52.246-24 Limitation of Liability-High-Value Items
Source: FAR 52.246-24 on acquisition.gov
FAR 52.246-24 limits contractor liability for post-acceptance loss or damage to high-value government property, except in cases of willful misconduct, lack of good faith, or where insurance applies.
Overview
FAR 52.246-24, Limitation of Liability-High-Value Items, establishes the extent of contractor liability for loss or damage to high-value government property after acceptance. The clause generally limits contractor liability for post-acceptance losses due to defects, except in cases of willful misconduct or lack of good faith by managerial personnel. It also addresses situations where the contractor has insurance or self-insurance, and clarifies that the clause does not diminish other contractual obligations for correction or replacement of defective supplies. The clause does not affect rights under other specific government property or warranty clauses. Alternate I applies when only certain line items are designated as high-value items.
Key Rules
- Limitation of Liability
- Contractors are not liable for loss or damage to government property after acceptance, unless exceptions apply.
- Exceptions for Willful Misconduct or Lack of Good Faith
- Liability limitation does not apply if defects result from willful misconduct or lack of good faith by managerial personnel.
- Insurance or Self-Insurance
- If the contractor has insurance or a reserve, liability extends to the amount covered for post-acceptance losses due to defects.
- Obligations for Defective Supplies
- The clause does not reduce obligations to correct, repair, or replace defective supplies as otherwise required by the contract.
- Other Government Rights
- The clause does not limit government rights under other clauses related to technical data warranties, flight risks, or government property.
Responsibilities
- Contracting Officers: Must include this clause in applicable contracts and identify high-value items when Alternate I is used.
- Contractors: Must understand liability limitations, maintain required insurance or reserves, and fulfill correction or replacement obligations for defective supplies.
- Agencies: Ensure proper clause inclusion and monitor compliance with liability and correction requirements.
Practical Implications
- This clause protects contractors from broad liability for post-acceptance losses, encouraging participation in high-value contracts while safeguarding government interests in cases of misconduct or inadequate insurance. Contractors must carefully manage risk, maintain appropriate insurance, and ensure managerial personnel act in good faith. Failure to comply can result in significant financial exposure or contract remedies.
As prescribed in 46.805 , insert the following clause:
Limitation of Liability-High-Value Items (Feb 1997)
(a) Except as provided in paragraphs (b) through (e) of this clause, and notwithstanding any other provision of this contract, the Contractor shall not be liable for loss of or damage to property of the Government (including 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 sup-plies.
(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.
(d)
(1) This clause does not diminish the Contractor’s obligations, to the extent that they arise otherwise under this contract, relating to correction, repair, replacement, or other relief for any defect or deficiency in supplies delivered under this contract.
(2) Unless this is a cost-reimbursement contract, if loss or damage occurs and correction, repair, or replacement is not feasible or desired by the Government, the Contractor shall, as determined by the Contracting Officer-
(i) Pay the Government the amount it would have cost the Contractor to make correction, repair, or replacement before the loss or damage occurred;
(ii) Provide other equitable relief.
(e) This clause shall not limit or otherwise affect the Government’s rights under clauses, if included in this contract, that cover-
(1) Warranty of technical data;
(2) Ground and flight risks or aircraft flight risks; or
(3) Government property.
(End of clause)
Alternate I (Apr 1984). If the contract is for both high-value items and other end items, the contracting officer shall identify the high-value items by line item and insert the following preamble before paragraph (a):
(This clause shall apply only to those items identified in this contract as being subject to this clause.)