EPC contracts—limits of liability
Produced in partnership with Clyde & Co
EPC contracts—limits of liability

The following Construction guidance note Produced in partnership with Clyde & Co provides comprehensive and up to date legal information covering:

  • EPC contracts—limits of liability
  • Exclusion of consequential and indirect loss
  • Caps on liability
  • 'Exclusive remedies' clauses
  • Duration of liability

This Practice Note provides specific guidance on exclusions and limits of liability relevant to engineer, procure and construct (EPC) contracts. It should be read alongside Practice Note: Limiting liability in construction contracts, which provides more detailed information.

A key consideration when reviewing any type of limitation or exclusion of liability clause in an EPC contract is the law applicable to the contract. This will often have a significant impact on both the interpretation and enforceability of the clause in question. It is outside the scope of this note to consider the various implications that may arise depending on the chosen jurisdiction, and references throughout this note will be to the implications under English law, unless otherwise specified.

In drafting any type of limitation or exclusion of liability clause it is important that clear and unambiguous wording is used.

Most EPC contracts include provisions limiting liability for the following reasons:

  1. EPC contracts are frequently used for major infrastructure and complex facilities. As a result, there are usually huge financial implications if the project is delayed or in some way defective

  2. many contractors will not be in a position to accept the commercial risk associated with unlimited liability in such projects

  3. the company engaging the contractor will want to limit its exposure as much as possible

Negotiation of limitation of liability clauses therefore needs to be