The Limitation of Liability clause is a hotly negotiated clause in any construction or renovation agreement. After all, a contractor wants to be able to walk away from a job knowing that they no longer have any risk of being sued apart from any guarantees they may have provided and a client wants to know they can come after someone in case their property is damaged as a result of the contractor’s work. A typical Limitation of Liability clause might resemble the following:

  • Subject to the workmanship warranty provided under this clause 5, the Contractor shall not be liable for a claim of any kind made by the Client after the work has been completed and inspection has been performed in accordance with the Prompt Inspection provision set out in clause 3 of this Agreement. The Contractor shall not be liable for leaks or water damage caused by eavestroughs to the roof or any other part of the house.

This example was taken from a contract concerning the renovation of a detached residential property. Much of this is common, although note the final line about leaks and water damage. This is an example of something which turns the clause in the contractor’s favour. Although it is not known whether damage to the roof is likely, it may be something the client wouldn’t want to release the contractor from liability for. Keep an eye out for such specific limitations as you read through these clauses, whether they are contained in the clause itself, another referenced clause, or an appendix to the agreement.

Another limitation to be mindful of, particularly as a property owner is limiting the liability to the cost of the renovation. Consider the following contractual language:

  • Should a court of competent jurisdiction decide otherwise, the Parties agree to limit the Contractor’s liability to the Compensation paid to the Contractor under the applicable Statement of Work, to direct damages only, and the Contractor shall have no liability whatsoever to the Client for any indirect, special, incidental or consequential loss or damage. The foregoing exclusions and limitations shall apply regardless of the nature of the loss or damages or the legal basis of any claim whether made in contract, tort, for negligence, strict liability or any other legal theory or cause of action.

Although it is not an issue to exclude “indirect, special, incidental or consequential loss” (which might encompass something like the loss of income from being unable to use a home office for the period of time it takes to fix the issue), it is overly-generous to limit the damages to the cost of the renovation as the damages from a faulty renovation or construction could greatly exceed the cost of that construction or renovation.

One possible solution is to keep the language simple, and agree to only limit the contractor’s liability to direct damages. For more, browse the documents in our learning library and be sure to click through the tags in our agreements to learn more about each clause!

 

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