reasonableness of a cap, the options available to the court are to uphold the cap or declare it unreasonable and unenforceable.
For example, in recognition of the relative risks and benefits of a project to both the client and the contractor, the risks may be allocated such that the client agrees – to the fullest extent permitted by law – to limit the contractor's liability to the client for any claims, losses, costs, damages or claims expenses from any cause or causes (including attorneys' fees and costs and expert witness fees and costs), so that the contractor's total aggregate liability to the client shall not exceed $10,000 or the contractor's total fee for services rendered on the project, whichever is greater. This limitation would apply to any liability or cause of action, however alleged or arising.
Disclaimers
Liability for negligence can also be limited or excluded by the use of a disclaimer. This usually seeks to prevent any duty of care from arising in the first place. As with contractual exclusions, to be effective, a disclaimer must be brought to the attention of the client and must be expressed in clear and unambiguous terms. Such language is usually boldfaced or capitalised to comply with requirements for conspicuousness and validity. For example, a typical disclaimer may read as follows:
"Contractor makes no express or implied warranty of merchantability, fitness for a particular purpose or otherwise or all other warranties expressed or implied including the warranty of merchantability and the warranty of fitness for a particular purpose are expressly disclaimed."
The parties may attempt to eliminate any common law or statutory remedies, instead limiting remedies to those defined in the contract, as follows:
"The parties' rights, liabilities, responsibilities and remedies with respect to this Agreement, whether in contract, tort, negligence, or otherwise, shall be exclusively those set forth in the Agreement."(2)
Liability to Third Parties
Liability in relation to claims made by third parties cannot be excluded or restricted in the absence of a contract between them. In such case, the contractor's liability to third parties is unlimited, even where the liability to the client has been capped.
In some circumstances, third parties to the contract may also want to rely on the contractor's work or work products (eg, survey and valuation reports or schedules of condition). Where contractors are aware of this possibility when they accept the engagement, a third party may argue that the contractor has assumed a duty of care and responsibility in law to the third party on a voluntary basis, thereby enabling the third party to make a claim against the contractor. Since the third party will not be a party to the contract, it will be difficult to argue that the third party is bound by any cap on liability or other protections contained in the contractor's contractual obligations. The absence of any fee payment by the third party is unlikely to be conclusive as to whether any duty is owed.
Where a contractor enters into a collateral warranty with a third party, the contractor's