IAI Actuarial Core Principles · Business Management · Professional negligence
An actuarial firm's engagement letter with a client says its total liability for any advice is limited to the fees paid. The client later claims for a large loss caused by a negligent calculation. Which statement is most accurate in general Indian contract-law terms?
A reasonable limitation clause agreed by the parties can generally be enforced against a negligence claim, but it is read strictly against the actuary relying on it and gives no protection for fraud or wilful misconduct. It is neither always void nor absolute.
- AThe clause is void in all circumstances because liability cannot be limited
- BThe clause binds the client absolutely, even for fraud
- CA reasonable limitation clause agreed between the parties may be enforced, but it will not protect against fraud or wilful misconduct, and it is read strictly against the party relying on itCorrect
- DThe clause applies only if the actuary is a Fellow of the Institute
- The clause is effective only if it is not written in the engagement letter
Explanation
Parties may generally agree to limit liability, and courts enforce reasonable terms, but such clauses are construed strictly against the party relying on them and cannot excuse fraud or wilful misconduct. Blanket invalidity or absolute effect are both overstated, and Fellow status is irrelevant.
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