Danger of over wide liability limits (2014) 25 2 Cons.Law 17 [Archived]
Danger of over wide liability limits (2014) 25 2 Cons.Law 17 [Archived]

The following Construction guidance note provides comprehensive and up to date legal information covering:

  • Danger of over wide liability limits (2014) 25 2 Cons.Law 17 [Archived]
  • Key points
  • Background
  • The arguments
  • Limitation of liability—effectiveness?
  • How are moneys paid under bonds to be treated when a cap on limitation of liability is being applied?
  • Conclusion

This article appears as originally published in Construction Law on 1 March 2014 and is not maintained.

Tom Pemberton and Ibaad Hakim of Beale and Company analyse a case that should be closely studied by drafters of clauses relating to liability and risk allocation in construction contracts. Widely drafted limits on liability might not find favour in the courts.

Key points

  1. A widely drafted limit of liability is likely to be construed against the party relying on it.

  2. Losses incurred by the claimant in completing the project following termination of the contract were the greatest part of the damages awarded, but were held (obiter) not to be subject to the agreed cap on the defendant’s liability.

  3. It was also held (obiter) that the amounts recovered by the claimant under bonds in respect of the defendant’s performance should not count towards the capped amount for which the defendant was liable.

  4. An obligation to exercise ‘due diligence’ means to do something ‘industriously, assiduously, efficiently and expeditiously’ and where there is such an obligation, it must be assessed by reference to the obligation to which it attaches.

  5. A ‘mere’ delay, even if substantial, would not normally be considered to be a repudiatory breach of contract.

The recent judgment by Stuart-Smith J in the Technology and Construction Court (TCC), SABIC UK Petrochemicals Ltd v Punj