National Roofing Legal Resource Center

Contract provision addresses waiver of consequential, special and punitive damages

A roofing contractor will be liable to the general contractor or building owner for damages if it breaches the contract. Direct damages are those that are directly caused by the breach, naturally result from the breach and are reasonably foreseeable to occur from a breach of contract. In contrast, consequential damages, which are sometimes referred to as special damages or indirect damages, typically are economic losses that are less closely related to the actual breach and usually are not contemplated by the parties at the time of contract formation. For example, if a roofing contractor installs a defective roof and water leaks into the building as a result, the costs to repair and/or replace the roof and correct the leaks would be direct damages. However, if the owner claims losses of management and employee productivity because of the leaks, those losses would be consequential damages.

Punitive damages are assessed specifically to punish a party for its egregious, wrongful behavior and to deter others from engaging in that same behavior. Punitive damages are awarded in excess of actual, direct damages. Punitive damages might be awarded in situations of gross negligence where a party acts with reckless disregard or indifference to the life, safety or rights of others.

General contractors and owners sometimes include provisions in contracts that protect the general contractor or owner from consequential, special and punitive damages while still exposing the roofing contractor to liability for these damages. In lieu of deleting this provision, an alternative approach would be to have a mutual waiver of such damages wherin the roofing contractor, general contractor and owner all agree to waive claims for consequential, special and punitive damages against one another.

The above contract provision can be used whether the roofing contractor enters into a contract with the building owner or a subcontract with a general contractor. To encourage general contractors and building owners to agree to such a provision, the roofing contractor can note a mutual waiver of consequential damages is included in standard construction industry contract documents such as the AIA-A201-2007 General Conditions and the ConsensusDocs 200, which are considered fair and equitable contracts.

Waiver of consequential, special and punitive damages: The parties agree to waive claims against one another for consequential, special and punitive damages. This mutual waiver covers claims by all parties for consequential, special and punitive damages.


5/30/2017



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