Legal Updates Critical Risk Mitigation Provisions for Design Contracts — Part 1: Waiver of Consequential Damages
An essential element of architect and engineer contracts with their clients is the treatment of risk sharing between the parties. Design professionals who are typically simply providing services for a fee, and who are not investors who will share in the profits of a successful project, can ill-afford to expose themselves to unlimited liability for negligent errors and omissions in the performance of their services. Architects and engineers would argue that it is fundamentally unfair to expose them to unlimited downside risk when they do not directly participate in the upside profit potential of the projects they design. Owners and developers would counter that this is why design professionals carry professional liability insurance. But even simple design errors can lead to liability that is many times greater than the amount of such insurance.
