A client asked me about a contract he was asked to sign in which consequential damages were being waived. Consequential damages are those things that cost money which arise indirectly out of a failure of a party on a construction project. They can include:
loss of use
loss of rent
loss of profit
loss of bonding capacity
extended equipment rental fees
increased material costs
Note that this is not an exhaustive list, and other consequential damages may be applicable depending on the project.
Often, like my client, you may be asked to waive consequential damages. This is a double edged sword. If the waiver is mutual (something on which you should insist), then the provision may save you money in the event your design or services delay the project. The Owner has agreed that it cannot seek to recover indirect, consequential damages. On the other hand, if you are the one suing the Owner, it means that there may be costs that you cannot be compensated for if a project goes awry.
The standard industry contracts all have at least some waiver of consequential damages, as noted in this chart.
Bottom line: waiver of consequentials can be a good thing or a bad thing, but you will not know which when you are signing on the dotted line.
Just make sure that if there is a waiver, that it is mutual on both sides. Good luck, and “be safe out there”
Your turn. Have you ever waived your right to consequentials? Horror story to share about paying someone else’s costs?
Dollar Photo (c) sivlen001.
Chart (c) Melissa Brumback