Limitations of Liability Clauses
By Dean G. Giles, Fillmore Riley LLP Contracts used in the construction and engineering fields often contain so-called “exclusion of liability” or “limitation of liability” clauses that purport to reduce a party's exposure to certain claims that may arise in connection with a project. Clauses of this sort are a means by which parties to the contract seek to minimize risk and protect themselves from what might otherwise be a ruinous damages award should something go wrong and litigation ensue. In some instances, the clause in question may operate to cap a party's exposure at a specific monetary amount, while others seek to exempt a party from liability for certaintypes of losses. A common example, often found in construction contracts, is a provision stating that the contractor “shall not be liable loss of earnings or other consequential damages howsoever caused,” or containing words to that effect.Consequential damages are those that arise from the nature of the innocent party's business and include such things as lost profits, lost customers and loss of reputation. This is in contrast to so-called “direct damages,” which are those that, without taking into account the particular circumstances of the party suffering the loss, one would reasonably expect to flow from a breach of contract. Still other clauses may limit a party's exposure to damages caused by negligent acts. {fastsocialshare}
