Building firm limits liability for loss and damages to 10%

Published: 24 April 2017

Category: Legal News

The High Court has upheld a legal agreement that limited a building firm’s liability for damages to 10% of the total value of a contract agreed with a developer.

The issue arose after the developer hired the firm to carry out the design and construction of certain earthworks, substructures, drainage and concrete works.

The contract terms included the JCT Design and Build Sub-Contract agreement with bespoke amendments. A clause in the agreement covered the possibility of delays taking place in the work and limited the firm’s liability for losses to 10% of the value of the contract.

Once the work got under way, there were various delays and disruption that led to the developer losing more than £2m. It sought compensation from the firm of £1.4m, that being 10% of the value of the contract.

However, it later went on to seek more compensation that went beyond the 10% cap. It argued that other claims for the financial consequences of delay and disruption, totalling £2,291,495, were claims under other clauses in the agreement and were not caught by the cap.

The court ruled in favour of the firm. It held that the cap was a straightforward provision seeking to limit the firm’s liability for "direct loss and/or expense and/or damages" at 10% of the value of the contract.

The percentage cap was a common way in which the parties to a commercial agreement sought to reduce risk and promote certainty. The cap was not said to refer to claims under particular clauses of the agreement or for breach of any implied terms.

Please contact Matthew Sigsworth in our Dispute Resolution Team if you would like more information about the issues raised in this article or any aspect of contract law.