Skip to content

IAI Actuarial Core Principles · Business Management · Implied terms, exclusion of liability, contractual remedies and damages

A pension-valuation firm's contract states: 'The firm shall not be liable for any errors in the report.' An analyst, Karan, knowingly alters key assumptions to hide a funding deficit, and the client suffers loss. In the dispute, which statement best reflects Indian legal principles and professional ethics?

The clause would be read as covering ordinary errors only and would not shield deliberate misrepresentation or fraud. A party cannot exclude liability for its own fraud, and knowingly altering assumptions also breaches the Actuaries' Code duty of integrity.

  1. AThe clause fully protects the firm because it refers to 'any errors'
  2. BThe clause is effective only if the client is a company
  3. CThe clause is read as covering ordinary errors, and is unlikely to shield deliberate misrepresentation or fraud, which also breaches the Actuaries' CodeCorrect
  4. DThe clause protects the firm if the loss is below a stated cap
  5. The clause protects Karan personally but not the firm

Explanation

Exclusion clauses are construed narrowly and are not normally read to cover fraud or deliberate wrongdoing; a party cannot contract out of its own fraud. Knowingly altering assumptions also breaches integrity under the Actuaries' Code. The 'any errors' wording does not extend to dishonest conduct, and a cap is irrelevant to fraud.

Did you get it right without looking?

One question tells you little. A timed set on Implied terms, exclusion of liability, contractual remedies and damages shows your real accuracy, how long you take and where you lose marks.

Practise Implied terms, exclusion of liability, contractual remedies and damagesFree diagnostic mock

More Implied terms, exclusion of liability, contractual remedies and damages questions