Limiting liability in construction contracts

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

  • Limiting liability in construction contracts
  • Overall caps
  • Standard form contracts
  • Specific caps and exclusions
  • Consequential loss
  • Standard form contracts
  • Carve-outs
  • Other ways in which liability may be limited or excluded
  • Exclusive remedies
  • Time bars
  • More...

Limiting liability in construction contracts

This Practice Note provides guidance on limitation clauses and exclusion clauses (sometimes referred to as exemption or exception clauses) in construction contracts, including financial caps, exclusions of consequential loss (also known as indirect loss) and common carve-outs, as well as other ways in which liability may be limited. It also considers restrictions and controls on the ability to limit or exclude liability, including under the Unfair Contract Terms Act 1977 (UCTA 1977), Defective Premises Act 1972 (DPA 1972) and the Consumer Rights Act 2015 (CRA 2015).

Construction contracts can range from small residential schemes to large infrastructure or commercial development projects. The potential exposure for contractors (and consultants and sub-contractors) where something goes wrong can be huge, particularly if they are responsible for design.

Professional indemnity insurance can help to protect parties in respect of certain claims, but may not be adequate to provide total cover. It is therefore not surprising that parties regularly seek to limit their exposure to a claim for damages by way of clauses which expressly limit, or even exclude, liability.

It is important to note that:

  1. there are restrictions and controls on the ability of parties to limit or exclude liability—see Restrictions and controls on limiting or excluding liability below

  2. insurance obligations and liability caps should not be confused—an obligation to maintain insurance at a specified amount does

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