Liability Assumed in Contracts

It is a growing trend in business (within New Zealand and internationally) for parties to agree, in contract, to indemnify each other for losses arising from the performance of that contract.

We are concerned with contracts that could impose liability on our clients that would not be covered by standard liability insurance covers – such as Professional Indemnity or Public Liability.  The sky is the limit with what liability you can agree to in a contract.  However insurance policies will generally only cover you for liability that you would be normally liable for under the laws of the land (i.e. setting the contract aside).

What can you do about this?  In many instances nothing – however the first step is to consult with your legal advisers on the ramifications of the contract.  Do not simply accept that the contractual terms are set in concrete.  Recently one of our clients achieved a significant alteration to a proposed contract with a large NZ company.  They stuck to their ‘guns’ and ultimately, the contract was amended to their satisfaction.

If you would like to understand how a contract may affect your liability coverage, please give us a call.  Please note we are not legal advisers.

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