Limitation of liability clauses which, since the 1970s have been written into engineering contracts, are discussed. It is noted as a proven, cost-effective risk management tool at a time when professional liability premiums are escalating and insurance in some areas is unavailable. The amount of risk taken by the client and the consulting engineer varies with the project. Ways in which the owner's risk and the engineer's risk may be reduced are discussed. Risk allocation clauses in contracts must satisfy the following: parties to the contract must have equal bargaining power; clause cannot be contrary to public interest; size of the liability cap should relate to the size of the project assignment; and the process of negotiation concerning risk allocation should be open, communicative, and satisfy both parties. Several court decisions are described that illustrate how design firms have insulated themselves from increased liability by negotiating clauses in their respective contracts.

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Filing Info

  • Accession Number: 00488922
  • Record Type: Publication
  • Files: TRIS, ATRI
  • Created Date: Oct 31 1989 12:00AM