Unlimited liability

[loska]

Hi All,

I am in the process of negotiating my first contract over here in Europe. The agency has put a term in the contract where I agree to indemnify the against all loss, damage, costs, etc. This is fine but I have never seen one of these where it is unlimited. Contracts in the past have been up to a certain amount. Is this normal? When I asked the agent he said this was standard and had the clause had never been questioned before.

He said that this would be covered by a 'back to back' insurance agreement. I have not found anything regarding this .... just the standard public liability and professional indemnity up to certain amounts.

The nature of the work is development so there is not a whole lot that can really go wrong but you never know.

Cheers,
Loska.

[NotAllThere]

...When I asked the agent he said this was standard and had the clause had never been questioned before....

This is standard behaviour from agents. And usually untrue.

If you've got PI insurance up to £2M (for example), tell them that that's the amount you're prepared to indemnify them for.

How are you working with this agency? Via umbrella, ltd co? Or some other way. The reason I ask, is because it matters which entity is actually indemnifying.

[loska]

How are you working with this agency? Via umbrella, ltd co? Or some other way. The reason I ask, is because it matters which entity is actually indemnifying.

Thanks. I am not working in UK but is with UK agency. I will be I guess the equivalent of sole trader. Looking at shifting to Ltd setup only to protect myself if will not budge on unlimited liability. I would really prefer to stick as sole trader because do not know how long this contract will go for and it is a heap of stuffing around to setup in the country I am resident.

How common is it that they change this term? (I realise this depends a bunch of circumstances)

[SueEllen]

How common is it that they change this term? (I realise this depends a bunch of circumstances)

If you get a lawyer to review the contract and get them to "negotiate" with the agency then they will change the term.

In general the term should either equal the amount the contract is worth in total, or the amount of your PI insurance. This because they are more likely to get the money if anything goes wrong.

There as if they put unlimited then there is nothing stopping you doing a disappearing act particularly if you are not in the UK, or finding something to make the entire clause invalid.

[Dearnla]

No company should be agreeing an indemnity clause like that - it means your liability is UNCAPPED and you CANNOT get insurance for an uncapped liability. What they are asking for is unreasonable so push back and tell them that the best you can do is cap the liability to the limit on your insurance.
Tell them that they would provide an uncapped indemnity back....

Oh, I'm available for consulting on contracts at £50/Hr

[PrinceNamor]

Interesting that an agency is asking for this from a contractor. A few years back I lost out a contract as the client co was asking for an unlimited liability clause from the agency and they wouldn't sign up to it. Maybe in this case the client is asking this of the agency.

[craig1]

If the contract is between agency and your ltd company then it's largely irrelevant if you're the sole fee-earner in the company. If you did get a silly liability claim then you just go bust and start again with v2 of your company.

You just need to be careful that there are no personal guarantee clauses or anything that states or implies that there is any sort of personal responsibility for liablities. Also, make sure the contract is governed by the laws of England and Wales as some countries t'other side of Dover have funny contract liability laws.

Even if you did have to get PI insurance, that just has an upper limit with everything over that your company's responsibility. Same thing, just go bust and start again if any claim exceeds your insurance.

That all said, get it reviewed by a competent contract lawyer, I'm sure there are plenty of people on here who can recommend someone.

[LisaContractorUmbrella]

Anyone can have anything written into a contract but that does not mean that it is legally enforceable - worth bearing in mind

[Wanderer]

The agency has put a term in the contract where I agree to indemnify the against all loss, damage, costs, etc. This is fine but I have never seen one of these where it is unlimited. Contracts in the past have been up to a certain amount. Is this normal? When I asked the agent he said this was standard and had the clause had never been questioned before.

The agency is taking the piss. If you sign up for unlimited liability as a sole trader then they could easily bring a case against you which would bankrupt you. There is absolutely no way you should accept this. The agency are telling a bare faced lie when they claim that this is a "standard term which has never been questioned".

My advice is to form a limited company, that way your business and personal money are kept separate. If it goes badly wrong then just close the company and they don't get tulip out of you.
Secondly, go and tell the agency that your insurance company will only underwrite the risk up to £1,000,000 so that is the maximum you can accept in the contract.

You don't need a lawyer to do all this, just stand up to the idiots.

While we are at it, don't let them bully you into "opting out" of the agency regulations if you don't want to and make sure they have reasonable payment terms. If they want 30 day payment terms then tell them you are invoicing them weekly.

Remember that the client wants you to work for them, the agency is just the slimy middle man here who takes a cut of the money but doesn't add any value. Don't take any tulip from them.

[SueEllen]

The agency is taking the piss. If you sign up for unlimited liability as a sole trader then they could easily bring a case against you which would bankrupt you. There is absolutely no way you should accept this. The agency are telling a bare faced lie when they claim that this is a "standard term which has never been questioned".

My advice is to form a limited company, that way your business and personal money are kept separate. If it goes badly wrong then just close the company and they don't get tulip out of you.
Secondly, go and tell the agency that your insurance company will only underwrite the risk up to £1,000,000 so that is the maximum you can accept in the contract.

Loska is abroad so depending on the country and client s/he can easily do a disappearing act and the UK agency gets f***ed over.

The main issue with the clause is that the agency would try and not pay up using such a clause, and other clauses not mentioned here against him/her. Normally when agents put in one sh*t clause in a contract there are a few others.

Hence if s/he got a lawyer involved the agent would know not to screw around, though some agents concede quickly to changes when you tell them your lawyer is going to look at it as they realise you may get the entire contract redrafted.