Knock-for-knock-clauses: When Should the Danish Courts Uphold a Knock-for-knock-clause that Excludes Liability for Gross Negligence?

Karoline Gravesen

Student thesis: Master thesis

Abstract

This thesis seeks to investigate whether the Danish courts should uphold a knock-for-knock-clause that exclude the contracting parties’ gross negligence. To do this the thesis’ legal analysis seeks to determine which matters that will be in favor of upholding the knock-for-knock-clause. This discussion is based on the analysis of two knock-for-knock-clauses that are apparent in a Norwegian standard contract and an English standard clause. The main counterargument against the contracting parties’ use of knock-for-knock-clauses is that they reduce the preventive effect that the general law of damages usually entails. Therefore, this hypothesis will be discussed in the thesis’ economic analysis. The economic analysis seeks to define a model showing whether the contracting parties incentives to take care are reduces under the use of a knock-for-knock-clauses compared to under the use of the negligence liability. Based on this model it can be shown that the contracting parties’ incentives are in fact reduced. In conclusion, the economic analysis will examine whether other mechanism, like health and safety regulation, will affect the contracting parties’ incentives to take care. In the end, the thesis will examine whether the knock-for-knock-clauses are desirable based on a desire for economic efficiency. This will be so if the contracting parties can compensate the third parties for the negative externalities with the gains they obtain in the form of reduced dispute costs and insurance cost by using a knock-for-knock-clause. Regarding this, it can be concluded that the gains the contracting parties obtain are in fact enough to compensate the third parties for the negative externalities they experience, by way of example if they suffer a pure economic loss because this is not normally protected by the general law of damages in Denmark

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2017
Number of pages83
SupervisorsMarie-Louise Holle & Henrik Lando