Excluding liability The contractor can seek to exclude certain types of liability (except for death or personal injury) by including a suitable exclusion clause in the building contract. The inclusion and extent of such a clause will depend on the respective bargaining strength of the parties but, typically, the exclusion of indirect or consequential loss is a key aim of negotiation, as these losses are generally the most unpredictable and can be high. What is deemed to be consequential loss, however, turns on the individual facts of a case, and the courts have found that even loss of profits may be a direct loss in certain circumstances, thus allowing its recovery despite the existence of an exclusion of consequential loss. It is therefore important that the types of losses that the contractor is seeking to exclude are carefully defined in the contract, rather than reliance being placed solely on phrases such as “indirect” or “consequential”. Standard form appointments published by bodies representing consultants (see Standard forms of contract ) tend to be favourable to the consultant, and contain net contribution clauses. These seek to limit the consultant’s liability to the client, by negating the doctrine of joint and several liability. Under this doctrine, where there is a problem with a project and a loss is suffered by the client, the latter may sue any or all of the parties responsible. This means that a client may bring proceedings against a single party, rather than have to sue all those involved, but still recover 100% of its loss. A net contribution clause seeks to reverse the effect of this doctrine, by providing that each party will only be liable for the proportion of the loss that is attributable to its fault.
Authorised signatories for the client and the contractor then release funds directly to the supply chain in the amounts contained in the contractor’s breakdown. This is beneficial in that it builds trust in the supply chain and speeds up payment. Design risk/site risk In traditional procurement, the contractor assumes responsibility for construction, but generally not for design. In design and build projects, the contractor assumes responsibility for design as well. The risk is managed by novating the design consultant appointments to the contractor when the building contract is signed. This ensures single point design responsibility and gives the contractor control of the design process. The contractor may also seek to offset design risks by: – Limiting its liability under the contract – Avoiding liability for design work procured by or on behalf of the client (where not the subject of a novation to the contractor) –– Ensuring that adequate levels of professional indemnity insurances are maintained There is no standard approach to risk allocation for unforeseen ground conditions. Typically, the client instructs a ground survey, but seeks to pass the risk on to the contractor. If this is the case, the contractor usually requires a letter of reliance or collateral warranty from the ground surveyor to cover this risk. The contractor may also protect its position by procuring its own surveys.
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