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HANDBOOK
Most professionals attempt to limit their exposure by including lim- itation of liability clauses in their
engagement letters. Unfortunately, these clauses are not foolproof. Several issues may arise, including:
• whether the letter was signed;
• the scope of the limitation clause;
• whether the clause was read and
understood by the client; and
• whether the clause is unenforceable on the basis of unconscionability or
on public policy grounds.
Let’s take a look at how to avoid some
common pitfalls that prevent such claus- es from limiting exposure as intended.
Professional liability
In an ideal world, professionals could simply draft engagement letters that absolve them from all potential liabil- ity. This would be consistent with the principle that parties are free to contract as they like. However, the courts try to balance this principle against concerns that a party who agrees to perform an obligation should not be free to absolve themselves entirely from that duty.
Generally speaking, the courts will be cautious about enforcing clauses that limit liability to a relatively small dollar amount. The more proportionate the liable amount is in relation to the en-
gagement, the more likely the courts will uphold the clause. Some clauses limit re- covery to the amount of fees charged. In many cases (especially in construction projects), the fees charged in relation to potential damages are often high enough to satisfy the courts.
The courts will also be more inclined to uphold clauses that specify the type of liability or damages sought to be ex- cluded. Limitation clauses that cover claims in “negligence” or claims for “in- direct or consequential damages,” for example, are more likely to survive than those seeking to limit liability for all “claims arising from services provided
PROFESSIONAL LIABILITY
Contractual hurdles
Professionals looking to limit their liability through contractual wording have to overcome a few obstacles first
BY STEVE VORBRODT, Partner,SingletonUrquhartReynoldsVogelLLP
canadianunderwriter.ca | September 2019 55