A limitation of liability clause attempts to restrict the amount or types of damages one party may recover for specified claims. Its effect depends on its wording, the contract as a whole, governing law, and public policy. A heading that says “limitation of liability” does not tell an owner whether the clause protects the firm, the client, both parties, or only particular claims. Read the operative language and related provisions together.
Check which parties and claims the clause covers. Does it apply to the client’s claims against the firm, claims by third parties, or both? Does it cap damages at a fixed amount, the fee, available insurance, or another measure? Are defense costs included in the cap? Do exceptions apply to indemnity, confidentiality, intellectual property, fraud, or other conduct? Review how the clause interacts with waivers of consequential damages, indemnity, insurance requirements, and dispute resolution. Conflicting provisions can make the practical effect uncertain.
Compare the proposed allocation with the scope and potential exposure of the project. A cap tied to fees may have a different effect on a small early project than on a long engagement with multiple phases. Ask counsel to explain the clause’s likely effect under the governing law and whether it is enforceable in the project context. Ask the broker whether the firm’s policy may respond to the obligations, and whether defense costs could reduce limits. Do not assume a contractual cap creates insurance coverage or that available insurance will match the cap.
Public contracts and some jurisdictions may restrict what parties can negotiate. Also consider whether the clause is mutual, whether it protects affiliates or subcontractors, and whether it applies after termination. If the firm negotiates changes, track them into the final executed agreement and make sure the project team understands the agreed allocation. A markup in a draft or proposal qualification may not appear in the signed contract.
Have qualified counsel review any provision that materially changes the firm’s exposure, especially if the proposed cap is unclear or linked to other clauses. Keep the final contract and negotiation record with the project file.
This is general education, not legal or insurance advice; contract language, applicable law, licensed PE judgment, and local codes govern.
