Sub Clause 1.15 Limitation of Liability PDF
Sub Clause 1.15 Limitation of Liability PDF
Sub Clause 1.15 Limitation of Liability PDF
The substance of this provision was already such loss. Normal rules of the underlying law of
in Sub-Clause 17.6 in the 1999 edition and the contract (unless mandatory) are thus excluded.
has now been separated from other Where the Sub-Clause to which the exception
provisions dealing with Risk and applies clearly sets out the loss or damage which
Responsibility. this exclusion from exemption refers to this does
not raise an issue. However, there are issues in
As before it generally exempts parties from liability respect of the cross reference to Sub-Clauses 8.8
to the other for “loss of use of any Works, loss of and 13.3.1(c).
profit, loss of any contract or any indirect or
consequential loss” except in respect of a list of
The new items are:
identified Sub-Clauses. The list has been extended
and several of the changes are very significant. It Sub-Clause 8.8 [Delay Damages]
also limits liability to certain levels in some
circumstances. Finally, it excludes parties from Sub Clause 8.8 already states that “this Sub-Clause
cover by the exemption and limits in certain shall not limit the Contractor’s liability for Delay
circumstances. All three elements have changed. Damages in any case of fraud, gross negligence,
Two additions are particularly noteworthy. The deliberate default or reckless misconduct by the
interaction between this Sub-Clause and Sub- Contractor.” Thus, if the Contractor is guilty of one
Clause 8.8 insofar as it relates to the liability- these types of misbehaviour it will not be able to
limiting effect of Delay Damages is confusing and it take advantage of the cap on Delay Damages. The
is very unclear what the final result should be taken lifting of the limitation in the Sub-Clause partly
to mean. There is also a similar lack of clarity in duplicates the last paragraph of Sub-Clause 1.15.
the way in which the Sub-Clause applies the This paragraph also lifts the limit in such
exemption to Sub-Clause 13.3.1(c) (proposals for circumstances but goes further in allowing the
valuation of variations). general limit of liability under the Contract to be
exceeded.
Exceptions to exemption from liability to As noted above Sub-Clause 1.15 is divided into two
the other party for loss of use of any Works, parts. The first lifts the exclusion of liability for
loss of profit, loss of any contract or any loss of profit etc. The second lifts the limits of
indirect or consequential loss liability under the Contract.
The list of exceptions to the exemptions from The reference to Sub-Clause 8.8 in Sub-Clause 1.15
liability in the 1999 edition extended to only 2 is under the first part and thus is intended to
items (Payment on Termination and Indemnities). remove the exemption from liability for losses of
It is now extended to some additional items. profit when applying Delay Damages. Since Sub-
Clause 8.8 provides that Delay Damages are the
It should be noted that the wording of the Sub- only damages due from the Contractor for failure to
Clause goes further than merely to negate the meet the Completion Date, except in the event of
exemption from of liability for these items. It says Termination Under Sub-Clause 15.2 [Termination
that “neither party shall be liable for loss of profit” for Contractor’s Default] it would therefore seem
etc. … “other than under…” . Thus, if the party can that the exclusion is intended to prevent arguments
show such loss, it confers an express right to claim
1
George Rosenberg is a Consultantat Corbett & Co. International Construction Lawyers Ltd. He can be contacted at george.rosenberg@corbett.co.uk
However Sub-Clause 13.3.1(c) does not only cover Sub-Clause 16.4 already includes a right to payment
omissions. It also covers all adjustments to the of loss of profit although it also refers only to “loss
Contract Price following variations. It would thus of profit or other losses or damages”. so, as with
seem arguable that the Contractor is entitled to Sub-Clause 15.7, there may be scope for a wider
include loss of profit etc. in all its Variation claim.
valuation proposals if there is a basis for it in the
circumstances. For example, a very substantial Sub-Clause 17.3 [Intellectual and Industrial
Variation, which the Contractor is required to carry Property Rights]
out on the basis of rates which cause it a loss, or
which force it to use resources which might have Under Sub-Clause 17.3 the Employer and the
been more profitably employed elsewhere, might Contractor each indemnify the other against any
open the door to a claim for the loss of profit etc. claims which may arise where the other faces a
This may have substantially different results ii. Was the conduct undertaken with an
depending on which Law applies to the contract. appreciationof the risks, but with a
blatant disregard of or indifference
In a very interesting treatment of the subject to an obvious risk?
recently presented to the Society for Construction
law in London2 the authors quoted a passage from iii. That disregard or indifference need not be
a Court of Appeal case Armitage v Nurse3 as conscious, or deliberate; it is sufficient that
follows: the reasonably competent professional in
the defendant’s position would have
“It would be very surprising if our law drew the considered the action or inaction to amount
line between liability for ordinary negligence and to a blatant disregard of or indifference to
liability for gross negligence. In this respect the relevant risk. Conscious
English law differs from civil law systems, for it disregard/recklessness will however
has always drawn a sharp distinction between be a likely aggravating factor, and
negligence, however gross, on the one hand and more likely to led to a finding of gross
fraud bad faith and wilful misconduct on the other negligence.
... we regard the difference between negligence
and gross negligence as merely one of degree ... iv. Were the potential consequences of
civil systems draw the line in a different place. The the action or inaction serious? The
doctrine is culpa lata dolo aequiparatur [gross more serious the consequences, the more
negligence is equal to fraud]; and although the likely the negligence will be gross.
maxim itself is not Roman the principle is
classical. There is no room for the maxim in the v. Had the same or similar consequences
common law.” 4 arisen out of the same or similar action or
2 3
Exclusions from Immunity: Gross Negligence and Wilful Misconduct, [1997] EWCA Civ 1279, [1997] 2 All ER 705, [1997] 3 WLR 1046
James Pickavance and James Bowling SCL October 2017 4
Armitage v Nurse Note 14 [1997] 3 WLR 1046 para [254]
5 In the Guidance included in the 2017 edition FIDIC notes that “under such an act or omission. It involves materially more want of care than
a number of legal systems (notably in some common law jurisdictions) mere inadvertence or simple negligence.” Although one might wonder
the term ‘gross negligence’ has no clear definition and, as such, is often what the difference is between “serious reckless disregard” and “reckless
avoided in legal documents.” In the general commentary on the disregard”, it would seem to be sensible to include a definition of what is
definitions it is suggested that a typical additional definition might be meant by “gross negligence” and this definition has the benefit of
“Gross Negligence means any act or omission of a party which is improving the level of certainty.
6
contrary to the most elementary rules of diligence which a conscientious The contents of this article should not be treated as legal advice. Please
employer or contractor would have observed in similar circumstances, contact the lawyers at Corbett & Co before acting on or relying upon
and /or which show serious reckless disregard for the consequences of anything stated in this article.