The Validity of Exemption Clauses for Fraudulent Misrepresentation in Iranian and English Law
Subject Areas : حقوق مدنیMohsen Pour Ali 1 , Reza Maghsoudi 2 *
1 - Master’s student in Private Law, Department of Law, Faculty of Literature and Humanities, University of Guilan, Rasht, Iran.
2 - Associate Professor of Private Law, Department of Law, Faculty of Literature and Humanities, University of Guilan, Rasht, Iran.
Keywords: Fraudulent Misrepresentation, Exemption Clause, Freedom of Contract, Reasonableness Standard,
Abstract :
Fraudulent misrepresentation, as a factor that vitiates consent, holds a significant position in contract law, and its remedy in the legal systems of Iran [absolutely] and England [generally] is the granting of the right of rescission to the deceived party. However, the issue of whether the effects of misrepresentation can be limited or waived through the inclusion of an exemption clause in the contract is considered a challenging matter in Iranian law; this is because the dominant view among legal scholars is based on the absolute invalidity of such a clause, regarding it as contrary to public order, good morals, and the principle of good faith in agreements. In contrast, English law, while recognizing the principle of protecting the deceived party as a general rule, has adopted a more flexible approach and, in limited cases where the element of fraud and deception is absent and the negligence is excusable, has accepted the validity of exemption clauses upon satisfying the criterion of “reasonableness.” It appears that although in cases of fraudulent misrepresentation the effectiveness of any clause excluding or limiting liability is inconsistent with the philosophy of protecting the integrity of transactions, in the absence of bad faith—particularly in relationships between professional parties and where the clause has been included with the awareness of both parties and within the framework of a rational allocation of risk—the validity of such a clause may also be accepted in Iranian law. This conclusion may be supported by drawing inspiration from the reasonableness criterion in English law and relying on the principles of contractual freedom, the presumption of validity, and the general provisions of Article 448 of the Civil Code, which does not exclude the waiver of the option of rescission for misrepresentation. Such an approach, while preserving protection for the deceived party, appears more compatible with the economic and commercial requirements of contemporary transactions.
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