CIPS L4M3 Chapter 3 (3.2) Flashcards
1
Q
What is the meaning of Liability?
A
- Being legally responsible for something
2
Q
What is the meaning of Strict Liability?
A
- A liability that exists without proof of wrongdoing
3
Q
What is indemnity?
A
- Security or protection against loss, usually by way of financial recompense
4
Q
What are Liquidated Damages?
A
- 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.
5
Q
List the things to consider in respect of liability and indemnity clauses
A
- 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’
6
Q
How can Contract terms seek to limit liability?
A
- By placing a financial limit on indemnity levels
7
Q
What is Insurance?
A
- 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
8
Q
Where is insurance referenced in contracts?
A
- Insurance clauses normally fall within the same section of the contract as those relating to liability and indemnity
9
Q
What are the types of insurance cover referenced in contracts?
A
- 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
10
Q
What is a Subcontract?
A
- A contract that sits below, is linked to and is partly governed by a higher contract to deliver part of the requirements of that higher contract. There can be several layers of sub- and sub-subcontracts
11
Q
What are the layers of a sub-contract often referred to?
A
- Tiers
12
Q
Why is subcontracting referenced in contracts?
A
- 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
13
Q
What is A guarantee?
A
- A formal written assurance that certain quality conditions will be fulfilled, and it provides a specific remedy if they are not
14
Q
List the things to consider in respect of guarantees
A
- Do you need a guarantee?
- How long does the guarantee need to be?
- What needs to be included in the guarantee? (Replace/repair)
15
Q
What is the meaning of Damages in contracts?
A
- It is the legal term for financial payments to compensate for a loss of some kind
