diff --git a/tests/test_utils.py b/tests/test_utils.py
index 7c196a3..b23121b 100644
--- a/tests/test_utils.py
+++ b/tests/test_utils.py
@@ -1,4 +1,5 @@
-from umodbus.utils import unpack_mbap, pack_mbap
+from umodbus.utils import (unpack_mbap, pack_mbap, pack_exception_pdu,
+                           get_function_code_from_request_pdu)
 
 
 def test_unpack_mbap():
@@ -13,3 +14,14 @@ def test_pack_mbap():
     Protocol identifier, Length and Unit identifier.
     """
     assert pack_mbap(8, 0, 6, 1) == b'\x00\x08\x00\x00\x00\x06\x01'
+
+
+def test_pack_exception_pdu():
+    """ Exception PDU should correct encoding of error code and function code.
+    """
+    assert pack_exception_pdu(1, 1) == b'\x81\x01'
+
+
+def test_get_function_code_from_request_pdu():
+    """ Get correct function code from PDU. """
+    assert get_function_code_from_request_pdu(b'\x01\x00d\x00\x03') == 1
diff --git a/umodbus/exceptions.py b/umodbus/exceptions.py
index 227a39c..53922f6 100644
--- a/umodbus/exceptions.py
+++ b/umodbus/exceptions.py
@@ -1,4 +1,9 @@
-class IllegalFunctionError(Exception):
+class ModbusError(Exception):
+    """ Base class for all Modbus related exception. """
+    pass
+
+
+class IllegalFunctionError(ModbusError):
     """ The function code received in the request is not an allowable action for
     the server.
 
@@ -13,7 +18,7 @@ def __str__(self):
             'server.'.format(self.function_code)
 
 
-class IllegalDataAddressError(Exception):
+class IllegalDataAddressError(ModbusError):
     """ The data address received in de request is not an allowable address for
     the server.
 
@@ -24,7 +29,7 @@ def __str__(self):
         return self.__doc__
 
 
-class IllegalDataValueError(Exception):
+class IllegalDataValueError(ModbusError):
     """ The value contained in the request data field is not an allowable value
     for the server.
 
@@ -35,7 +40,7 @@ def __str__(self):
         return self.__doc__
 
 
-class ServerDeviceFailureError(Exception):
+class ServerDeviceFailureError(ModbusError):
     """ An unrecoverable error occurred. """
     error_code = 4
 
@@ -43,7 +48,7 @@ def __str__(self):
         return 'An unrecoverable error occurred.'
 
 
-class AcknowledgeError(Exception):
+class AcknowledgeError(ModbusError):
     """ The server has accepted the requests and it processing it, but a long
     duration of time will be required to do so.
     """
@@ -53,7 +58,7 @@ def __str__(self):
         return self.__doc__
 
 
-class ServerDeviceBusyError(Exception):
+class ServerDeviceBusyError(ModbusError):
     """ The server is engaged in a long-duration program command. """
     error_code = 6
 
@@ -61,7 +66,7 @@ def __str__(self):
         return self.__doc__
 
 
-class MemoryParityError(Exception):
+class MemoryParityError(ModbusError):
     """ The server attempted to read record file, but detected a parity error
     in memory.
 
@@ -72,7 +77,7 @@ def __repr__(self):
         return self.__doc__
 
 
-class GatewayPathUnavailableError(Exception):
+class GatewayPathUnavailableError(ModbusError):
     """ The gateway is probably misconfigured or overloaded. """
     error_code = 11
 
@@ -80,7 +85,7 @@ def __repr__(self):
         return self.__doc__
 
 
-class GatewayTargetDeviceFailedToRespondError(Exception):
+class GatewayTargetDeviceFailedToRespondError(ModbusError):
     """ Didn't get a response from target device. """
     error_code = 12
 
diff --git a/umodbus/functions.py b/umodbus/functions.py
index 9fec117..ba30d72 100644
--- a/umodbus/functions.py
+++ b/umodbus/functions.py
@@ -3,8 +3,10 @@
 from math import ceil
 
 from umodbus import log
-from umodbus.utils import memoize, integer_to_binary_list
-from umodbus.exceptions import IllegalDataValueError, IllegalDataAddressError
+from umodbus.utils import (memoize, integer_to_binary_list,
+                           get_function_code_from_request_pdu)
+from umodbus.exceptions import (IllegalFunctionError, IllegalDataValueError,
+                                IllegalDataAddressError)
 
