While the decisions of the Supreme Court mentioned above have upheld the validity of limitation of liability and exclusion of liability clauses in several fact scenarios, the contours of the doctrinal distinction between a limitation of liability clause, an exclusion of liability, and an exclusion of entire liability clause have not yet been explored by the Supreme Court. Further, the scenarios in which the enforceability of even an exclusion of liability clause might pose challenges under Indian law are yet to be explored by the Supreme Court.
As a result, sometimes, different High Courts (or arbitral tribunals) incorrectly apply the grounds that might be potentially justified for invalidating an exclusion of entire liability clause, to a limitation of liability clause or an exclusion of liability clause as well. The Simplex case is one such example.
However, it is clear from the decisions of the Supreme Court discussed above that a stipulation that substitutes the secondary obligation of the contract-breaker to pay compensation with an alternative performance – for example, by granting an extension of time instead of paying compensation for having caused delay – is valid under Indian law.
It is hoped that in an appropriate case, the Supreme Court would explore these issues and clarify the theoretical basis of limitation of liability and exclusion of liability clauses under Indian law.