What Is Proportionate Liability and When Will It Apply?

Proportionate liability enables the court to apportion the responsibility for a damages claim amongst each wrongdoer as the court considers fair. The legislation which governs proportionate liability varies in each State and Territory in Australia.

It is not uniform in every jurisdiction. As such, it is important to have a litigation and contract lawyer assist you in understanding your rights. The courts will apply the relevant legislation in the applicable State or Territory in determining the extent to which each wrongdoer’s actions contributed to the damage or loss.

Application of Proportionate Liability

Proportionate liability can apply in a broad range of commercial contracts. This includes products and services such as:

• leases;
• licences;
• service contracts; and
• commercial contracts.

Proportionate liability does not apply to:

• negligence claims involving death or personal injury;
• intentional damage;
• vicarious liability; or
• absolute or strict warranties or conditions in a contract.

Contracting Out

Contracting out is where parties to a contract agree between themselves that the proportionate liability legislation will not apply. They can also agree to indemnify one another on a basis does not reflect proportionate liability principles. In order to contract out of the proportionate liability regime, parties are required to allocate liability under the contract between them in a manner inconsistent with the normal operation of the regime.

Concurrent Wrongdoer

To have its liability apportioned, a defendant must also establish that other parties
are “concurrent wrongdoers” as defined by the applicable legislation. A defendant must identify other parties whose acts or omissions caused the loss or damage which is the subject of the claim and establish that the potential wrongdoer:

• has or had a legal responsibility to the plaintiff; and
• caused the same loss or damage that is the subject of the claim.

Small Businesses and Proportionate Liability

Recent cases before the courts have highlighted the importance of contract drafting and the proportionate liability regime. Contract parties need to be careful when entering into and negotiating new contracts that contain clauses which affect a party’s liabilities to ensure that they do not inadvertently contract out of the proportionate liability regime. Moreover, contracting parties should consider existing contractual arrangements to determine whether they have inadvertently contracted out of the proportionate liability regime.

Key Takeaways

LegalVision can assist you with any questions you may have about proportionate liability regimes. If you need help with drafting contracts, please contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.