How to manage your liability in commercial contracts

Whether you are a customer or a supplier, the apportionment of risk between you and your counterparty is one of the key features of any contract you enter into. Both parties want to ensure that their respective interests are protected, so agreeing how risks are borne and which party is liable for what risks under the contract can require negotiation and compromise.

Why does liability matter?

The respective liabilities of contractual parties are important because they dictate which party is liable for losses which occur as a result of something particular going wrong during performance of the contract. Each transaction carries risks which mean that a party could incur liability for a host of reasons including:

  • Breach of contract;
  • Negligence;
  • Misrepresentation;
  • Infringement of property rights (e.g. physical and/or intellectual property);
  • Breach of statutory obligations (e.g. data protection); and/or
  • Infringement of third party rights.

Every contract has its own specific risks, which should be assessed on a case-by-case basis.

What are the main laws to be concerned about?

The Unfair Contract Terms Act 1977 (UCTA) and the Consumer Rights Act 2015 (CRA) are the main statutes that regulate the use of exclusion and limitation clauses in the UK. UCTA applies to business-to-business (B2B) contracts, whilst the CRA applies to business-to-consumer (B2C) contracts.

If you would like a copy of our guide, please contact us.