Damages, Limits of Liability and Indemnification in Construction Contracts (Part 2)
These three items are often in close proximity to one another in a contract. Damages may be defined as certain types of losses that could create liability under the contract. A limit on liability would restrict the amount of damages that a party would be required to pay if found liable for such damages. Sometimes this may also include a limit for indemnification.
Indemnification provisions allocate risk and cost between the parties. It’s important to examine whether the party assuming the risk is the party with the most control over that risk. For instance, when a company’s employees are required to work at a customer’s location, the company is often asked to release the customer from all liability relating to the employees presence at the customer’s location.
In some cases, indemnification is limited to negligence or to a specific dollar amount, under a heading of “limits of liability.”
- Part 1: The Scoop on Construction Contracts
- Stay tuned for Part 3 on Insurance Coverages & Construction Contracts
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