Service contracts often include liability exclusion clauses which limit liability for breach of contract and for negligence in performing the contracted service to the amount actually paid under the contract. Naturally, if the contract is not properly performed and the recipient of the service suffers damages, they may attempt to convince a court that the exclusion clause is either not applicable to the particular negligence or breach, or should not be enforced because it is unconscionable or contrary to public policy.
In considering whether a contractual term is unconscionable, courts look at two factors:
(a) inequality in the position of the parties arising from the ignorance, need or distress of the weaker, which left him in the power of the stronger; and(see for example Loychuk v. Cougar Mountain Adventures Ltd., 2012 BCCA 122 at paras. 29-31 and McNeill v.Vandenberg, 2010 BCCA 583 at para. 15)
(b) proof of substantial unfairness in the bargain.
As shown by the recent decision in Gordon v. Krieg, 2013 BCSC 842, in considering whether a particular bargain is unfair, courts apply a common sense approach whereby they consider the service that was provided, how much was paid for the service, and the potential damages that could result from an improper performance. In this particular decision, the court concluded that it was not an unfair bargain to limit damages arising from a visual only, three-hour home inspection - which damages could be in tens, if not hundreds of thousands of dollars - to the $400 paid for the inspection.