UPset Agent

[Brian A. MacNeish]

Originally Posted by rcooke

I can read ... Thanks ... You need to look close to see what is on web site .

ROTFLMAO!!!!!!!!
But you don't know how I conduct business!! That contract at the front of the CD book has NEVER been used by myself!!

Keep it up, Roy.....Let's have some fun tonight!!!

[Roy D. Cooke, Sr]

I do not need to see how you conduct your business .
I see how badly you are on this Forum and I do not feel I need to know any more about you
I see how badly you behave your self in our home .
You are not a very good example of this industry the way I see it .
You are a self centered person who seems to try and show how great you are .

[Brian A. MacNeish]

Originally Posted by rcooke

I do not need to see how you conduct your business .
I see how badly you are on this Forum and I do not feel I need to know any more about you
I see how badly you behave your self in our home .
You are not a very good example of this industry the way I see it .
You are a self centered person who seems to try and show how great you are .

G'Night, Roy!!!

[Wand Raymond]

Courts have upheld exculpatory clauses, provided they are brought to the attention of the party signing the contract. While other jurisdictions have ruled them invalid.

If the client does not like the terms of the contract they are free to contract with another party.

[Brian A. MacNeish]

Originally Posted by Wand Raymond

Courts have upheld exculpatory clauses, provided they are brought to the attention of the party signing the contract. While other jurisdictions have ruled them invalid.

If the client does not like the terms of the contract they are free to contract with another party.

IMO, in the majority of cases, the problem with that is: The client never sees the weasel clause until on-site just before the inspection is to begin. Arrangements have been made for the vendor to be absent, buyer(s) have taken time off work/have someone take care of kids. In some cases, other professionals have been contacted to be on site (water testing, sewer video inspection, kitchen/bath reno specialist, etc).

When the contract is to be signed on-site without the client having a prior chance to view it*, there is a lot of pressure to sign it and move on. With the above arrrangements in place, it would take a unique inidvidual to be onsite and say "we're cancelling this whole inspection; I don't like the terms of the inspector's contract!"

If we're going to have contracts (especially with weasel clauses) for home inspections, the client should have at least 2-3 business days to view the contract they will sign and possibly have their lawyer look at it.


* and/or run it by their lawyer. This happens in the vast maority of real estate purchase contracts also- lawyer only sees contract AFTER it is signed and binding!! Then the lawyer can't do much for you!!

[Wand Raymond]

Who said anything about the client not having a chance to review the contract?

That is why its important to post contracts on inspectors websites!

The Supreme Court of Canada has upheld limitations of liability clauses.

[Roy D. Cooke, Sr]

Exactly My client gets the Contract and fills in all the information required including the address of the inspection their info including all phone numbers and their address . I fill in my info and inspection fees after they have finished reading and writing.
If they choose to not read it all, not my fault.
Tell me when if ever have you read the contract you sign with your credit card transaction ,many of these are long very small writing and confusing.and a washed out colour
I know I never read them . .

[Vern Mitchinson]

Originally Posted by Wand Raymond

Who said anything about the client not having a chance to review the contract?

That is why its important to post contracts on inspectors websites!

The Supreme Court of Canada has upheld limitations of liability clauses.

Do you have a reference where I can go and read this ruling.
The reason I ask is because the Alberta Government has written the following into the new regulations.

Prohibited wording
22 A home inspection business shall not include a clause in a home inspection contract or home inspection report that
(a) limits the liability, or the amount of liability, of the home inspection business or the home inspector for breach of contract or negligence, or
(b) limits the time for making any claim against the home inspection business or home inspector.

I have been told that there is a two year limit in others article's in the fair trade act of which the above is going to be a part of.
I have also been told that the government can not force you to write these kinds of clauses into your contracts.
We Will probably have to seek a legal opinion on this and may have to go to court and get a ruling on it.
If anyone can provide a web address where court rulings in this situation, I would appreciate it.

[Brian A. MacNeish]

[quote=Wand Raymond;788527]Who said anything about the client not having a chance to review the contract?

That is why its important to post contracts on inspectors websites!

The Supreme Court of Canada has upheld limitations of liability clauses.[/quote]

But if a government has banned them through legislation, it is a moot point......you cannot use them. It may require a supreme court challenge to change the law, if possible.

[Wand Raymond]

Well of course if they have been legislated out that is different, but in Ontario they have not been legislated out and are quite legal, as with other provinces with the proviso that the exculpatory clause must be drawn to the attention of the contractee.

