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Re: Limit of Liability

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Dennis S. Wish PE wrote:
> I, too, have limited the cost of my liability by the limits of my contract.
> I go as far as to warn the client to read the limits of liability clause on
> the back of my work agreement and sign the bottom of the sheet to indicate
> that he accepts the terms of the agreement.
> However, I was told that whether the limits can be upheld in court or
> exceeded can be tested each time at a cost to the engineer. I was also
> warned that nothing is written in stone to stop a client from going after
> personal assets in excess of the agreement. This becomes financially
> draining on both sides and ultimately is left in the hands of the court or
> jury.
> In so far as limitations are concerned, I may be sued at some point in the
> future, but I will not normally enter into contract with a client until
> this clause is agreed to and signed off.
> I say "not normally" because it is not uncommon for a client to issue a
> retainer to start work and promise to return the agreement but fails to do
> so. The question is " Since he issued the retainer as indicated on the
> contract, but has not signed the agreement, is he bound by the terms of the
> agreement?" The assumption is that there is a record of the agreement (ie,
> fax, certified letter etc) and that the amount paid corresponds to the
> terms. His payment may be considered acceptance of our agreement as a
> verbal contract or as default to the written contract.
> Do any of you have thoughts on this question?
> Dennis Wish PE
>From my experience, in general the limits of liability clause
is weak unless you have a letter from your client's attorney 
accepting the limits. From what I understand, the courts have
ruled that the limits of liability clause had implications beyond
the lay client and therefore unenforceable.

With regards to the second part, acceptance of your agreement
without a signature, this can be upheld in court although it is
not as strong as a wet signature but better than a verbal agreement.
NONE of my clients accept limits equal to my fee (or a multiple
thereof) and they have a legitimate (sp?) reason. If the client is
an Architect contracting with a building owner and he is sued by
the building owner, he is left responsible for the difference in
the suit amount and your limits. Most of the sophisticated clients
(Architects, etc.) are unwilling to do this. They only want to take
credit for the work, not the liability. If you were to hire a specialty
consultant, you would want him to be fully responsible for his/her
work as well (I would). My E&O broker tells me not to "cut off my
nose to spite my face" with this issue; agree to the limits the client
feels comfortable with and protect your ASSets the best you can.