Limitation Of Liability Clauses

Many jurisdictions have statutes that limit the enforceability of contractual indemnity provisions. A number of judicial principles and public policy considerations exist when determining whether a limitation of liability or limitation of remedy will be enforceable pursuant to its terms. These limitations on enforcement of contract provisions are uniquely specific to each factual situation and to each jurisdiction. Many jurisdictions will construe an exclusion or limitation of liability clause against the party seeking to rely on the clause. Many jurisdictions have rules which apply specifically to exclusion and limitation of liability clauses. One example is the ‘express negligence test which provides that, if a party to a contract wishes

In the event that the limitation for general damages is not present or, if it is present but found to be unenforceable the overall limited of liability should cap the organisations liability. Most organisations will have a policy whereby the Contractors overall liability, to the Company, for breach of contract should always be limited in some way. This can be expressed as a percentage of the contract value (in this case the contract value should be clearly defined if possible) or as a specific sum of money. Limitation of liability clauses and exclusion of liability clauses are often difficult to enforce as the courts in many jurisdictions do not encourage parties to a contract to be allowed to exonerate themselves from their liabilities. In addition to having wording to limit the liability for breach one approach to limit your liability is to ensure that the scope of work and the obligations in the contract are well defined and clear. Once again this demonstrates the reason to clearly define the scope of work. The scope of work should clearly set out the Contractor’s responsibilities. A limit of liability provision is used, as with the consequential loss clause and the indemnity regime, the wording of the limitation of liability clause is critical and should be reviewed by a contracts

Many parties to a contract only consider the legal liabilities and commercial terms when discussing and mitigating liability and risk. However, other portions of a contract have application to mitigating liability and risk. For example, the scope of work, performance schedule, and contract pricing can be utilised to mitigate or address some risk and liability exposure. The second step is to ensure that the final agreement is reduced to writing. The final contract document should be clear and unequivocal. There is a distinction between interpreting and construing contractual language. Any Manager can read and interpret contract clauses, including all the incorporated documents, addenda, amendments etc. Construing a contract includes deciphering the legal effect of the whole document and requires different training and skill sets than those associated with General Management. For example contractual provisions are to be interpreted in the context of the entire agreement of the parties. A common error is to read the literal content of a single provision and not interpret the meaning of the provisions as part of the entire agreement. It is important to understand that not all contractual provisions are enforceable in accordance with their literal interpretation. A good example of this in the legal definition of