Disclaimer… I am not a lawyer, nor qualified to give advice in law or contractual agreements. I do however have extensive experience in insurance policies which are governed and dictated by the types of conditions that a drainage firm uses or agrees to in their contractual relationships. The below is intended merely as a guide to some things you or your business should give consideration to when setting out your T&C’s for undertaking a CCTV Drainage survey.
Terms and conditions, limitations of liability, non-performance breach remedies and governing legislations is a far reaching and complex subject, so my intention is to break it down into manageable, bite-sized pieces, addressing some of the finer points one at a time.
I am often asked to advise on the need for Professional Indemnity insurance by contractors undertaking all forms of drainage surveys to which I set out the various reasons they should consider purchasing the cover. However, I am often met with “I exclude or limit my liability in my terms and conditions” which is great to an extent as some form of limitation in contract is always better than none but if that limitation is found to be unenforceable, this leaves you with some major headaches and some potentially costly awards. There are of course a plethora of variables in this topic, but for now the focus is purely on the general basics rather than the intricate details.
So how can we make sure that a) the contracts are enforceable, and b) how do we protect ourselves in the event that it isn’t?
Have you and your business considered the following when utilising a Limitation of Liability clause in your Terms and Conditions:
- Are you using a standard form contract and standard limitation clause for all of surveying contracts?
- Do you provide surveys on a B2B basis or a B2C basis or both?
- When are your T&C’s provided to the client and were they given notice of the Limitation?
- Do you have Professional Indemnity insurance?
- Is insurance requested or required as part of your contract?
- Are you limiting liability out of contract or out of tort, or both?
- Were your T&C’s drafted by a solicitor on a bespoke basis?
- Do you have the ability to defend the basis of your contract in a Court of Law?
What about the wording of the Limitation of Liability itself?
- Have you used a clear and unambiguous wording?
- Have you expressly identified the types of liability to be excluded?
- What are you limiting the liability for or are you excluding liability in full?
- Are exclusions implied or explicit?
- Have you given the client a meaningful remedy to any potential breach?
- Is the wording of your clause in line with the rest of the industry?
- Have you used general terms and words such as “other” or “including”?
The key legislations which will determine how enforceable your terms and conditions are will be the Unfair Contract Terms Act 1977 (business to business) and the Consumer Rights Act 2015 (business to consumer), and the test used is a “requirement of reasonableness”.
What is reasonable?
The interpretation of all limitation of liability clauses will usually depend on the facts of the particular case (and not necessarily what is stated in the contract itself). An example, if you have a standard clause that looks to exclude all claims for financial losses incurred by the other party, this is more likely to be considered ‘unreasonable’ by the Courts and therefore unenforceable. However, a limitation clause which sets a financial limit for such claims, for example a certain percentage over the invoiced value or up to your limit of Professional Indemnity insurance, is much more likely to be deemed reasonable and therefore enforceable by the Court.
Check out the following link for some useful information: http://ow.ly/S7py30eLI49
In Part 2 we shall have a look at how standard form contracts or terms can cause potential problems when dealing on a business to consumer basis.
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Have a fantastic day and if you’d like to discuss any element of this piece please drop me a message or give me a call at any time.