In public tenders for engineering consultancy services, many (if not most) organs of state use the CIDB Standard Professional Services Contract 2009 as the proposed consultancy services agreement, which will form the contract between the parties after tender award (the “Contract”). 

While working in-house, we found that most engineers and project managers believed that, under the unamended standard Contract, a consultant’s liability is limited to two times (200%) the professional services fee under the Contract.

It is not.

The liability clause (13.5.1) states the following:

“Unless otherwise indicated in the Contract Data, the amount of compensation payable by either Party to the other in respect of liability under the Contract is limited to:

1. the sum insured in terms of [clause] 5.4 in respect of insurable events; and
2. the sum stated in the Contract Data or, where no such amount is stated, to an amount equal to twice the amount of fees payable to the Service Provider under the Contract, excluding reimbursement and expenses for items other than salaries of Personnel, in respect of non-insurable events.”

Looking at the clause above, is the Consultant’s liability limited to twice the fees?  In the unamended form, where no information is specified in the Contract Data?  Surely not. 

Clause 13.5.1 starts with “unless otherwise specified in the Contract Data”.  This means, to limit your liability, the Contract Data for clause 13.5.1 must state that the maximum amount of compensation is limited to “X”.  If the Contract Data is empty for Clause 13.5.1, we shift our focus to items (a) and (b) in clause 13.5.1. 

Item (a) refers to insurable events, for example, professional negligence, which is covered by your Professional Indemnity Insurance.  Do you see any words in clause 13.5.1 (a) stating that the consultant’s liability is limited to twice the amount of fees for negligence or breach of contract?  We don’t.

Much more can be said about the limit of liability under the CIDB Standard Professional Services Contract 2009.  In the interest of keeping this post short, and driving two points home, we want to reiterate that:

• under the unamended standard Contract, with no Contract Data, the Consultant’s liability is not limited; and
• the cleanest way to limit liability is to include a specified limit in the Contract Data for clause 13.5.1 – not in the Contract Data for clause 5.4.

For more on the limitation on liability vs insurance requirements, read Sidebar’s previous bLAWg post here: 

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