 try:
     from functools import reduce
@@ -44,8 +46,11 @@ def function_factory(pdu):
     :param pdu: Array of bytes.
     :return: Instance of a function.
     """
-    function_code, = struct.unpack('>B', pdu[:1])
-    function_class = function_code_to_function_map[function_code]
+    function_code = get_function_code_from_request_pdu(pdu)
+    try:
+        function_class = function_code_to_function_map[function_code]
+    except KeyError:
+        raise IllegalFunctionError(function_code)
 
     return function_class.create_from_request_pdu(pdu)
 
diff --git a/umodbus/server.py b/umodbus/server.py
index 9db4c20..e65c93e 100644
--- a/umodbus/server.py
+++ b/umodbus/server.py
@@ -6,8 +6,10 @@
 
 from umodbus import log
 from umodbus.route import Map
+from umodbus.utils import (unpack_mbap, pack_mbap, pack_exception_pdu,
+                           get_function_code_from_request_pdu)
 from umodbus.functions import function_factory
-from umodbus.utils import unpack_mbap, pack_mbap
+from umodbus.exceptions import ModbusError
 
 
 def get_server(host, port):
@@ -59,21 +61,30 @@ def handle(self):
         request_adu = self.request.recv(1024).strip()
         log.info('<-- {0} - {1}.'.format(self.client_address[0],
                  hexlify(request_adu)))
-        transaction_id, protocol_id, _, unit_id = unpack_mbap(request_adu[:7])
-
-        function = function_factory(request_adu[7:])
-        results = function.execute(unit_id, self.server.route_map)
-
         try:
-            # ReadFunction's use results of callbacks to build response PDU...
-            response_pdu = function.create_response_pdu(results)
-        except TypeError:
-            # ...other functions don't.
-            response_pdu = function.create_response_pdu()
+            transaction_id, protocol_id, _, unit_id = \
+                unpack_mbap(request_adu[:7])
+
+            function = function_factory(request_adu[7:])
+            results = function.execute(unit_id, self.server.route_map)
+
+            try:
+                # ReadFunction's use results of callbacks to build response
+                # PDU...
+                response_pdu = function.create_response_pdu(results)
+            except TypeError:
+                # ...other functions don't.
+                response_pdu = function.create_response_pdu()
+        except ModbusError as e:
+            function_code = get_function_code_from_request_pdu(request_adu[7:])
+            response_pdu = pack_exception_pdu(function_code, e.error_code)
 
         response_mbap = pack_mbap(transaction_id, protocol_id,
                                   len(response_pdu) + 1, unit_id)
 
+        log.debug('Response MBAP {0}'.format(response_mbap))
+        log.debug('Response PDU {0}'.format(response_pdu))
+
         response_adu = response_mbap + response_pdu
         log.info('--> {0} - {1}.'.format(self.client_address[0],
                  hexlify(response_adu)))
diff --git a/umodbus/utils.py b/umodbus/utils.py
index 5528d4d..6cdca91 100644
--- a/umodbus/utils.py
+++ b/umodbus/utils.py
@@ -54,6 +54,51 @@ def pack_mbap(transaction_id, protocol_id, length, unit_id):
     return struct.pack('>HHHB', transaction_id, protocol_id, length, unit_id)
 
 
+def get_function_code_from_request_pdu(pdu):
+    """ Return function code from request PDU.
+
+    :return pdu: Array with bytes.
+    :return: Function code.
+    """
+    return struct.unpack('>B', pdu[:1])[0]
+
+
+def pack_exception_pdu(function_code, error_code):
+    """ Return exception PDU of 2 bytes.
+
+        "The exception response message has two fields that differentiate it
+        from a nor mal response: Function Code Field: In a normal response, the
+        server echoes the function code of the original request in the function
+        code field of the response. All function codes have a most – significant
+        bit (MSB) of 0 (their values are all below 80 hexadecimal). In an
+        exception response, the server sets the MSB of the function code to 1.
+        This makes the function code value in an exception response exactly 80
+        hexadecimal higher than the value would be for a normal response.
+
+        With the function code’s MSB set, the client's application program can
+        recognize the exception response and can examine the data field for the
+        exception code.  Data Field: In a normal response, the server may return
+        data or statistics in the data field (any information that was requested
+        in the request). In an exception response, the server returns an
+        exception code in the data field. This defines the server condition that
+        caused the exception."
+
+        -- MODBUS Application Protocol Specification V1.1b3, chapter 7
+
+        ================ ===============
+        Field            Length (bytes)
+        ================ ===============
+        Error code       1
+        Function code    1
+        ================ ===============
+
+    :param error_code: Error code.
+    :param function_code: Function code.
+    :return: PDU of 2 bytes.
+    """
+    return struct.pack('>BB', function_code + 0x80, error_code)
+
+
 def memoize(f):
     """ Decorator which caches function's return value each it is called.
     If called later with same arguments, the cached value is returned.