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Privacy statement - Terms and conditions

limiting contractual liability; beware of conflicting insurance provisions

10 August 2012

In a case which considered the provisions of the Unfair Contract Terms Act 1977 a project manager, who was sued for losses arising on a delayed project has been prevented from relying on a liability cap, due to the substantial insurance cover that was also provided for in the contract.

The liability cap imposed was less than the contract price of £200,000; yet the contract also required the project manager to take out professional indemnity insurance with a limit of £10 million. As a professional consultant inevitably passes on the cost of its insurance cover to the client in assessing its fees, and as no explanation was provided for the discrepancy between the limitation of liability and the insurance cover available, the limit was found to be unreasonable.

This decision should be borne in mind when seeking to challenge the validity of a cap on liability of another party, or when drafting onerous caps on liability when your client also holds substantial insurance cover.

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