What is an evaporation clause?

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Published on LexisPSL on 23/07/2018

The following Construction Q&A provides comprehensive and up to date legal information covering:

  • What is an evaporation clause?

What is an evaporation clause?

‘Evaporation clause’ is an alternative name for a particular type of clause limiting liability. This type of clause is most commonly found in consultant appointments.

There are various ways that a contractor or consultant may seek to limit its liability under a construction contract, including the insertion of an express cap on liability and there are, similarly, different approaches that are taken in terms of deciding the level of such caps.

Where there is no express agreement set out in a contract that specifically limits the liability of the contractor/consultant, liability will be unlimited. This potentially puts the contractor/consultant’s business at risk if a large claim is made against it that it does not have the resources to meet. The inclusion of a cap gives both parties some comfort: certainty as to the maximum level of claims (for the contractor/consultant) and confidence that claims have a reasonable chance of being met (for the employer).

See Practice Notes: Limiting liability in construction contracts and Limitations and exclusions of liability—consultant appointments.

One option, in setting a cap on a consultant’s overall liability under its appointment is to link it to the level of professional indemnity insurance (PII) cover that the consultant holds. Such a clause is sometimes called an evaporation clause and they are most typically seen in a consultant appointment. See Practice Note: Professional indemnity

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