52.246-23 Limitation of Liability
Source: FAR 52.246-23 on acquisition.gov
FAR 52.246-23 limits contractor liability for post-acceptance defects except in cases of willful misconduct, lack of good faith, or when insurance/self-insurance applies.
Overview
FAR 52.246-23, Limitation of Liability, establishes the extent to which contractors are liable for loss or damage to government property after the government has accepted delivered supplies. Generally, contractors are not liable for such loss or damage resulting from defects or deficiencies in the supplies post-acceptance, unless exceptions apply. The clause outlines specific circumstances where the limitation does not apply, such as when defects result from willful misconduct or lack of good faith by the contractor's managerial personnel. Additionally, if the contractor has insurance or a self-insurance reserve covering such liability, the contractor is liable to the extent of that coverage. This clause is designed to balance risk between the government and contractors, encouraging participation in government contracts while protecting government interests in cases of gross negligence or misconduct.
Key Rules
- General Limitation of Liability
- Contractors are not liable for loss or damage to government property (excluding delivered supplies) after government acceptance, if the loss results from defects in the supplies.
- Exceptions for Willful Misconduct or Lack of Good Faith
- The limitation does not apply if defects or acceptance are due to willful misconduct or lack of good faith by the contractor's managerial personnel.
- Insurance or Self-Insurance Coverage
- If the contractor has insurance or a reserve for self-insurance covering such liability, they are liable up to the amount of that coverage.
Responsibilities
- Contracting Officers: Must include this clause as prescribed and ensure exceptions are understood.
- Contractors: Must understand liability limitations and exceptions, maintain accurate records of insurance or self-insurance, and ensure managerial personnel act in good faith.
- Agencies: Should monitor for willful misconduct or lack of good faith and verify insurance coverage where applicable.
Practical Implications
- This clause limits contractor risk for post-acceptance defects, except in cases of gross negligence or misconduct.
- Contractors should ensure robust quality control and ethical management practices to avoid exceptions.
- Failure to disclose or maintain appropriate insurance could expose contractors to greater liability.
As prescribed in 46.805 , insert the following clause:
Limitation of Liability (Feb 1997)
(a) Except as provided in paragraphs (b) and (c) of this clause, and except for remedies expressly provided elsewhere in this contract, the Contractor shall not be liable for loss of or damage to property of the Government (excluding the supplies delivered under this contract) that-
(1) Occurs after Government acceptance of the supplies delivered under this contract; and
(2) Results from any defects or deficiencies in the supplies.
(b) The limitation of liability under paragraph (a) of this clause shall not apply when a defect or deficiency in, or the Government’s acceptance of, the supplies results from willful misconduct or lack of good faith on the part of any of the Contractor’s managerial personnel. The term "Contractor’s managerial personnel," as used in this clause, means the Contractor’s directors, officers, and any of the Contractor’s managers, superintendents, or equivalent representatives who have supervision or direction of-
(1) All or substantially all of the Contractor’s business;
(2) All or substantially all of the Contractor’s operations at any one plant, laboratory, or separate location at which the contract is being performed; or
(3) A separate and complete major industrial operation connected with the performance of this contract.
(c) If the Contractor carries insurance, or has established a reserve for self-insurance, covering liability for loss or damage suffered by the Government through purchase or use of the supplies required to be delivered under this contract, the Contractor shall be liable to the Government, to the extent of such insurance or reserve, for loss of or damage to property of the Government occurring after Government acceptance of, and resulting from any defects or deficiencies in, the supplies delivered under this contract.
(End of clause)