3.3.2 Flashcards
What is the meaning of Liability?
Being legally responsible for something
What is the meaning of Strict Liability?
A liability that exists without proof of wrongdoing
What is indemnity?
Security or protection against loss, usually by way of financial recompense
What are Liquidated Damages?
An amount, stipulated in the contract, that the parties to a contract believe to be a reasonable estimation of the damages that will occur in the event of a breach.
List the things to consider in respect of liability and indemnity clauses
Liquidated damages
Exclusion of liability i.e. force majeure
Negligence of the other party
Indemnity
Financial limit of indemnity
Limiting scope of liability
Transfer of liability - often called ‘transfer of risk’
How can Contract terms seek to limit liability?
By placing a financial limit on indemnity levels
What is Insurance?
An arrangement where a fee is paid to one party (the insurance company) so that it will accept the risk and meet any costs that would normally fall to the person who has the legal liability for them. Effectively the risk is transferred from the person with the liability to the insurer
What is A guarantee?
A formal written assurance that certain quality conditions will be fulfilled, and it provides a specific remedy if they are not
What are the layers of a sub-contract often referred to?
Tiers
List the things to consider in respect of guarantees
Do you need a guarantee?
How long does the guarantee need to be?
What needs to be included in the guarantee? (Replace/repair)
What are Labour standards
They refer to the terms and conditions of employment of the workforce, particularly the non-professional workforce who are generally the lowest paid and most vulnerable members of a company’s human resource
Where is insurance referenced in contracts?
Insurance clauses normally fall within the same section of the contract as those relating to liability and indemnity
What are the types of insurance cover referenced in contracts?
Employers liability - a legal requirement for any company that employs staff, this covers the duties of care owed by an employer to those staff, e.g. compensation for injury suffered in the course of their employment
Public/products liability - Sometimes known as ‘third-party cover’, this relates to any injury, loss or damage caused by the company products, or on its premises, or because of the actions of its personnel
Professional indemnity cover - This relates to losses that occur because of poor or negligent advice that is given in a professional capacity e.g. by accountants or engineers
Goods in transit cover - This is for damage caused during the delivery process
Works/buildings - This is cover for partially completed building works, or the buildings in which they are being carried out
Aggregate or Each and every cover- that the total claims under that policy or in a given time period (often 12 months) cannot exceed a given level. If there are several claims in that period, the later ones are unlikely to be met and that the financial limit applies to each individual claim, no matter how many claims are made
Why is subcontracting referenced in contracts?
To control the Supply chain – by ensuring consistency in quality of supplier selection/audits. The more layers there are, the less the purchaser will know about the person that is doing the work for them.
To control the Contract terms – by ensuring the agreed terms are reflected in the subcontracts
To control Liability – by ensuring that even if some of the supply is subcontracted, the main contractor remains legally liable for any faults and walk away
What must Commercial contracts include?
compliance with international standards and the national standards of the place where the contract is to be carried out, as minimum contract terms
