Limitation of Liability for Damages to Canada and Indemnification for Third Party Claims

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Item Information

ID
N0002C
Effective Date
2008-05-12
SACC Manual item status
Active
Parent Section
Limitation of Liability
SACC Item usage
Full text

Remarks – Recommended Use of SACC Item

Use the following clause in contracts when limiting a contractor's liability to Canada and requiring the contractor to indemnify Canada against third party claims.

Limiting a contractor's liability should be an exception to the normal practice of using the standard conditions. When the decision is made to limit a contractor's liability to Canada, contracting officers, in conjunction with client departments, must be able to demonstrate that the risks associated with the procurement have been analyzed and that the limitation of liability provides adequate protection to Canada. Decisions with respect to limiting a contractor's liability should be made before bid solicitation release or, in instances of non-competitive contracts, before the start of negotiations.

The dollar amount below must be completed using the amount from the appropriate commodity grouping, or in consultation with Risk Management Advisory Services.

Clauses N0001C and N0002C are similar, in that both create a limit on the contractor's liability for damages to Canada. However, the two clauses deal with the contractor's liability for claims made by third parties in different ways. N0001C essentially provides that the parties agree to allow the laws in the jurisdiction of the contract to determine who is responsible for any damages to third parties. It then goes on to provide that, if Canada must pay the third party for damages caused by the contractor because of joint and several liability, the contractor must reimburse Canada for that amount. In short, under clause N0001C, each party is responsible for any damages that it causes to third parties. On the other hand, clause N0002C states that the contractor must indemnify Canada against any third party claims that relate to the contract.

Legal text for SACC item

  1. This section applies despite any other provision of the Contract and replaces the section of the general conditions entitled "Liability". Any reference in this section to damages caused by the Contractor also includes damages caused by its employees, as well as its subcontractors, agents, and representatives, and any of their employees.
  2. Whether the claim is based in contract, tort, or another cause of action, the Contractor's liability for all damages suffered by Canada caused by the Contractor's performance of or failure to perform the Contract is limited to $__________. This limitation of the Contractor's liability does not apply to:
    1. any infringement of intellectual property rights; or
    2. any breach of warranty obligations.
  3. The Contractor agrees to pay to Canada the amounts of all of Canada's losses, liabilities, damages, costs, and expenses resulting from any claim made by a third party relating to the Contract, including the complete costs of defending any legal action by a third party. The Contractor agrees that Canada is not required to have satisfied its liability to the third party before the Contractor is obliged to pay Canada in respect of that liability. The Contractor also agrees, if requested by Canada, to defend Canada against any third party claims.
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