On child-friendly activities, contractual releases, and choice of forum: part 4.¹

The story so far:
- brought my kids to a temporary indoor playground in a mall;
- had to fill in an online waiver form before unleashing my brood;
- actually bothered to read the legalese; and
- am now letting my nerd flag fly.

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In the last post, we concluded that the terms and conditions used by the organisers were likely drafted in, or for use in, the United States.

We see this all the time - folks using a contract template, of unknown provenance, that was drafted according to the laws of a different jurisdiction.

So what's the big deal?

Well, the danger of doing so is that you may have clauses in there that have a specific meaning under the laws of that other jurisdiction, but:
(a) bear a completely different meaning in your jurisdiction; or
(b) are not enforceable in your jurisdiction.

In other words, the legal drafting equivalent of a false friend.

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In linguistics, a "false friend" is a false friend is a word in a different language that looks or sounds similar to a word in a given language, but differs significantly in meaning.²

Take for example, "gift". In English, it refers to a present, but in German, it refers to...

...poison.

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It has been suggested that in the United States, "[a] contract would typically include a clause to the effect that the company shall not be liable for any special, indirect, incidental, punitive or consequential damages, including loss of profits, arising from or related to the breach of the agreement..."³ Let's call this a "US Limitation Clause".

But in France, "limitation of liability clauses may be struck out if the court considers that such clauses exonerate the obligor of its essential obligations", and the "notion of 'special, incidental, punitive or consequential' damages does not exist under French law, which only recognizes the distinction between direct and indirect damages".⁴

So imagine a situation where you:
(a) are contracting with a French party;
(b) utilise a contract template drafted for use in the United States, which includes a US Limitation Clause;
(c) accede to a request from the counterparty for the contract to be governed by French law; and
(d) believe that you are protected by the US Limitation Clause.

Suppose further that a dispute arises, and the French party sues you. In other words, you now have a cross-border commercial dispute to contend with.

You think to yourself, "well, no big deal. After all, I have a clause in place that limits my liability!"

You may well have made a million-dollar mistake.

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In part 5, I'll share practical tips on some things to look out for when entering into cross-border contracts and transactions, to reduce your chances of facing such unwelcome surprises.