[Roy D. Cooke, Sr]

c o n s u l t i n g e n g i n e e r s o f b r i t i s h c o l u m b i a

CEBC Position Paper

Limitations of Liability

Purpose

Limitation of liability clauses are included in a Client-Consultant Agreement in order to limit a consulting
engineer’s exposure to liability for certain types of claims that may be brought by the client in the
event of a dispute. It is important that consulting engineers be aware of limitation of liability clauses
and seek to include them as a standard part of every Client-Consultant Agreement. In general terms,
limitation of liability clauses can accomplish three things:

1.

limit a consultant’s liability to a monetary amount;

2.

limit a consultant’s liability in time
(i.e. prevent claims from being brought after expiry of a certain period of time); or

3.

limit a consultant’s liability to certain types of claims
(i.e. claims for breach of contract or for certain kinds of damages only).

An Illustrative Example

There are many examples of standard-form limitation of liability clauses. Clauses GC 14.5 and GC
14.8 of the ACEC 31 are useful to review as they address all three areas of limitations of liability (time,
amount, and type). Clause GC 14.5 and GC 14.8 read in relevant part:

GC 14.5

The Engineer’s liability for claims which the Client has or may have against the Engineer or
the Engineer’s employees, agents, representatives and Sub-Consultants under this Agreement, whether
these claims arise in contract, tort, negligence or under any other theory of liability, will be limited, notwithstanding
any other provision of this Engineering Agreement:

(a)

to claims brought within the limitation period prescribed by law in the jurisdiction in which the
Project is located or, where permitted by law, within 2 years of completion or termination of the
Services, whichever occurs fi rst; and

(b)

to re-performance of defective Services by the Engineer, plus:

(i)

where claims are covered by insurance under section GC 14.1, and, if applicable, by any
additional insurance under section GC 14.2 – to the amount of such insurance; or

(ii)

where claims are not covered by insurance under section GC 14.1, and, if applicable,
by any additional insurance under section GC 14.2 – to the amount of $250,000.

GC 14.8

The liability of each party with respect to a claim against each other is limited to direct
damages only and neither party will have any liability whatsoever for consequential or indirect loss or
damage (such as, but not limited to, claims for loss of profi t, revenue, production, business, contracts or
opportunity and increased cost of capital, fi nancing or overhead) incurred by the other party.

Each key aspect of Clause GC 14.5 in the ACEC 31 is discussed in detail below.

- 1 -

Time-Based Limitation of Liability

The ACEC 31 limits a consulting engineers liability “in time” through Clause GC 14.5(a) which provides
that no claims may be brought by the client two years after either “completion or termination of the
engineer’s services” (whichever occurs fi rst).
The importance of incorporating a contractual time limit on claims is highlighted by the liberal interpretation
the courts in this jurisdiction have given to the Limitation Act. Generally speaking, unless
a contractual time limit exists, construction-related claims for defects in engineering work can be
brought, in some circumstances, as late as 30 years after substantial completion of a project. As has
been stated by our courts, engineers are particularly vulnerable to stale claims:

“A professional advisor drafts a document or designs a structure and fi nds himself attacked
when, generations later, damage fl ows from his act. The attack may come at a time when mind
and memory have faded or even failed altogether. He may not be able to recall or may have an
imperfect memory of instructions or discussions which excluded liability or which redefi ned in
some limiting fashion the duty he undertook.”

1

Potential prejudice to engineers as a result of the passage of time highlights the importance of including
a clause in every client agreement that provides a date-certain within which claims against the
consultant must be brought. A limitation clause such as the one found in Clause GC 14.5 of the ACEC
31 accomplishes this objective.
A client may not want to limit the time within which a claim must be brought. In fact, consultants are
sometimes required to contract out of a limitation period. A consultant should do its best to avoid this
long-tail exposure unless it has specifi cally considered the risk, obtained the appropriate insurance,
and charged an appropriate premium. From the client’s perspective, there should be reasons why the
consultant is being asked to assume greater liability than would otherwise be imposed by law, and
should be made to appreciate the increased cost associated with increased assumption of risk.

