General
The limitation of liability is an issue that is hotly negotiated
in most commercial contracts and construction is no different. It
can, however, sometimes be overlooked where unamended standard form
contracts are used. Parties often rely on the standard form clauses
as having the "authority" of being tried and
tested and drafted with the benefit of the knowledge and experience
of the industry. Unfortunately, such reliance can prove perilous as
they may not always adequately deal with the commercial risks of a
particular project.
Clauses governing contractual liability fall into three main
categories: risk, indemnity and exclusion clauses. Risk clauses
assign the risk of certain events to one of the parties to the
contract so that it is clear, from the outset, who will bear the
liability of that risk occurring. Indemnity clauses involve one
party agreeing to make good a loss suffered by the other. Exclusion
clauses refer to those clauses that seek to exclude
