Contractors are often in the situation where a term in a proposed building contract seeks to limit the liability of the contractor (to the employer) or sub-contractor (to the contractor) for negligence. These clauses are generally contested by the receiving party at pre-contract stage and can also be challenged post contract.

The Unfair Contract Terms Act 1977 (UCTA) prevents a party from limiting its liability in a business contract for negligently causing death or personal injury. Other losses are capable of being excluded provided that the specific term meets the requirements of the reasonableness test as set out in UCTA.

The Technology and Construction Court (TCC) recently revisited this issue in Goodlife Foods Ltd -v- Hall Fire Protection Ltd [2017] EWHC 767 (TCC) (07 April 2017). In this case, Goodlife sustained losses exceeding £6 million due to the alleged negligence of Hall Fire. The time for bringing a claim in contract had time-barred and Goodlife therefore sought a remedy in tort (i.e. for negligence) as that normally has a longer time bar.

Hall Fire relied on a wide-ranging clause in the contract that excluded liability for negligence. That clause included any damage caused to persons. Such a term is of course contrary to UCTA. Goodlife challenged the validity of the whole limitation clause on that basis and its reasonableness generally under UCTA.

The TCC considered several factors when making its decision and ultimately ruled that any negligent acts other than damage to persons were excluded by the clause which was found to be enforceable. Accordingly, Goodlife’s case in negligence did not get off the ground.

The presiding TCC judge considered the availability of insurance to Goodlife against the risk as a factor when making his decision. Interestingly it was only the availability of insurance that was considered rather than whether a policy was actually in place.

Accordingly clauses can seek (and fail) to exclude liability for personal injury (and presumably, death) without necessarily impacting upon the reasonableness (and in effect the enforceability) of the rest of the clause. Whilst the unlawful element of the clause was unenforceable the general exclusion was upheld.

The conclusion to be drawn from the above is that the courts remain reluctant to deviate from the express intentions of the parties and will seek to enforce contractual terms wherever possible. From a contractor’s perspective, it is clear that such exclusion clauses can serve the intended purpose and will be enforced by the courts. Employers, however, should remain extremely cautious of agreeing to such clauses to avoid a potential dispute later down the line with potentiality limited merits.