Monetary Limits

ACEC 31 limits the amount of a consulting engineer’s liability to its client to “the amount of such insurance,
or … to the amount of $250,000” through Clause GC 14.5(b).
The purpose behind limiting the consultant’s liability in monetary terms is simple: if the consultant
obtains a small economic benefi t (profi t) while helping the client achieve a much larger one, the risk
the consultant must bear should be commensurate with the fi nancial return. The ACEC 31 limits the
quantum of any claim by the client against the consultant to the limits of available insurance. This
can be a reasonable way to allocate the risk of loss on a project between the parties and, it can also be
benefi cial by causing both sides to turn their minds to insurance coverage issues at the front end of
the project. Another example of an industry accepted clause that limits liability to insurance available
is found in the MMCD Agreement.
In some circumstances (such as small fee retainers), it may be appropriate for a consulting engineer to
contractually limit its liability to a set amount such as $25,000, $100,000, or some other amount, such
as the value of the engineering fees for the project.

1

Costigan v. Ruzicka (1985), 13 D.L.R. (4th) 368 (Alta. C.A.) at 377
- 2 -

Contract Language Issues of Concern to Engineers – Limitations of Liability

It is in the consultant’s best interests to limit its exposure to liability to the extent possible. Where a
client requires a consultant to assume greater liability than that which the consultant is insured for, it
is important that both parties understand the implications of such an arrangement. The consultant
essentially has three choices: (1) decline the project on the basis that the risk assumed is too great; (2)
take on additional insurance over and above the minimum amount prescribed by the contract and
refl ect that cost in the bid; or (3) assume the risk and accept that in the event of a signifi cant claim, the
survival of the fi rm may be jeopardized.
Clients have to realize that it is not in their interests for there to be uninsured risk. In the event that
something goes wrong on a project, it is in the client’s interest for there to be access to a pool of insurance.
Professional liability insurance is a risk allocation tool that should be discussed with the client
at the outset of the project to ensure the client’s interests are reasonably protected and the fi nancial
future of the engineering fi rm is not put at risk by a particular project. Discussing and resolving these
allocation of risk issues at the front-end of the project (rather than after a dispute has arisen) avoids
the confl ict and damage to the ongoing working relationship between client and engineer that can
occur when an engineering fi rm’s fi nancial future is unexpectedly put at risk by a client’s claim.
On a larger project, a consultant may not be able to obtain suffi cient insurance to completely cover
its exposure, or at least not at a reasonable cost, particularly if the client-consultant agreement does
not include a limitation of liability clause. In that situation, it may be in the interests of both the client
and the consultant to take out a project specifi c professional liability policy. While that may increase
the initial cost of the project to the client, the consultants and contractors will all be able to off er their
services at lower cost because they are not burdened with accepting uninsured risk or obtaining their
own insurance.

Types of Liability

Consultants can greatly reduce their exposure to liability by including in the client-consultant agreement
a clause limiting their liability to claims arising directly out of their performance of the agreement.
ACEC 31, Clause GC 14.8 (transcribed above) limits the types of claims that may be advanced
against a consulting engineer to “direct damages” arising from the engineers services. A client’s lost
opportunities or reduction/loss of profi t are not recoverable when this clause is implemented.
Consultants should always seek to limit their exposure to certain types of damage. The ACEC accomplishes
this objective. The MMCD Agreement also has a clause that restricts the types of claims that
may be advanced against a consulting engineer. There are, however, other types of damages that
consultants may want to exclude based on the specifi c nature of the project.
The Engineers Joint Contract Documents Committee (“EJCDC”) E-500 contains a useful clause for this
purpose:

To the fullest extent permitted by law, and notwithstanding any other provision in the Agreement
… the Engineer and Engineer’s offi cers, directors, partners, employees, agents, and Engineer’s
Consultants, or any of them, shall not be liable to Owner or anyone claiming by, through,
or under Owner for any special, incidental, indirect, or consequential damages whatsoever arising
out of, resulting from, or in any way related to the Project or the Agreement from any cause
or causes, including but not limited to any such damages caused by the negligence, professional
errors or omissions, strict liability, breach of contract, or warranties, express or implied, of Engineer
or Engineer’s offi cers, directors, partners, employees, agents, or Engineer’s Consultants, or
any of them, and including but not limited to:[list particular types of damages].

