Did you know that you may be able to limit your liability on a construction project? Limitation of liability provisions are enforceable in Nebraska and may provide an effective method to limit your liability.
Limitation of liability clauses generally set forth the upper limit a contractor may be liable for the work it performs. These clauses often times contain language like:
Contractor’s maximum liability to Owner for all damages shall not exceed _____________ (the contract price). This provision shall not apply with respect to liability caused by the gross negligence of Contractor
One effective way for contractors to incorporate a limitation of liability provision into the contract is to submit general terms and conditions that contain such a clause with each proposal. The general terms and conditions should contain a statement that they are part of, or will become part of, the contract.
The limit on liability, however, must bear some relation to the cost of the actual project to avoid a claim that the maximum liability was set so low that the contractor had no incentive to perform its work professionally. Often times, courts look to the entire amount charged for the project and whether it bears any relation to the limitation on liability.
Owners may also find that limitation of liability clauses encourage reputable contractors to bid on projects. By incorporating a limitation of liability clause, reputable contractors will be less inclined to incorporate large bid contingencies to cover unforeseen risks.
If you would like assistance creating or reviewing limitation of liability clauses, give me a call.