Construction & Engineering Briefing - March 2014: Caps on Liability - how are they applied by the courts?

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In a recent case that came before the High Court, the Court considered a contract clause which attempted to impose a financial cap on the contractor's liability. The case acts as a reminder to those who negotiate and draft construction and engineering contracts to be mindful of the scope and ambit of these clauses.

In engineering, construction and infrastructure projects, it is not unusual for the contractors that are engaged and the consultants that are appointed to seek to limit their potential liability under the contracts they enter into. One way they attempt to do this is by agreeing with their employer, a financial cap on the contractor's or consultant's liability under its contract. Requests for financial caps on liability have become more frequent, as have other clauses seeking to exclude or limit liability - sometimes at the request of professional indemnity insurers.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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