in an emergency. Some tips:

• Agree a maximum liability amount: Instead of “liability excluded”, it is better to stipulate that liability for certain damages is limited to an amount X. This is more moderate and more likely to be effective.

• Exclude indirect damages: You can define that no liability is accepted for consequential damages, loss of profit, business interruption, etc. This is often accepted in the B2B sector.

• Mention insurance: If you have liability insurance with a cover amount, you can limit your liability to this cover amount. This shows your partner that the insurance will at least pay out in the worst-case scenario.

• Ensure inclusion of the GTC: A well-written disclaimer is of no use if the GTC have not been effectively included in the contract. So make sure that the customer agrees to them or has received them during the ordering process or when concluding the contract.

• Transparency: The clauses should be formulated so clearly that even a non-lawyer can understand what the company is liable for and what it is not liable for. Unclear or surprising clauses will otherwise fail anyway (Section 305c BGB: Surprising clauses are not part of the contract).

Conclusion

Disclaimers are a double-edged sword: on the one hand, they are essential to avoid unlimited liability for every little thing – on the other hand, they are strictly limited by law. Startups should learn early on where the red lines are so that they do not use ineffective clauses that give them a false sense of security. Instead of trying to reject all responsibility across the board, it is more successful to set specific liability limits while keeping the customer’s interests in mind. This keeps you within the bounds of what is permitted and prevents you from being liable without protection in an emergency simply because the planned exclusion of liability does not stand up in court.