- 3 -

Contract Language Issues of Concern to Engineers – Limitations of Liability

CEBC Position Papers

The CEBC Position Papers are a series of articles published by CEBC’s Business Practice Committee. They are intended to provide general
information about issues and best practices in the consulting engineering industry, and should not be construed as legal advice.
Permission is granted to copy articles when credit is given to CEBC.
Executive Director: Glenn Martin
Edition Editors: Neil Ferguson, P.Eng., Hatch Ltd., CEBC Business Practice Committee Chair
Mike Dickens, P.Eng., Kerr Wood Leidal Associates, CEBC Business Practice Committee Member
Edition Reviewer: Chris Rusnak, Partner, Harper Grey LLP
Design/Layout: Brian McAskill
ISSN: 1193-9990

June 2010

consulting engineers of british columbia | 657 - 409 Granville Street, Vancouver, BC V6C 1T2

��

(604) 687-2811 | �� (604) 688-7110 | �� info@cebc.org | �� www.cebc.org

These clauses are very broad in that they limit the consultant’s liability to the client to direct damages.
Special, incidental, indirect, or consequential damages of any kind in any way related to the project
are excluded. These clauses would be particularly useful to a consultant engaged on a large project
where there is potential for business interruption losses which may be signifi cant and not capable of
being defi ned at the front for which the consultant should not be responsible even in the event of the
consultant’s negligence.

Enforceability

A common question by many in the construction industry, including consulting engineers, is whether
limitation of liability clauses have been found by the courts to be enforceable. The Supreme Court
of Canada has held that these clauses are enforceable provided they are not unconscionable, unfair,
unreasonable, or otherwise contrary to public policy

2. This determination is highly fact driven and
as such, a comprehensive review of the law is beyond the scope of this discussion. As a general rule
though, where parties are of equal bargaining power, and they are aware of what they are agreeing
to, the courts will permit them to make their own bargain and hold them to the terms of that bargain.
Recent court decisions have upheld limitation of liability clauses in client-consultant agreements3.
There are steps a consultant can take to increase the likelihood that a limitation of liability clause will
be upheld. First, it is important that a limitation of liability clause be incorporated into every contract,
so it becomes a matter of standard practice. Second, the limitation must be brought to the client’s attention.
This can be done by way of a cover letter or obtaining the client’s initials next to the clause or
at the bottom of every page of the agreement. Third, if the client is unsophisticated, explain the clause
and document that explanation by way of a letter.

2

Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423 at ¶64
3 Summitville Consolidated Mining Co. v. Klohn Leonoff Ltd. (1989) 21 C.L.R. (2d) 128 (B.C.S.C.) and

Howe Sound School District No. 48 v. Killick Metz Bowen Rose Architects and Planners Inc.

2007 BCSC 28
- 4 -

Contract Language Issues of Concern to Engineers – Limitations of Liability

[Roy D. Cooke, Sr]

Article

Limits on Contractual Limits of Liability — Part I
Date

May 13, 2010

AUTHOR(s)

