A Peerless Approach To Excluding Or Limiting Liability

Clauses excluding or limiting liability for consequential losses are becoming increasingly common in construction contracts.

Case law however amply demonstrates the necessity for careful drafting. As Arch Fletcher commented in our September 2004 edition, it is easy for contractors to believe they are covered by an exclusion or limitation clause and yet be leaving themselves open to the possibility of extensive liabilities. Generally, Australian courts try to take a straightforward approach to exclusion clauses by giving them their natural and ordinary meaning in the context of the whole contract. Unfortunately, the natural and ordinary meaning given by the law to terms such as consequential loss does not always accord with what commercial parties might believe those words to mean.