Archived - Standard Acquisition Clauses and Conditions Manual - N - Limitation of Liability

Use the following clause only in Information Management/Information Technology (IM/IT) contracts, because special authority was granted by Treasury Board to allocate risk in accordance with this clause only for IM/IT contracts. Contracting officers must fill in the blank below using the amount from the appropriate commodity grouping.

Use this clause in conjunction with general conditions 2030 , 2035 and 2040 . Do not use this clause with any of the other general conditions.

For more information, contact Risk Management Advisory Services, at: NCR.RMIAS-SCGRA@tpsgc-pwgsc.gc.ca

Use the following clause ONLY in Information Management or Information 
Technology contracts that come within the Treasury Board Special Authority to 
Public Works and Government Services Canada (PWGSC).  (See the Deskbook, 
Appendix A, Commodity Groupings Risk Table.)

Contracting officers should consult Legal Services for a possible adjustment to 
paragraph 2.(a) if the contract is a defence contract in which the powers under 
section 22 of the Defence Production Act are invoked.

If the contract is for telecommunications services regulated by a tariff 
established by the Canadian Radio-Television and Telecommunications Commission, 
some of these provisions will be overridden by the tariff.  (See Legal Services 
for details.)

1.	For Informatics Professional Services (IPS) contracts and call-ups against 
Standing Offers with values below the NAFTA threshold:

	The liability of contractors to the Crown for losses they cause to the Crown 
and third parties is specified in the clause below.  The contract should not 
include any insurance conditions.  The Crown will rely on the protection 
provided by the clause below.

2.	For contracts and call-ups against standing offers, including IPS 
procurements with value above the NAFTA threshold:

	Where this clause is used, the resulting contract must include an insurance 
covenant as recommended by PWGSC departmental policy, which will require at 
minimum a specified insurance limit, coverage commensurate with the type of 
contract (Commercial General Liability and / or Errors and Omissions coverage) 
and other related insurance clauses as required.  Either a Certificate of 
Insurance or an equivalent letter of self-insurance will be required for all 
contracts in which this clause is used.  Please contact PWGSC's Risk Management 
and Insurance Advisory Services, at 819-956-7379.

Use the following clause in contracts when limiting a contractor's liability to Canada, but not limiting each party's liability for damages to third parties. Typically, this clause would be used when a commodity grouping exists (other than Information Management or Information Technology or Satellite Services, which have their own clauses) or after a risk assessment has been performed to determine the risk exposure and amount of protection required by Canada.

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 the 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.

Use the following clause when limiting a Contractor's liability to the Crown and 
remaining silent on Contractor's liability for third party claims.  Typically, 
this clause would be used in conjunction with the commodity groupings, (other 
than Information Management or Information Technology which has its own clause) 
or after a risk assessment has been performed to determine the risk exposure and 
amount of protection required by the Crown.

Limiting a Contractor's liability should be an exception to the normal practice 
of using the standard terms and conditions.  When the decision is made to limit 
a contractor's liability to the Crown, 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 the Crown.  Decisions with respect to limiting a 
Contractor's liability should be made prior to the Request for Proposal release 
or in instances of sole source contracts, prior to the start of negotiations.

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.

Use the following clause when limiting a Contractor's liability to the Crown and 
requiring the Contractor to indemnify the Crown against third party claims.  
Typically, N0001D is used when a Contractor's first party liability is limited 
and third party is unlimited.  N0001D relies on the law to protect the Crown 
against third party claims, whereas this clause states the Crown's position with 
respect to third party claims.

Limiting a Contractor's liability should be an exception to the normal practice 
of using the standard terms and conditions.  When the decision is made to limit 
a Contractor's liability to the Crown, 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 the Crown.  Decisions with respect to limiting a 
Contractor's liability should be made prior to the Request for Proposal release 
or in instances of sole source contracts, prior to the start of negotiations.

Use the following clause in contracts when limiting a Contractor's liability to Canada for first and third party claims. Limiting a contractor's liability to Canada should be an exception to the normal practice of using the standard conditions. Limiting a Contractor's liability to Canada for third party claims should be avoided at all costs, as the exposure of risk to Canada could be extensive. Limiting a contractor's third party liability can only be done under a very limited number of circumstances, the main one being non-competitive contracts.

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 or, if there is a substantive transfer of risk to Canada, that appropriate approvals have been sought. Decisions with respect to limiting a contractor's liability should be made 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.

Use the following clause when limiting a Contractor's liability to the Crown for 
first and third party claims.  Limiting a contractor's liability to the Crown 
should be an exception to the normal practice of using the standard terms and 
conditions.  Limiting a Contractor's liability to the Crown for third party 
claims should be avoided at all costs, as the exposure of risk to the Crown 
could be astronomical.  Limiting a contractor's third party liability can only 
be done under a very limited number of circumstances, the main one being sole 
source contracts.

When the decision is made to limit a Contractor's liability to the Crown, 
contracting officers, in conjunction with client departments, must be able to 
demonstrate that the risk associated with the procurement have been analyzed and 
that the limitation of liability provides adequate protection to the Crown or in 
the event that there is a substantive transfer of risk to the Crown, that 
appropriate approvals have been sought.  Decisions with respect to limiting a 
Contractor's liability should be made prior to the start of negotiations.

Use the following clause in contracts for Public Cloud Software as a Service (SaaS) when limiting a Contractor's liability to Canada for first and third party claims. This clause is to be used when using the Commodity Grouping Public Cloud (SaaS) and the associated Limitation of Liability.

Use the following clause in conjunction with general conditions in Information 
Management or Information Technology contracts using Commodity Groupings.  It 
protects Canada by providing that the Contractor will pay the cost of 
infringement claims against Canada that are related to the software or other 
work that has been supplied by the Contractor under the contract.  It also 
provides Canada options like termination and refund where other settlement 
options are not reasonably available and notifies the Contractor of its 
obligations and options in respect of defence.

Contracting officers need to fill in the blank with the following information:

(a)	When used in conjunction with general conditions 9601, insert in the blank: 
"23, Royalties and Infringement, of general conditions 9601";

(b)	When used in conjunction with general conditions 9676, insert in the blank: 
"20, Royalties and Infringement, of general conditions 9676";

(c)	When used in conjunction with general conditions 9624, insert in the blank: 
"21, Royalties and Infringement, of general conditions 9624";

(d)	When used in conjunction with general conditions 2010 or 2029, delete entire 
sentence: "Section ______, is hereby amended by replacing the section in its 
entirety by the following:".

This clause must only be used in contracts that are primarily for the provision of satellite services, because special authority was granted by the Treasury Board to allocate risk in accordance with this clause for contracts for satellite services only. Contracting officers must complete paragraph (3)(e) in consultation with Risk Management Advisory Services (RMAS) or in accordance with published commodity groupings approved by RMAS .