Real Estate Development Law Alert: Waiver of Consequential Damages Contract Clause Poses Substantial Risks to Project Owners and Developers

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This alert refers to an article published in the November 16, 2007 Daily Journal of Commerce regarding the risks posed by the waiver of consequential damages clause in contracts. Please download the article here (updated copy). Members of the Stoel Rives Real Estate Development Law Group continue to learn that our project owner and developer clients commonly are either (1) unaware of the waiver of consequential damages clause or (2) unappreciative of the substantial risks to which the clause exposes them. We urge project owners and developers to carefully read the article and consider the implications of the subject on their design, construction and design-build transactions. In addition to the two compromise solutions mentioned in the last paragraph of the article (making the waiver truly mutual, and including a dollar limit on consequential damages in lieu of the waiver), two other such compromises include:
  1. providing that the waiver will not apply to the extent the consequential damages are covered and paid by the designer's, contractor's or design-builder's insurance; and
  2. providing, similarly, that the waiver will not apply to the extent the consequential damages are recovered (or recoverable) by the designer, contractor or design-builder from that party's subcontractors, suppliers or consultants or such lower-tier parties' insurance.

Key Contributors

Eric A. Grasberger
Guy A. Randles
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