X18: Limitation of Liability

NEC4 X18 lets the parties cap the Contractor's liability to the Client in four ways, and adds a cut-off date after which it can't be liable for a matter that hasn't been notified. Without X18, the core clauses contain no such caps, so liability is limited only by the general law.

The Option's numbering moved between editions, because the NEC4 subcontract text starts with a clause saying each limit only applies if a figure is stated. Anyone reusing an NEC3 letter or Z clause should check the references. For where X18 sits in the wider picture, see the secondary Options overview.

The limits

What's limited	NEC3 ECC	NEC4 subcontract text
Each limit applies only if a figure is stated	No such clause	X18.1
Indirect or consequential loss	X18.1	X18.2
Harm to the Client's property, per event	X18.2	X18.3
Defects due to design and not listed on the Defects Certificate	X18.3	X18.4
Total liability, apart from the excluded matters	X18.4	X18.5
Cut-off: no liability unless notified before the end of liability date	X18.5	X18.6

X18.6 is the end of liability number for the NEC4 ECC and subcontract. The other NEC4 numbers follow the subcontract, which uses the ECC's numbering, but confirm them in your own ECC before citing them. The NEC3 PSC has its own, shorter numbering.

What the total cap doesn't include

The total liability cap leaves out four "excluded matters". These can make the true maximum exposure higher than the figure in the Contract Data.

• Sums for harm to the Client's property (subcontracts add the Contractor's property).
• Anything payable under Option X7 for late Completion.
• Anything payable under Option X17 for low performance.
• The Contractor's share on Options C and D.

So an agreed cap of £10m can sit on top of other amounts outside it. A Contractor pricing its risk has to add these up, and may well want a Z clause capping delay damages separately.

A worked example

This fictional scenario uses illustrative figures. The Contract Data on a £15m Option C contract states:

Limit	Figure
Indirect or consequential loss	£500,000
Client's property, any one event	£5,000,000
Design Defects not on the Defects Certificate	£2,000,000
Total liability	£15,000,000
End of liability date	Six years after whole-works Completion

Seven years after Completion, the Client notifies a design problem. The Contractor can say the end of liability date has passed, so it isn't liable for the matter, subject to legal advice on the exact wording and any undertakings. A similar problem notified in year three is limited to £2m, and any indirect loss it causes is limited to £500,000. If that same problem also damaged the Client's existing building, the property limit would be considered separately.

How to choose the figures

• Ask what's insurable. A cap with no insurance behind it gives comfort only as far as the Contractor's balance sheet goes. Line the figures up with the Contract Data's insurance entries.
• Consider the Client's real exposure. A Client operating an asset that earns revenue may have large indirect losses. A nominal figure here shifts that risk back to the Client.
• Look at the design liability together. If Option X15 also applies, you have two layers of protection for the Contractor: the standard of care, then the cap. Clients should see them as a pair.
• Be precise about the date. The end of liability date is a Contract Data entry. It works as a contractual long-stop. Whether it's effective for every type of claim is a question for your lawyers.

What people get wrong

1. Leaving a line blank by mistake. In NEC4, no figure means that limit doesn't apply. A blank isn't a nil cap.
2. Assuming it covers subcontractors automatically. X18 is between the Parties to the contract. A subcontract has its own Subcontract Data figures. See back-to-back subcontracts.
3. Forgetting undertakings. Liability under an Option X8 undertaking depends on its own form, so check it reflects the cap.
4. Assuming the law allows every limit. Liability for some matters can't be limited at law. Take advice rather than relying on the figures alone.

Related guides

• NEC Secondary Options: X, Y, W and Z Clauses Explained
• X19: Task Order (NEC3) and Termination by Either Party (NEC4)
• X20: Key Performance Indicators
• X21: Whole Life Cost
• X16: Retention
• X17: Low Performance Damages

This guide is general information in our own words, not legal advice. Your contract and its Contract Data always govern. NEC, NEC3 and NEC4 are trade marks of Thomas Telford Ltd; Contract Status is not affiliated with or endorsed by NEC.