In Caroline Foster's blog on the case of the Trustees of Ampleforth Abbey Trust v Turner & Townsend Project Management Limited, Caroline touched upon the project manager's limitation of liability clause being held to contravene section 3 of the Unfair Contract Terms Act 1977. As a non-contentious construction lawyer who spends a lot of time negotiating these types of clauses I found this decision interesting.
The project manager had introduced a limit of liability into its appointment for the third project it carried out for the employer. The clause stated that the project manager's liability was limited to the lower of the fees paid to it by the employer and £1,000,000. It was held by the Technology and Construction Court ("TCC") to be an unreasonable term as the level of professional indemnity insurance required of the project manager under the appointment was infact £10,000,000. The TCC stated it was unfair as the cost of this higher level of professional indemnity cover would have been passed to the employer in the the project managers fees but the employer would not receive the benefit of this level of insurance cover. It would be worth noting in practice consultants usually take out blanket cover on an annual basis so it is unlikely that it would pass the entire cost of the insurance cover on to one employer.
As the limitation clause was not included in the project manager's previous two appointments, the TCC held that the employer would be entitled to expect the same terms and conditions from the project manager as it had received for the previous projects. If the project manager was looking to incorporate any additional terms it should have brought these to the employer's attention.
My advice to employers remain the same: always check the terms and conditions that you are presented with and where they seem unreasonable be sure to negotiate. My advice to consultants is also common sense: if you want to introduce new terms into a appointment be sure to flag them up.