George S. Takach




While the term "LOL" in an Internet chat environment denotes a jocular sentiment (i.e., "laugh out loud"), in the context of legal contracts an "LOL" clause is no laughing matter. Rather, the "Limitation of Liability" clause is of central importance in any agreement for the acquisition of tech-related products or services. LOL language, however, can also be found in a range of other commercial agreements. Therefore, several recent cases that address LOL contract matters discussed below (and next edition) will be of keen interest to companies buying or selling tech products and services.
Tech LOL Clauses
It is extremely rare for the supplier of IT equipment, software and services to a customer not to limit supplier’s liability in the contract between supplier and customer. While it is difficult to generalize, most LOL provisions look something like this: "direct" damages are limited to some percentage of the revenue paid by customer to supplier; there is a general exclusion of "indirect and consequential" damages; and there are a few exceptions to both of these limitations.
The rationale for the LOL in most situations is understandable. For example, if a supplier sells a customer a laptop computer for, say, $1,500, and the customer installs the laptop as the key control device in a nuclear plant, then in return for the $1,500 in revenue, the supplier does not want to take on the huge liability that may ultimately result if the laptop does not work properly.
Moreover, by limiting its liability for such a scenario, the supplier is signalling to the customer that the customer should take appropriate measures to "de-risk" the situation as much as possible, including: procuring more than one unit of the hardware to ensure that adequate redundancy/back-up is built into the design of the control system; instituting other back-up mechanisms; and buying enough appropriate insurance to cover the risks of non-performance of the equipment.
Non-Tech LOL Clauses
The practice of suppliers of goods and services limiting their liability contractually has spread to a number of non-IT-related industries. In a leading Ontario Court of Appeal decision, for instance, the supplier of a remote security system monitoring service stated in its customer subscription agreement that regardless of the breaches in performance by the supplier, the customer could not recover damages in an amount greater than 12 months of fees paid by the customer to the supplier. While the trial court refused to enforce this LOL clause (and awarded damages of $50,000 to the small town jewellery store plaintiff when thieves made off with its inventory because of the negligence of the security service supplier), the Ontario Court of Appeal reversed, upholding the LOL clause that limited the compensation of customer to $890 (being one year’s services fee).
In a Supreme Court of Canada (SCC) decision that was the leading case on contractual LOL clauses until recently, the supplier of gear boxes for large conveyor belt equipment in Alberta’s tar sands had an LOL in its sales contract with customers. And again, the clause (in this case, a warranty disclaimer) was upheld to shield a supplier from liability when the equipment proved defective. In short, whenever the particular product or service presents specific legal risks to the underlying customer, suppliers are keen to limit their liability contractually.
Recent Supreme Court Guidance
Recently, the SCC readdressed the important issue of the enforceability of LOL clauses. In Tercon, the SCC generally affirmed the ability of business counterparties to agree in advance, in a contract, to limit their respective liabilities to one another in the event activity under the agreement was to give rise to a damages claim.
This approach to enforcing contractual LOL clauses, however, was made subject to three very important exceptions in the Tercon decision.
Ambiguous LOL Clauses
First, it is necessary that the LOL speak clearly, and that as a matter of interpretation, it clearly applies to the relevant scenario of liability. In a similar vein, if the court finds that the LOL is ambiguous, the court may well decline to enforce the clause.
On the other hand, if properly drafted, the contractual LOL can even be crafted in a way to limit liability not only for breach of contract but also in respect of tort/negligence claims. That is, when a supplier fails to perform under an agreement, in addition to a contract claim, customer may well also be able to bring a negligence claim if the supplier’s conduct fell below the requisite standard of care. The SCC however, years ago, held that so long as the LOL is properly worded, it can serve as an effective shield against negligence claims as well.
Unconscionable LOL Clauses
In Tercon, the court also decided that an LOL clause could be invalid if it was unconscionable at the time it was entered into. This second basis on which LOL clauses can be found to be unenforceable generally turns on whether there was an inequality of bargaining power between the respective parties at the time of contract formation.
For most situations involving two (or more) corporate entities, each with professional management, and typically represented by legal counsel, it would be difficult to vitiate the LOL clause for reasons of unconscionability. It is a very different story, however, in the "consumer space," where businesses usually present take-it-or-leave-it contracts of adhesion to their customers, particularly in "click consent" agreements concluded over the Internet. When these contracts contain LOL clauses, they can run the real risk of being held unenforceable, especially if they are drafted in an overbearing, difficult-to-understand manner. In Canada over the past few years, more than one company was surprised (and dismayed) when the LOL provision in its standard online agreement was found to be ineffective by a judge.
The lesson from these cases is that, especially in the consumer environment, LOL clauses have to be drafted very, very carefully and even-handedly. Corporate Canada would do well to aim for a middle-of-the-road clause that serves to adequately protect suppliers, while at the same time providing some scope of redress for the user as well.
The Fundamental Death of Fundamental Breach
There is a third ground under which a court can find an LOL clause to be unenforceable. Traditionally this centred around the doctrine of "fundamental breach"; namely, that if a supplier’s breach of performance was so fundamental as to go to the very heart of the bargain between the parties, a court could elect not to let the supplier take advantage of the protection afforded by the LOL clause.
In colourful language, the SCC in Tercon has now proclaimed the death of the doctrine of fundamental breach: "We should again attempt to shut the coffin on the jargon associated with ‘fundamental breach.’" In its stead, the SCC provides that, essentially, a court can always decide to decline to enforce a LOL clause if there is a compelling public policy rationale to do so. For example, the SCC points out that conduct approaching "serious criminality or egregious fraud" are but two examples where a court might override the public policy of freedom to contract, and not permit a party to rely on an LOL clause.
One example given by the SCC involved a case where a supplier knowingly sold defective products, rather than telling customers about the defects. The supplier’s strategy was to rely on the ostensible shield provided by an LOL clause in customer contracts to block any product liability claims (rather than be forthright with customers). The court in that decision refused to allow the supplier to rely on the LOL clause, and the SCC indicated that it is a good example of the type of scenario where the courts would decline LOL enforcement in order to protect the public interest.
The core lesson on LOL clauses provided by the SCC in Tercon is that these important liability-limiting provisions can indeed serve a central objective to the parties to a contract (particularly to the company charged with supplying products and services that may be inherently risky), but they must be drafted and negotiated with care, and they will not save the defaulting party in all circumstances. In a similar vein, the next edition will consider a couple of cases that illustrate further limits to these LOL provisions.

Expertise