Limitations of Liability Clause of a contract broadly states that the " Aggregate Liability of the contractor shall not exceed 50% of the annualised contract value".
An AMC contract value was say Rs. 25 per year for four years, total contract value being Rs. 100.
There were stringent provision for " Non performance deductions" if availability of equipment being maintained falls below and remains so below a certain level. These deductions eventually grew to Rs. 120/- against a contract with total value of Rs. 100.
This has resulted in a scenario wherein not only Rs 100/- payable to the contractor has been deducted but Rs 20/- has to be further recovered from the contractor.
The contractor has sought relief seeking limitations of liability clause.
What is the aggregate liability of the contractor in this scenario, on which the limitation shall apply?
Is the entire penalty of Rs. 120/- against payable contract value of Rs. 100/- has to be considered as aggregate liability and the contractor?
OR
The balance amount of 120-100 I.e Rs. 20/- which needs to be recovered from the contractor has to be considered as his aggregate liability
For the purpose of applying 50% cap of annualised value on it.
